Skip to content

Credit where due

I have been known to be somewhat critical of Obama on occasion, such as when he sells out the 99.9% by pushing rotten “trade” deals designed to make the comfortable far more comfortable. So, it’s only fair that I give credit when due, and his step today giving full diplomatic recognition to Cuba deserves a lot of credit. This comes about 50 years late, but that’s not Obama’s fault. Any objective observer would be mystified by the intransigence of the U.S. with regard to Cuba, particularly considering our fairly relaxed attitude toward certain “allies” with, let us say, less than stellar human rights records.

Republicans say the darndest things

Federal Communications Commission member Michael O’Rielly, a Republican, had this to say recently:

[P]eople do a disservice by overstating [the internet's] relevancy or stature in people’s lives. People can and do live without Internet access, and many lead very successful lives.

via Daily Kos

This is coming from a man who shares responsibility for regulating the internet. This surely proves that you don’t have to run for president to participate in the “I’m stupider than you” Republican sweepstakes. But I’m sure this type of thinking is not new. Most likely back in the 30s there were Republicans wondering why anyone needed the TVA, since many people lived without electricity, not to mention indoor plumbing.

Back from the shadows

It’s been a while since I posted, thereby letting down the legions who read this blog. As Thomas Jefferson said in an entirely different context, a decent respect to the opinions of mankind requires that I should declare the causes which impelled me to put aside my keyboard. I have of late been occupied with the premath (new word, and hereby copyrighted) and aftermath of the nuptials of my only begotten younger son (my only begotten older son being in attendance as well).

The happy couple wrote their own wedding vows and chose the accompanying readings. I never thought I’d be proud to say that my son chose the words of a Republican for his wedding ceremony, but the world is a strange place. At the last minute they chose to read a portion of Kennedy’s gay rights decision, which has an eloquent paean to marriage. It was spot on, and a big hit.

The nuptials took place in our back yard, so we were pretty busy, both before and after the big event, but things have slowly returned to normal, and I am now in a position to inflict my views on the world, unencumbered by other responsibilities.

Justice Roberts (and Kennedy too) gives the Republicans a gift

Today’s Supreme Court decision upholding Obamacare subsidies was precisely what most Congressional Republicans wanted, except for the precious few true believers among them. They now have the best of both worlds. They can complain bitterly about the decision, thus pleasing their base, without any risk of electoral fallout at the hands of those who would have lost their insurance had the court ruled the way they say they wanted it to rule. Had the court struck down the law, the Republicans might have been forced to act responsibly, something they’re adverse to doing, and, in fact, something of which they are constitutionally incapable. The relief must be palpable, especially among those such as Paul Ryan who would have been responsible for coming up with a Republican alternative. The sad fact is that the Obamacare system is about as right wing as you can get and still deliver something approaching universal health care; any workable alternative would have to veer toward socialism.

Pity poor John Roberts, who has saved his party, but is now the target of its hypocritical scorn. Well, wasn’t it Harry Truman who said that if you want a friend in Washington, you should get a dog. Roberts is probably at the pet store now.

Bowdoin man makes good

The folks at the National Review, who specialize in giving racism a (very thin) veneer of intellectual respectability, have set their sights on DeRay McKesson. Here’s the intro:

Meet DeRay McKesson: Bowdoin ’07, a former Minneapolis-area school administrator — and now the public face of “Black Lives Matter.” Imagine Al Sharpton, circa the Crown Heights riot, with access to Twitter. That’s DeRay.

via National Review

Now, I come not to praise or defend Mr. McKesson, who can take care of himself. I merely point out the prominence accorded his alma mater, which, I flatter myself into believing, the National Review considers self evidently a bastion of liberal perfidy, just as it considers Al Sharpton self evidently representative of all that is evil. After all, Bowdoin has been certified the worst school in the nation by a group of right wing professors, so, I feel comfortable in asserting that the folks at the white shoe racist rag are sending a message by the reference to Bowdoin.

To paraphrase a Dartmouth man, which pains this Bowdoin alum a bit, Bowdoin is a small college. And yet there are those who love it!  I love it all the more knowing that it produced DeRay McKesson, and that he has disturbed the folks at the National Review. They wouldn’t bother attacking him if they weren’t afraid of him. A few more like him and we might finally live down the shame of Franklin Pierce.

A corollary

Upton Sinclair once said: “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Self evidently true.

I believe I have discovered an equally obvious corollary to Sinclair’s observation:

It is easy to get a man to believe something, when his salary depends on his believing it.

This is the most charitable explanation for the fact that there are people in New Hampshire (all, apparently, members of Trump’s staff) who claim that they actually want Donald Trump to not only run for president, but to win.

Speaking of Trump, I was briefly puzzled by the fact that he became an announced candidate. He surely does not expect to win, and unlike the Carsons and Santorums, he has no need to keep his name out there to get speaking fees from the yahoos. But, as I said, I was puzzled only briefly. The Donald may be the first person to run for president simply because he needs people to pay attention to him. It is surely a sign of the decline of our empire that not a single one of the announced Republican candidates is remotely qualified to be president. It will be a certain sign of our decline if one of them gets elected, which is not as unlikely as many people seem to think.

History rhymes

Read this article before proceeding. If you find it a bit complicated or opaque, I think I can help by defining a few terms and giving a simple explanation of what’s going on here.

“Regulatory Capital Relief” refers to a method currently utilized by banks to skirt the Dodd-Frank requirement that they keep enough real assets to cover their losses if they make bad loans. The riskier the loan, the more cash they are supposed to keep in reserve.

“Credit default swaps” are insurance policies issued by hedge finds and other criminal enterprises that promise to pay a creditor if a borrower defaults on an insured loan. Banks buy credit default swaps instead of putting cash aside in case risky loans go bad. They do it because the cost for the insurance is less than the cost of putting the money aside, just as it’s cheaper for you to buy auto insurance than to put money in the bank to cover your liability should you cause a horrible accident. The difference between you and the banks is that you honestly expect your insurance company to make good if you cause an accident, while the banks have no such expectations about the crooks that issue credit default swaps. Also, the likelihood of you causing an accident pales in comparison to the likelihood that the banks will crash the economy.

Anyone can issue a credit default swap. I could do it if I wanted to, and the banks were willing to pay me a premium. Banks are well aware that credit default swap issuers will most likely not be able to pay up if the insured loans go bad, just like AIG wasn’t able to pay up in 2008. However, the banks don’t care because 1) pretending that the swaps are on the up and up frees up more money for them to play with, and 2) they know that if the loans go South the government will step in again and save their bacon.

It’s nice to know that the SEC has been aware of this issue for years; not so nice to know they have no intention of doing anything about it.

The more time passes after 2008, the more admiration I have for FDR and the folks who dealt with the fallout from the Depression. They made some mistakes for sure, but they at least learned from history. As soon as we could, we took steps to make sure that if history didn’t repeat itself, it would certainly rhyme.

The rich are different than you and me

Polling proves it, just check out this article on Kos.

Now, what is interesting about this is that on almost every question, the rich truly are different from you and me (considering you and me collectively). It would not be a stretch to say that they are more selfish and self-centered, with all that leavened by a smidgen of entitlement. Putting the causation question aside, there is something else about this poll that is quite striking. Public policy in this country closely tracks the opinion of the very rich, and where it doesn’t presently precisely align, the general drift is toward their preferences. Funny, that, as it seems inexplicable that in the world’s greatest democracy (we are, aren’t we?) the public policy preferences of the few should consistently trump the preferences of the many. After all, as Justice Kennedy has told us, there is absolutely no evidence that money is a corrupting influence in politics. One can only conclude that the policy preferences of the rich have been adopted because they are so self evidently the right positions, even if so many of them don’t work in practice.

Having their cake, and eating it too

In this day and age, many a time honored adage has been proven untrue, among them that referred to in the title of this post. Against all reason, it appears that Hank Greenberg, the guy who drove AIG into the ground, will be getting a multi-billion dollar payday, because the American government bailed out his company, which would have collapsed without said bailout. It took some judge shopping, but…

…Greenberg is asking the court to award him and other AIG shareholders at least $23 billion from the Treasury. He says that’s to compensate them for the 80 percent of AIG stock that the Federal Reserve demanded as a condition for its bailout. Judge Thomas Wheeler has repeatedly signaled his agreement with Greenberg. A decision is expected any day.

Hank Greenberg had been forced out as chairman and chief executive in 2005 after state and federal regulators uncovered that the company had been engaged in sham transactions that allowed AIG and its corporate customers to manipulate reported earnings, avoid taxes, evade regulatory requirements and hide risks and liabilities from shareholders. Ever since, Greenberg has been on a mission to restore his reputation and regain control of the company that he had ruled over with an iron hand for 37 years.

Even in exile, Greenberg remained AIG’s most important shareholder, controlling 20 percent of the company’s stock. He successfully sued some AIG executives in court and recruited away others to build his own rival insurance company. He also agreed to pay $15 million to settle civil charges brought against him by the Securities and Exchange Commission, though he refused to acknowledge any wrongdoing.

Greenberg has repeatedly claimed that if he’d still been in charge, AIG would never have gotten into the mess it did. But that is impossible to know.

What is known, however, is that when Greenberg was in charge, he ran the company “as if it were a feudal state .?.?. disdainful of modern concepts of internal controls and regulatory compliance,” according to one person with intimate knowledge of the company’s management. After his firing, AIG paid $1.6 billion to settle multiple counts of accounting fraud brought by the SEC.

What is also known is that the two lines of business that were the source of AIG’s major problems during the 2008 crisis were launched on his watch. He helped to create their risky business models and strategies, which were based on playing one regulator off another and engaging in complex financial arrangements between regulated subsidiaries and a largely unregulated parent company. And both business lines took root in the same clever rules-bending corporate culture that had always been Greenberg’s trademark.

“The AIG which came begging to the Fed’s doorstep was the AIG that Hank Greenberg built,” said James Millstein, the Treasury official who oversaw AIG’s restructuring. “It’s capital structure was opaque, it was heavily dependent on short-term funding, with a highly leveraged financial products subsidiary that had been organized to evade effective regulatory oversight.” Greenberg, he said, “ran the parent company like a hedge fund with a triple A rating.”

As the financial crisis unfolded, AIG’s fundamental flaws were finally exposed. On the same week Lehman Brothers collapsed, desperate executives went to the Treasury and the Federal Reserve looking for a loan. Dozens of Fed officials were dispatched to AIG headquarters on Pine Street in lower Manhattan. Within days, they were convinced that without a substantial cash infusion, AIG would be forced to file for bankruptcy, threatening the solvency of a number of big banks in Europe and the United States.

To avoid such a meltdown, the Fed agreed under its emergency authority to act as a lender of last resort, lending AIG an initial $85 billion. The terms were to be the same as AIG’s investment bankers had offered the previous week, without success, to private lenders — a 14 percent interest rate and ownership of 80 percent of the company. With lawyers sitting in the next room ready to file a bankruptcy petition, AIG directors reluctantly agreed to the terms.

via The Washington Post

This story has been around for a while, but it’s worth reminding ourselves that this did not have to be. Had we played our cards right, people like Greenberg would either have jumped out of windows or would be dealing with having their mansions foreclosed even as we speak. (Well, we’re not speaking, but you know what I mean.) There were those among us, myself included, who did not buy into the “too big to fail” talk. There were other ways, besides bailouts, to deal with the fallout from the collapse of Wall Street. A bit of creativity would have done the trick. A side benefit: had we let Wall Street collapse, we would more than likely have faced up to the reality of the Depression that is still with us. Since the people like Greenberg that own the government are doing well, thanks to that massive handout, we have, as a nation, simply pretended that the destruction visited on ordinary people didn’t happen, and isn’t continuing. It is, unfortunately, an article of faith on much of the left and the right (always beware of bi-partisan agreement) that we simply had no choice but to rescue the criminals and con men that control our financial system. I’ll always be proud of my Congressman, Joe Courtney, for voting against the bailout. Had his side (and my side) prevailed, Hank Greenberg might not have the money to pay his expensive legal talent to pull off this final heist.

Word for the day: Sphexishness

If you’re a Paul Krugman fan, you have no doubt read more than one column or blog post about the fact that the right refuses to learn from experience. I think the latest example he cited is the failure of Sam Brownback’s Kansas “experiment”. That experiment has decidedly failed, but Sam and the rest of the right have learned no lesson, and continue to believe (or say they believe) that throwing money at the rich in the form of lopsided tax cuts will deliver an economic Nirvana.

I’m currently reading Intuition Pumps and Other Tools for Thinking by Daniel Dennett, and was reminded of Krugman’s frequent complaint when I read Dennett’s description of the Sphex moth. (As a side note, Apple’s auto suggest feature knows all about “Sphexishness”) The moth feeds its young by paralyzing a cricket, bringing it to its nest, checking the nest to make sure all is well, dragging the cricket into the nest, laying its eggs, and then leaving the larvae to fend for themselves, with the still living, but paralyzed cricket as food. However, if someone moves the cricket by a few inches while the Sphex is checking its nest, it will move the cricket back to the nest entrance and re-check the nest, ad infinitum if one keeps moving the cricket. At least, that was the initial knock on the Sphex, until it was discovered that not all of them were quite that stupid. The liberals among them learned their lesson, while the conservatives among them never seemed to do so.

Now, at first glance it might seem that stupid Sphexes (not sure if that’s the plural) and Republicans are completely analogous, but that’s not really so, for reasons to which Krugman has alluded. It may be quite true that tax cuts for the rich don’t benefit the rest of us, but they do benefit the folks to whom politicians such as Brownback are beholden, so unlike the Sphex, the Brownbacks and their billionaire backers achieve their real objective with every seeming failure. The real Sphexes are the mass of people who keep voting for the Brownbacks of the world.