In it, but not of it. TPM DC

Just wanted to highlight something I wrote yesterday about Chief Justice John Roberts and his inauguration flub. President Obama (!) was gracious enough to exonerate him and even credit Roberts for helping him out. But it sure seemed like Roberts flubbed it and had no notes at hand to help him out. Vice President Joe Biden was not so forgiving. Yesterday I noted in a TPMDC world exclusive--theme music, please--that I had talked with someone who works with Roberts. This person noted to me about ten days ago that Roberts was studying hard for the inaugural and was taking his preparation very seriously. At the time I didn't give it much thought. But I should have asked myself why he'd need to study at all. The oath is short enough that one might easily memorize it and you could always bring notes if you didn't but it doesn't seem like the latter occurred to the chief justice.

Barack Obama just publicly announced a far-reaching set of ethics rules and other changes from prior practices for his White House staff:

• Over a hundred senior staffers making over $100,000 per year will have their pay frozen at current levels.

• There will be a two-year waiting period for any former lobbyists to work on issues for which they had previously done lobbying work.

• Extra openness will be practiced with any information that the Administration might want to keep secret.

This was perhaps the most striking quote: "Information will not be withheld just because I say so. It will be withheld because a separate authority believes my request is well grounded in the Constitution. Let me say it as simply as I can, transparency and the rule of law will be the touchstones of this presidency."

Harry Reid's office just announced that he'll be meeting with Al Franken later today, and will be holding a photo opportunity prior to the meeting itself.

Reid's office informs TPMDC that the two of them will be discussing the upcoming legislative agenda -- essentially a recognition by Reid of Franken as the legitimate Senator-in-waiting from Minnesota, and an apparent desire to make sure Franken is ready to get to work once he eventually takes the seat.

Of course, Franken might otherwise just be a plain old freshman Senator were it not for a unique quirk of Minnesota election law, which has thus far allowed Norm Coleman to bottle up Franken's 225-vote win in the Minnesota Senate race and prevent Franken from being issued a certificate of election.

Late Update: The Huffington Post reports that Coleman is also making his way around Capitol Hill, in order to speak with Washington reporters.

Let's step back from the last 48 hours worth of insanity in banking stocks. (Bank of America and others plunged on Monday and seem to be recovering today.) Let's step back further, beyond the immediate problems of how to bail out or repair the banks. What are banks likely to look like in a few years? After all, Wall Street, as we once knew it, is now gone with all the investment houses having either disappeared or turned themselves into bank holding companies. The idea of nationalization has been out there but that, I think, is a loaded word and not quite right. We've already lost our virginity by partially nationalizing the banks when we put taxpayers money into them and we're likely to do much more before it's over. With it's connotations of South American guerrillas in fatigues, nationalization carries a lot of dire implications. It's also a misnomer since no one really thinks Citigroup or Wachovia are about to become wholle federally owned and run.

The better metaphor may be the idea that banks will become utilities, like ConEd in New York or Duke Energy in the south and midwest. Electricity in the United States is mostly provided by private utility companies that are heavily regulated even more than banks. For instance, they usually need regulators to sign off on rate increases while no bank has to check in with the FDIC before raising fees for say, an overdrawn check. Still, utilities are not nationalized in any sense. They trade on public exchanges like the NYSE/Euronext and NASDAQ . You can invest in them and put your money at some risk but because their business is so stable their prices don't fluctuate too widely, relative to the rest of the market, and so they tend to pay large dividends.

Nassim Nicholas Taleb, the author of The Black Swan: The Impact of the Highly Improbable, an investment adviser, philosopher academic, trader and prescient gloom and doomer about the current economy has used this metaphor. On Charlie Rose, late last year he said:

It will be very different. Number one, banks will be utility companies, because we no longer will tolerate privatizing the gains and socializing the losses anymore. If you and I are going to bear the losses of bankers, we don't want to pay them bonuses for five or six or seven years, and then bail them out. No more of that. Banks are going to converge with utility companies, because if you go to Detroit or LA you want to be able to get cash from a cash machine. It's a utility.


People will still be able to take risks but there will be no government bailout. As he told TIME:

I think that we've got to progressively become a society where banks are deemed to be too precious for us, for our currency, to take too much risk. We need to have a banker who is just as responsible as someone working for the water company. Banks are going to become a utility. And banks probably will not have a lot on their balance sheet, and the risks taken will be borne by individuals like myself who have capital, and who know the risks, with their own money. Otherwise you're going to keep having a cycle that's deeper every time.


Getting to this place will take some time. We're nowhere near the levels of regulation needed to make banks as reliable and safe as the water or gas companies. And it doesn't mean there won't be casinos open. In the future, you will have, say, hedge funds or private equity firms taking risks, but not banks themselves. Everyone's heard of Jamie Dimon or Ken Lewis or other bigshot bankers. I couldn't name a utility executive.

Will this happen soon, this year? No. I've asked around with Democrats involved in the financial crisis and I don't think there's anything like this level of regulation coming even given the sensible ideas under consideration such as the ones my colleague, Elana Schor, unearthed from Barney Frank. It would require a reinforcement of Glass-Steagall which kept banks out of the business of being stockbrokers until it was repealed in the 90s. But things are moving quickly and I wouldn't be shocked if Taleb, who saw the current crash--and has urged clients, by the way, to keep 90% of their money in cash and safe assets--turns out to be right yet again.

The incoming president has demonstrably warm relationships with Democrats in Congress. I wonder, then, which side will back down first now that one thing is clear: Many Dems want the upcoming stimulus bill to include a provision allowing bankruptcy judges to modify the terms of primary mortgages for Americans facing bankruptcy (a policy known as 'cramdown'); Obama thinks it's a good idea, but doesn't want it on the stimulus.

The latest affirmation of the Obama team's stance came during this morning's Senate confirmation hearing for Treasury Secretary-designate Tim Geithner.

What remains unclear is why the new administration believes the "cramdown" change would be better tackled in a separate housing bill. When Citigroup is already on board, and no less a Wall Street ally than Sen. Chuck Schumer (D-NY) tells the Journal that "we think it would be great to put this on the stimulus," what's the trouble here?

Late Update: To answer the commenters who cite the Obama team's interest in locking down Republican votes for the stimulus bill ... The notion that Democrats should delay one of their longtime priorities -- one that would help millions of mortgage-holders avoid economic ruin, one that just won a major financial industry endorsement -- to woo the GOP is fairly bizarre. And as we can see today, House Republican leaders aren't likely to vote for the stimulus as it is.

The White House has now released President Obama's schedule for his first full day in office:

• 1:15-2:15 p.m. ET: Obama attends a swearing-in ceremony for White House staff, and addresses the staff and cabinet officers. There will be pooled press.

• 2:30 p.m. ET: Obama attends a White House open house.

• 3:15-3:45 p.m. ET: Obama holds a closed-door meeting with a group of his economic advisers: National Economic Director Lawrence Summers; Office of Management and Budget Director Peter Orszag; White House Policy Council Director Melody Barnes; and White House coordinator of energy and climate policy Carol Browner.

• 4:15-5:15 p.m. ET: Obama holds a closed-door meeting with Joe Biden, Rahm Emanuel and key defense officials on the subject of Iraq: Sec. of Defense Robert Gates; National Security Advisor Gen. James Jones; Chairman of the Joint Chiefs of Staff Adm. Mullen,; Gen. David Petraeus; U.S. Ambassador to Iraq Ryan Crocker; and Gen. Ray Odierno.

Brace yourselves, folks, for another financial bailout. Bloomberg reports today (and Politico concurs) that President Obama may be seeking upwards of $50 billion more in bailout cash from Congress by next month.

Leaving aside for a moment the merits of spending even more money to keep the banking industry afloat -- even if it is paired with more foreclosure aid, as appears to be the case -- this presents an immediate political challenge to Democratic congressional leaders. Do they push to pair this new mini-bailout with the stimulus bill, as Bloomberg's report suggests?

After all, House Speaker Nancy Pelosi (D-CA) has set a hard February 13 deadline for passing the massive economic recovery package. There simply may not be time to debate and pass a separate mini-bailout by then. But will the Senate be able to corral its bailout critics to climb aboard a stimulus bill that includes extra help for the banks?

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The new White House has just sent out this release from Press Secretary Robert Gibbs, telling the public how Obama spent his first morning in the Oval Office:

At 8:35 AM, the President arrived in the Oval Office and spent 10 minutes alone in the office. He read the note left to him by President Bush that was in an envelope marked "To: #44, From: #43". At 8:45 AM, White House Chief of Staff Rahm Emanuel came in to discuss the schedule of today's events. The First Lady came into the Oval Office at 9:10 AM. We will release a picture shortly.

The U.S. Chamber of Commerce is about to begin its push for a new addition to the economic stimulus bill, debate on which will begin today in the House.

And anyone who thought K Street would stop seeking its share of the stimulus pie after convincing Democrats to add the mysteriously named "net operating loss carryback" to the stimulus ... well, you'd be wrong. K Street wants more tax breaks for businesses -- and the latest one is called the "cancellation of indebtedness (COI) waiver."

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We've already posted several clips of our inauguration interview with the chairman of the House Financial Services Committee, Barney Frank (D-MA), but the need to keep those videos short -- links to them are here, here, and here -- left some of his most newsworthy statements on the cutting-room floor.

After the jump, find a transcript of the portions of the Frank interview that didn't make it into the clips.

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