Bankers of the world, unite!

Today was a tempestuous day on Wall Street, to put it mildly. Public and market reaction to the plan being put forward by the administration was less than unanimously enthusiastic. Perhaps it has something to do with finding this kind of language in it(in all cases, boldface added by me):

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary's authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

(New York Times)

Then there's the specter of Wall Street fat cats profiting off the bailout…or trying to:

Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.

Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.

At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.

(New York Times)

With attitudes like that, it's no wonder that John McCain's suggestionresonates:

"We can't have taxpayers footing the bill for bloated golden parachutes like we see in the Lehman Brothers" bankruptcy filing, Sen. McCain said at a town-hall meeting to applause. "My friends, the top executives are asking for $2.5 billion in bonuses after they ran the company into the ground."

Sen. McCain called for the pay of senior executives who would benefit from the bailout to be limited to that of the highest-paid government official.

(Wall Street Journal)

In other words, the chairman of Morgan Stanley couldn't make any more than the President of the United States. Since we're bailing his sorry butt out, it sounds fair to me. Unfortunately, our future Wirtschaftsfuehrer doesn't agree:

Mr. Paulson has argued that pay limits shouldn't be part of this plan because they could discourage firms from participating. Treasury is also arguing that it isn't feasible to expect thousands of companies to change their executive compensation structurejust to participate in the program…

Oh, the poor finance companies. It just wouldn't be fair. Hey, if they'd rather go under due to bad debt than reduce their executive compensation packages, fine.

…and says such a move would discourage small banks and credit unions from participating.

(Wall Street Journal)

Hmmm. It couldn't possibly be because his last job was as Chairman and CEO of Goldman Sachs, one of the firms expected to benefit most, could it? Nah…

Looking at it in retrospect, the following passage, written at the beginning of the year, seems prophetic:

The massive build-up of toxic debt is threatening the functioning of the international financial system. The banks have been forced in the last two months to write down $80 billion of bad mortgage debt. Conservative estimates are that they will have to take losses of $300-400 billion in the next year-if the economy doesn't go into recession.

You'll never believe where that passage comes from. When these folks start sounding sensible, it really is time to worry.

A billion here, a billion there...

So, according to the New York Times, the federal government could spend $1 trillion dollars to clean up the Wall Street mess. That's trillion. With a T.

For comparison, here's what the entire Iraq War has cost as of this writing:

costofwar.png

Courtesy of the National Priorities Project (http://www.nationalpriorities.org/costofwar_home))

That's $555 billion, a bit more than half of what the bailout will cost. Or, if you prefer, the bailout will cost a little less than twice what five years of war has cost us.

And it will be paid by you and me, and our children, and our children's children, and our children's children's children.

Get the picture?

And all because of greed…the greed of speculators, the greed of Wall Street executives who took out millions in stock options and bonuses while their firms went into the red, and the greed of ordinary men and women who bought into the fantasy that you could afford an $800,000 house on an income of $50,000 a year and almost no money down.

And let us not forget that we're bailing out the same industry that has been nickel-and-diming us to death with late fees, overdraft charges, and transfer fees, all while paying us half a percent on our savings accounts.

I don't know about you, but I'm ready to grab a pitchfork.

The virtue of smallness

In my wildest dreams, I could never have imagined that one day I would wake up to find myself an owner of the world's largest insurance company. Yet, today I and 300 million of my fellow citizens awoke to exactly that, since the U.S. Government has seen fit to take over American International Group in a bailout. Rod Dreher had this to say:

If we live in a world in which the collapse of a single firm-- not even a bank or a manufacturer, but an insurer -- could push the US economy (and no doubt the global economy) into a full-blown depression, are we not all living on the skin of a bubble?

Let that sink in for a minute.

OK. That made me think: what if the very bigness of modern corporations carries within itself the seeds of disaster? Stay with me here, and see if this doesn't ring some bells…

We have been told, and have largely accepted, that we live in a global economy. In this global economy, companies must have vast resources in order to effectively compete. Company A, which does not have the wherewithal to compete on a global scale, must inevitably be swallowed up by Corporation B, which can either leave them as an autonomous division or merge them into the company and incorporate their products/services into their own product line. Increased resources give them the ability to expand, therefore making possible an increased revenue stream. This provides value to the shareholders and makes it possible to acquire Company C.

So far, so good. But what happens when the new ABC Conglomerate makes a few poor decisions? What happens when it controls so much of its market that its failure becomes a problem for the global economy? Previously, if Company A had gone under, Corporation B and Company C would have taken up the slack. But now there is one company where before there were three, and if it falls, it falls hard.

In a way, we're talking about the dinosaur problem. The dinosaurs were at one time the kings of the earth. But they were large, and unwieldy, and unable to adapt to changing conditions. Eventually, a few small, furry mammals proved more adaptable, and ended up basically ruling the planet.

I'm not sure what the answer is. I'm a historian by training, not an economist, and I'm still groping my way through the dark. But to the extent that government economic policy for the last thirty years has encouraged the growth of large multinational conglomerates, it seems to have been unwise. Globalization is problematic, particularly in an era of $100-per-barrel crude oil that is largely controlled by people who don't like us very much. After all, you have to move stuff across the globe somehow --and there is still the issue of dependence on foreign nations for much of what we need. Everyone agrees that dependence on foreign oil is bad, but we haven't yet come to that conclusion about foreign shoes, or auto parts, or anything else.

If we're going to live in a capitalist economy--and for the first time in my life, I'm beginning to see that as a mixed blessing--we should encourage more competition by making it difficult for companies to grow so large that they can take the rest of the economy down with them should they collapse (this would also obviate the necessity for the taxpayers to bail them out). We have antitrust legislation--let's use it. Instead of a few huge national banks, let's have many regional institutions with roots in the communities they serve. And let's temper the greed with some good old-fashioned government regulation in the public interest, so we can begin to reduce the gap between executive compensation and the wages of the average worker. We've let things get a bit too unbalanced. It's time to re-balance them.

And here's some food for thought, courtesy of Los Angeles Times columnist David Lazarus:

Once the Merrill buyout is complete, BofA will rank as the country's largest retail bank, the largest credit card issuer, the largest mortgage provider and the largest retail brokerage. The bank has about 59 million consumer and small-business accounts, roughly $163 billion in credit card loans and more than 6,000 branches.

…Since 2004, BofA has purchased FleetBoston Financial Corp. for $47 billion, credit card issuer MBNA Corp. for $35 billion, Chicago's LaSalle Bank for $21 billion and mortgage lender Countrywide Financial Corp. for $4 billion. And now Merrill Lynch for a cool $44 billion (or maybe a bit less, depending on BofA's stock).

That list, by the way, doesn't include the fact that BofA itself is the result of a merger between NationsBank and the original Bank of America. By my count, that makes seven formerly independent major financial institutions now under one roof, with overwhelming dominance in four separate areas of the financial world. Why are we letting this happen?

Again from David Lazarus' column:

"It can be very convenient having so much under one roof," said Jennifer Ellison, a principal at investment firm Bingham, Osborn & Scarborough in San Francisco, which was BofA's home until the bank and its name were taken over by NationsBank Corp. of North Carolina in 1998. "But if that roof ever collapses, where does that leave you?"

Indeed.

Notes on 9/11, postscript

Following up on the comment I quoted in the previous post, I had the questionable joy of flying cross-country about a month ago. I found myself giving the following advice to my wife as we prepared to go through airport security:

"Have your stuff ready. Don't make waves. Don't complain about anything. Give them your ID, and cooperate with anything they tell you to do."

Then it hit me--I'd been given virtually identical advice twenty-seven years ago with respect to the East German Grenztruppen as I prepared to cross the Iron Curtain for the first time. But that isn't what scares me.

What scares me is that I have a nine-year-old nephew who has never known anything different, and who will grow up thinking that this is normal. That, more than anything, testifies to the country that we lost.

I am not so naive to think that this is the first time our country has abandoned its ideals in the name of self-defense and security. President Lincoln suspended habeas corpus during the Civil War, and in World War II President Roosevelt imprisoned American citizens simply because they were of Japanese ancestry. We righted those wrongs and got back on course, and someday the current mistakes will be corrected.

I just wish I were confident that it would happen in my lifetime. Right now, I'm not feeling so sure about that.

Notes on 9/11

Some miscellaneous thoughts and ruminations:

  1. Anyone else find the timing of Sarah Palin's first network interview interesting, and her canned responses depressing? It's the seventh anniversary of the 9/11 attacks, and the GOP has nominated a candidate for Vice-President of the United States who doesn't know what the Bush Doctrine is. She's had the benefit of preparation by the Republican Party's groomers and experts, and she still looked like a moose caught in the headlights of an approaching Peterbilt. Be afraid. Be very afraid.

  2. Over at Rod Dreher's blog, he posted an article called "9/11 And The Country We Lost." He spoke mainly of the spirit of community that was evident in the days immediately following the attacks. One of the commenters, David J. White, posted this in response:

When I saw the headline of your post, "9/11 and the country we lost," my initial expectation of what I was about to read was completely different from what you actually posted. I expected you to write about the country we lost because of 9/11: the country where we didn't have to take off our shoes at the airport, where we could take a drink onto an airplane without causing an incident, where I could fly with just a carry-on bag because no one had a hissy fit if I happened to have disposable razor in it, where we didn't have to worry about being banned from flying just because we might have a name similiar to a suspected terrorist. A country had a proud tradition of, for the most part, not torturing prisoners and not invading countries that hadn't done anything to us. That is the country I miss.

Amen.

False choices

Author's note, 2016-10-14: It's a measure of how far I've traveled politically in the last eight years that I call myself conservative in this post. Let it be noted that it is no longer true--if it ever really was.

I haven't blogged anything yet about the nomination of Sarah Palin to be the Republican vice-presidential candidate, because I've been waiting for the dust to clear. Her speech to the GOP convention was about par for the course, albeit delivered flawlessly. It's the job of the vice-presidential candidate to be an attack dog, and she clearly fulfilled that mandate. So far, so good.

What has been interesting to me is the reaction of conservatives of all varieties to her nomination. For the most part, they've been falling all over themselves to praise her, and even people who should know better are joining the chorus. There's been a great deal of talk about how refreshing it is to have someone on the ticket who is such a regular person, someone who knows what it's like to shop at Wal-Mart, someone who goes hunting and has membership in the NRA. This is usually contrasted with the usual culture-war stuff about the liberal elite and how they're out of touch with ordinary Americans, how they look down on them and consider themselves to be their betters.

Frankly, all that makes me want to throw up. It's setting up a false dichotomy between so-called "ordinary Americans" and those who have a more cosmopolitan outlook. I'd like to know just what an "ordinary American" is. Is it the closeted gay teacher in Bismarck, North Dakota who drives his F-150 to shop at Wal-Mart? Or is it the conservative Russian Orthodox deacon in New York City who always rides public transportation and buys organic? I'm conservative, but I'm a Californian with an imported car and I'm married to a woman with a Ph.D. Am I an ordinary American?

It will come as no surprise to anyone who opens their eyes occasionally that America is a bit more diverse than the crowd at the GOP convention in St. Paul, which was 92% white and chock-full of party loyalists. Palin was a hit with the base. Great. Now, the real question is this: how will she play in Peoria? Or New York? Or New Orleans?

It's one thing to energize the base of the party. It's another thing to win an election. I happen to think there is a middle ground, something between giving Islamic extremists everything they want in the name of political correctness and going into an invade-Russia-and-drill-in-the-Arctic mentality.

What I'd like to see, ideally, is some understanding that the world is a complicated place. I'd like to see a candidate who knows enough about history to understand why Russia views Ukraine as its own backyard, or has foreign policy advisers who do. I'd like to see a candidate who has the insight to ask the Patriarch of Antiochif he might have any insights into living with Islam, seeing as how his church has been doing it for around six hundred years.

Of course, none of that will happen. The American political process doesn't lend itself to a lot of thoughtful discussion. What we will probably get instead is more of the same speechifying about "putting the country first," comparisons between pit bulls and hockey moms, and divisive culture-war nonsense about "real Americans" in places like Alaska and Idaho vs. the Volvo-driving, espresso-swilling, Atlantic Monthly-reading, homosexual-loving, liberal coastal elites who want to make your kids Wiccans and teach them Darwin.

Lord, have mercy.

Signposts along the way

(Note: this post is about some personal business, and likely only of interest to people who know me. If you're looking for something a tad more interesting, check back in a bit.)

A little over a week ago I took care of an important bit of personal business. Those who know me personally know that I was a Baha'i prior to becoming an Orthodox Christian, and the Baha'i administration loves its paperwork (indeed, the Baha'i equivalent of baptism or initiation is the signing of a form). While I consider that I ceased to be a Baha'i with my baptism and chrismation, the Baha'is happily continued to send me mail, email, and their bi-monthly magazine because I was officially on the rolls.

So, on the 22nd I mailed off letters to both my local assembly and the national records office informing them that I had become Orthodox and that yes, that meant I was no longer a Baha'i, and they should delete my name from the membership roster. I also mailed off a letter to the elderly Baha'i lady who introduced me to my wife, and who graciously permitted us to have our wedding at her house. I had hoped to avoid telling her, as I knew she would be disappointed, but ultimately I decided that I owed her the courtesy of an honest explanation, and as it happened she took it well.

There isn't much more to say about this, except that I have finally cast off the last remnants of my former religious identity. Now that I've gone public, I can be more open about my Baha'i experience, and if I can ever get it down in coherent form, I'll blog about my experience leaving the Baha'is. For the most part, though, I'd much rather look ahead than look back, so don't hold your breath. In the meantime, I can basically endorse most of what is said in this letter. It was written by someone who resigned nine years ago, but much of what she wrote is still valid today. There are others out there, written by people who are basically professional ex-Baha'is, but that's a path I don't want to go down. It doesn't seem spiritually healthy.

This is, however, a signpost along the path of my life, and I thought I'd mention it. You may now return to whatever you were doing before reading this. :-)

Standing on the precipice

With Barack Obama's acceptance speech tonight, the general election season truly begins. It seems to me to be worthwhile to pause for a moment, and consider some of the implications of what we, as Americans, are about to do in electing a new president.

The first thing we have to acknowledge is that the next President of the United States, whether it is McCain or Obama, is going to disappoint us all. Expectations are high, and it is inevitable that not all of them are going to be fulfilled. Following George W. Bush, who is about as popular among Americans right now as Mao Tse-tung is among Tibetan exiles, one might think that it wouldn't be terribly hard for the next president to look like a success. But even a Republican presidency under McCain won't be able to magically transform Iraq into a politically moderate and economically prosperous island of democracy in the Middle East, thus disappointing the neocons; and a Democratic presidency under Obama won't be able to magically transform inner-city Detroit into an upper-middle-class paradise, or make Detroit's automakers produce hybrid SUVs that survive 55-mph crashes, get 100 mpg and cost $12,000. Some inconvenient realities will get in the way. And regardless of party affiliation, the next president will have to deal with a Congress that is in no mood to kowtow to the White House after eight years of Bush the Younger.

This is not to say that it doesn't matter which candidate we elect. There are some important differences between them, as well as between the parties, and these must be taken into consideration. What follows is a brief sketch of each of them, and where they show promise as well as where they fall down.

McCain

John McCain is not the man that much of the Republican base wanted. He's been a bit of a maverick in the Senate, going against the Bush administration when it suited him, and there are lots of conservatives who are not happy with his candidacy. To some extent, this is probably a good thing--it increases his chances with the broad mass of the electorate, who tend to occupy the moderate center. Unfortunately for McCain, there has been some talk among the conservative core of sitting this election out. For a party that is trying to keep control of the White House despite the unpopularity of the incumbent, this is not good news.

McCain's personal life also does nothing to endear him to many voters. He unceremoniously dumped the wife who waited for him while he sat in a North Vietnamese prison in favor of a rich, blond, connected heiress to a beer distributorship. So much for the family values constituency. In a recent interview, he was unable to remember how many houses he owned, and suggested that you weren't rich unless you made more than $5 million a year. Unless you're the spokesman for Monocle Pete's Magic Yacht Wax(apologies to Merlin Mann), this isn't a good thing.

What is a good thing is that given McCain's experience as a POW during the Vietnam War, he's been fairly unequivocal in his denunciations of torture, which gives hope that he would curtail some of the activities that took place in places like Guantanamo Bay under the Bush administration. But given his voting record in the Senate, where he supported the policies of the current administration time and time again, voters would be wise to not make too many assumptions about his desire for change. And while a military background would seem to give him an edge in judgment about when to use force, his recent statements on the conflict between Russia and Georgia have been, in my opinion, grossly irresponsible.

Obama

Much has been made of Barack Obama's unusual background, which tends to obscure the fact that he is the product of an Ivy League education and is an incumbent U.S. Senator, which makes him somewhat less of an outsider than his campaign staff would like you to think. It also means that he is somewhat less naive and inexperienced than his detractors would have you think--no one who succeeds in the world of Chicago politics is exactly a babe in the woods.

As with McCain, Obama faces a challenge in that there are numerous members of his party who would have preferred to see someone else elected, namely Hillary Clinton. Some Clintonistas have voiced an intention to vote for McCain, and one of them has actually appeared in a McCain campaign ad. It's hard to imagine, though, that once the general election campaign starts and reality kicks in that many of them will actually vote for an elderly white male who opposes gay marriage and national health insurance and favors continuing the war in Iraq.

Obama also faces the problem of being the first black candidate to be nominated for President by one of the two major parties. While it would be nice to think that America has moved beyond racism, the reality is different, and it is not too difficult to find people who will refuse to vote for him because of his skin color. If this turns out to be a close election, it could mean the difference between victory and defeat.

Some of that difference will be made up by the fact that he has been virtually anointed by the Kennedy family as the successor to JFK. In his youth, his optimism, and his vigor, he does remind many of the late President. Of course, this cuts two ways: like JFK, he is also thin on foreign policy experience, and has been in the Senate a relatively short time. The historian in me also remembers that JFK brought us closer to nuclear war during the Cuban Missile Crisis than any President before or since, and that the memory of his administration as Camelot is colored both by its relative brevity and a by a certain romanticism. Comparisons to JFK are not unreservedly positive.

Conclusions

As can perhaps be inferred from the foregoing, I will voting for Obama unless something happens in the next two months to change my mind. I will vote for him despite the fact that I disagree with him on certain issues (like abortion), and that I am far from certain he will be able to extricate us from the disaster that is Iraq. However, there is one overriding issue that takes precedence for me over all others, and which leads me to conclude that there is no other rational choice: the Constitution.

The Constitution of the United States is what defines us as a nation. In 1787, thirteen squabbling former British colonies came together to revise the Articles of Confederation that had been the basis for their government, and ended up writing one of the most flexible and far-sighted documents the world has ever seen. For over two hundred years, each President of the United States has taken an oath to "preserve, protect, and defend" the Constitution.

It is my belief that the current occupant of the White House is in violation of that oath. As a direct result of actions taken by the current administration, the U.S. is holding people in prison without charges for indefinite periods of time. It has handed over prisoners to governments that practice torture, for the express purpose of facilitating said torture. It has authorized the FBI to search individuals' homes without their knowledge, and to search their financial, email, and telephone records without a court order. If you are a person the government is interested in, they may compile information on your reading habits by searching your library and bookstore transactions. It has even turned the simple act of air travel into an ordeal resembling East German passport control (I speak from experience, having been through both).This is not how Americans are supposed to behave. This is not what America is supposed to be like.

I recognize, of course, that George W. Bush is not running for re-election. But to the extent that John McCain would continue the policies of the current Republican administration, I feel that it is too dangerous to take the chance of electing him. It's a shame, really. In many ways, he'd make a good President. But there is simply too much at risk. I'll take the chance of an Obama administration doing something really stupid, because I have more confidence that I'll be able to continue to exercise my constitutional rights under an Obama administration.

And one more thing: the Republicans as a party have behaved execrably in the last eight years. Historically, the GOP has seen itself as the party of fiscal restraint, yet this administration has taken the national debt to new highs, and Republicans in Congress have been all too willing to spend like drunken sailors on leave. And why shouldn't they? It was the "conservatives" who encouraged the rampant consumerism in this country over the last twenty years that led to easy credit, creating a society that accepted 8-year car loans and adjustable-rate mortgages with balloon payments that were predicated on a real-estate bubble that had to burst eventually. It's hard to argue that the government should live within its means when you're convincing the citizenry that they don't have to live within theirs.

Someday, there will be a true conservative movement in this country again, less beholden to global corporations, one that accepts the notions of restraint, frugality, personal responsibility, and the common good. Such a movement would be closer in ideology to what the British call Red Toryism than to the consumerist neoconservative drivel spouted by Rush Limbaugh and Sean Hannity. When that day comes, I'll be the first to join. Until then, I see no reason not to give my vote to the Democrats. They may tax me more to pay for social programs, but at least that's doing some of God's work. The Republicans have proven they are more interested in doing Mammon's.

Checking in

Just looking in to make sure everything is shipshape. Things have been fairly busy since getting back from vacation at the beginning of August, but I will be back soon with some content--maybe even tonight.

Until then, take a look at Leo Laporte's new project.

The doctor and the commander

The past week has not been kind to genocidal war criminals, nor to those accused of being one. First, former Bosnian Serb leader Radovan Karadzic was apprehended in Belgrade, living quite openly under an assumed name (and one heck of a disguise). Karadzic is charged with responsibility in, among other things, the Srebrenica massacre. From Wikipedia:

Karadzic is accused of personal and command responsibility for numerous war crimes committed against non-Serbs, in his roles as Supreme Commander of the Bosnian Serb armed forces and President of the National Security Council of the Republika Srpska. Under his direction and command, Bosnian Serb forces initiated the Siege of Sarajevo and carried out numerous massacres across Bosnia. Tens of thousands of non-Serbs were killed, hundreds of thousands were driven from their homes and thousands more were imprisoned in <span class="mw-redirect">concentration camps</span>where many died. He is accused of ordering the Srebrenica massacrein 1995, directing Bosnian Serb forces to "create an unbearable situation of total insecurity with no hope of further survival of life" in the UN safe area. In addition, he is accused of ordering that United Nations personnel be taken hostage in May-June 1995.

A lovely human being. Of course, it should be remembered that the Serbs, who have so often been demonized in the Western press, are not solely to blame for the horrors that have been perpetrated in the Balkans. During World War II, the Croatian fascists, the Ustashe, were allied with the Nazis, and carried out acts of depravity comparable to anything that Himmler and his minions could dream up.

One of them, Dinko Sakic, died this week in Croatia, where he had been extradited from Argentina, which sheltered him for over fifty years. Sakic was commandant of the concentration camp complex of Jasenovac, known as the "Auschwitz of the Balkans." From the New York Times:

Mr. Sakic was found guilty of killing more than 2,000 Serbs, Jews and Gypsies at the camp named Jasenovac. Among other crimes, the verdict said, he ordered executions; did not treat the sick; worked inmates to death; starved and tortured some with a blowtorch; and hanged others, sometimes leaving them dangling for days. He personally shot at least four prisoners dead, two of them for smiling…in 1994, during a state visit to Argentina by (Croatian) President Tudjman, Mr. Sakic spoke to Magazin, a Croatian magazine. "I'd do it all again," he said, adding that he wished more Serbs had died at Jasenovac. "I sleep like a baby."

An equally lovely human being.

The moral of all this, if there is one, is this: in human affairs, there is always more than enough blame to go around. In war, no side is completely blameless. The atrocities committed by the Croats during World War II, which were just one more chapter in an ongoing saga of interethnic hatred, provided a rationale for Serb extremists to commit atrocities against Croats. This does not excuse either side for what it did; rather, it condemns each of them equally. Sakic and Karadzic were both monsters. Sakic is answering to God for his crimes; in time, so will Karadzic.

Addendum: Early reports had it that Karadzic hid by disguising himself as a Serbian Orthodox priest. For a well-rounded discussion of this topic, and the role of the church in the Balkans, see this blog article by Terry Mattingly. (Disclaimer: Mr. Mattingly, like myself, is Orthodox.)