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What’s in a word?

Wednesday, March 11, 2009

I highly recommend this column in today’s Times, by David Leonhardt, in which he argues that today’s financial crisis was caused by people who knew they were free to ruin the economy, making big bucks for themselves in the process, because they knew the government would step in and bail them out. In a word, he says they were “looting”. That would be us, the taxpayers that they were looting, by the way.

I was struck by this paragraph:

Mr. Bernanke actually took a step in this direction on Tuesday. He said the government “needs improved tools to allow the orderly resolution of a systemically important nonbank financial firm.” In layman’s terms, he was asking for a clearer legal path to nationalization.

It made me realize how quickly we have legitimized the use of what is, in this very odd country of ours, a loaded word, namely “nationalization”. I think I’ve used it myself, so I’m not criticizing Leonhardt, but it’s testimony to the Republican spin machine that this bogey man word has entered common parlance as it has.

I lived through the Savings and Loan debacle, and as a I recall, failing banks back then were put into receivership. In fact, many banks have failed this year and last, and they have been put into receivership. It’s only the banks that have not yet been put into receivership about whom we use the word “nationalization”. My online dictionary defines the term thusly: “transfer (a major branch of industry or commerce) from private to state ownership or control.” At least by that definition, it’s an all or nothing proposition; if you don’t nationalize all the banks, you haven’t nationalized at all. But if we grant that you can leave some private actors standing, the term still implies a degree of permanency that no one wants and no one is advocating. So why the easy shift from “receivership” to “nationalization”. It certainly harmonizes well with the so far quaint Republican attempts to revive fears of “socialism”.


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Browser Review

Tuesday, March 10, 2009

I had an English teacher in high school who was fond of quoting this line from Alexander Pope:

Be not the first by whom the new are tried, nor yet the last to lay the old aside

She was an old biddy, and perhaps because I disliked her intensely, I have ignored Alexander’s advice, sometimes to my cost. I love new gadgets and I invariably download beta upgrade versions of software that is working perfectly reliably, often with disastrous results.

Not this time, or at least not so far.

Today I downloaded the new version of Apple’s browser, Safari 4.0 beta. At first I felt I had brought on another disaster, but I kept my head. The program was hanging up, but I suspected that a plug-in that I use and love was responsible. Once I installed the new version of the plug-in (I had to use Firefox to get it, since it had put Safari out of commision), the program worked great. Web pages do, as Apple claims, load faster. The ITunes like history browser is cool, as is the Top Sites page, though in truth I’m not sure how often I’ll use that particular feature.

Anyway, highly recommended (so far), at least for use on the Mac. At work, on my pedestrian PC, I’m sticking with Firefox.


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All in One Place

Tuesday, March 10, 2009

Scott Bates writes to say that Susan Bysiewicz has now agreed to appear at a gubernatorial candidate’s forum here in Groton on Saturday, joining Dan Malloy, Jim Amann and Nancy Wyman, all of whom had previously committed.

Scott says that means all the potential candidates will be there, but unfortunately Scott is shooting at a moving target, since Ned Lamont has also been making noises about running.

Nonetheless, this puts Southeastern Connecticut in the forefront. It will be the first time all these candidates have appeared together, and it should be interesting.

Place: Groton Municipal Building
295 Meridian Street
Groton
Time: 10:00 AM


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Courtney a “New Democrat”

Tuesday, March 10, 2009

Hmmm.

From an email from Joe Courtney’s office:

Today at the White House, Congressman Joe Courtney and other members of the New Democrat Coalition met with President Obama to discuss critical issues facing our nation. The New Democrat Coalition is a group of like-minded moderate Democrats who have joined to seek solutions on issues such as the economic crisis, healthcare, and energy and technology innovation.

The “New Democrats” are the folks who led the fight to “improve” the recent bankruptcy amendments to make them more banker friendly, because after all, at this particular time, there’s no one in the country more deserving of a little love than your friendly neighborhood mega-bank.

Just when we thought we’d captured two out of three branches of government, we see our party at work, rapidly abandoning their president and trying to appease the non-existent middle. If the Republicans are too fixated on appeasing their base, the Democrats are too anxious to stab their own in the back. What we will get from the New Democrats is “responsible” policy positions that will be half measures in a time when only bold action will do. Personally, I prefer the old Democrats like Teddy Kennedy, who aren’t afraid to advocate a truly progressive agenda.


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Thorny issue

Monday, March 9, 2009

Charlie Savage of the Times, who has earned his stripes on this issue, examines Obama’s instructions to the Justice Department that it consult with the Justice Department before relying on any signing statement issued by any of his predecessors. Apparently, Obama felt it was impolitic to pick on Bush alone, so he has required his minions to consult on 200 years of signing statements.

Obama also stated that he would use signing statements himself, though far more judiciously than Bush.

I just watched Keith Olbermann, who opined that Obama has it wrong. In his opinion the president should either sign without comment or veto. The issue is a bit more complicated that that, since, as Savage points out:

.. [L]egal scholars, while critical of Mr. Bush’s use of the device, said that the bar association’s view was too extreme because Congress sometimes passed important legislation that had minor constitutional flaws. They said it would be impractical to expect a president to veto the entire bill in such instances.

As a practical matter, the president is charged with enforcing the law, and like any law enforcement officer, he has a lot of latitude in how he goes about enforcing them. If Obama does as he promises, his use of the signing statement may be non-controversial. What rankled most about the Bush signing statements was the audacity of them-in many cases the claims of unconstitutionality were obviously wrong, with legal reasoning direct from the John Yoo school of “let’s make it up”.

What Obama is now proposing to do with past signing statements is, among other things, a recognition that such statements are merely an expression of policy and have no legal effect whatsoever. What one president can state, another can un-state. Still, it would be best if there were some way to get meaningful and expeditious judicial review of these statements in appropriate cases. If any member of Congress who voted for the bill in question had standing to sue for declaratory relief, the problem would, perhaps, be largely solved.


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John Larson on cramdowns

Monday, March 9, 2009

A while back I mentioned that, according to Firedoglake, John Larson had lined up behind a “New Democrat” push to water down Obama’s bankruptcy cramdown proposal. I got an email from one his staff people, and we had a brief email exchange. According to the staffer:

I wanted to inform you that Congressman Larson is supportive and voted in favor of The Helping Families Save Their Home Act. In fact, the Congressman has worked with the members of House Judiciary Committee and authors of the legislation on establishing an accurate and thorough message highlighting the overall importance of this legislation in stabilizing the housing market.

The legislation provides fairness to those families facing foreclosure through no fault of their own. By providing bankruptcy judges the chance to modify existing mortgages for families who file for Chapter 13, families will be afforded the ability to make their payments and stay in their homes. All of this will be accomplished without one federal dollar being spent. Rep. Larson understands the importance of this bill in stabilizing the housing market, restoring our economy, and keeping American families in their homes.

Unfortunately, Firedoglake misinterpreted and misrepresented Congressman Larson’s role and stance concerning this legislation. Below I have provided you with a press release by Congressman Larson after the House of Representatives passed the legislation on Thursday.

Here is the text of a press release from Larson’s office on the issue:

Washington, DC – Today, the House of Representatives passed fair legislation to help keep American families who are facing foreclosure in their homes. Without spending any taxpayer money, the legislation gives bankruptcy court judges the chance to modify existing mortgages for families who file for Chapter 13 bankruptcy. Chapter 13 is not an easy way out of debt. It is a cumbersome and invasive process that requires a family to open up their finances to the oversight and management of the courts for five years.

Congressman John B. Larson (CT-01), Chairman of the House Democratic Caucus, said:
“The American Dream has been bruised and damaged by the record level of home foreclosures we’ve seen in this country over the last year. Millions of Americans either have or are at risk of losing their homes. The legislation we passed in the House today is a fair response to this crisis. Without spending one federal dollar it could keep hundreds of thousands of families in their homes. The Helping Families Save Their Home Act gives average Americans who own one home the same rights to keep that home when they face bankruptcy as investors and speculators who own two, three or more houses. The aspirations of the American Dream should apply to everyone, not just the wealthy.

Stabilizing the housing market is an important piece of our economic recovery. As long as Americans are losing their homes, the foundation of our economy and our neighborhoods is shaky. This legislation, along with President Obama’s plan to keep 8-9 million families in their homes will go a long way to restoring our communities and keeping the American Dream intact.”

Okay, I diligently tried to untangle this. First, I believe that the bill as originally proposed can be found here, and the bill as eventually passed can be found here. If I’m wrong then all I can say is that there are no other versions at the Thomas website.

There are significant changes from the first bill, none of which are advantageous to the consumer. One fairly major change allows the creditor to share in the profit should the debtor sell the home after the mortgage is modified. As an example: Debtor files for bankruptcy. He has mortgage debt of $150,000.00. The judge determines that the house is only worth $100,000.00 so he modifies the principal amount of the mortgage to $100,000.00. A year later the debtor sells the house for $110,000.00. The bank gets $8,000.00 of the $10,000.00 difference. The proportion is lowered as time goes on. I don’t believe there is a similar requirement in other cramdown situations, but I could be wrong.

There is also a condition that the debtor prove that he or she attempted to modify the mortgage privately before filing, which is just an additional nuisance requirement at best, and at worst a source of confusion if creditors can then claim that the borrower unjustifiably refused a proferred modification less generous than that allowed by the new law. There is also the problem that it is sometimes impossible to identify anyone with whom one can talk about modifying a mortgage.

There is also a change in language regarding the interest rates to which loans can be modified, though it is unclear to me which way it cuts. However, since all the other changes to the original act are favorable to creditors, I’m going to assume that the interest rate change is similar.

Overall, the changes introduce impediments to this process, which is unfortunate, because if it worked efficiently and quickly it would probably benefit everyone, including the banks.

Of course none of the above tells us much about Larson’s position in all of this. The statement he released is not inconsistent with Firedoglake’s report that he was among the “New Democrats” that watered down the bill, nor does it establish that he was among that group. The fact that he supported the final bill also proves nothing either way. The bill is better than nothing, and were I in Congress I would have voted for it, given the status quo alternative.

So, at least from the vantage point of this blogger, on this issue, the Congressman gets a Scottish verdict of “not proven” on the charge of conspiracy with the “New Democrats”. I should add that whatever his role in this particular case, I think he’s an excellent Congressman overall. He opposed the Iraq war from the start and as I wrote a while back, he’s leading a probably futile campaign to impose a carbon tax rather than the more cumbersome, less workable cap and trade system.


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Yet more on credit default swaps

Sunday, March 8, 2009

It is becoming crystal clear that, as Gretchen Morgenstern reports in today’s Times, the AIG bailout is in fact a backdoor bailout of the folks who purchased credit default swaps from AIG. The government has refused to disclose the names of these counterparties, but word is leaking out, and suffice it to say, the list is larded with the usual suspects (e.g., Goldman Sachs, Merrill Lynch, etc.).

There are interesting articles about the AIG bailout in particular, and the resulting counterparty bailout here and here. One very interesting factoid concerns Goldman Sachs. It’s former CEO was at the table when the AIG rescue was hammered out, despite the fact that everyone at the table knew or should have known that Goldman would be one of the primary beneficiaries of the AIG “rescue”

I have been looking for a coherent explanation of why it is necessary for the government to step in and pay full dollar on these instruments, which are referred to as insurance, but appear to have been only a sophisticated form of gambling. On the one hand, we seem to be directly shoring up these institutions, by helping them out from under the bad loans they made. On the other hand we are paying them full dollar on “insurance policies” on those same bad loans. It would be ever so nice if someone could explain why throwing $180 billion dollars at AIG (which then goes to these counterparties) is a more productive use of that money than using it to build infrastructure, or educate kids, or for a thousand other uses. I know that we are constantly told that it would be the end of the civilized world if these gamblers didn’t win all their bets, but I am beginning to suspect that this is a form of socialism we could all do without.


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Earmarks

Sunday, March 8, 2009

The earmark debate is a distraction of major proportions. It is also an example of hypocrisy of major proportions, as Taxpayer for Common Sense documents. You can download there data at this location.

The data demonstrate quite conclusively that earmarks are largely, though not solely, the domain of those states and of that party that keeps lecturing the rest of us about-well, about how terribly irresponsible our government is due to all those earmarks. By and large, Republican Senators lead the pack in requesting and getting earmarks. By and large the money is flowing from those states that pay the lions share of the taxes (e.g, the Northeast) to those that have made a century long habit of sucking the public teat (e.g., the South). It would be interesting to see what the per capita expense for earmarks is for those states that voted for McCain versus those that voted for Obama. Bear in mind that those states are largely the less populated ones, though each has two senators elbowing their way to the front of the lunch line.

Ryan Grim at the Huffington Post concludes:

Rural and small-state voters were the big winners on an absolute and on a per capita basis, even though it was big states and urban areas that have delivered Congress and the White House to Democrats. Of the top ten earmarking senators, only Sen. Dianne Feinstein (D-Calif.; $77 million solo; $235 combined), represents a large state and only three of the top ten are blue states. In the top 20, only six blue states are represented.

I’m not sure all those conclusions are expressly supported by the Taxpayers for Common Sense data, but its reasonable to conclude that earmarks do constitute a massive shift of wealth from Blue to Red States, and from urban to rural states, and therefore, by extension, from us socialists to the hardy self reliant folk in the “heartland”. Most of the Republican Senators railing against earmarks are, in essence, demanding that we stop them before they kill again.

There’s nothing wrong in theory with earmarks, and some of them are worthwhile. In total they are an extremely small percentage of the budget. They are a talking point really, and it would be nice if Reid (who is a sinner in his own right) would call their bluff by stripping the bill of any earmark requested by any Republican complaining about them (McConnell has 36 private earmarks (total cost a little more than $51 million). By way of comparison, the entire New England Delegation has 47 (total cost about 21 million), with the Democrats in the delegation accounting for 1 of those earmarks. If you include Bernie Sanders as a Democrat, the number increases to 17.

Reid may or may not need 60 votes to pass anything in the Senate, but he could stop a lot of the Republican nonsense by doing a better job of illuminating their hypocrisy.


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Leave Rush alone

Saturday, March 7, 2009

Unless you’ve been living under a rock, you have no doubt seen the Chris Crocker “Leave Britney alone” video, one of the most viewed youtube videos ever. If you have been living under a rock you can view it here. I am still not sure if he (she?) is serious or pulling our legs

Here’s John Amato with probably the thousandth takeoff on this classic video, entitled Leave Limbaugh Alone:


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Larson pushes for carbon tax

Saturday, March 7, 2009

John Larson is fighting a lonely, apparently hopeless fight to do something that is extremely sensible:

Representative John B. Larson embarked again this week on his lonely quest to enact a national tax on carbon dioxide emissions.

His idea is to set a modest price on a ton of emissions, gradually increasing it each year until the desired reduction in heat-trapping-gas pollution is achieved. Under the bill he introduced this week, virtually all the revenues from the tax would be returned to the public in lower payroll taxes.

“The American people want us to level with them,” Mr. Larson, a moderate Democrat from Connecticut and a member of the House leadership, said in an interview. “We create price certainty without any new bureaucracies or complicated auction schemes.”

Many economists and academics, as well as a handful of Mr. Larson’s colleagues on both sides of the aisle and perhaps a few White House officials, if secretly, agree that a carbon tax is a simpler and more effective means of tackling global warming than the complex cap-and-trade scheme embraced by the Obama administration and most Democratic leaders in Congress.

Even Al Gore has accepted the political reality that only a more cumbersome and less effective “cap and trade” system has any possibility of becoming law, though he would prefer a plan like Larson’s. The article points out that the cap and trade systems adopted in Europe have not performed well.

It’s true, as I’ve noted before, that the perfect is the enemy of the good. But there are also times when the “possible” is the enemy of the necessary. That seems to be the case with the carbon tax/cap and trade issue, as it is with the single payer/complex-make-sure-you-subsidize private insurance health care issue and the nationalize/throw money at banks issue.

Perhaps this is simply the playing out of an historical dynamic. Maybe all political systems ultimately fall apart because of the accumulated weight of choosing the possible over the necessary. What’s troubling is that so often we assume what is necessary is not possible. Cap and trade advocates point out that carbon tax proposals have been unpopular elsewhere. The fact is that both the straight on tax or “cap and trade” will be violently opposed in this country. Larson’s idea is to use the carbon tax to reduce the payroll tax, meaning it would benefit the vast majority of workers in this country from a financial perspective, not to mention that it would be more effective in preserving the planet on which they reside. It should be possible to sell that kind of tax, if one marketed it right, particularly if one were not overly concerned with being charged with waging “class warfare”. Parenthetically, isn’t it funny that the people most opposed to class warfare are the most likely to support any other form of warfare.

Larson may lose this fight, but he should be congratulated for waging it.


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