Tag: Matt Taibbi

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Barack Obama Health care Politics The Opinionsphere

Greenwald Jumps the Shark?

[digg-reddit-me]I am quite honestly shocked reading this piece from Glenn Greenwald yesterday. His reaction to defenses of Obama is quite visceral – and in fairness, I’m sure many of the attacks on him for attacking Obama have come from a similar type of unreasoned anger. But I expect more from a figure of Greenwald’s statute, of his intellect. His reaction – to be generous – mirrors those he is critiquing.

His attacks on Ezra Klein, who has been consistently fair-minded in evaluating the politics and policy of the health care debate in a manner of which Greenwald sometimes seems scarcely capable, are especially unfair. Klein has been strongly making the case that this bill, for all its faults, should be passed – against the Tea Partyers back in the late summer and now against progressives – all the while acknowledging flaws in the bill and the process. Thus, he has been taking on a number of important progressives recently – and in doing so, at least once, he found that his progressive opponent (Jane Hamsher) had made an arguments against this health care legislation that substantially misstated the facts of the case, as so much political propaganda does. Klein writes that of the list he is responding to:

Some of the list is purposefully misleading and is clearly aimed more at helping activists kill the bill than actually informing anyone about what is in the bill.

Klein then goes on to deal with each of the points Jane Hamsher raised in a substantive manner. Greenwald linked to this piece claiming that Klein is calling opponents of health care reform, “liars” (a word that appears nowhere in the piece) and then later in an update, insisted that Klein is part taking part in “coordinated efforts by the President’s loyal supporters to attack the credibility and character (rather than the arguments) of Obama critics.” Greenwald does acknowledge that “there has been some very responsible and informative debate among these various factions, the insults have flown in both directions, and it’s understandable that passions run high on an issue of this significance.” But then he goes right on to equate “campaigns by White House loyalists in government and the media to destroy the personal credibility and malign the character of the President’s critics” during the Bush years to out Valerie Plame as a secret agent to efforts today regarding health care.

Really?! This attack falls fall short to me – the type of hyperbolic rhetoric that generally leads me to take a several-week break from Greenwald. I mean – does this post by Nate Silver on “Why Progressives Are Batshit Crazy to Oppose the Senate Bill” which Greenwald specifically cites strike you as the equivalent of the demonization of Valerie Plame and Richard Clarke? I suppose that depends on whether or not you see the title as serious – or deliberately heightened language.

Don’t trust my take on this – read Klein’s piece, read Greenwald’s piece, read Hamsher’s piece, read Nate Silver’s piece – and see if your respect for Greenwald is diminished. Respond in the comments either way.

Greenwald likewise took the curious tact of defending Matt Taibbi. He slandered all critics of Taibbi as, like Ezra Klein, part of “coordinated efforts by the President’s loyal supporters to attack the credibility and character (rather than the arguments) of Obama critics.” But even the piece Greenwald linked to defends Taibbi against one of his critics concludes with this rather limited endorsement:

Personally, I love it that Taibbi exists, and I’m impressed that his 6,500-word screed (into which a great deal of work clearly went) in fact has very little in the way of factual errors, let alone “lies”. Yes, Taibbi is polemical and one-sided, and he exaggerates his thesis, and he’s entertaining; I daresay he’s learned a lot from watching Fox News. And no, I would never want to live in a world where everybody wrote like that.

This is roughly the opinion I, along with most admirers and critics of Taibbi, have. While hiding behind the fact checkers of Rolling Stone, Taibbi makes various un-fact-checkable statements (that also seem to be designed to convey his meaning without being subject to a lawsuit for defamation), for example:

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.

Ezra Klein, as usual, has an excellent substance-based critique. This is more than I can say for Greenwald’s visceral response. As I wrote earlier, Greenwald “creates his own politically stereotyped parody of Obama defenders, which he then viscerally, emotionally reacts to.” Yesterday’s post was more of the same, with just a bit less of the good Greenwald than usual.

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Categories
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.

Categories
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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Categories
Economics Financial Crisis Politics The Opinionsphere

Fact-Checking Taibbi: The Sarah Palin of Journalism?

Having cited Matt Taibbi’s well-read Rolling Stone article on Goldman Sachs in a few previous posts, it’s worth taking some time to air some fact-checks of it. (Complete article here.) Megan McCardle has dubbed Matt Taibbi “the Sarah Palin of journalism”  but I wonder what this makes McCardle – whose feeling-based objections to any of the health care reforms on the table seem different only in tone than Taibbi’s hysteric rants on financial companies.

Which is why I cite this article at The Big Money instead – which takes a fact-based rather than feeling-based – look at Taibbi’s article. The takeaway by Heidi Moore is about what I suspected:

The mammoth article disappointingly failed to provide the smoking gun that so many people on Wall Street—who have envied and admired and hated Goldman for much of this decade—would have been delighted to see.

Moore’s piece also points out some of the ways in which Taibbi’s article is misleading – and it’s worth a read. Unfortunately, I do not know have the expertise in the subject to adjudicate these disputes – which essentially involve whether Goldman Sachs was a player or the main player in these various financial disasters.

It’s worth taking a look at Moore’s piece if you were one of the many who has read Taibbi’s. But I think it was pretty clear to anyone reading Taibbi’s piece that it was deliberately over-the-top and overstated.

Categories
Economics Financial Crisis

Theories of the Financial Crisis: Goldman Sachs Did It!

[digg-reddit-me]Matt Taibbi most famously posited that the financial crisis was the result of Goldman Sachs’ self-interested manipulations. He saw this single investment bank as the malevolent force behind the latest financial crisis – as well as speculative bubbles throughout history:

The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money…The bank’s unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam, manipulating whole economic sectors for years at a time, moving the dice game as this or that market collapses, and all the time gorging itself on the unseen costs that are breaking families everywhere – high gas prices, rising consumer-credit rates, half-eaten pension funds, mass layoffs, future taxes to pay off bail-outs. All that money that you’re losing, it’s going somewhere, and in both a literal and figurative sense, Goldman Sachs is where it’s going: The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth – pure profit for rich individuals.

As over-the-top as Taibbi’s description might be, it wasn’t wholly inaccurate. Putting aside the exaggerated, macho, Hunter Thompson-esque prose, and even Felix Salmon, a mainstream blogger and financial writer for Reuters, finds a great deal of truth in this portrait of Goldman Sachs:

I don’t agree with all of Taibbi’s article, but I’m surprised at how much of it I do agree with…

Adding credence to this portrait of a massive bubble-making machine were the recent best-ever quarterly profits by Goldman in the midst of a recession for the rest of the country. Graham Bowley and Jenny Anderson of the New York Times summarized this state of affair simply in their piece:

Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs.

The free market digest The Economist immediately saw the significance of these profits so soon after government aid:

For a firm that probably would have collapsed without government capital, debt guarantees and fast-track approval to turn itself into a commercial bank (not to mention a multi-billion-dollar payout as a counterparty of American International Group), such largesse is cheeky at best, distasteful at worst. It has already drawn rebukes on Capitol Hill, even though Goldman has repaid the government’s $10 billion preferred-equity investment.

That Goldman Sachs was going to be a big winner in all of this was pretty evident as early as October when I included this as one of the 11 lessons I learned while trying to figure out the financial crisis: “Goldman Sachs always wins.” What was evident already was that – as Russell Roberts pointed out in the Times – Goldman Sachs had “won” the bailout game:

It is deeply disturbing that Lehman Brothers was a long-time competitor of Secretary Paulson’s former firm, Goldman Sachs. It is equally disturbing that the chief executive of CIT, Jeffrey Peek, has been a contributor to Republicans rather than Democrats. This could be mere coincidence. But the current and ad hoc bailout strategy inevitably creates suspicion and destroys faith in our economic and political system.

Aside from Taibbi – who sees Goldman’s tentacles at the root of most of America’s worst economic  moments through history – most observers do not see Goldman Sachs as the deliberate instigator of the current crisis. They see it instead as an opportunistic organization – one that navigated through the crisis with aplomb – as it saw its rivals vanquished and as it shored up its own business. It also played a significant role as the leader of the financial industry as it used political influence to push for various policies including a relaxation of regulation. The oversize influence of the financial industry should be the next Theory of the Financial Crisis I cover.

But the key point now is that Goldman Sachs – if successful in opposing most common-sense reforms – will be substantially to blame for the next crisis.

[Image by nydisccovery licensed under Creative Commons.]

Categories
Economics Political Philosophy The Opinionsphere

The Success of Goldman Sachs as a Repudiation of the Free Market

[digg-reddit-me]David Rothkopf – commenting on Goldman Sachs – sees their success as a repudiation of the free market – and I tend to agree with him:

I’m a dyed-in-the-wool capitalist. I love free markets. I hope a free market marries one of my daughters some day. But if some people have too many advantages and others simply can never catch up, the markets aren’t free, regardless of law or intent. Even if the advantages are in part derived from talent and hard work, fairness can remain an issue if other components of the success are linked to access, influence, history and other intangibles. [my emphasis]

From this insight comes the inevitable conclusion that – contrary to the doctrine of the right-wing – the government is not the antithesis of the free market, but rather plays an essential role in creating and maintaining it.

Goldman Sachs – with their obscene profits so soon after needing public assistance – demonstrate that our system has become less free and more feudal. As I wrote several weeks ago:

[T]he free market is effective because it prevents any small set of individuals from monopolizing decision-making. Especially in the world today with so much information available and events moving so quickly, the “right” business choices to make aren’t always clear. A free market – by allowing each business to make its own choice – prevents decision-making from falling victim to individual follies. But our current economic system – with it’s enormous corporations – ends up recreating the feudal system in which power is not centered in a single place, but in a handful of powerful “princes.” While these “princes” push for free market reforms, it is not in their interest to actually achieve this ideal free market – as Yglesias points out:

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.

George Will himself has pointed out that those “reforms” that are passed tend to be of a specific sort, following what Will calls, “the supreme law of the land…the principle of concentrated benefits and dispersed costs.” What free market supporters rarely seem to admit is that the free market exists not in spite of the government, but because of it. And today, our market is far from free because the government has failed to protect it – and has instead allowed the worst characteristics of capitalism (exploitation of labor; externalizing as much cost to society as possible, for eg. pollution) with the worst characteristics of socialism (concentration of power and limitation of competition) to create a kind of modern feudal society. In  this feudal society, freedom is enjoyed by the “princes” of finance and industry while the creative ferment of a real free market is formally protected but effectively quashed.

David Rothkopf expresses the same thing with different terminology:

These guys [at Goldman Sachs] operate as ultra-citizens in our society, virtually able to tell the government to heel and fetch in ways the rest of us can only fantasize about.

Warren Buffett seems to agree – as he claimed that America is moving from an aspiring “Ownership Society” to a “Sharecropper’s Society” – with its suggestions of a feudal structure. Of course, Buffet now owns a significant portion of the very Goldman Sachs that epitomizes this trend.

Goldman Sachs – along with other major corporate powers – rise by exploiting inefficiencies in the market – and eventually must try to create inefficiencies in the market in order to maintain their profitability (which is the hyperbolized point of Matt Taibbi’s recent piece). This contradicts those who see the market as supremely efficient – as Warren Buffet admitted, he would “be a bum on the street with a tin cup if the markets were always efficient.”

Goldman Sachs proves – with its successes – that our system is not a truly free market – but a more feudal one – in which those with sufficient money can secure power and tilt the system to their advantage.

[Image by saebryo licensed under Creative Commons.]

Categories
Economics Financial Crisis The Opinionsphere

Theories of the Financial Crisis: Greed

[digg-reddit-me]

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.

Continue reading “Theories of the Financial Crisis: Greed”
Categories
Criticism Iraq National Security The Opinionsphere The War on Terrorism

Contra Taibbi: Fighting Them Over There So We Don’t Need to Fight Them Here

The thing is, we’ve been listening to this stuff for so long that when we hear it, we don’t recoil in confused disbelief anymore — we’re so familiar with these arguments we’ve forgotten that they don’t make any sense. It’s similar to that other Bush-era standard: “We fight them over there, so we don’t have to fight them here.”

I never understood what the hell that was all about. The best I could figure is that the people who were saying this think of the world like a big game of Risk, and they think that if we commit a big force to some place like Iraq, the “other side” will have to leave all his forces over there or something to keep us from moving through Eurasia. This might make sense in a real war, in a war-between-nations war, but it’s completely absurd in a conflict where the “other side” is actually hundreds if not thousands of different/unrelated actors and can successfully attack a country like the U.S. using just a few people at a time. Sending 160,000 troops to Iraq does absolutely nothing to prevent a terrorist group like al-Qaeda from sending over a couple of “exchange students” to dump botulinum toxin into the Akron reservoir.

That’s Matt Taibbi in a recent blog post. Given his explanation, he clearly is missing something.

One understanding of terrorism holds that acts of terrorism are a reaction to the fact that many people in the world have no say in how they are governed. They realize that who Americans elect as their president has a more of an impact on their lives than their local leaders. Yet – they have no vote in this matter – and few ways to affect what America does. Those who are especially frustrated and determined and who value life least see there is a way they can impact America – how they can make their views matter. They can commit an act of terrorism against America – or American interests.

This understanding of the root cause of terroism is implicit both in many liberal critiques of the War on Terror and in Bush’s democracy promotion. Liberal critiques tended to see our doubling down in our support of tyrants in the region as kong as they were anti-terrorist as contributing to the sense of alienation. The neoconservatives saw democracy as a kind of safety valve in which these frustrations could be channeled – which is why they were so focused on promoting it in the Middle East. 

If terrorism is the means by which people whose views are not represented make themselves heard by those who have the power to change their lives, then allowing them to fight us over there does make it less likely we will be attacked at home. It provides an outlet in which they can channel their displeasure – killing American soldiers. It’s easier to travel to Iraq or Afghanistan than to America – and to participate within structures already set up while attacking outsiders – than to work undercover in an American sleeper cell, plotting against the people with whom you have contact every day.

Taibbi is right that leaving ourselves vulnerable over there doesn’t preclude them from attacking us here – but that mis-states what the “fighting them over there” idea is about. The fact that we can be attacked over there provides a release valve for frustrations – in a way similar to having a democracy where people could vote anti-American politicians into office would. 

I’m not sure if I buy this theory. And it’s not clear that even if it is true, that the overall approach is effective – because after all, by responding to attacks on us, we probably create more ill-will than we have allowed to be “released.” But there is a coherent view behind this – and mocking it doesn’t make it less so.