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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.]

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Posted in Barack Obama, Criticism, Economics, Financial Crisis, National Security, New York City, Politics, The Media, The Opinionsphere, The War on Terrorism, The Web and Technology, War on Drugs | 2 Comments »

Theories of the Financial Crisis: Greed

Thursday, May 21st, 2009


George Will may seek to defend greed (Or maybe not – it’s actually kind of hard to tell.) – along with Ayn Rand and other market fundamentalists.

But just about everyone else lists it as a fundamental cause of the financial crisis. Will tries to make the case that free markets punish greed. But what Will presumes is that an unregulated market is a free market – and on this fundamental point he is wrong. The market Will describes is not one heavily regulated by the government – but it is regulated by ebay which in this instance takes on the role of the government for this small market. The financial markets on Wall Street though were largely unregulated – especially the shadow banking system (which was created in such a way as to be unregulated) – and they were in this sense free from government interference. But they were controlled by a small number of individuals – and in this sense were part of a world where freedom was available only to a princely few. Will makes the point that greed is an immutable human characteristic – and thus does not account for the booms and busts of our business cycle (and of financial crises such as this.) But what does is the combination of perverse incentives for short-term profit (indeed a form of legal fraud), a relaxation of the regulations designed to keep the markets stable that tends to occur when Republicans have power, and greed.

There has always been an historical wariness in America about the combination of greed and concentrations of wealth – focusing on a national bank, on various financiers, on “the malefactors of great wealth” and indeed, on Wall Street. The people, in their wisdom, could see that this concentration of financial power undermined the democratic distribution of political power. But by the 1980s, there was an additional reason to be wary – as Ronald Reagan unleashed a money revolution. This money revolution – like all revolutions – was the commingling of many forces – globalization, the ad-hoc Bretton Woods II agreement, and the relaxation of regulations and reduction of taxes. This revolution helped to concentrate an increasing percentage of the world’s wealth in the hands of a small number of Wall Street (and also London) bankers. The function of these bankers – their expertise – was to balance risk and profit to their customers’ satisfaction – to maximize profit for themselves and their customers while minimizing (or controlling for) risks. As a small percentage of individuals accumulated more and more wealth around the world, these individuals entrusted more and more of this wealth to Wall Street bankers – and the more money the bankers controlled, the bigger their cut. As Michael Osinski explained in a piece for New York magazine:

When you’re close to the money, you get the first cut. Oyster farmers eat lots of oysters, don’t they?

This closeness to the money created an easy money culture – in which enormous sums money were distributed whether they was deserved or not and the culture began to prize attempts to satisfy the bottomless desire that is greed. Wall Street bankers took on the culture of gamblers – except with the market going up, everyone made money. The long boom began to create perverse incentives – as risks began to seem safer, as luck and a rising tide and short term profits made everyone seem like geniuses, they all became accustomed to a certain lifestyle. Financial innovations sought to overturn many of “the fundamental rules of banking” including “that default risk is an inevitable liability of the business.” The combination of innovation and the culture of greed and gambling led to greater and greater risks being taken.

As steady foundations of banking – both as a business and as a culture deteriorated – and as the cautionary tales of Oliver Stone’s Wall Street and Liar’s Poker morphed into guides – a new culture of excess developed – excessive greed, excessive pay, excessive drinking, excessive spending, excessive personal risks, and eventually excessive professional risks. Wall Street bankers began to betray all the symptoms of the easy money culture – like gamblers whose knew their earnings were ephemeral and that every up would be followed by a down to be followed by an up – as long as they could stay at the table. But as Matt Taibbi wrote,  “this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires…”

Osinski tells a story of how this easy money culture affected the individuals:

Now that I was spending more time on the floor, I wondered why the men’s room always stank. Then one afternoon at three, when I was in there taking a leak, I discovered the hideous truth. Traders had a contest. Coming in at eight, they never left their desks all day, eating and drinking while working. Then, at three o’clock, they marched into the men’s room and stood at the wall opposite the urinals. Dropping their pants, they bet $100 on who could train his stream the longest on the urinals across the lavatory. As their hydraulic pressure waned, the three traders waddled, pants at their ankles, across the floor, desperately trying to keep their pee on target. This is what $2 million of bonus can do to grown men.

This easy money culture warped the incentives at Wall Street firms as well – as they were structured in such a way as to generously reward short-term success (without controlling sufficiently for long-term failure.) Rather than being paid large salaries, most of a banker’s income was handed out in enormous bonuses based on yearly performance. As long as fees were generated, as long as this quarter’s profits were growing – bankers would be rewarded with enough profits to last a lifetime. This alone is enough of an incentive to cause massive fraud. But at the same time, the culture of Wall Street ensured that money would be spent ridiculously, ostentatiously, and quickly. 

Perhaps no one has been more articulate in his visceral disgust for the excesses of Wall Street than Matt Taibbi of Rolling Stone

[I]t’s time to admit it: We’re fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we’re still in denial – we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream.

The story of AIG – in its way – symbolizes better than anything else what this culture did to Wall Street. Back to Taibbi:

AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror. This is a company that built a giant fortune across more than a century by betting on safety-conscious policyholders – people who wear seat belts and build houses on high ground – and then blew it all in a year or two by turning their entire balance sheet over to a guy who acted like making huge bets with other people’s money would make his dick bigger.

A culture of greed and excess – a lack of respect for tradition – a market free only to a princely few – negligence bordering on fraud with regards to the evaluation or risk – and an increasing percentage of the world’s wealth concentrated in the hands of a few. Together, these were the recipe for this financial disaster. 

The problem with greed is that it is unsustainable. It exists in a cycle, like all unsustainable desires. Government regulation, like morality, seeks to control and channel greed in less destructive ways – to mitigate the effects of this cycle. The true cause of this financial crisis was not greed – but the ideology that held that finally the immutable human vice of greed had been overcome with clever financial innovation and the magic of the market.


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Posted in Economics, Financial Crisis, The Opinionsphere | 4 Comments »

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?

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Posted in Financial Crisis, Humor, National Security, Pakistan, Politics, The Bush Legacy, The Opinionsphere, The War on Terrorism | 2 Comments »

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.

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Posted in Criticism, Financial Crisis, Holy Cross | 2 Comments »

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