October 17, 2011

Dour Denninger Dumps on Yours Truly — and Pajamas Media

The financial commentator refers to my PJM article as “bald lies from the right.”


Special Note: I am grateful to Pajamas Media for giving me an opportunity to respond so quickly to Karl Denninger’s hit piece at Market-Ticker.org, and for allowing me to post the column here at BizzyBlog without the usual blackout.


Even when they sharply criticize yours truly, I have tried in recent years to avoid getting unduly exercised over individual posts at other sites. They have their views, I have mine. It’s a (mostly) free country (for now).

Unfortunately, I must carve out an exception to that stance because the individual objecting to my most recent PJM column (“October 14, 2008: The Day the Economy as We Knew It Died”; BizzyBlog mirror): a) has accused me of “bald lies” while failing to successfully identify one; b) did so without having the integrity or basic decency to name me; c) criticized a column which deliberately focused on a narrow two-week time frame as “a particularly odious and sickening piece of crap” without the faintest understanding of my full take on the government-led, bank-assisted, political corruption-driven financial crisis we face and the several decades of history which led to it (completely irrelevant to this column, which will exclusively address the absence of “utter falsehood”); and d) deliberately made it about more than my work by indicating that “these people (in context: ‘at Pajamas Media’) need to be exposed as the liars they are.”

The critique in question, “Bald LIES From The Right (This Is IMPORTANT),” was published Friday evening at Market-Ticker.org by Karl Denninger, who is also a frequent contributor at the leading and highly regarded financial website Seeking Alpha. Denninger has a hard-earned reputation as a no-holds-barred commentator. Though I disagree with him strongly on occasion (e.g., his extraordinarily uncharitable “nothing of societal value” attack on the accomplishments of Steve Jobs and Apple), I also frequently agree with him. His Saturday afternoon item on GOP presidential candidate Herman Cain’s “999 Plan” is just one such instance. His attack on my column and PJM is obviously not.

I will show that, unless the sources I referenced totally made up their stories out of thin air, no sentence Denninger specifically criticized could possibly be construed to contain, in his words, “utter falsehood.”

The first three of four paragraphs Denninger excerpted followed my quote of part of the text of a CNBC exchange (video here) between Dylan Ratigan and Charles Gasparino. Twice, Gasparino described the October 14, 2008 meeting between Treasury Secretary Hank Paulson and the CEOs of the nation’s largest banks, during which the CEOs “agreed” to direct government “investment” (i.e., partial ownership and de facto control) as done with a “gun to the head.” Here’s what I wrote:

The “gun to the head” was obvious: “You really have a nice bank there. But if you walk out without signing this document, right here, right now, we will bring all of the regulatory and law-enforcement powers of the United States government to bear on your institution. Your depositors and shareholders will suffer immensely. Your bank won’t survive. It would really be a shame if that were to happen. But we promise you, it will.”

What I wrote is my interpretation of what happened in that room, based on what CNBC, the New York Times, to a lesser extent the Associated Press (which watered it down to, “Paulson basically told the bank CEOs that they had to accept the government stock purchases for the good of the U.S. economy”), and precious few others reported. The Times even described Godfather Paulson’s “proposal” as “an offer the banks could not refuse.” My interpretation based on what is known sure as hell isn’t “utter falsehood.”

Next, I wrote the following about a provision in the TARP legislation that became law eleven days earlier which permitted the Treasury Secretary to buy “any other financial instrument” in achieving the law’s goals:

Hank Paulson’s defenders will probably claim that provision (B) above gave him authorization to do what he did, and that the preferred shares the banks were forced to issue count as “financial instruments.” The problem with that “logic” is that these weren’t “purchases.” They were extorted ownership interests — and in case you’re wondering, there is no authorization to extort anywhere in the legislation.

Again, if there’s evidence that all the banks willingly jumped up and said okey-dokey without coercion, I’d like to see it. Otherwise, what I wrote is an opinion based on the clearly understood difference between a willing seller-willing buyer transaction and one based on implicit and explicit threats. It sure as hell isn’t “utter falsehood.”

The next paragraph is clearly an expressed opinion. As much as Karl may not like it, I’m entitled to it, and it sure as hell has no “utter falsehood” component:

The economy as we knew it died that day — and virtually no one objected. As Michelle Malkin wrote: “If you don’t feel like throwing up today, you’re not paying attention.”

I wrote that paragraph because in my view (which Michelle at least generally shared) what happened three years ago on October 14 represented a pivotal turning point for the worse in our economic history:

  • It was as far as I know the first instance, and certainly the first on such a large scale, where the government deliberately and under threat of force took effective ownership and control of an entire industry sector, not just its failures.
  • It directly defied the clearly understood intent (and, I would argue, the hardwired provisions) of the TARP law passed only eleven days earlier.
  • It was greeted with near silence by the political class, the press which knew how different Paulson’s actions were from the law’s intent, and the public at large.

The fact that the large majority of TARP funding has been repaid hardly represents an exoneration of what Paulson did. His action — again, I must emphasize, “with President George W. Bush’s shameful capitalism-betraying acquiescence” — gave cover to all manner of subsequent longer-lasting government moves towards tyranny (“arbitrary or unrestrained exercise of power; despotic abuse of authority”), including but by no means limited to the use of TARP funds to bail out General Motors and Chrysler (which Congress, at least publicly, never originally intended), while arbitrarily and extralegally divvying up the spoils; the government’s outright takeover of student loans; the Dodd-Frank legislation, which, as I wrote in the run-up to its passage, is a massive power grab giving the government nearly unquestioned power to shut down any financial institution any time it likes; and pervasive regulatory overreach like we haven’t seen since the economically depressed 1930s.

The final paragraph with which Denninger takes issue is also the column’s finale:

Even beyond what we can see with regulations gone wild, failed stimulus, and outright corruption, our government’s authoritarian overhang and its destructive psychological effect on business and investor behavior largely explain why the economy won’t acceptably grow.

Denninger wrathfully writes: “If you believe one word of that paragraph you’re dumber than a box of rocks.”

Rock on this, Karl: It sure as hell isn’t an “utter falsehood” — and for heaven’s sake, please note that in my view the government influences cited “largely explain” why the economy won’t grow — not by any stretch exclusively, or even nearly exclusively. Plenty of individuals, businesses, government institutions, politicians, and government officials — including Hank Paulson, both before and during his Treasury tenure — are deserving of properly allocated blame for the conditions which led to our currently stuck in neutral (at best) economy. The column was about how the legislated TARP was not the Paulson-executed TARP, and how the Paulson-executed TARP was a tragic, possibly point-of-no-return authoritarian first.

Thus, the column contains no “utter falsehoods.” I try my damnedest not to write ‘em, and I can attest from experience that the editors at PJM try their damnedest to prevent ‘em from getting published.

Karl Denninger owes us — myself and Pajamas Media — nothing short of an unconditional apology. The proper words are: “I was wrong. I am sorry. I will appropriately retract.” Period. From my standpoint, there’s no chance of any kind of dialog about the rest of the content at your post — which might otherwise be quite worthy of discussion — until I get one.



  1. Good for you (and PJM)! There is no one that documents facts and supports opinion with references better (or more often) than you. The “box of rocks” comment is typical transference from someone throwing a hissy when proven wrong. Keep it up. You’re making an impact, and they can’t stand it. Keep it up.

    Comment by Joe C. — October 17, 2011 @ 8:39 pm

  2. Looks like I picked an interesting time to start commenting again! I backed off a bit because I felt I was monopolizing too much and too many of the comments sections, but I did still fairly regularly follow the site in the meantime.

    My question is: beyond what you’ve told us and what info I can gleam from searching the site, what exactly is this Denninger’s guys ideology/political orientation? The evidence I have so far is inconclusive either way.

    Either way, I just don’t understand why anyone of any mainstream political stripe would be so gung ho to defend what Paulson did and the silence from virtually every major quarter that followed. From the few posts on here that reference him he does not seem a far left reflexively liberal type at the least, but the only people I can think of who would take the attitude he has (and so viciously stridently to boot!) is a) those who want to absolve Paulson of any responsibility and defend the idiotic TARP legislation b) occupation Wall Street types who think the ‘evil” banks got what they’d deserved or c) Obama apologists who want to deny the significant drag his admins arrogant and abusive posture has done on the economy (*I* would argue that yes, that *is* nearly exclusively the reason for the economic morass we find ourselves in.)

    Another thing that bothers me is that for all his being a contributor to a respected outset, his personal demeanor comes across as very unprofessional and at times downright nasty. Look, I agreed with him on the TSA’s overreach, but couldn’t he have made the point without the generous use of unnecessary vulgarity and cursing as he did? Also, for the sake of argument even if Tom was some evil liar making up stuff (which is NOT the case at all either in general or in this specific case) how does that make *everyone* at PJM guilty of the same and thus people who need to “be exposed as the liars they are?” Such a insinuation is unfair and disingenuous. Also, calling people who agree with Tom’s position about the current political/eco climate as “dumber than a box of rocks?” That is incredibly immature and grossly unnecessary.

    If this guy is a respected commentator he needs to start acting and talking like one and not like a 14 year old boy.

    P.S. Please don’t tell me Denninger is *against* the 999 plan and that you agree with him on his opposition? I’d read the article myself and find out, but I don’t like to give web hits to sites/people I don’t quite trust yet.

    Comment by zf — October 17, 2011 @ 11:54 pm

  3. #2 zf, good to hear from you. Denninger believes that a large swath of people get the blame: bankers, “Wall Street,” corrupt pols, of all parties, corrupt institutions (govt., bank, brokers), the Fed, etc. I don’t necessarily disagree with him much of the time.

    Denninger is largely for 9-9-9 (“Cain’s plans are not “radical”, they’re mathematically sound”).

    Comment by TBlumer — October 18, 2011 @ 12:06 am

  4. Thanks, good to be back! There is a lot I want to comment on but since it’s off topic I will wait until the next open thread (having such threads is a GREAT idea, btw, I always felt like an intruder when I gave in to posting off-topic comments and questions) to do so.

    That’s good to hear, but troubling in one aspect at the same time, namely that if he tends to agree with supply side ideas it makes his vehement attack on you and PJ for exposing Paulson’s inexcusable actions even more baffling and questionable.

    I agree that there is blame to go around, but he seems to go further than that. Remember, he seemed to take issue with you saying the current environment was a large part of the current problem, as you pointed out you didn’t say “exclusively” and not even “nearly exclusively”, but simply largely. Anyone who thinks Obamas and his minions posturing isn’t a large part or even a small part of the problem may be “dumber than rocks.” Also, you didn’t say only Paulson and the current economic climate was solely to blame in the first place, so for him to attack you from such an angle was dishonest in any case. And for him to label you and PJM as “liars” even more so. It would have been one thing if he had said “Yes, Paulson’s actions were wrong and very damaging, but not sorely to blame” even though it uses an inaccurate summing up you thesis but he didn’t do that. Instead he seemed to try and absolve Paulson completely. Baffling. His response should been one of mild rebuke/disagreement at worst, not an outright vitriolic attack on you and your integrity.

    And his use of foul language and name calling and his engaging in such an attack as he pulled here is still deplorable, no matter how accurate his analysis may be.

    Comment by zf — October 18, 2011 @ 12:58 am

  5. #2, Ben Stein holds a similar position on the absolute need for TARP and the way it was implimented because he bought into the falsehood that the financial system would have collaspsed otherwise.

    Many of us completely disagree on the manner TARP was imposed because:
    #1, the funds were illegally used for other than their intended purpose (which no one can deny) meaning that the funds did not get used to buy bad mortgages and debts which proves TARP was totally unnecessary as sold to the Congress in the first place.
    #2, The fact that most of the banks didn’t want TARP and in fact posted a profit (& paid bonuses) that year which if you will remember Obama decried meant that the ONLY entities needing an actual bailout was GM, GMAC (now Ally Bank), Chrysler, AIG and Bear Sterns.
    #3 in actual truth, the Fed did the real heavy lifting by loaning at virtually zero interest money to every foreign and domestic bank that asked for it! These entities in turn bought sovereign debt to make profits off the spread and in doing so recapitalized their accounts.

    For these 3 reasons TARP was completely unnecessary and those who administered the program should be prosecuted for fraud against the US government. Having most of the money paid back is not an excuse for misappropriation of funds, this is like saying the book keeper needed the boss’s money, took it without permission to pay her own debts and then paid most of it back. The no harm no foul agruement doesn’t fly. GM paying back TARP money with borrowed money doesn’t count, they still owe the taxpayer billions from the other pocket they picked with the help of their corrupt politicians and bureaucrats.

    Those companies that actually needed a bailout should have been allowed to fail thus disciplining the market for excessive risk taking. Ironically, the government’s enabling behavior is at the center of the cronyism that Occupy WallStreet is protesting. Why did these companies get a bailout? ALL OF THEM I JUST NAMED WERE MAJOR FINANCIAL CONTRIBUTORS TO BARACK OBAMA and the DEMOCRAT PARTY!

    Yes a lot of UNION members would have lost their jobs at GM and Chrysler but that’s what they deserve for driving their companies to that point with excessive labor demands. Now they are under the understanding they can endless demand more money and the government will fund their pensions by propping up the stock value. Saturn would have been spun off and sold as a successful entity had GM died as it should have, instead, the incompetently run portion of the company survived and the successful division was put out of business by envious unions who hated Saturn from it’s inception. Rest assured if a GOP run Congress and POTUS are installed 2013, GM and Chrysler will be allowed to die and stay dead. GM’s truck and train divisions will probably live on.

    Comment by dscott — October 18, 2011 @ 1:10 am

  6. #5, Long time no see dscott! I agree completely with you too.

    Comment by zf — October 18, 2011 @ 1:29 am

  7. #6, we need all the help we can get, glad you’re back in the fray.

    Regarding the 9-9-9 plan, I like the plan as stated, but I don’t want the phase II of the VAT by itself. Cain can stop right at the 9-9-9 plan which strikes a more appropriate balance between taxation schemes. NO MORE STEALTH TAX INCREASES. IF Congress wants to spend more money than the revenue stream takes in, they have a moral and ethical obligation to take it to the voters to get their explicit approval. 1) If you can’t pay for it, you don’t do it. 2) If the voters don’t want to pay for it, then it is up bureaucrats and pols to trim other existing programs to impliment a good idea. It’s called governing within the realm of the consent of the governed. Violating the explicit consent of the governed by deficit spending is immoral and unethical and should be made illegal as any deficit spending that can not be repaid in full within the generation the debt incurred is disenfranchising the next generation of their consent.

    If any Constitutional amendment is to be done, it must be so written that explicit consent of the governed for that generation ONLY where repayment in full is less than 25 years. Secondly, a complete prohibition of using borrowed money to de facto pay interest as we are currently doing. Of course an ethical and moral Congress would never deficit spend unless it were a national emergency making a Constitutional amendment unnecessary, PERIOD.

    Comment by dscott — October 18, 2011 @ 3:26 am

  8. Denninger’s rebuttal is fixated on the use of quotation marks. It’s too bad the debate has to come down to punctuation (I did not find Tom’s writing to be deceptive in the least). Denninger also bases 90% of his opinion on a single photo of smiling bankers. I don’t find that to be especially compelling evidence for one side or the other. The argument is interesting, but to use one photo to support or rebut one side lends a degree of superficiality to the whole notion of “fact.”

    Must we choose between which party, the government or big bankers, is the biggest fool? Perhaps it is just a mirage that they are separate parties. My ultimate conclusion is that the American citizenry has acquiesced to the bank/govt screwing for decades. History tells us war will break out as a means for the American public to shift its attention, act out its anger, and blindly agree to be further raped by the bankers and the government.

    Comment by Michael — October 18, 2011 @ 9:56 am

  9. #8, I just read the rebuttal. The use of the photo really is a strange argument. The analogy would be that a lot of guys have probably walked out of meetings smiling after the godfather agreed to leave them and their families alone as long as the “protection” payments keep coming. That doesn’t exactly “disprove” the notion that extortion has still taken place.

    Comment by TBlumer — October 18, 2011 @ 10:16 am

  10. [...] 17 (BizzyBlog mirror) — “Dour Denninger Dumps on Yours Truly — and Pajamas [...]

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