SmartRemarks

And no one told me when to run… that’s for damn sure.

New Year’s came and went without me writing a blog post. I was preoccupied with other things at the time, as detailed to some extent in my last couple of entries bookending my computer headaches. But I did make some observations that I think are still worth mentioning, as both the year and the decade rolled over and restarted.

I’m well aware, of course, that both our calendar year and the decades into which we assemble them are completely arbitrary human constructs, and that there’s nothing metaphysically significant about the transition from one random chronological marker to another, despite all the cultural baggage we attach to them. Nevertheless, one of the central components of human consciousness is our capability for pattern recognition, and the end of the first decade of the twenty-first century definitely displayed some patterns that are, at the very least, psychologically meaningful.

To put it all in a nutshell… this past decade sucked. Big time.

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Tags: 2009, 2010, climate, George W. Bush, government, internet, journalism, Mark Morford, media, Obama, progress, the future

Wednesday was Barack Obama’s 100th day in office. Everyone else has been talking about it. Why not me?

A hundred days is a pretty arbitrary number, of course. But ever since FDR used it as a marker in 1933 for taking quick action against the Depression, it’s been a convenient hook on which to hang stories about new presidents. Few of them compare to FDR, of course. Then again, few are up against the kind of problems he was.

These days, though, the times make the comparison seem a bit more apropos.

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Tags: Afghanistan, climate, diplomacy, DOJ, energy, EPA, FDR, George W. Bush, Obama, Timothy Geithner

At the moment this post goes live…

We’re finally done with him! Bush is out of here! The sunovabitch is gone, done, finished, he’s through, he’s hitting the road, he will darken our horizons no more.

Good riddance.

And if no other punishment is forthcoming for what he’s done to this country… may he be cursed with self-awareness.

Tags: George W. Bush

If anyone wonders how (A) a nation can move step-by-step down the path toward fascism, or (B) why the mainstream press in this country is held in such increasingly dismal regard, this week’s cover story in Newsweek provides a searing case study.

Co-authors Stuart Taylor Jr. and Evan Thomas—both award-winning, Ivy League-educated journalists who move in the highest circles of academia, media, and politics; IOW, the very definition of establishment credibility—have decided that one of the key issues facing the incoming Obama administration, when confronting the boundaries of presidential power, is (as the cover blurb puts it), “What Would Dick [Cheney] Do?”

And Editor-in-Chief Jon Meacham—he who recently resuscitated the meme that “America is a center-right country”—heartily endorses this angle, writing inside the magazine that the cover feature addresses how “the urgent question now is whether President Obama will hew to [the anti-Cheney] dogma or whether, confronted with the realities of office, he will begin to see virtue in the antiterror apparatus Cheney helped Bush create.”

This, in the aftermath of an election that decisively and unequivocally repudiated the disastrous policies of Bush and Cheney—even Bush himself used the word “repudiated” in his semi-self-aware press conference today!—is what our establishment media wants us thinking about.

Where does one begin?

Well, with getting one’s gorge to subside. But after that…

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Tags: Constitution, Dick Cheney, fascism, FISA, George W. Bush, journalism, media, Obama, Rachel Maddow

In crisis lies creative potential.

If there’s any silver lining in the cascade of crises facing the country (and the world) right now, it’s in how they lay the groundwork (pardon the mixed metaphor) for the incoming Obama administration to pursue policy solutions that would otherwise have been impossible. There are good, serious ideas out there in the larger political discourse, some of which have been around for quite a while, yet which as of four years ago, or two years ago, or even six months ago, would have been dismissed by the commissars of conventional wisdom as “too radical,” or “not viable,” or outside the political “mainstream.”

I’ve stepped back a bit from my usual preoccupation with political details in recent days, perhaps out of exhaustion as much as anything else. In a sense, though, that makes it easier to avoid getting caught up in speculation about the News Of The Day and take a look at the big picture.

And one thing that’s clear from that perspective is that “change” is more than just a campaign slogan at this point—it’s an inevitability. The only question is how we choose to direct it.

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Tags: climate, Congress, economy, energy, environment, George W. Bush, Obama, Pelosi

As my last couple of posts should demonstrate, I can’t write about all politics all the time. I wouldn’t want to. But this is a political season, and there’s no doubt that the topic is on the front burner. We can all understand the reasons why.

We are seven days away from a momentous change in this country. One week from today, all the waiting and the suspense and the anticipation will be over, and Barack Obama will be elected president.

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Tags: economy, Election 2008, George W. Bush, McCain, Obama, polling, voting

Regarding Oliver Stone’s much-publicized new film, one would be hard-pressed to improve on Chicago Reader critic J.R. Jones’s succinct take:  W. “follows George W. Bush (Josh Brolin) from his youth as a spoiled, oblivious fuckup to his maturity as a spoiled, oblivious fuckup.”

So in case anyone was hoping (or fearing) this film would offer Bush a bit of redemption, it certainly doesn’t do that.

It doesn’t do much of anything else, either, though. Read the rest of this entry »

Tags: George W. Bush, Josh Brolin, Oliver Stone

Interesting news today:

US prepared to accept reconciliation with Taliban

The United States Defense Secretary Robert Gates says the Bush administration would be prepared to reconcile with the Taliban if the Afghan government pursued talks to end the war.

However, he says there’s no chance of any negotiations with Osama Bin Laden’s al Qaeda organisation.

Mr Gates says reconciliation could be the political end to the conflict in Afghanistan, but it must happen on the Afghan government’s terms and the Taliban must subject itself to the sovereignty of the government.

Now, reading between the lines, what this says to me is that the Afghan government is already on board, and talks have already begun under its auspices, through intermediaries. This would never have hit the press if things weren’t at least that far along. It’s obviously a fig leaf for the U.S. needing to withdraw from an untenable situation, where we have too few troops on the ground to control the country and no more available to send in. With a depression nipping at our heels, we can’t afford this kind of adventurism any more (much less the nation-building that comes with it), so it’s time to try to save face and get out as soon as possible.

(That we never should have invaded or occupied the country in the first place, when all we needed was some international pressure along with small, targeted police actions designed to weed out bin Laden and the al Qaeda leadership, is of course never even discussed. This is something about which I definitely disagree with Obama:  we can’t “win” in Afghanistan, no matter what strategy we pursue there. Outsiders never win in Afghanistan.)

Bush can spend years insisting that it’s wrong to sit down with our enemies (wasting billions of dollars and countless lives along the way, all while driving our country into an economic ditch), and he and his party can lambaste Obama for proposing such a naive thing as diplomacy with other nations… but as soon as he’s really up against the wall and needs to cover his ass (pardon the mixed metaphor), suddenly (even with an “evil” organization) formal talks are just fine.

(Just as they were before 9/11, of course, when the U.S. was perfectly happy to deal with the Taliban, even having delegations come to our shores, for no better cause than the hope that it would help facilitate a Unocal oil pipeline.)

Even when Bush stumbles into doing the right thing, it’s for all the wrong reasons, and with a worse result than he could have achieved by leaving things alone in the first place.

Tags: Afghanistan, diplomacy, George W. Bush, Obama

So, what did John McCain accomplish with his grand gesture, as he swept into Washington Thursday to “help” his colleagues in Congress work out a deal on how to approach the economic crisis? Well, he went to the high-profile meeting he’d insisted that Bush call, at which…

…he sat silently for more than 40 minutes, more observer than leader, and then offered only a vague sense of where he stood, said people in the meeting.

Meanwhile, the tentative deal Congressional leaders had already announced that morning dissolved around him. (The “Agreement on Principles” Senate Banking chair Christopher Dodd had released was far from perfect—including nothing at all on how to value the “toxic” corporate assets, nor on what sort of new regulations are necessary—but it did include valuable progress on formal oversight of the process, on taking equity shares in return for public funds, and on limiting executive compensation, all steps in the right direction. Of course, at last report, Bush was still threatening to veto any bill with that last item in it.)

From all reports Sen. Obama took a more active role in the discussion than did Sen. McCain. The real obstacles, however, came from the House Republicans, seeing an opportunity to distance themselves from Bush on an unpopular measure. At what cost? Well,

According to one GOP lawmaker, some House Republicans are saying privately that they’d rather “let the markets crash” than sign on to a massive bailout.

“For the sake of the altar of the free market system, do you accept a Great Depression?” the member asked.

And needless to say, the Democratic leadership isn’t about to let any version of the Bush/Paulson plan reach the floor unless the GOP is backing it. Even though Hank Paulson reportedly went down on one knee and pleaded with Nancy Pelosi.

So what was the takeaway? Well, after the meeting McCain’s campaign issued a statement saying,

“We’re optimistic that Sen. McCain will bring House Republicans on board without driving other parties away, resulting in a successful deal for the American taxpayer.”

Yet somehow, at the same time, McCain’s friend and ally…

[Sen.] Lindsey Graham of South Carolina – said Thursday night that McCain joined House Republicans in opposing [the compromise] proposal.

I guess where McCain stands is anybody’s guess at this point. Maybe McCain will show up to explain himself in Mississippi tonight. Or maybe not.

—

Meanwhile, just to keep the pot boiling…

In a move initiated by scholars from the University of Chicago, 166 economists from across the political spectrum, including three Nobel Prize winners, released an open letter opposing the Bush/Paulson plan, criticizing its fairness, its ambiguity, and its long-term effects. Of particular note is this remark:

“I suspect that part of what we’re seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,” said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.

That’s a sobering thought—that Paulson and his former industry colleagues may be deliberately spreading FUD to save their own hides.

Then again, lest we grow too cynical, there’s ample evidence that things really are growing worse, not just on Wall Street but on “Main Street” (and as an aside, I’m already torn between appreciating the frequent use of that metaphorical contrast as a sign of growing public awareness of American class conflict, and being sick to death of its sheer repetitiveness and mind-numbing lack of imagination). But, the point: as the New York Times reports, mortgage lending and small-business credit has already entered a “lockdown”:

For nonfinancial firms during the first three months of the year, the outstanding balance of so-called commercial paper — short-term IOUs that businesses rely upon to finance their daily operations — was growing by more than 10 percent from a year earlier, according to an analysis of Federal Reserve data by Moody’s Economy.com. From April to June, the balance plunged by more than 9 percent compared with the previous year.

This week, the rate charged by banks for short-term loans to other banks swelled to three percentage points above the most conservative of investments, Treasury bills, with the gap nearly tripling since the beginning of this month. In other words, banks are charging more for even minimal risk, making credit tight. …

[In one midwestern city], as people try to refinance mortgages to hang on to homes and extend credit cards to pay for gas for their job searches, the local credit union is saying no.

And as you’ll surely have heard before reading this, the big news last night was that Washington Mutual went under. The nation’s biggest S&L became the biggest bank failure ever, as it was taken over by the FDIC and promptly sold off to JPMorgan Chase at fire-sale prices. (Customers, of course, are assured that business will go on as usual. At least one lesson learned in the Depression seems to have stuck.)

What are the side effects from all this? Well, even without a bailout—but possibly even moreso with one, given the effect on the Treasury—the rest of the world (i.e., the countries that buy our bonds and pay our bills) is getting more than a little nervous. The news from China late Wednesday was that Chinese regulators had told their banks to stop lending to U.S. financial institutions; by Thursday the Chinese government was categorically denying the report; yet by late Thursday, after the WaMu news broke, it was announced that “China’s banks are limiting foreign- exchange transactions with U.S. and European financial companies on concern tighter global credit markets will cause more failures.” Make of it what you will. Meanwhile, the German Finance Minister has accused “Anglo-American capitalism” of “endangering global stability,” and warns that “the US will lose its superpower status in the global financial system.”

Certainly, it’s not hard to imagine that if our foreign creditors lose confidence and decide to cut their losses rather than continuing to prop up U.S. capital markets, then in order to keep the country nominally solvent in the face of massive federal deficits (made even larger by the bailout under discussion), the Fed would have no choice but to monetize the debt (read: print money in very very large batches). At which point the dollar would stop being the global reserve currency, its exchange value would drop through the floor, inflation would skyrocket, more banks would fail, more jobs would disappear, and American standards of living would quickly evoke the 1930s.

The Bush years have vividly shown us the logical endpoint of the mania for deregulation begun in the Reagan era. Play the game without a ref, and everybody winds up getting injured.

Yeesh, and I started out thinking that this would just be a quick “news survey” post. Interesting times, indeed…

Tags: bailout, economy, George W. Bush, McCain, Paulson

So the word is that Bush is planning a prime-time address to the nation tonight about the financial crisis. Better late than never in terms of talking to the public, I suppose, but I think it goes without saying that whatever he has to offer might just as well go without saying. His credibility these days is somewhere south of the average late-night infomercial host, after all.

Meanwhile, McCain is trying to use the situation as an excuse to back out of Friday night’s debate with Obama. Because, you know, in times of crisis it’s not like people need to hear from those who aspire to make decisions for them, right? Somehow I don’t see this move gaining much traction with the public.

At any rate, here’s where things stand:

There is a real risk of a broadening credit freeze that would weigh down businesses and jobs across the country. Not a guaranteed outcome, by any means, but a legitimate risk.

However, the fact remains that the parties most directly on the brink of disaster—and in line to benefit most directly from a bailout—are not “Main Street” businesses or banks, but the big Wall Street financial houses (like Hank Paulson’s alma mater Goldman Sachs) that are overexposed to the kind of unregulated “toxic waste” securities that they themselves and their political allies worked enthusiastically to create.

Thus, the finance industry’s bargaining position here amounts to putting a gun to its own collective head and saying “give me what I want or I’ll shoot!” If it wants cooperation, especially in the face of tremendous pushback from the general public, the industry—and the administration, both personified by Paulson—really has no choice but to accept the kind of reasonable quid pro quos that economists and politicians are talking about, including but not limited to:

• Equity shares in any companies getting help, to keep the reigns in the hands of the government and help make the taxpayers whole
• Strict limits and “clawbacks” on the compensation of the millionaire executives who created this situation
• Stringent oversight of how and where public funds are spent, rather than just handing carte blanche to Paulson (or anyone else)

However, these are not the only conditions that should be imposed. It’s worth remembering that the grand total of “toxic waste” securities out there on the balance sheets has a nominal value in the tens of trillions, even as its actual value is impossible to determine; in comparison $700B is a drop in the bucket, and indeed it’s not at all clear how Paulson even arrived at that figure. Thus, the open question is whether any version of this proposal will actually work to stabilize the markets (in contrast to earlier and smaller band-aid efforts over the past year or so)… or simply turn into more money dumped down a hole, its only effect to bankrupt the treasury and cripple the federal government.

In light of that paramount concern, there are several other prerequisites that should be imposed as part of any bailout legislation. (A hat tip here to Karl Denninger at the site FedUpUSA; the site’s rhetoric may be a bit overheated, but the quiality of the research and analysis is impressive.) It seems clear that one of the key underlying causes of the current crisis was the SEC’s 2004 move to deregulate the debt-to-net-capital ratios firms were required to maintain, which until that point had a cap of 12-to-1. In the intervening years firms pushed their ratios to unprecedented levels—as high as 40-1 at Merrill Lynch, 80-1 at Fannie and Freddie—creating a situation where even a slight drop in underlying values could topple the whole highly leveraged house of cards. Another factor was allowing firms to use controversial “mark-to-market” pricing for Level 3 assets (the kind of securities under discussion), despite the fact that there was no liquid market for such assets, essentially inviting inflated, frankly imaginary nominal valuations.

The combined result was trillions of dollars (supposedly) of assets on balance sheets, with no regulated exchange, no central clearing house, no margin supervision, to keep things in line and ensure a minimum level of trust between parties in financial contracts. Under those circumstances, it’s understandable why people are unwilling to lend, buy, or sell. The case can be made that no matter how much money you pump into the system at this point, it won’t circulate effectively unless and until a basic level of trust has been restored.

How can that be done? Where can one look for underlying value? Paulson seems to be looking at the top of the market: to prop up the value of the questionable assets themselves by providing a buyer of last resort. As already discussed, though, the government doesn’t have enough revenue on hand to do this in any comprehensive sense, and even if it did it would just be propping up a collective fiction.

On the other hand there’s the bottom of the market, the real estate that underlies most of these derivatives (beneath multiple levels of leverage). The problem there is that housing prices are falling for real and legitimate reasons. Many people simply can’t afford to pay their mortgages, in the wake of lost jobs or health-care emergencies or adjusted ARMs that they can’t refinance as expected. Others, upside-down on properties they bought at the top of the market, are simply making the rational decision to walk away rather than continue paying more than their homes are worth. And as noted in my previous post, most experts agree that housing values still have some way to fall. Even now, in most parts of the country median prices are well above the traditional “three times household income” rule of thumb that has traditionally marked the affordable middle-class mortgage. Even if it were possible to keep housing values artificially high, then, rather than letting them revert to the historical mean, doing so would only serve to exacerbate the real problem.

The true solution is to find a way to deleverage the “toxic waste” that writes its value down to rational levels without causing a downward spiral of panic selling and bankruptcies. What Congress should do to achieve this, before approving any bailout funds, is threefold:

• Insist on a return to the 12-1 leverage ratio, stepped down gradually over a period of months leading up to a hard deadline, with frequent progress reports. This will help restore public confidence, especially in those firms that are (relatively) less excessively leveraged.
• Eliminate the mark-to-market fictions used to hide losses, and require all firms to make full disclosure to CUSIP (the securities clearing system) of the formulae used to value their Level 3 assets, so that prospective investors can judge the legitimacy of any claimed values.
• Require all over-the-counter derivatives to be moved to a formal exchange, cleared by the Options Clearing Corporation or an equivalent, again by a date certain—or written down to zero.

These steps would gradually but decisively reduce the uncertainty about the value of the questionable securities out there—while still providing the opportunity to recapture and declare as much legitimate value as possible, rather than simply imploding the system with a rush to the bottom that may let that value go to waste and create undesirable ripple effects. This approach would get the bad debt out of the system, preserve the good debt, and put the credit markets back on a rational footing. And it would prevent taxpayer money from being invested in any securities that are genuinely worthless.

There may be even better, or additional, steps that Congress could take toward the same ends. If so, I have yet to read about them anywhere. There’s been considerable talk about the need for new regulation, but very little discussion of what kind, or how or when it should be imposed. Thus far, the steps outlined above seem to offer the best available answer.

Tags: bailout, economy, financial crisis, George W. Bush, McCain, Paulson