Category: Economics

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Economics Financial Crisis Politics The Opinionsphere

Geithner on the Political Bind the Obama Administration Faces

Timothy Geithner:

The country is torn between these two, not completely unrelated, basic impulses out there. One is that Washington is out of control; those people in Washington did this outrageous, take-over-the-economy type of stuff. And the other is that they haven’t done enough to help real people. The crisis came on top of this deep, terrible erosion in the basic level of trust in government and public institutions. That has made it much harder for people to believe that the policies we were [implementing were] going to help.

(During an interview with Daniel Gross of Slate.)

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Barack Obama Criticism Economics Financial Crisis Politics The Opinionsphere

The Left’s Odd Abandoment of Obama: Matt Taibbi

I recently castigated Glenn Greenwald for the umpteenth time for distorting the world to fit his ideological lens. He, like a significant portion of the left, seems to have turned on Obama. Despite his claims to judge politicians on a case-by-case basis and not to give them support or opposition based on their history, it is clear that Greenwald’s recent attempts at rationally ranting about Obama have a strong emotional core; I extrapolate this from the somewhat tortured manner in which he caricatures the positions of Obama and Obama’s supporters in order to take them down, and the eagerness with which he seems to try to get to his rants in which he loses the remaining bits of common sense he has. Thus, it isn’t that exceptional that he endorsed Matt Taibbi’s recent piece on the Obama administration. While Taibbi is sloppier than Greenwald – and lacks the “fair” persona that Greenwald sometimes adopts – both have a core position: they are anti-establishmentarian. Taibbi though writes news rather than opinion journalism and constantly hides behind the (no-doubt vigorous) fact-checking of his pieces by Rolling Stone – but his most egregious errors are implicit. He writes as if insinuation were fact, which makes him difficult to take seriously whether he is writing about AIG or Goldman Sachs or Obama. And his constant mode is paranoid conspiracy theorist – which certainly fits the moment. Perhaps the best response to Taibbi was to call him the “Sarah Palin of journalism.” And he certainly demonstrated that out-of-the-gate with his first sentence responding to critics:

When we went to print with the latest Rolling Stone piece about Obama’s economic hires, a couple of my sources advised me to expect some nastiness in the way of a response from Obama apologists.

Like Palin, Taibbi defends himself by pointing out who his enemies are, as if their existence makes him right. Granted, Taibbi is a better writer than Palin – and doubtless is better informed. But what he does with his knowledge is create elaborate conspiracy theories embedded in the colorful opinions he gives throughout his news:

The point is that an economic team made up exclusively of callous millionaire-assholes has absolutely zero interest in reforming the gamed system that made them rich in the first place.

Go ahead – fact check that! The main point of his most recent piece seems to be the pernicious effect of Clinton Treasury Secretary, former Goldman Sachs head, and Citibank big shot, Robert Rubin. A good article could be written about this – but Taibbi chose instead to write a piece about Obama’s hypocrisy demonstrated by his embrace of Rubin’s mentees. Taibbi accomplishes this with a quick bait-and-switch, describing the vague hopes people had for Obama during the campaign – that he was “a man of the people” – and then deftly pivoting:

Then he got elected.

What’s taken place in the year since Obama won the presidency has turned out to be one of the most dramatic political about-faces in our history.

Now – this assertion is the core contention Taibbi makes – yet he entirely fails to do several things: (1) to describe what Obama actually campaigned on; (2) to fairly or honestly describe the Rubin/New Democratic positions; or (3) to describe accurately the attempts made by Obama to reign in the financial industry. Instead, Taibbi merely lists the many people who worked for Rubin at some point who now work for Obama as if that proved the audacious opinions he starts his piece with. His entire piece would work better as a footnote supporting one contention in his three paragraph opening.

Tim Fernholz also writes a good piece taking on Taibbi’s anti-Obama screed.

Andrew Leonard of Salon provided a pretty good summary of Taibbi in general:

It’s the classic Taibbi approach: vastly and sloppily overstate the case in absurd, over-the-top rhetoric while ignoring any possible counterargument.

But Ezra Klein as always has an extremely intelligent take:

But in this case, Taibbi chose a swift-moving narrative at the expense of an accurate picture of how — and more importantly, where — Wall Street is capturing the political process.

The issue here is not that Taibbi should be nicer to the Obama administration, which is how he’s framing most of the criticism of his article. Quite the opposite, actually. Taibbi is being much too nice to the Obama administration. He’s imbued them with a lot more power than they have.

If the result of the 2010 election is that Obama fires his economics team and moves his administration to the left, but the Republicans pick up 60 seats on the House and move the body to the right, then American public policy outcomes move to the right.

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Barack Obama Criticism Financial Crisis Politics The Opinionsphere

The Left’s Odd Abandoment of Obama: Glenn Greenwald

Whatever Charles Krauthammer or Rush Limbaugh may tell you, there is no evidence that Obama is secretly an extreme leftist. On the contrary, he both ran and has governed as a liberal. The various forces on from the left to the center-left rallied around him in 2008 though – seeing hope in his ascendancy. But like all presidents, Obama while campaigning in poetry now faces the challenge of governing in prose.

Yet what is remarkable is how fashionable it has become for respectable voices on the left to hyperventilate and rant against Obama, most often by equating him with George W. Bush. European leftists, unused to America’s slow-moving political system can be forgiven for not appreciating the scope of what Obama is attempting to do, and for the difficulties in doing it. But among mainstream American intellectuals to the left of center, this is harder to understand.*

Reacting to this anti-Obama sentiment on the left, which most often seems to embrace an hysterical tone more appropriate to spurned lovers than political supporters, Andrew Sullivan (who himself recently announced that he could no longer countenance being on the right-wing because what he sees as their odd rejection of Obama’s core conservatism) began to publish emails from readers purporting to “leave the left” because of this demonization of Obama. (In fairness, let me admit that this meme bothered me too: Andrew Sullivan decided to leave the right after every dissenting voice has already been purged. To leave the left over the rants of some of its prominent members is to overreact.)

Glenn Greenwald responded by doing what he does best: He distorted the opposition beyond recognition in order to make his case that they are wrong. He accused these critics of a veneration of Obama similar to the veneration of Bush and Palin among some on the right:

According to these defenders, it’s just wrong — morally, ethically and psychologically — to criticize the President. Thus, in lieu of any substantive engagement of these critiques are a slew of moronic Broderian cliches…Those who venerated Bush because he was a morally upright and strong evangelical-warrior-family man and revere Palin as a common-sense Christian hockey mom are similar in kind to those whose reaction to Obama is dominated by their view of him as an inspiring, kind, sophisticated, soothing and mature intellectual. [my emphasis]

As always, Greenwald has an interesting point – and there is some subset of people who do take the view he is refuting. But it’s far from clear the commentors on Sullivan’s blog do. (Go ahead and read them.) More importantly, Greenwald’s reaction follows exact same emotional logic he is criticizing: Just as these readers of Andrew Sullivan’s blog have created a politically stereotyped parody of the Left based primarily on what bothers them, and react viscerally, emotionally to it, so Greenwald creates his own politically stereotyped parody of Obama defenders, which he then viscerally, emotionally reacts to.

Another good example of this came earlier this week, as Greenwald responded to his bête noire, Joe Klein:

Klein explained:

[S]ome of the best arguments about why this war is necessary must go unspoken by the President.

So there are deeply compelling reasons to escalate in Afghanistan.  But they’re secret.

Greenwald then goes on a rant about wars justified only by “secret reasons.” Being a fairly intelligent guy, Greenwald clearly knows the difference between things a President cannot say and “secrets” – but he elides this, even contradicts this common-sensical reading, because what his opponent is actually saying does not fit into the political stereotype that Greenwald wants to kick in the groin.

Let me step back again in fairness to Greenwald – who, let me emphasize, I often admire. The way I see it, there are two Glenn Greenwalds. One who will take a step back and observe that Obama is far better than the alternatives and who is able to fairly ascertain that Obama is not guilty of hypocrisy in escalating in Afghanistan and that he should not be blamed for failing to keep those promises he clearly has tried to keep like closing Guantanamo, and who fairly criticizes Obama for a range of issues ranging from Bagram to state secrets.

And then there is the Glenn Greenwald who likes to rant and throw tantrums. The second Greenwald paints the world in vivid colors that bear some resemblance to the more muted colors that my eyes see. The second Greenwald goes on, blithely ignorant of his own more reflective judgments, self-confident and self-satisfied, secure in the knowledge that he himself, merely a critic and holding no formal powers, is above reproach. This second Greenwald is still a useful addition to the political conversation, but in a marginal way.

At his best, Greenwald could be a polemicist, arguing against the conventional wisdom; but he lacks the audaciousness positioning that is the mark of a true polemicist. Too often, Greenwald becomes one of the many voices in our political chorus – a ranter, a talking head.

I would argue the one core principle that allows Greenwald to so often lapse into ranting is his view that: “Political leaders deserve support only to the extent that their actions, on a case-by-case basis, merit that support…” Thus it’s not quite fair to tar Greenwald as someone who abandoned Obama – as he never claimed to embrace Obama. Instead he rationally analyzed and decided to support certain discrete positions Obama took. This is the rationale. But it ignores the second Greenwald certainly who expresses a visceral, emotional distaste for Obama that seems at odds with this rational “case-by-case” analysis of Obama’s actions.

* To be clear, and to preempt attempts to write me off as a victim of Obamania, deluded by hope, I have seriously criticized Obama about Bagram (here and here), on the mere technocratic approach to serious issues (here and here), on his approach to state secrets, and I would endorse several other criticisms of the administration – specifically on their seeming reluctance to embrace what I see as clear principles in regulating the financial industry, on transparency issues, and regarding national security. But I do – at the same time appreciate that Obama is moving in the right direction on these issues – though not on the first two.

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Barack Obama Economics Financial Crisis Health care Politics The Bush Legacy

Real Fiscal Responsibility & Deficit Politics: Democrats

[digg-reddit-me]This is part 3 of a 4-part series of posts. Part 1 provided an introduction and description of the groups that benefit from the government spending status quo: the elderly, the military, the poor, and big corporations in that order. The overall societal status quo clearly favors all these groups except the poor. Part 2 described the main political dynamics behind what the Republicans are doing, along with their solutions; it explained why Republicans oppose government intervention in principle, and yet protect the status quo because it benefits those interest groups that support their party – the elderly, the military, and the big corporations. The solution to this political dilemma is to “starve the beast,” to protect the status quo until it becomes so catastrophically unstable that it has to be dismantled; which explains why, when in power, Republicans have both cut taxes and increased spending – protected today’s elderly at the expense of tomorrow’s elderly while trying to force Democrats to take responsibility for the undoubtedly unpopular solutions to the deficit problems created by Republican administrations.

Given this, the next question is: what is the Democratic approach? Do they seek to dismantle the programs that benefit the Republican interest groups? Have they figured out the political answer to the politics of “starving the beast” that so benefit the Republican Party? In short, the answer to both is no. Social Security and Medicare do benefit the elderly – who were the only demographic group to go Republican, even in the aftermath of Bush – but they are historic Democratic programs. They represent in some sense liberalism at its best* – an attempt to soften the roughest edges of capitalism, to ensure that our grandparents and parents are taken care of in their old age. It’s not clear that the Democrats have the political will to go about rescinding subsidies of various sorts to big corporations or to dramatically cut military spending. This doesn’t simply motivate Democratic voters, but the backlash caused by doing so could hurt the party. And the Obama administration’s approach of blaming the short- and mid-term deficit on Bush’s irresponsibility is of decreasing political utility, even if it has the benefit of truth.

What the Democrats offer is at best a partial solution in the hope that before the time is too late, the Republicans will abandon their destructive “starve the beast” strategy. In short, the Democrats are finessing the issue – to avoid the hard clashes that the Republicans claim are inevitable, and that Republicans while in power have made almost inevitable.

What the Obama administration offers now is a 3-part plan – one that is, to some degree, a Hail Mary pass, a desperate attempt to ease long-term deficit before it is upon us.

Step 1: Keep the Economy Going. Part of the urgency for the stimulus early in Obama’s term was the knowledge that if the economy was not growing, then the staggering short term deficits incurred by the Bush administration could prove crippling to the economy. The only way to pay off the debt without causing significant social problems at home or defaulting on the debt is to have a growing economy. This is how stable nations have gotten out of deficit holes such as the one we are in, and how we almost painless paid off massive debt following World War II, following the stagflation of the 1970s, and again in the 1990s. (A constantly growing economy also happens to be an implicit part of the social bargain at the heart of the American dream.)  The stimulus was needed because keeping the economy growing was essential to easing the fiscal pressure on America’s mid-term debt.

Step 2: Health Care Reform. Policy wonks – led by Office of Management and Budget Director Peter Orszag – have seen this fiscal timebomb coming for some time. They can see the two root causes of the rapid growth in projected federal expenses:

(1) the aging of our population and

(2) the rapidly rising cost of health care, which has been growing faster in America than in any other nation in the world for the past several decades.

As they cannot change the former, they decided to address the latter. The Obama administration has made clear that their primary goal is reducing the growth of health care costs, even at the expense of extending coverage, and the plans consist mainly of a hodge-podge of measures that would tinker with how health care is paid for and how people obtain health insurance, using some previous Republican proposals which focused on cutting costs as models.

As a necessary precondition for rationalizing our current system, the plan would also significantly extend health insurance – following Milton Friedman’s observation that as health insurance approaches universality, political incentives change to allow for more cost control (even in wholly private systems.) In part this explains how the current health care bills has become not only the most significant effort to expand coverage, but the most significant attempt at cost control in a generation. Mark McClellan, director of the Center for Medicare and Medicaid Services under George W. Bush, for example, called the bill “the right direction to go” while suggesting medical malpractice reform would also be good. (However, as Ron Brownstein observes, “since virtually, if not literally, none of [the Republicans] plan to support the final health care bill under any circumstances, the package isn’t likely to reflect much of their thinking.”) The bill includes pilot projects for almost every other cost control program that those interested in health care believe has promise.

The hope is that if we act now before the imminent wave of Baby Boomer retirements, we will soften the impact of the fiscal timebomb that is entitlement spending. Then, programs can be adjusted without being slashed – as proponents of the “starve the beast” approach would prefer. Our debtors, including the Chinese government, have thus taken a keen interest in the steps we are taking to curtail the growth in health care costs. As one prominent Chinese economist has said, “At some point, if you refuse to contain health care costs, you’ll go bankrupt.”

Step 3: The Grand Bargain. These first two parts were the easy ones. This part is where it gets tricky. If the first two parts of the plan work, the pressure for massive change will be relieved. The mid-term deficit incurred during Bush’s term and during the early Obama years will be less painful in the face of a growing economy. The long-term deficit will still be a problem, but not an insurmountable one if health care costs stop growing so rapidly. Each of these will take tremendous pressure off of our fiscal situation – but neither are enough to make the status quo sustainable. At this point, Obama has said he hopes to strike a “grand bargain,” putting everything on the table, and engaging in a frank discussion of tax reform and entitlement reform, of how America collects money and what it spends the money on. At the moment, with the idiocrats dominating the public debate, this doesn’t seem a very promising route.

Tackling these issues would be many times more explosive than health care as so many groups have a stake in maintaining the status quo. And the biggest flaw in the plan is that by relieving the pressure, the Obama administration may simply put off the day it will be dealt with – no matter how determined they are to deal with these issues. But breaking the grip of the idiocrats was at the core of the promise of Obama’s campaign. And these are core issues Obama was elected to address.

*Contemporary Democrats do not – contrary to the caricature Republicans push – think government and centralized control is the solution to everything; but they do believe that government can be a force for good, that through democracy we can make modest steps and institute policies that improve our society. And despite an organized campaign to suggest otherwise, history has demonstrated this to be true, from the the founding of our nation, the building up of our infrastructure, to that giant social engineering project called abolition, to Social Security and bank regulation, to the Civil Right Movement.

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Barack Obama Criticism Economics Financial Crisis Foreign Policy Politics The Opinionsphere

Kashkari, 2009’s Ideas, Richard Milhouse Obama, Frum!, Chinese-American Trade Imbalance, Obama’s Nobel, and Charborg

1. The Personal Toll TARP Exacted. Laura Blumenfeld profiled Neel Kashkari for the Washington Post – the Treasury employee and Hank Paulson confidante who presided over TARP and assisted with much of the government’s response to the bailout who is now “detoxing” from Washington by working with his hands in an isolated retreat. The piece focuses not on what happened and the enormous impact, but on the personal toll this crisis exacted on Kashkari and those around him: the heart attack by one of his top aides; the emotional breakdowns; the trouble in his marriage as he didn’t come home for days, sleeping on his office couch and showering in the Treasury’s locker room:

Thoughts tended toward the apocalyptic. During midnight negotiations with congressional leaders, Paulson doubled over with dry heaves. A government economist broke into Kashkari’s office sobbing, “Oh my God! The system’s collapsing!” Kashkari counseled her to focus on things they could control. (Minal: “So you offered her a bag of Doritos.”)

“We were terrified the banking system would fail, but the thing that scared us even more was, what would we do the day after? How would we take over 8,000 banks?”

The piece seems to ask us to feel pity for these men and women who toiled under difficult circumstances, but it seems inappropriate to feel pity for those who assume power because they also feel its heavy weight. But the piece acknowledges that Kashkari himself seeks to get back to Washington again, “Because there’s nowhere else you can have such a large impact — for better and for worse.” Lionize them for their heroic sacrifices if you will, but there is no place for pity. Those who choose to take on the burdens of power should not be pitied because it proves too weighty.

2. New Ideas. The New York Times briefly discusses the Year in Ideas. Some of the more interesting entries:

  • Guilty Robots which have been given “ethical architecture” for the American military that “choose weapons with less risk of collateral damage or may refuse to fight altogether” if the damage they have inflicted causes “noncombatant casualties or harm to civilian property.”
  • The Glow-in-the-Dark Dog (named Ruppy) that emits an eerie red glow under ultraviolet light because of deliberate genetic experiment.
  • Applying the Google Algorithm that generates the PageRank which first set Google apart from its competitors to nature, and specifically to predicting what species’ extinctions would cause the greatest chain reactions.
  • Zombie-Attack Science in which the principles of epidemiology are applied to zombies.

3. Obama’s Afghanistan Decision. Fareed Zakaria and Peter Beinart both tried to place Obama’s Afghanistan decision into perspective last week in important pieces. Both of them saw in Obama’s clear-eyed understanding of America’s power shades of the foreign policy brilliance that was Richard Nixon and Henry Kissinger. Zakaria:

More than any president since Richard Nixon, he has focused on defining American interests carefully, providing the resources to achieve them, and keeping his eyes on the prize.

Beinart:

Nixon stopped treating all communists the same way. Just as Obama sees Iran as a potential partner because it shares a loathing of al-Qaeda, Nixon saw Communist China as a potential partner because it loathed the U.S.S.R. Nixon didn’t stop there. Even as he reached out to China, he also pursued détente with the Soviet Union. This double outreach — to both Moscow and Beijing — gave Nixon more leverage over each, since each communist superpower feared that the U.S. would favor the other, leaving it geopolitically isolated. On a smaller scale, that’s what Obama is trying to do with Iran and Syria today. By reaching out to both regimes simultaneously, he’s making each anxious that the U.S. will cut a deal with the other, leaving it out in the cold. It’s too soon to know whether Obama’s game of divide and conquer will work, but by narrowing the post-9/11 struggle, he’s gained the diplomatic flexibility to play the U.S.’s adversaries against each other rather than unifying them against us.

Perhaps this accounts for Henry Kissinger’s appreciation for Obama’s foreign policy even as neoconservative intellectuals such as Charles Krathammer deride Obama as “so naïve that I am not even sure he’s able to develop a [foreign policy] doctrine“:

“He reminds me of a chess grandmaster who has played his opening in six simultaneous games,” Kissinger said. “But he hasn’t completed a single game and I’d like to see him finish one.”

4. The Unheeded Wisdom of Frum. It seems that almost every week a blog post by David Frum makes this list. This week, he rages at how the Republican’s “No, no, no” policy is forcing the Democrats to adopt more liberal policies (which Frum believes are worse for the country, but in the case of health care, more popular among voters):

I hear a lot of talk about the importance of “principle.” But what’s the principle that obliges us to be stupid?

5. Fiscal Imbalances. Martin Wolf in the Financial Times identifies the imbalance between America’s deficit spending and China’s surplus policy as the root of our financial imbalances in a piece this week:

What would happen if the deficit countries did slash spending relative to incomes while their trading partners were determined to sustain their own excess of output over incomes and export the difference? Answer: a depression. What would happen if deficit countries sustained domestic demand with massive and open-ended fiscal deficits? Answer: a wave of fiscal crises.

While he says both sides have an interest in an orderly unwinding of this arrangement, both also have the ability to resist:

Unfortunately, as we have also long known, two classes of countries are immune to external pressure to change policies that affect global “imbalances”: one is the issuer of the world’s key currency; and the other consists of the surplus countries. Thus, the present stalemate might continue for some time.

Niall Ferguson and Morris Schularack offered a few suggestions in a New York Times op-ed several weeks ago as to how best unwind this. I had written about it some months ago as well, albeit with a pithier take.

6. War & Peace. Obama’s Nobel Prize acceptance speech was an audacious defense of American power and ideals. If you read nothing else on this list, read this.

7. Song of the week: Pinback’s “Charborg.”

Categories
Domestic issues Economics Politics The Opinionsphere

National Review: “Soak the Rich!”

[digg-reddit-me]The National Review gives Conrad Black some space to somewhat incoherently go after Barack Obama on economic issues. He writes with the accumulated resentments and reduced expectations of an old man – and one imagines one is meant to receive this incoherence as hard-won wisdom.

Black has formed his opinion of Obama’s health care plan without taking the time to understand it – as his one-sentence description makes clear: “the administration claimed that it would reduce medical costs by taking over the insurance of those already covered.” His simple health care plan simply calls on the Democrats to go after their interest groups – trial lawyers and unions – and ignore the rest of the factors undermining our health care system. A convenient position to take while writing for a right-wing publication.

He dismisses the consensus of economists (“The whole concept of stimulus is bogus”) with a single clause (“as the borrowing of the money consumes at least as much stimulus as it generates.”) He suggests Al Gore is an eco-terrorist and calls the plans to stop exacerbating climate change, “insane.” In short, Conrad Black throws every bit of feces he can – working off of the standard right-wing playbook.

But finally, he has a few interesting things to say – after spending the bulk of his piece proving his right-wing bona fides. He suggests a few taxes to raise – and here is what I find interesting. His first two ideas are standard: a strong gasoline tax and a tax on financial transactions. Both of these are much favored by those who know something about policy, but face serious obstacles in terms of the politics of getting them done. But his last idea is interesting and new (or at least new to me.)

[A] small, self-terminating wealth tax could be imposed on very large fortunes, to provide funds for those taxpayers to engage in legitimate anti-poverty projects they would devise themselves and have certified, like charities. The tax would decline as sensibly defined poverty declined, and would evaporate when poverty did. The greatest commercial minds in the private sector would have a vested interest in eliminating poverty and would produce a variety of imaginative methods of doing so.

I’m not sure how well this idea would work – but it is quite interesting. It seems to be an idea very much based on right wing presumptions but to have a traditionally liberal goal: using government policy to reduce poverty. And Black certainly has a personal history that leads him to understand the very wealthy he is attempting to manipulate with this tax. That said, it addresses itself not to the escalating divide between the rich and poor, but merely to reducing poverty. It presumes the rich are “the greatest commercial minds” when it seems evident to most liberals (including to me) that chance and luck play as great a role in success as mental skill. What is intriguing is that it attempts to marry the self-interest of the rich with the reduction of poverty. Whether this is the best means or not, it is a worthy goal.

Categories
Economics Financial Crisis

Playing BrickBreaker While the Financial System Burned

[digg-reddit-me]The weekend of September 12 through September 14 – before the collapse of Lehman Brothers on Monday, September 15, 2009 and the near collapse of the world financial system that followed – was a frenzied one in the financial world. By this point, everyone knew huge events would occur: perhaps massive government bailouts, or perhaps multiple mergers of titans of finance, or if all else failed, a cascading series of major business failures. Treasury Secretary Hank Paulson, New York Federal Reserve Chairman Tim Geithner, and Securities and Exchange Commissioner Chris Cox thus convened a meeting of the “heads of the families” – the CEOs and top management of the big Wall Street firms – at the Federal Reserve Bank of New York on Liberty Street in downtown Manhattan to try to, through collective action, stave off disaster.

Paulson and Geithner seemed to be trying to recreate the “Drama at the Library” that averted the Panic of 1907, in which J. P. Morgan almost single-handedly averted a financial catastrophe by himself, as he used his own fortune and cajoled other major bankers to inject liquidity into the stock markets and bond markets to keep them active. The high point occurred when Morgan locked the bankers and the trust company officials in his library to force them to reach a consensus on how to save the insolvent trust companies. A few years later, the Federal Reserve was created in a large part to mimic what J. P. Morgan had done in managing that financial crisis.

As options for Lehman began to dwindle on this September weekend, and its moment of insolvency came closer, Paulson and Geithner summoned the heads of the current elite of Wall Street to a room and told them to come up with a plan – if necessary using their own money to aid another company in the purchase of Lehman. These were the men (and some women) who were paid the big bucks to make the big decisions – all put in the same room with the goal to avert the disaster that they could all see would rock their industry. Yet despite all the power and the extraordinary circumstances, these top bankers were reluctant to help a competitor unless they could see their own upside, and were convinced that Washington would step in. As Andrew Ross Sorkin, reporter for the New York Times and author of Too Big to Fail, reported, conversations took place in which these top bankers made it clear that even as they felt a responsibility to the world at large, their first responsibility was to their shareholders. Systematic risk was the responsibility of the federal government, they felt.

Even with all these decision-makers gathered in a room, Sorkin explained that the “CEOs and their underlings” felt that “Despite the grave assignment they’d been given, there was little they could actually accomplish on the spot.” The top executives knew that the people with “real expertise” to figure out what could be done were doing their work elsewhere – the numbers people working for them who could understand high finance and Lehman Brothers’ balance sheet – and would let their bosses know their conclusions.

So, the executives, twiddling their thumbs, did what they could to pass the time. They did “vicious imitations of Paulson, Geithner, and Cox:

“Ahhhh, ummmm, ahhhh, ummmm,” one banker muttered, adopting Paulson’s stammer. “Work harder, get smarter!” another shouted, mocking Geither’s Boy Scoutish exhortations. A third did his best Christopher Cox, whom they all were convinced had little understanding of high finance: “Two plus two? Um – could I have a calculator?”

And of course:

Colm Kelleher, Morgan’s CFO, had begun playing BrickBreaker on his BlackBerry, and soon an unofficial tournament was under way, with everyone competitively comparing scores.

No word yet on what top score won the tournament.

As well all know, several days after the BrickBreaker tournament, Paulson, Bernanke, Geithner, and the Congress gave in and bailed out the executives in the room as they realized though these executives controlled vast amounts of capital, they were not willing or able to save their competitors and preserve the financial system in order to save themselves.

Most of the information from page 326 of Andrew Ross Sorkin’s Too Big to Fail. Quite an interesting book – well worth a read.

[Image by Cyndie@smilebig! licensed under Creative Commons.]

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Barack Obama Criticism Economics Financial Crisis National Security Politics The Bush Legacy The Media The Opinionsphere The War on Terrorism

Dueling Op-Eds

Last Friday saw two sets of dueling op-eds on the opinion pages of the Washington Post and the New York Times.

At the Post, Charles Krauthammer, professional pundit, accuses the Obama administration of aiding Khalid Sheikh Muhammad in giving “voice” to the “propaganda of the deed” that was September 11. Krauthammer accepts no justification offered and launches one after another attack on the very idea of trying KSM, and most of all, on the Obama administration for bringing him to trial. Reading Krauthammer, it is difficult to understand why Attorney General Holder made the decision he did. It seems unfathomable and downright un-American.

Elsewhere in the section, two former top Bush Justice Department officials – Jack Goldsmith and James Comey – make the case that Attorney General Holder’s decision was reasonable, though there may be reason to disagree with it. They go through some of the advantages of the Attorney General’s decision, and conclude:

The wisdom of that difficult judgment will be determined by future events. But Holder’s critics do not help their case by understating the criminal justice system’s capacities, overstating the military system’s virtues and bumper-stickering a reasonable decision.

Over at the New York Times, David Brooks and Paul Krugman have a more evenly balanced argument over Timothy Geithner.

Brooks’s conclusion was that Geither’s intervention was effective:

On the other hand, you would also have to say that Geithner, like many top members of the Obama economic team, is extremely context-sensitive. He’s less defined by any preset political doctrine than by the situation he happens to find himself in…In the administration’s first big test, that sort of pragmatism paid off.

Krugman though concludes Geither is part of the problem, and even if he got the short-term economics right, the political situation won’t allow for any significant course corrections because the initial steps were so against the popular mood:

Throughout the financial crisis key officials — most notably Timothy Geithner, who was president of the New York Fed in 2008 and is now Treasury secretary — have shied away from doing anything that might rattle Wall Street. And the bitter paradox is that this play-it-safe approach has ended up undermining prospects for economic recovery.

It’s interesting to see such jousting on the same op-ed page. As opposing sides make their case, one can often learn more than from reading mere news.

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Barack Obama Catholicism China Criticism Economics Financial Crisis Gay Rights Politics The Bush Legacy The Media The Opinionsphere

Chinese Racism, Andrew Ross Sorkin’s Power, Andrew Sullivan’s Catholicism, America’s Decline (?), and Megan Fox’s Savvy Self-Creation

Chinese Racism. Reiham Salam posits that China’s ethnocentrism will retard it’s development into a superpower – especially given the demographic obstacles it is facing thanks to it’s One Child Policy.

Andrew Ross Sorkin’s Power. Gabriel Sherman describes the world of Andrew Ross Sorkin, star financial reporter for the New York Times, in New York magazine. He describes the unique amount of power Sorkin has accumulated in financial circles, all from the paper that was traditionally lagging behind the others in financial journalism. Attending a book party, Sherman observes the way Sorkin is treated by the many powerful titans of Wall Street:

“What you noticed when you went was how many powerful Wall Street people were there to kiss his ring,” adds The New Yorker‘s Ken Auletta, a party guest. “He’s a 32-yeard old guy, and there were all these titans of Wall Street crowding around to say hello and make nice to Andrew.”

That type of praise only makes your job harder of course.

Andrew Sullivan’s Catholicism. Andrew periodically writes these moving pieces about his Catholicism, and why he is still a Catholic. Yesterday, in an emotional response to a number of recent events, he writes:

Maybe I am too weak to leave and be done with it. But in my prayer life, I detect no vocation to do so. In fact, in so far as I can glean a vocation, it is to stay and bear witness, to be a thorn in the side, even if the thorn turns inward so often, and hurts and wounds me too.

I stay because I believe. And I stay because I hope. What I find hard is the third essential part: to love. So I stay away when the anger eclipses that. But the love for this church remains through the anger and despair: the goodness of so many in it, the truth of its sacraments, the knowledge that nothing is perfect and nothing is improved if you are not there to help it.

America’s Decline (?). John Plender writing in the Financial Times pokes several more holes in the growing consensus that China’s power will soon eclipse America’s. Rather, he sees China as returning to it’s historic position of economic power – increasing relative to America, but not eclipsing it given the various problems they are facing.


Megan Fox’s Savvy Self-Creation. When I saw the New York Times Magazine was writing a major article about Megan Fox I was intrigued. What about her might be interesting enough to hold up a feature? It turns out that there was quite enough. Lynn Hirschberg writes about a starlet whose main focus is her own image, the character she plays in the media. Fox deliberately holds herself apart from this character:

I’ve learned that being a celebrity is like being a sacrificial lamb. At some point, no matter how high the pedestal that they put you on, they’re going to tear you down. And I created a character as an offering for the sacrifice. I’m not willing to give my true self up. It’s a testament to my real personality that I would go so far as to make up another personality to give to the world. The reality is, I’m hidden amongst all the insanity. Nobody can find me.

As she studies Marilyn Monroe, Ava Gardner, Elizabeth Taylor, and other Hollywood icons, almost all of whom were overwhelmed by their characters, Fox seems to be searching for lessons she can take herself:

Monroe was her own brand before branding existed. “She lived her whole life as a character playing other characters,” Fox said. “And that was her defense mechanism. But Marilyn stumbled and lost her way. She became overwhelmed by the character she created. Hollywood is filled with women who have tried to cope. I like to study them. I like to see how they’ve succeeded. And how they’ve failed.”

Hirschberg didn’t seem to know whether Fox’s obsession with Monroe and other starlets would foreshadow Fox’s own decline, or whether it could be managed. The last lines Hirschberg leaves her readers with are plaintive:

In a few short weeks, she had gone from happily outrageous to virginal and controlled. It was, perhaps, a healthier attitude, but pale by comparison. “I have to pull back a little bit now,” Fox said. “I do live in a glass box. And I am on display for men to pay to look at me. And that bothers me. I don’t want to live that character.”

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Barack Obama Criticism Economics Election 2008 Financial Crisis Gay Rights Health care New York City Politics The Opinionsphere

Must-Reads of Last Week: Data Warfare, Gay Rights, McCaughey, Summers, and Yankee Tickets

Data Warfare. Marc Ambinder got hold of Catalist’s after-action report on the 2008 elections – describing how effective the Democrats were in pushing their voters to vote. According to the report, the combination of the effectiveness of data targeting and the pull of Obama’s candidacy made the difference in at least four states: Ohio, Florida, Indiana in North Carolina.

Gay Rights. Andrew Sullivan takes on the Weekly Standard‘s arguments in favor of Don’t Ask Don’t Tell and continues his crusade to push the gay rights movement to agitate for change instead of simple accepting leaders who make the right noises. He continued over the weekend:

The president wasn’t vilified on the streets on Sunday as he has been recently. We are not attacking the president; we are simply demanding he do what he promised to do and supporting the troops who do not have the luxury of deciding to wait before they risk their lives for us.

We know it isn’t easy; but the Democrats need to know we weren’t kidding. You cannot summon these forces and then ask them to leave the stage. We won’t.

Remember: we are the ones we’ve been waiting for. Not him, us.

A Professional Health-Care Policy Liar. Ezra Klein recommends: “Michelle Cottle’s take down of professional health-care policy liar Betsy McCaughey is deservedly vicious and unabashedly welcome.” The entire article is illuminating, but I want to point out Cottle’s nice summary of McCaughey’s brilliance at debate:

Ironically, her familiarity with the data, combined with her unrecognizable interpretation of it, makes it nearly impossible to combat McCaughey’s claims in a traditional debate. Her standard m.o. (as “Daily Show” host Jon Stewart recently experienced) is to greet each bit of contradictory evidence by insisting that her questioner is poorly informed and should take a closer look at paragraph X or footnote Z. When those sections don’t support her interpretation, she continues to throw out page numbers and footnotes until the mountain of data is so high as to obscure the fact that none of the numbers add up to what she has claimed.

But it is Klein, in recommending the article that gets at the heart of why McCaughey is so effective:

She’s among the best in the business at the Big Lie: not the dull claim that health-care reform will slightly increase the deficit or trim Medicare Advantage benefits, but the claim that it will result in Death Panels that decide the fate of the elderly, or a new model of medical ethics in which the lives of the old are sacrificed for the good of the young, or a government agency that will review the actions of every doctor. McCaughey isn’t just a liar. She’s anexciting liar.

Summers. Ryan Lizza profiles Larry Summers for the New Yorker. Read the piece. This excerpt isn’t typical of the approach of the Obama team that the article describes, but it touches on something I plan on picking up later:

Summers opened with a tone of skepticism: The future of activist government was at stake, he warned. If Obama’s programs wasted money, they would discredit progressivism itself. “I would have guessed that bailing out big banks was going to be unpopular, and bailing out real companies where people work was going to be popular,” he said. “But I was wrong. They were both unpopular. There’s a lot of suspicion around. Why this business but not that business? Is this industrial policy? Is this socialism? Why is the government moving in?”

Noblesse oblige. Wright Thompson for ESPN explains the reason for the exorbitant prices and examines their affect on the loyalty of longtime fans. The article provides a close-up view of the  of the corrosive effect of the concentration of wealth and Wall Street culture – and how it destroys what the very things it enriches.