In his Monday mailbag, Matt Taibbi got a number of great questions. Two are of note — a continuation of our own ongoing Tea Party discussion, and a window into the coming state and local government default crisis.
About those teabags:
You have a somewhat positive spin on the sincerity of the Tea Party, yet the movement has been funded/controlled by the Kochs and their ilk. Do you reckon they've created a "monster" they can't possibly control in the long run?Taibbi's reply (my emphasis):
I have to admit to being a little confused about the whole Tea Party phenomenon. In the year-plus I've been covering Tea Partiers, 99% of them are completely disingenuous goons -- Rush/Hannity fans and Bush Republicans who've crudely reinvented themselves as "constitutionalists" and appropriated Ron Paul's small-government rhetoric in order to disguise their basically unchanging political belief system, which almost exclusively involves hating liberals and leftists and Democrats, and immigrants and nonwhite "water drinkers," no matter what they do. I see the Tea Party mainly as a vehicle for the Republican Party to corral public anger and turn it against Democrats, and also to aid the campaign contributors of both parties in continuing to deregulate the economy and keep certain subsidies in place, and most Tea Partiers are I think willing participants in this scheme.He also fields a question about JPMorgan CEO Jamie Dimon regretting the coming epidemic of municipal bankruptcies:
But I have met a few, like this Chris Littleton fellow in Ohio, who seemed deadly focused on the spending issue, and on some legitimate concerns about expanded government power even when it's the result of Republican legislation (i.e. No Child Left Behind depriving local public schools of autonomy with regard to curricula), and they seemed sincere in that at least. I did not have the same experience with Tea Party leaders in Kentucky, in Nevada, in New York, or other states, where I mostly heard a lot of preposterous Beck-fueled hysteria about how Obama is converting America into a Soviet territory and the health-care program is the first step on the road to government re-education camps (I really heard that one in Nevada). But some key Tea Partiers in John Boehner's home state are insisting that they will not become tools of the Republican Party, and the deadline for them to show their sincerity there is sometime around this spring. If Boehner raises the debt ceiling and the Tea Party doesn't call for his ouster, we'll know something's up. The Republicans meanwhile are going to have to continue to fight to keep the Tea Partiers steamed in the right direction -- and though they may fail in a few places, my guess is that over the long haul they'll be successful in rousing most of the mob against Death Panels and Black Panthers and the like, and keeping them away from the issues of Republican spending habits and/or crappy governance.
I can't believe what I just read. Jamie Dimon talking about how serious the looming epidemic of municipal bankruptcies is.Matt's partial reply:
Ummm... JP Morgan is directly responsible for two very notable ones, JAMIE. The Jefferson County sewer fiasco and the Chicago parking meter swindle.
Where did he find the balls that big to come out and nonchalantly issue advisories about a "terrible" crisis for which his bank is heavily responsible?
Don't forget Denver and a host of school districts in Pennsylvania and Los Angeles County, among many, many others.Remember, the crisis is the plan. All that public property doesn't privatize itself, you know.
I bet that we're going to find out that the corruption in the municipal debt sector has been greater than is currently believed. The whole auction-rate bond world is set up in a way that makes corruption on the part of the banks almost an inevitability -- it's a paradise for churning and fee-gouging, with a setup not to unlike the option-ARM mortgage deals. Just like option-ARMs, municipalities take more upfront cash in exchange for the variable risk of higher potential future rates; municipalities who sign up pay relatively low interest rates to borrow money through bond auctions, but the catch is that they have to hold auctions for that same bond repeatedly, and if any of those auctions fail, the borrower suddenly has to pay fantastic penalty rates. To give just one of hundreds/thousands of examples, the auction for a bond for Lynchburg, Virginia failed a few years back and in just a week the interest rate jumped from just above 4% to 15%. On that same day three years ago, 29 other auctions failed, leaving the bonds with penalty rates of 12%-18%. Imagine dozens of cities suddenly looking at paying three and four times their usual bill for debt service, and you can imagine how these budget crises develop.
GP
