Posts Tagged ‘Financial Times’

Must-Reads of the Week: SWAT, Google’s News Plans, MTA Motto, Peanuts, Tea Party Feminism, Republican Pravda, Fiscal Hangover, New York’s Tyranny, Brooks on the Military, and Facebook Backlash

Friday, May 14th, 2010

1. SWAT antics. Radley Balko does some follow-up reporting on the now infamous video of the SWAT team raid in Missouri in which 2 dogs were shot:

[D]espite all the anger the raid has inspired, the only thing unusual thing here is that the raid was captured on video, and that the video was subsequently released to the press. Everything else was routine… Raids just like the one captured in the video happen 100-150 times every day in America.

2. Google’s News Plans. James Fallows discusses how Google is trying to save the news industry.

3. If you see something… Manny Fernandez in the New York Times discusses the impact and coinage of the ubiquitous phrase, “If you see something, say something.”

It has since become a global phenomenon — the homeland security equivalent of the “Just Do It” Nike advertisement — and has appeared in public transportation systems in Oregon, Texas, Florida, Australia and Canada, among others. Locally, the phrase captured, with six simple words and one comma, the security consciousness and dread of the times, the “I ♥ NY” of post-9/11 New York City. [my emphasis]

4. Artful Grief. Bill Waterson — creator of Calvin & Hobbes — reviewed a biography of Charles Schultz for the Wall Street Journal a few years ago — writing on the ‘Grief’ that Made Peanuts Good. It’s several years old but well worth reading.

5. Tea Party Feminism. Hanna Rosin of Slate evaluates the Tea Party as a feminist movement. And her reporting surprised me at least.

6. Republican Pravda. Jonathan Chait collects a few Weekly Standard covers to illustrate the changing right-wing portrayal of Obama over the past year. He identifies the passage of the health care bill as a turning point:

Now that Obama has won his biggest legislative priority and is closing in on at least one other important win, the tone is change. The hapless patsy has become the snarling bully. The lack of Republican support for Obama’s agenda, once a credit to Republican tough-mindedness, is now blamed upon Obama’s stubbornness. Here is a recent cover of Obama–the nefarious, but powerful, overseer…

7. Fiscal Hangover. Gillian Tett of the Financial Times explains the successful approach the Irish are taking to their fiscal crisis: treat it like a hangover.

8. The Tyranny of New York. Conor Friedersdof complains about the tyranny of New York — but I will excerpt his praise:

Even if New York is a peerless American city, an urban triumph that dwarfs every other in scale, density, and possibility; even if our idea of it is the romantic notion that Joan Didion described, “the mysterious nexus of all love and money and power, the shining and perishable dream itself;” even if you’ve reveled in the fact of the city, strutting down Fifth Avenue in a sharp suit or kissing a date with the skyline as backdrop while the yellow cab waits; even if you’ve drunk from the well of its creative springs, gazing at the Flatiron Building, or paging through the New York Review of Books on a Sunday morning, or living vicariously through Joseph Mitchel or E.B. White or Tom Wolfe or any of its countless chroniclers; even if you love New York as much as I do, revering it as the highest physical achievement of Western Civilization, surely you can admit that its singularly prominent role on the national scene is a tremendously unhealthy pathology.

Despite the rent, the cold, the competition, the bedbugs, the absurd requirements for securing even a closet-sized pre-war apartment on an inconvenient street; the distance from friends and family, the starkness of the sexual marketplace, the oppressive stench of sticky subway platforms in the dog days of August; despite the hour long commutes on the Monday morning F Train, when it isn’t quite 8 am, the week hardly underway, and already you feel as though, for the relief of sitting down, you’d just as soon give up, go back to Akron or Allentown or Columbus or Marin County or Long Beach — despite these things, and so many more, lawyers and novelists and artists and fashion designers and playwrights and journalists and bankers and aspiring publishers and models flock to New York City.

I don’t quite get Friedersdof’s complaint to be honest. What would be improved if there were more sitcoms taking place in Houston?

9. Military Flow Chart. David Brooks analyzes the military’s adaptation of counterinsurgency as a case study in the flow of ideas in entrenched organizations.

10. Facebook Backlash. Ryan Singel of Wired has one of many pieces in the past week fomenting the growing Facebook backlash:

Facebook has gone rogue, drunk on founder Mark Zuckerberg’s dreams of world domination. It’s time the rest of the web ecosystem recognizes this and works to replace it with something open and distributed.

[Image by me.]

Obama’s pragmatic ambitions

Thursday, March 4th, 2010

Clive Crook too easily descends into the “pox on both their houses” heuristic of trying to damn Republicans and Democrats equally so as not to take sides when he’s taking sides. But heuristics are useful for a reason, and here Crook’s analysis is near perfect:

Sadly for the president, the left objects to his pragmatism more than it applauds his ambitions, and the centre and right object to his ambitions more than they welcome his pragmatism.

The only issue I have here is with Crook’s lumping of the center and right together. Obama is still supported by a majority of Americans (or a near majority.) His biggest issue has been the re-polarization of the right so determinedly against his pragmatic ambitions, and their hysterical objections, which have caused concern among the center.

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

Friday, December 11th, 2009

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.”

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

Friday, November 13th, 2009

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.”

Mirror Neurons, Iran’s Fissures, Yglesian Insights, The Deficit Crisis, Rare Minerals

Friday, June 12th, 2009

Once again, it’s Friday, so it’s time for my weekend reading recommendations.

1. Mirror Neurons. Daniel Lametti explains the importance of mirror neurons in the Scientific American.

2. Iran’s Fissures. Roger Cohen has been prominently writing about Iran for the past year or so – predicting and pushing for a thaw in relations. Now, on the cusp of an important election, Roger Cohen discusses Iran:

Iran, its internal fissures exposed as never before, is teetering again on the brink of change. For months now, I’ve been urging another look at Iran, beyond dangerous demonization of it as a totalitarian state. Seldom has the country looked less like one than in these giddy June days.

3. Yglesian insights. Matt Yglesias’s blog has long been on my must-read list – but he’s offered some especially insightful observations in various contexts about the free market in recent weeks. Here Yglesias speculates about the advantages of non-profit-maximizing corporations in a free market:

After all, profit-maximization is not a natural form of human behavior. I think it’s best understood as a very idiosyncratic kind of pursuit. It happens to be one that’s economically rewarded because with money to invest tend to want to invest it with would-be profit-maximizers. Thus, in fields of endeavor where the ability to raise large sums of capital on reasonable terms is a huge advantage, a profit-maximization impulse winds up being a huge advantage.

In a later post about health care, Yglesias makes a related point:

[P]art of what’s wrong with the world is that the very same people who spend a lot of time cheerleading for free markets and donating money to institutions that cheerlead for free markets—businessmen, in other words—are the very people who have the most to gain from markets being totally dysfunctional. The absolute worst place on earth you can find yourself as a businessman is in the kind of free market you find in an Economics 101 textbook. As a market approaches textbook conditions—perfect competition, perfect information, etc.—real profits trend toward zero. You make your money by ensuring that textbook conditions don’t apply; that there are huge barriers to entry, massive problems with inattention, monopolistic corners to exploit, etc.

4. How to tackle the deficit crisis. Set off by David Leonhardt’s excellent look at the forthcoming deficit crisis, the Opinionsphere quickly took this up as a theme of the week. Noah Millman at The American Scene had the best take on how to tackle the deficit crisis – once we decide to get serious. One of the main ways he suggests is to reform the tax code:

We have an income tax that is riddled with deductions that undermine its purported progressivity, and we rely on increasingly steep progressivity to justify every additional change to said code. A 1986-style reform that eliminated many deductions and lowered rates would not only be a likely booster of the economy, but would probably raise revenue – certainly on the corporate side.

5. China’s Great Game. And of course, the Financial Times reported that China has almost cornered the world market in rare minerals needed for most high tech products. I’m looking forward to some analyst really following up on this and explaining what implications – if any – this has.

Theories of the Financial Crisis: Animal Spirits

Monday, May 11th, 2009

David Brooks is a reliable barometer of the opinions and beliefs of the Washington establishment (and I don’t mean that as an insult.) The figure he cuts is a rather odd combination of an amateur (but insightful) anthropologist and a insider protecting the system. All of this makes it significant to note that David Brooks has on several occasions stated that the root of this financial crisis is a “loss of confidence.” He has stated this in several of his columns, including his one immediately following the September 15 freefall:

At its base, the turmoil wracking the world financial markets is a crisis of confidence.

Many of Geithner’s critics have said that he is treating the financial crisis primarily as a liquidity crisis – which is defined as “a ‘general feeling of mistrust in the banking system’ conducting to a temporary disappearance of credit.” This is a common form that a crisis of confidence in the financial system takes.  

The Congressional Oversight Panel in their report [pdf] written to evaluate the TARP bailouts, for example, described what they saw as one of Geithner’s asusmptions :

One key assumption that underlies Treasury’s approach is its belief that the system-wide deleveraging resulting from the decline in asset values, leading to an accompanying drop in net wealth across the country, is in large part the product of temporary liquidity constraints resulting from nonfunctioning markets for troubled assets. The debate turns on whether current prices, particularly for mortgage-related assets, reflect fundamental values or whether prices are artificially depressed by a liquidity discount due to frozen markets – or some combination of the two.

Paul Krugman has also often made this point – stating that Geithner seems to be acting as if we were in a liquidity crisis – in which the loss of confidence is the cause of the problem – instead of a solvency crisis – in which the loss of confidence is a symptom of the problem. 

Geithner, for his part, rejects this assertion that he is treating the problem as a liquidity crisis. When asked, he said it was, as all financial crises are, a combination of the two.

If this is primarily a crisis of confidence, there have been a number of historic examples of how these were contained. For example, this is a description of the resolution of the Panic of 1907 – in which J. P. Morgan’s timely intervention demonstrated how this could be done:

Shipments of gold were on the way from London to New York, and confidence had returned to the French Bourse, “owing,” reported one paper, “to the belief that the strong men in American finance would succeed in their efforts to check the spirit of the panic.” During a panic, confidence is almost as good as gold.

As politicans saw how these crises could be contained – and as they realized Morgan who had successfully beaten back several of these panics was getting near his end – they created the Federal Reserve to officially take on the role Morgan had been unofficially occupying, the lender of last resort and de facto regulator. 

As panics are short, they generally do not affect the fundamentals of the economy – but in a liquidity crisis such as this, restoring confidence is a more delicate task. It involves restoring what John Maynard Keynes referred to as “animal spirits” – those positive energies that cause people to be trusting and optimistic that are essential to a thriving economy. As Keynes wrote in his seminal work, The General Theory of Employment, Interest, and Money:

Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than mathematical expectations, whether moral or hedonistic or economic. Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits – a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. [my emphasis]

This idea of animal spirits has created an opening for what appears to be Obama’s favorite branch of economics – behavioral economics. While economics generally treats human beings as homo economics, rational, self-interested (indeed, selfish), individuals who act entirely to serve their best interest (and who know what their best interest is) – behavioral economics takes a more scientific view of human beings. They try to understand human behavior through testing and real-life examples rather than through theoretical models. Some of Obama’s top advsiors from Cass Sunstein to Austan Goolsbee are known to be proponents of behavioral economics. And a recent article by Chrystia Freeland in the Financial Times, suggests that Obama’s administration may be using behavioral economics to solve this crisis, describing how “emotions might yet save the economy“:

Judging by the upbeat economic message we have been hearing from the White House, the Treasury and even the Federal Reserve over the past six weeks, that is a shrewd guess. The authors argue that “we will never really understand important economic events unless we confront the fact that their causes are largely mental in nature”. Our “ideas and feelings” about the economy are not purely a rational reaction to data and experience; they themselves are an important driver of economic growth – and decline.

I don’t have the expertise to judge if this crisis is one of solvency or confidence or whatever else it may be. But at this point there is a feeling – almost of a wind at the back of the economy. (I certainly hope this is the case.) It does seem to me that the lack of confidence is a major cause (rather than merely a symptom) of this crisis; and Obama’s gradualist approach, with every move telegraphed and thus predictable – seems to be generating confidence.

Must-Reads of the Week

Friday, May 8th, 2009

1. Inhuman. Andrew Sullivan, who has been one of the most insightful commenators on torture, discusses the term “inhuman”:

It’s odd, isn’t it, that we use this word to describe abuse and torture of prisoners. The reason it’s odd is that I’m not sure any animals torture. Yes, they can kill and maim and inflict dreadful suffering in the process of killing, eating or fighting. But the act of intentionally exploiting suffering, of lingering over some other being’s pain – using it as a means to an end – is not an animal instinct, unless I’m mistaken.

And so torture is in fact extremely human; it represents in many ways humankind’s unique capacity for cruelty.

2. 30 Rock. Jonah Weiner discusses 30 Rock’s odd conservative streak at Slate. The explanations he posits for this conservatism are perhaps beside the point, but interesting nonetheless:

Of course, 30 Rock was conceived during the reign of George W. Bush, which might help explain its ideological complexity. The show has been consistently critical of Bush, but perhaps 30 Rock began as a way to explore—and mine for gallows humor—the crisis of identity many liberals began to feel in his second term, when the Karl Rove playbook had seemingly replaced the laws of physics, when the “reality-based community” (including Liz Lemon’s Upper West Side) felt like an island populated by the marginal, flip-flopping, arugula-munching few.

3. Animal Spirits. Chrystia Freeland writes for the Financial Times that the Obama team seems to have accepted the premise of a recent book by behavioral economists about economic crises:

Judging by the upbeat economic message we have been hearing from the White House, the Treasury and even the Federal Reserve over the past six weeks, that is a shrewd guess. The authors argue that “we will never really understand important economic events unless we confront the fact that their causes are largely mental in nature”. Our “ideas and feelings” about the economy are not purely a rational reaction to data and experience; they themselves are an important driver of economic growth – and decline.

4. A Taliban Strategist Speaks. To The New York Times. Perhaps the most interesting article I have read about the Taliban’s plans in the Af-Pak region – though I have to wonder why this man would be speaking to a Western newspaper about the Taliban’s strategy. That said, you can judge the article for yourself. I pass it on as it seemed plausible to me:

One Pakistani logistics tactician for the Taliban, a 28-year-old from the country’s tribal areas, in interviews with The New York Times, described a Taliban strategy that relied on free movement over the border and in and around Pakistan, ready recruitment of Pakistani men and sustained cooperation of sympathetic Afghan villagers.

His account provided a keyhole view of the opponent the Americans and their NATO allies are up against, as well as the workings and ambitions of the Taliban as they prepared to meet the influx of American troops.

It also illustrated how the Pakistani Taliban, an umbrella group of many brands of jihadist fighters backed by Al Qaeda, are spearheading wars on both sides of the border in what for them is a seamless conflict.

5. Fool’s Gold. This one is actually a must-listen podcast of a talk given at the London School of Economics. Gillian Tett is a journalist for the Financial Times who recently wrote a book about the financial crisis and what led to it from her view as someone with a background in anthropology reporting who was reporting on derivratives before it was an exciting beat.

Bonus: Polar Insanity. Tim Wu writes in Slate about the perplexing desire of so many people – including himself –  to make the expensive trips to the polar regions:

Every so often, an iceberg floats by that is grander and more beautiful than any cathedral, though it lacks any history or even a name. What’s almost as shocking as its appearance is its anonymity: beauty untainted by fame. Most of these perfect objects will never be seen by human eyes. They float around and slowly melt by themselves, unappreciated and utterly indifferent to that fact.

Unnamed, plentiful beauty feels unearthly and almost decadent, like Sinbad the Sailor’s cave. It is alien to the typical human experience of finding everything we really desire to be scarce, expensive, or behind some temple curtain. It has always struck me that no one bothers to build museums in places of extreme natural beauty, and in Antarctica the effect is magnified. If an iceberg the size of Manhattan showed up outside town one day, why would you bother going to an art exhibit?

Profiling Holy Cross Grad Mark Walsh

Wednesday, May 6th, 2009

Devin Leonard for the Times wrote this weekend about Mark Walsh, formerly of Lehman Brothers. The article portrays him as one of Wall Street’s top deal makers whose decisions were one of the major factors that led directly to the fall of the bank. Yet the article is also strangely positive in describing Walsh. 

What stood out for me most were the numerous connections Walsh has to me. As the article describes his brief biography:

Mr. Walsh grew up in Yonkers, the son of a lawyer who once served as chairman of the New York City Housing Authority. He attended Iona Preparatory School in New Rochelle; the College of the Holy Cross, where he majored in economics; and, finally, the Fordham University School of Law.

And then a bit later:

He bankrolled Tishman Speyer in its purchase of the Chrysler Building in 1997.

I am a fellow alumnus of Holy Cross – a fact which by itself causes me to be irrationally positive about individuals, from Chris Matthews to Bob Cousy to Obama speechwriter Jon Favreau. He also went to Fordham Law – which is one of the schools I am considering. And I currently work in the Chrysler Building. All tenuous connections, but enough to make me root for the guy.

Of course, it’s hard to get around the damning nature of this reporting:

[I]t wasn’t long before Mr. Walsh found a way to do an even bigger deal with Mr. Speyer’s company. In May 2007, Lehman and Tishman Speyer offered to buy Archstone-Smith Trust, a $22 billion deal struck at the peak of an already dangerously frothy market. Tishman Speyer put up a mere $250 million of its own equity. Lehman, in a 50-50 partnership with Bank of America, put up $17.1 billion of debt and $4.6 billion in bridge equity financing.

The most enlightening aspect of the article were the way in which it spotlighted the oddness of what was going on. Leonard describes one of Walsh’s biggest clients pulling out his money saying that:

 [T]he real estate market — and, indeed, the entire financial system behind it — was becoming increasingly bizarre.

In an example of this from 1997 – well before this observation – Leonard describes one of Walsh’s coups – how he managed to steer Lehman clear of the financial crisis resulting from the failure of Long Term Capital Management that Nassim Nicholas Taleb had predicted at the time:

On the eve of the financial crisis brought by the near collapse of Long Term Capital Management in 1998, Lehman flushed $3.6 billion in commercial real estate loans through its securitization machine, avoiding some of the losses that crippled other firms, including Nomura and Credit Suisse.

I hate to say it – but I have no idea what that means. And that’s not unintional – at least according to a lecture given by Financial Times reporter Gillian Tett at the London School of Economics. (A lecture very much worth listening to – and which I will blog about later.)

But to demonstrate the oddly positive take on Walsh, here’s how Leonard concludes his piece:

His friends say they believe that Mr. Walsh will eventually emerge from the rubble of Lehman’s collapse and return to deal-making.

“Guys like this are very rare,” says Mr. Rosen, the developer. “He’ll be back. He picked up the phone and people listen. Nobody can take that away from him.”

Back in the game perhaps – but hopefully a bit wiser.

Gallows Humor from an FT Employee

Tuesday, March 24th, 2009

Daniel Drezner shares some gallows humor from a Financial Times employee:

[H]e described his niche as, “being in one industry that’s fucked writing about another industry that’s fucked.” 

Drezner had asterisks in place of the “uck” though.

Clive Crook’s “Everything For Nothing”

Monday, March 9th, 2009

Clive Crook in his new Financial Times column faults Obama for:

telling almost all taxpayers they can have everything for nothing.

This is his second column on the subject – and he bases this claim on a small portion of Obama’s overall plan. He does not fault Obama for proposing to increase the top marginal tax rate from 35% to 39%, as Bush’s tax cut legislation actually mandates unless it is amended; he does not fault Obama for pusing for health care reform; he does not fault Obama for pursuing cap-and-trade legislation; he does not fault Obama for any range of allegedly “socialist” policies – rather he takes issue with the fact that Obama plans to cap the deduction for charitable contributions, so that those making over $250,000 get the same percentage credit for a charitable contribution as someone making less than $250,000. 

In addition to this rather minor tweak of our tax system (which Crook points out will generate a large amount of revenue thanks to the extreme concentration of wealth in our society), Crook raises the more substantial issue of how health care reform and cap-and-trade legislation, both of which he favors, are being paid for:

[T]he revenues from cap and trade are spent mainly on wage subsidies and tax cuts tilted toward the working poor. The down-payment on the cost of healthcare reform is financed by an additional tax increase on the rich.

Crook seems to be trying to conjure that bane of neo-liberals and conservatives alike – class warfare! All of this based on the assumption contained in the beginning, that Obama is “telling almost all taxpayers they can have everything for nothing.”

But is this so? Crook bases his argument on the presumption that the status quo is fair. He says that if Obama is planning on paying for health care reform without levying any additional taxes on the majority of Americans, then this majority is getting something – or in the exaggerated vernacular of those who make opinons for a living, “everything” – for nothing. 

But this same majority of Americans getting “something for nothing” here allows a very small minority to control a far disproportionate amount of resources. The legitimacy of these social bargains – whereby those with power and wealth are allowed to keep their power and wealth peaceably – rarely enters into the minds of those who benefit most from the bargain until we enter periods of unrest and instability. In many parts of the world – China, Pakistan, Russia, Latvia, Bulgaria, Iceland – the current crisis is calling into question the legitimacy of their social bargains in fundamental ways. In America, this crisis is calling into question the historically recent amendments to our social bargain from the Reagan revolution of the 1980s. 

The crisis might have prompted a sort of reactionary liberalism that sought to rollback the Reagan revolution in its entirety – much as Reagan’s reactionary conservatism sought to undo the Great Society. But instead, liberalism is guided by Barack Obama whose liberalism accepts some of Reagan’s most profound critiques and incorporates them into a new liberalism, leavened with both the wisdom of Edmund Burke and Friedrich Hayek.

Clive Crook’s invocation of the lazy masses being offered everything for nothing strikes me as a more refined take on Rick Santelli’s famous rant about the “losers” who took out loans they could not pay for. What strikes me about both sentiments is the sense of who the “losers” are – not the corporations and Wall Street bankers who lost the most. To call them “losers” may be morally appropriate but rings hollow when you’re speaking about those who benefited the most from our societal bargain. These “losers” may be feeling the pressure from our flagging economy but having benefited disproportionately during the boom of the past thirty years – and especially the Bush recovery – are still quite well-off. Those who “lost” the most also had the most – and still, after losing so much, often have more than the majority of the population. The real “losers” in the complete derogatory sense of the word as the individuals who took on mortgages they could not afford and now will be left with nothing but bad credit and the knowledge that they too contributed to the financial meltdown.

In other words, the real losers are not those whose prosperity (based on fees generated from borrowed money) is diminished, but those whose prosperity was never quite achieved as they borrowed money (generating the above-mentioned fees) to acquire some portion of their American dream of prosperity.

Crook while complaining about those being offered everything for nothing fails to acknowledge the system itself which has been redistributing wealth upwards for some time now. What – a different version of Crook might ask – did the 95% of Americans receive for allowing the top 5% to control most wealth? They received the promise of a growing economy that would lift everyone up – and the assurance that certain basic services would be provided, even to the least of our citizens. So, if the wealthy will be paying $4.10 more per day to help maintain the stability of the society which has provided them with the opportunity to become so wealthy, I wouldn’t call that something for nothing.