the '3' key is broken, not terminally yet but it will be soon I can tell, I have seen this before - the laptop is ending ... obviously time for reflection since the money for a new one is problematic:
one on how much time I spend at it (the keyboard that is), enough that the N M L A and E keys have the letter worn right off and R & H are about gone as well, funny that it is the 3 that is actually breaking?
two on the total lack of feedback - about 50 visits per day and not one person has a thing to say?
and, three that it is debilitating and I am already accelerating on the downhill slide, this ain't no hypochondria, no it ain't, interesting ... the OED tells me that hypochondria originally referred specifically to the liver, during those 24 days in April/May when I did not smoke this accelerating slide very perceptibly slowed, if I could just 'jump back on the waggon' but it is not that simple, trade in the shade is about as close as it gets and I am thinking that it is one of those 'tantalizing tendencies' as Coxeter calls Phi or Tau or whatever, 1 plus root five over 2, the divine proportion, the golden mean, 1.6180339887498948482045868343656... (approximately :-) rather than the real-meal-deal theorem & solu-shun!
What happened to the kid General Hudson?
The trauma of a whole generation.
No one leaves comments on his blog, Colonel.
so here's the news :-)
I knew that Peru's Presidente Alan Garcia would move to invalidate his token repeal of the two most egregious exploitation laws relatively quickly ... but Holy Shit! Two weeks flat, WOW! the man doesn't waste any time, no
my son and I were talking about it on the streetcar, he thought it was all fixed since the Peruvian government had been 'forced to repeal the bad laws' ... this view is unfortunately quite common
some images and maps below of the Perenco presence and their CEO, Jean-Michel Jacoulot, the colour coding in green yellow & blue mean 'Lotes de Contratos,' 'Lotes en Proceso de Aprobació,' & 'Areas de Convenio de Evaluación' which looks to me to mean that they are all on the go, note that these Lots cover the entire Peruvian portion of the Amazon basin ... doh! you can go to the Perenco website and read all the good words about the 'environment' and 'social responsibility' and so forth ... God, I hope it is all true because one way or the other these guys are going in there to get their oil, pretty pictures notwithstanding ... what does Jean-Michel Jacoulot look like? just exactly that one picture of him that I could find, mug shot, passport photo maybe, no information about him, low profile, whatever, and what does Alan Garcia look like? a fat bellicose South American dictator disguised somewhat behind his good-old-boy go-getter smile, no mysteries there
Paul Street's essay, Obama's Violin: Populist rage and the uncertain containment of change, is not something I would normally read, it came to me from a friend, I was skeptical and looking out for echoes of conspiracy and exxageration, but it's a no-brainer, of course the political parties do not cover the spectrum, not much movement in either subject or object since Jean Baptiste Colbert wrote, "The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing."
so the object of the game is simply to keep the mob off the gates, who can argue with that?
Frye says somewhere ... "Antitheses are usually resolved, not by picking one side and refuting the other, or by making eclectic choices between them, but by trying to get past the antithetical way of stating the problem," or you could say, 'in the box' and 'out of the box'
here's a headline from the NYT today, "Homeowners in the U.S. are challenging their property tax bills in droves as the value of their homes drop, threatening local governments with another big drain on their budgets," can't go at this sentence very easily eh? on the one hand it says 'boo hoo poor local governments' nevermind how they squander their money, and on the other it says 'boo hoo poor homeowners' nevermind that the houses temselves are junk and the owners never should have afforded them in the first place, it's as if you had to pick, the sentence tries to make you pick in a way ... Jane Jacobs now, there was a public spirit if there ever was one
many ruminations seem to lead to my parents these days, I think it was my mother who corrupted me with religion ... my father had nothing to do with it and was surprised when he learned that I do, and my mother was intellectual enough to buy heavily into the 'myth of perfectability' which comes up centrally in Charles Taylor's A Secular Age ... lemme (which 'lemme' is in the OED - I thought there was an apostrophe somehere in it, like le'mme :-) ... lemme just go and check that out ... yeah, he goes at it right in Chapter 1, and at various points throughout, I am getting used to actual hard-copy books, managed to use the Index once I remembered that he calls it Reform not 'perfectability'
so yeah, the notion that over time Christians will come to embody the Gospels, live by the spirit of them, and that Laws will atrophy and disappear through not being needed, this is what I took at the maternal pap, and, since I was just a wee lad at the time, it seemed like the solution to all problems and I have been waiting for it ever since, silly fellow ... "But on the seventeenth he burst into the arms of Judas Priest which is where he died of thirst."
here it is - sex: in Northrop Frye the other day Lord Byron confirmed my mother's folk wisdom that 'women do the choosing, you just have to be there,' and in the Globe recently Margaret Wente has been relating how she had sex in a canoe in her youth, my parents were both excellent canoeists, undoubtedly had sex in one at some point, when it came my turn I think it was raining and we did it under the canoe ... then finally today someone was going on about sex among the enderly, which I am getting to know something about as well, and which my parents taught me implicitly through their evident and ongoing glee in this physical realm 'out even to the edge of doom' ... so, in dorys too on the east coast we are told, full circle, all good
quitting in April was mostly dumb luck, a Sunday movie about Balm in Gilead, and a tooth pulled on day 1 (April 28), which left me on pain killers till day 4 (May Day - Hurray! Hurray! it's the first of May! outdoor screwing starts today!), still on antibiotics on day 5 when I finally realized what was going on (doh!?) & went looking for support, which did eventually came through about day 17, but I thought I had had to work too hard for it and I was not satisfied as I maybe should have been, should have counted my blessings, instead it was death-wish 'trade in the shade' that got me ... caved on day 24 feeling low and mean.
a song is
anything that can walk by itself
Bringing It All Back Home - Liner Notes, Bob Dylan, 1965.
what about a love-song I wonder?
can't think about perspective without thinking about Thomas Pynchon's V, maybe go get a copy somewhere and read it?
nope, that won't do ... endorphins impaired
The lyf so short, the craft so long to lerne,
Th' ssay so hard, so sharp the conquering,
The dredful joye, that alwey slit so yerne,
Al this mene I by love,
Geoffrey ChaucerThe Parliament of Fowles, late 1300's, maybe 1382.
no idea what 'slit so yerne' means, almost 'slight so yearn' ???
"In the context of our own Great Recession, Madoff’s old-fashioned Ponzi scheme was merely a one-off next to the esoteric and (often legal) heists by banks and bankers. They gamed the entire system, then took the money and ran before the bubble burst, sticking the rest of us with that fear, panic and loss."
Bernie Madoff Is No John Dillinger, Frank Rich, July 4 2009; and some perspective by Neil Reynolds: The case against The Crash conspiracy theory & Holman W. Jenkins: The Financial Markets and Fear Itself.
150 years, no problem, but what about the hundreds and thousands of other greed heads? someone has called this Madoff fellow 'evil' but that is just pretend bourgeois morality, strategic morality to cover the greed ... greed which colours the entire culture, a rogues gallery? hardly possible it it?
what about AIG - American International Group, Inc.? but it is all just the tip of the iceberg isn't it eh? and the ones who pretend to be 'principled' ... Edward Michael Liddy? why does he really want out'a there? probably old enough and rich enough and with the morals of Leonard Cohen's alarm clock mechanic ... even the boys on the so-called 'other side': Tim Geithner? Ben Bernanke? Edolphus Townes? Barack Obama himself?
everyone has to cooperate to catch the dinoasurs before they fall, TOO BIG TO FAIL is about it
what about the notion of insurance at all? feeding on fear, you may not be able to live forever, you may not be able to take it with you, but these insurance guys live in a secular realm where you can and will and MUST!
want some perspective?
I guess you may have to stand waaaaay back then ... maybe right out of the room, you can't quite get off the planet though can you? how far I wonder? where?
The Sick Rose, William Blake.
O Rose, thou art sick!
The invisible worm,
That flies in the night,
In the howling storm,
Has found out thy bed
Of crimson joy;
And his dark secret love
Does thy life destroy.
all I have to do is pick up a pencil and re-draw these and the spanish guy from Chile at Vernissage will make them for me in precious metals and abalone or maybe Mokume-gane to show moving wind and water, but picking up that pencil ... who would have thought it would be such a big step to just pick up a pencil?
and I did try again today to quit, a few hours went by and then I tried to trick it by taking a nap, but woke muzzy-headed and at the first evidence of recalcitrant luck did the deed, down the stairs and out the door to buy some more, no bottom to him, no gumption in him, less than none, he welcomes failure in the door with open arms ... capitulation
Four Quartets - Little Gidding, T.S. Eliot
Quick now, here, now, always —
A condition of complete simplicity
(Costing not less than everything)
And all shall be well and
All manner of thing shall be well
When the tongues of flame are in-folded
Into the crowned knot of fire
And the fire and the rose are one.
1. 'Business as Usual' Days After Peru Crisis, Martha Dodge, July 2 2009.
2. The secret to good sex: aging, Zosia Bielski, Saturday July 04 2009.
3. Obama's Violin: Populist rage and the uncertain containment of change, Paul Street, May 10 2009.
4. And twice in a dory ..., Thomas Rendell Curran, July 04 2009.
5. Zen and the art of creative architecture, Lisa Rochon, Saturday July 4 2009.
6. The Ballad Of Frankie Lee And Judas Priest, Bob Dylan.
7. Bringing It All Back Home - Liner Notes, Bob Dylan, 1965.
8. Bernie Madoff Is No John Dillinger, Frank Rich, July 4 2009.
9. The case against The Crash conspiracy theory, Neil Reynolds, July 8 2009.
10. The Financial Markets and Fear Itself, Holman W. Jenkins Jr., June/July 2009.
'Business as Usual' Days After Peru Crisis, Martha Dodge, July 2 2009.
WASHINGTON - The Peruvian government has given a company permission to drill for oil in Amazon territories populated by two uncontacted tribes, just 13 days after dozens of people were killed during protests against the exploitation of indigenous lands.
What's the Story?
Indigenous protests ended in violent confrontations with military in Peru. © powless (flickr)Indigenous protests ended in violent confrontations with military in Peru. © powless (flickr)
Despite protests and blockades by local groups, Peru's government has agreed to allow the Anglo-French gas giant Perenco launch a billion-dollar drilling project to harness what is perceived as Peru's biggest oil discovery in 30 years.
"Anyone who hoped that the dreadful violence of the past few weeks might have made Peru's government act with a bit more sensitivity towards the indigenous people of the Amazon will be really dismayed at this news," said Stephen Corry, director of the indigenous rights group Survival International.
Perenco denies uncontacted indigenous communities live on the proposed project site, even though "the Peruvian government, the Ecuadorian government, local indigenous organizations, and countless experts have all recognized the presence of isolated Indians in the area," reports Survival.
While Peruvian officials hope the project will boost the economy, the cost to the uncontacted tribes will be severe, warns Survival. Adds the organization: Perenco "admits that 'contamination of soil,' 'contamination of water,' and the flight of game and birds are possible consequences of its work. All these are essential to the survival of the uncontacted Indians who live there. More seriously, the Indians face the very real threat of contagion from diseases to which they have no immunity." (Read more from Survival International below.)
Protesting Government Policies
Over the last three months, indigenous Peruvians have been protesting government policies that would allow major corporations to mine for oil and gas on indigenous ancestral lands, explains Survival.
Violent clashes broke out in early June between indigenous demonstrators and the Peruvian military, claiming dozens of peoples' lives and injuring many more.
Two weeks ago, in an effort to end the protests, Peruvian lawmakers repealed two controversial laws that further opened up indigenous peoples' land to private investment by mining, oil, and timber corporations. Signed a year ago by President Alan Garcia, the decrees "gave foreign companies the right to take title to Amazonian land and facilitated their acquisition of road building rights of way," reports the Los Angeles Times. Although Peru's national Amazonian indigenous organization AIDESEP applauded the laws' annulment, it noted seven other pieces of legislation continue to threaten the rights of Peruvian indigenous people.
Government officials and Peru's Native groups have scheduled talks on development in the Amazon, and indigenous territory will be at the heart of the discussions, reports Latinamerica Press. Nearly one fifth of the country's native communities lack land titles, according to Margarita Benavides, an anthropologist at the Instituto de Bien Comun, a Peruvian non-profit that is geared toward the optimal management of commonly held resources, such as water and forest.
In addition, tribal representatives will address the need for stronger and more efficient government-run indigenous institutions and greater government consultation of indigenous groups when passing laws that impact these communities. "Development should be in harmony with Mother Earth, with nature, not destroy it," said Mario Palacios, president of the National Confederation of Communities Affected by Mining, quoted by Latinamerica Press. "We have to overcome the irrational use of resources and respect the rights of the indigenous peoples."
However, recent reports cited by the organization Amazon Watch indicate that continuing persecution of indigenous leaders threatens to derail current dialogue. Fasabi Zapata, acting president of AIDESEP, says such actions are leading indigenous peoples to "doubt and mistrust" the government's intentions.
President Garcia has also been criticized for saying indigenous people are refusing to share the Amazon's resources with the rest of the country and insisting that foreign investment in mining, petroleum, and timber is "the key to Peru's economic development," writes the Los Angeles Times.
Drilling in the Peruvian Amazon
"In 2003, the Peruvian state granted the international oil industry carte blanche access to indigenous ancestral lands throughout almost the entire Peruvian Amazon. Indigenous titled territories and reserves including the last refuges of indigenous peoples living in voluntary isolation are now within the reach of the international oil industry," reports Amazon Watch.
Survival International has called on all oil and gas companies to suspend operations in the Peruvian Amazon, maintaining that only when indigenous communal land rights are recognized can fair negotiations take place between local communities and mining corporations.
"We cannot continue to allow a group of transnational companies to divide up the Amazon, as if it were just a business without consideration given to the territory of ancestral peoples, or without taking into account that this is the 'lungs of the world' and the greatest source of fresh water on the continent," said Egberto Tabo of the Coordinating Body for the Indigenous Organizations of the Amazon Basin during the eighth annual United Nations meeting on the rights of indigenous peoples. "We will not permit the continuation of this exploitation." Indian Country Today reports.
Indigenous Paraguayans Also Fighting for Land
Indigenous communities in Paraguay are also engaged in lengthy battles with their federal government to retain the rights to their land.
Paraguayan lawmakers recently voted against the return of ancestral territories to the Yakye Axa community, undermining a 2005 decision by the Inter-American Court of Human Rights that the state should return the land to the tribe, reports Amnesty International. The Yakye Axa have been forced to live on the side of the road for over 10 years with little access to clean water, food, and medicines while waiting for a final ruling on their land claim.
"Forcing 'development' or 'progress' on tribal people does not make them happier or healthier," writes Survival International. "In fact, the effects are disastrous. The most important factor by far for tribal peoples' well-being is whether their land rights are respected."
The secret to good sex: aging, Zosia Bielski, Saturday July 04 2009.
When researcher Peggy Kleinplatz put out a call for “great lovers” across Canada and the United States, she and her team were deluged with old married people
Despite aging bones and decades spent sharing the conjugal bed, old married people just might do it better.
That's what Peggy Kleinplatz of the faculty of medicine at the University of Ottawa discovered after putting out a call for “great lovers” across Canada and the United States. She and her team were deluged with married people who boasted that they'd enjoyed their unions – and sex lives – for a quarter of a century.
Dr. Kleinplatz's findings, published in the current issue of the Canadian Journal of Human Sexuality, suggest what many people in long-term relationships believe: that great sex flourishes in relationships that deepen with maturity.
“It has nothing to do with try this position and try this sex toy. None of that turned out to be relevant,” Dr. Kleinplatz said. “What turned out to be relevant was being able to be fully absorbed in each other in the moment.”
Through long interviews with 30 men and women over the age of 60 who had been in relationships of 25 years or longer, several ingredients for “great sex” emerged: being present; connection; deep sexual and erotic intimacy; extraordinary communication; interpersonal risk-taking and exploration; authenticity; vulnerability, and transcendence.
“Optimal sex gets surprisingly better with experience and becomes self-perpetuating,” Dr. Kleinplatz writes in one of her articles on the topic. “Aging may be an asset towards optimal sexual development.”
Dr. Kleinplatz was well aware that aging husbands and wives don't typically come to mind when thinking of steamy lovemaking: “Usually when we think of old, married people we think of people to whom sex is a thing of the past, to whom Viagra ads are marketed,” she said.
But she sought out the demographic because they “have a lifetime of sexual experience.” Some interviewees were married to each other, while others were widows and widowers who recalled their sex lives.
Interviewees said that sex became “greater” when it became slower, less focused on orgasm and less “goal-directed” in general.
“Young people … they're just too anxious,” one interviewee said. When older, “instead of rushing by the windows in a train, one watches the scenery,” another woman explained. And with experience, one learned that “the great relief of sexual urges is not the same as great sex.”
The findings go against how popular culture portrays fantastic sex, a depiction that stresses performance, technique and novelty. This image of sex sends mixed messages that create unrealistic expectations, anxiety, shame and guilt, Dr. Kleinplatz said.
“If you go to any newsstand checkout … you're going to see magazines blaring headlines at you about ‘Tips for how to make your partner want you,' ‘How to make his thighs go up in flames,' ‘How to keep her coming back for more,' and all that drivel.”
Those headlines mean people tend to think of sexuality as “requiring mechanical aptitude,” Dr. Kleinplatz said.
Her own study, however, found “people who are elderly, who are disabled, who are chronically ill, having optimal sexuality in their 60s, 70s and 80s.”
“Just because you are mechanically skilled and all your parts are in working order does not necessarily mean that you're going to be experiencing optimal sexuality. Functional sexuality is in no way optimal sexuality,” Dr. Kleinplatz said.
Her team also conducted interviews with 20 sex therapists and with 20 people who identified themselves as members of a “sexual minority group” including lesbian, gay and transgendered – and as great lovers.
“Despite quite varied backgrounds, they pretty well all describe it in ways that are remarkably similar, even including a lot of the same language,” Dr. Kleinplatz said.
She concludes in her article: “Perhaps this picture can promote optimal sexual development and put a dent in predominant myths, thereby helping to prevent sexual problems.”
Obama's Violin: Populist rage and the uncertain containment of change, Paul Street, May 10 2009.
As of this writing in late March, the Barack Obama administration and its allies in the Democratic-run Congress have been attempting to perform system-maintaining acts of co-optation and popular pacification that no Republican presidency or Congress could ever carry out. Lance Selfa reminds us in his recent book The Democrats: A Critical History (Haymarket, 2008) that corporate America would have no reason to embrace a two-party system if there were no significant differencesbetween the two competing "subdivisions" of what Ferdinand Lundberg once aptly called "the Property Party." The business elite profits from a narrow-spectrum system in which one business party is always waiting in the wings to capture and control popular anger and energy when the other business party falls out of favor.
But the two parties are not simply interchangeable. It is the Democrats' job to define and embody the constricted left-most parameters of acceptable political debate. For the last century, it has been the Democratic Party's distinctive assignment to play "the role of shock absorber, trying to head off and co-opt restive [and potentially radical] segments of the electorate" by posing as "the party of the people"(Selfa). The Democrats performed this critical system-preserving, change-containing function in relation to the agrarian populist insurgency of the 1890s and the working-class rebellion of the 1930s and 1940s. They played much the same role in relation to the antiwar, civil rights, anti-poverty, ecology, and feminist movements during and since the 1960s and early 1970s. In every case, the movements that arose to challenge concentrated power and oppression and to reduce inequality were pacified, silenced, and ultimately shut down, their political energies sucked into the corporate and militaristic Democratic Party.
The standard historic pattern of Democratic Party co-optation and progressive surrender is currently trying to repeat itself amidst epic economic crisis and imperial disruption. Two and a half weeks after Obama's victory in the 2008 presidential election, David Rothkopf, a former Clinton administration official, commented on the president-elect's corporatist and militarist transition team and cabinet appointments with a musical analogy. Obama, Rothkopf told the New York Times, was following "the violin model: you hold power with the left hand and you play the music with the right."
The Obama administration's record so far is richly consistent with the violin analogy. Dominant, so-called "mainstream" media routinely portray Obama as a "bold" and even "radical" "departure from the past"—a person of what the leading communications authorities call "the left." This is offensive to people on the actual left. The supposed "peace candidate" intends to increase the United States' massive "defense" budget this and next year. Reading the fine print on Obama's Iraq plan, moreover, it is clear that he plans to sustain the illegal occupation of that country well past 2011 and very likely into the indefinite future.
To make matters dangerously worse, Obama is actively increasing the level of U.S. violence in Afghanistan and—most ominously—in nuclear Pakistan. The New York Times reports, with no hint of disapproval, that he is considering "expanding the American covert war in Pakistan," where every U.S. missile attack destabilizes the political situation a bit more. Obama and his so-called "national security" team are planning, the Times reports, to "widen the target area" of their already "extensive [CIA] missile strikes" on that country to include Baluchistan, "a sprawling province that is under the authority of the central government" (March 20, 2009).
Obama is continuing core Bush policies on Israel and Iran. He refuses to pay honest attention to the legitimate grievances of the Palestinian people about whose fate he stayed revealingly mute during the savage U.S.-Israel assault on the people of Gaza last December and January. He made no effort to resist the U.S. Israel lobby's torpedoing of Charles Freeman's nomination as chair of the National Intelligence Council. Freeman, a veteran national security operative, was brusquely dismissed because he dared to suggest that the Israeli apartheid and occupation state might bear some responsibility for violence and hatred in the Middle East.
Meanwhile, Obama dangerously and revealingly resists pressure to investigate and prosecute the monumental war and human rights crimes of the Bush administration. He quietly commits to the officially concealed trillion dollar annual Pentagon budget, a giant subsidy to high-tech industry that pays for more than 760 bases across more than 130 nations and accounts for nearly half the military spending on earth—all in the name of "defense." The leading Wall Street investment firm and bailout recipient Morgan Stanley reported the day after Obama's election victory that Obama "has been advised and agrees that there is no peace dividend."
To Restore the Old Order That Failed
Turning to the home front, Obama refuses to advance the obvious cost-cutting and social democratic health-care solution: single-payer national health insurance (improved Medicare for all). Consistent with his recent description of himself as a New Democrat, Obama's Treasury Department and the secretive, unaccountable Federal Reserve Bank (to whom the new Administration increasingly wishes to pass the buck of the current financial crisis) will dispense untold trillions of dollars in further taxpayer handouts to the giant Wall Street firms who spent millions on his campaign and who drove the U.S. and world economy over a cliff. According to leading liberal economist James K. Galbraith in the Washington Monthly, Obama's plan to guarantee the financial, insurance, and real estate industries' toxic, hyper-inflated assets while keeping existing Wall Street management in place amounts to a massive effort to "keep perpetrators afloat." By left-liberal writer William Greider's account, "Obama's approach so far is devoted to restoring Wall Street's famous names and his [supposedly non-ideological] advisors tell him this is the 'responsible' imperative, no matter that it might offend the unwashed public. Obama evidently agrees" (Washington Post, March 22, 2009). The liberal economist and New York Times columnist Paul Krugman is "filled with a sense of despair" by Obama's "bank rescue plan," which "recycles Bush administration policy—specifically the 'cash for trash' plan proposed, then abandoned, six months ago by then-Treasury secretary Henry Paulson" (March 23, 2009).
The Obama plan rewards reckless and selfish investor class behavior by funneling billions of taxpayer dollars to bankrupt banks. Under the scheme unveiled on March 23, 2009, the public is put on the hook to the tune of $1 trillion. The program amounts to what Krugman calls a coin flip in which investors win if it's heads and taxpayers lose if it's tails. As the Times quickly noted, "the Treasury and the Federal Reserve will be offering at least a tablespoon of financial sugar for every teaspoon of risk that investors agree to swallow," buying up the toxic mortgage assets that the investor class created in the first place. The government (identical to the people in a functioning democracy) will take more than 90 percent of the risk, but private investors reap at least half the reward.
Meanwhile, the underlying insolvency of the banks continues, a problem the Obama administration hopes we will forget about as we get dazzled by their fancy and obscure plan. Beneath claims of allegiance to "free market" ideals and "private enterprise," the Administration's "bank rescue" design—described by former U.S. Labor Secretary Robert Reich as a continuation of "the most expensive tax-supported fiasco in history" (Salon, March 20, 2009)—boils down to a traditional exercise in Wall Street welfare: socialism for the rich, market discipline and capitalism for the rest of us. It is at heart what Greider calls an effort "to restore the old order that failed," the dark reality beneath newspaper headlines proclaiming a new age of progressive-style government regulation ("Bill Moyers' Journal," PBS, March 27, 2009).
Obama's tepid and undersized stimulus plan (deceptively described as "massive" in much of the business press) is dysfunctionally overloaded with business-friendly tax cuts and too short on labor-intensive projects to put people to work right away. He says nothing about the overdue labor law reform he campaigned on, the Employee Free Choice Act (EFCA). He speaks in support of the anti-union, teacher-bashing, and test-based corporate education agenda, advocating teacher "merit pay" and charter schools. And he makes a public visit (in support of his stimulus bill) to the headquarters of Caterpillar, a provider of bulldozers for illegal Israeli settlements. Caterpillar was also the first large U.S. manufacturer in decades to break a major strike with scabs.
Praised by political and media elites for the skill with which he and his handlers are "managing expectations," Obama fails to advance elementary and urgently needed progressive measures like a moratorium on foreclosures, a capping of credit card interest rates and finance charges, and the rollback of capital income tax rates to 1981 (not just 1993) levels. Even before the inauguration, Obama committed himself to so-called "entitlement reform," a term that is code language for claiming to cut the federal deficit by chipping away at Medicare and Social Security.
Team and "Vision"
Obama's cabinet is loaded with elite agents of corporate and imperial power. Leading players include Defense Secretary and Iraq warrior Robert Gates, carried over from the Bush administration. National Security Advisor James Jones is a former NATO commander known for advocating increased U.S. control of Middle Eastern oil resources. Secretary of State Hillary Clinton was a leading Iraq War hawk who approved a Bush plan to attack Iran in late 2007. White House Chief of Staff Rahm Emmanuel was a leading pro-war and "pro-Israel," anti-Palestinian Democrat during his recent congressional career. Obama's top economic advisor Lawrence Summers is a leading corporate neoliberal economist and was an architect during the 1990s of the financial deregulation that contributed so significantly to the current economic crisis. Treasury Secretary Timothy Geithner is a Wall Street-approved expert in bailing out large and parasitic financial institutions.
Obama's claim that he will provide the "vision" to move such corporate and imperial operatives in a "progressive" direction is like a baseball manager claiming that he's going to build a team based on speed and defense with a roster full of clumsy, slow-footed, 280-pound power hitters.
Tellingly enough, even mildly progressive U.S. economists like Galbraith, Krugman, and Joseph Stiglitz have been blacklisted from the Obama administration. These unradical but left-of-center economists are too much for the corporate types who hold sway in the current Administration. For economic direction, the new White House prefers regressive corporate-neoliberal hacks associated with the Wall Street firm Goldman Sachs and with the conservative pro-business economic think tank the Hamilton Project. John R. MacArthur, the president of Harper's magazine, noted in late March that Summers and Geithner "are in place precisely to prevent real reform of a banking system that helped put Obama in the White House" (the Providence Journal, March 19, 2009).
Obama's Challenge: Tamp Down Populist Anger
Despite the occasional populist-sounding outburst required to contain widespread popular anger over grotesque economic disparities and corporate corruption, Obama no longer stands up before giant crowds to proclaim that (in a frequent Obama refrain on the campaign trail) "Change doesn't happen from the top down. Change happens from the bottom up." After having mobilized citizens to vote out the old Republican regime in the name of progressive and democratic transformation, the in-power Obama team has a different message for the people: calm down and let the political class do its work. This is no time for "anger" and "ideology," which stand in the way of "getting things done." The populace is supposed to return quietly and hopefully to remote, divided, and private realms, dutifully executing their paid work assignments (if they still have jobs), buying stuff (largely on credit thanks to the continuing lag of wages behind productivity in the U.S.), and investing their modest savings (if they have any) in the stock market again (as Obama has recently admonished Americans to do). They are to watch their telescreens while the new system-maintaining coordinators (including supposedly "pragmatic" and "non-ideological" technicians like Summers and Geithner) do the serious and sober work of putting the profit system—described by Obama in his 2006 campaign book The Audacity of Hope as "our greatest asset...a system that for generations has encouraged constant innovation, individual initiative and efficient allocation of resources"—back on its feet. Summers lectures Americans to heed Obama's call for an "age of responsibility" by agreeing to dutifully "manage [their] own finances" and "do [their] own jobs.... People," Summers told NBC's David Gregory, "need to work hard, they need to play by the rules, and those of us with responsibility for economic policy need to do everything we can to make the economy work." Appearing on the PBS "News Hour" on the day that the latest phase of the bankers' bailout was announced, Summers said that Obama "recognize[s] and he share[s] the outrage that people feel at what has happened, at some of the bonuses that have been paid, about some of the irresponsibility that brought us to this point. But he also," Summers added, "urge[s] that we can't govern out of anger, that we can't let our rage, our legitimate anger, stop us from the necessary steps."
A front-page New York Times "news analysis" in March noted that the Obama political and public relations team was "increasingly concerned" about "a populist backlash" that could target the new bailout-friendly White House as well as the investor class. According to Times correspondent Adam Nagourney, "a shifting political mood challenges Mr. Obama's political skills, as he seeks to acknowledge the anger without becoming a target of it. A central question for Mr. Obama is whether his cool style will prove effective when the country may be feeling more emotional." Nagourney cited unnamed Obama advisors on how the new White House "risks... backlash as Mr. Obama tries to signal that he shares American anger but pushes for more bail-out money for banks and Wall Street" (March 16, 2009).Consistent with that contradictory and manipulative goal, Obama expressed calculated indignation against "excessive" executive bonuses at AIG (originally approved by Geithner) and made carefully orchestrated visits expressing concern about poverty and job loss to hard-hit places like Pomona, California and Elkhart, Indiana. These were well understood by political and media elites to be public relations ("expectation-managing") efforts to "get ahead" of "populist rage" over the corporate agenda that continues to hold sway in Washington in the age of Obama.
What Exists of a Popular Left
John Judis (no "far leftist," as Obama's radical critics are commonly described by his "progressive" supporters) recently argued in the centrist journal the New Republic (in an essay titled "End the Honeymoon"), that a major reason Obama has gone forward with a conservative and inadequate economic plan "is that there is not a popular left movement that is agitating for him to go" further. "Sure," Judis writes, "there are left-wing intellectuals like Paul Krugman who are beating the drums for nationalizing the banks and for a trillion dollar-plus stimulus. But I am not referring to intellectuals, but to movements that stir up trouble among voters and get people really angry. Instead, what exists of a popular left is either incapable of action or in Obama's pocket." By Judis's analysis, the U.S. labor movement and groups like moveon.org are repeating the same "mistake that political groups often make: subordinating their concern about issues to their support for the [Democratic] party and its leading politician." MacArthur observes that many leading U.S. progressives "persist" in "fantas[izing]" that "the president is a Mr. Smith-goes-to-Washington character prepared to 'take on' the powers that be." This is "an absurd reading of Obama," who MacArthur (rightly) describes as "a moderate with far too much respect for the global financial class" and as "surely the unleft, unradical president."
Consistent with Judis's critique, moveon.org's Executive Director Justin Ruben responded in February to Obama's highly qualified and deceptive Iraq "withdrawal" plans by telling the New York Times that "activists are willing to give Obama the benefit of the doubt." Sounding like a docile house pet instead of a serious progressive activist, Ruben said that "people have confidence that the president is committed to ending the war" because "this is what he promised" (New York Times, February 26, 2009). Ruben's group and the antiwar group United for Peace and Justice and numerous prominent left-liberals bought into the false notion that Obama was "a peace candidate" and have worked to dampen progressive anger over—and mobilization against—Obama's determination to execute the imperial project. Known for organizing online opposition to the Bush administration's war policies, moveon.org recently sent its members an e-mail proclaiming the U.S. invasion of Iraq to be effectively over and congratulating members for having helped achieve that wonderful result. Ruben also recently told Nation correspondent Ari Melber that MoveOn has no intention of opposing Obama's plans to increase troop levels in Afghanistan. As left writer and activist Anthony Arnove notes, "The message being sent [by MoveOn and other liberal groups and dominant U.S. media] to the antiwar movement is, 'It's over. We can move on'" (SocialistWorker.org, March 13, 2009).
Towards a New Populist Moment?
The left Democratic weekly the Nation focuses most of its ire on an easy target—the out-of-power Republicans. It says that "Obama Needs a Protest Movement" (November 13, 2008), not that the people and democracy need one—an excellent expression of so-called liberalism's deeply ingrained habit of subordinating movement concerns to the needs of the Democrats' leading politicians. The Nation alsoabsurdly calls Obama's tepid budget proposal "an audacious plan to transform America" in progressive ways.
Many of the Nation's so-called left liberals might want to take another look at Howard Zinn's A People's History of the United States along with Frances Fox Piven's and Richard Cloward's classic Poor Peoples' Movements: Why They Succeed, How They Fail to review some elementary lessons on how serious progressive change occurs. These authors demonstrate in rich historical detail how direct action, social disruption, and the threat of radical change from the bottom up forced social and political reform benefiting working- and lower-class people and black people during the 1930s and the 1960s. They show the critical role played by grass-roots social movements and popular resistance in educating presidents and the broader power elite on the need for change. Today, we can be sure that the in-power Democratic Party and president will not move off the corporate and military "center" unless "the power of the people asserts itself in ways that the occupant of the White House will find dangerous to ignore" (Zinn, "Election Madness," the Progressive, March 2008).
For what it's worth, the Democrats are best exposed as agents of empire, inequality, and "corporate-managed democracy" (Alex Carey's useful term) when they hold top offices. That's when their populist and peaceful sounding campaign rhetoric hits the cold pavement of corporate imperial governance.
It's not too late for genuinely progressive activists and citizens to pursue radical-democratic change in defiance of both the profit system and that system's Democratic Party guardians. Thankfully, we may be heading for something of a new populist moment in the U.S., despite efforts of leading political, economic, ideological, and communications institutions. As giant financial bailouts expose the crippling chasm between the investor and political classes and the broad citizenry, "people everywhere learned a blunt lesson about power, who has it and who doesn't. They watched Washington run to rescue the very financial interests that caused the catastrophe. They learned that government has plenty of money to spend when the right people want it. 'Where's my bailout,' became the rueful punchline at lunch counters and construction sites nationwide. Then to deepen the insult, people watched as establishment forces re-launched their campaign for 'entitlement reform'—a euphemism for whacking Social Social Security benefits, Medicare and Medicaid" (Greider).
This is essential raw material for a radical rebellion, one where citizens and workers move from "watching" to demanding and acting in ways too "dangerous to ignore." Happily enough, there is left-progressive potential in the confrontation between Obama's progressive-sounding rhetoric and his corporate and imperial commitments. The popular resentment and hopes he rode to power need more genuinely democratic and effective solutions than an Obama (or a Hillary Clinton) presidency could have been realistically expected to provide. Obama and other Democrats have been riding a wave of citizen anger and excitement that goes beyond their conservative worldview and agenda. They have done their best to contain and co-opt that popular and progressive energy, but their lofty political rhetoric seeks to safely channel popular expectations that may well transcend the political class's capacity for top-down management and control.
Paul Street is a political commentator living in Iowa City, Iowa. He is the author of Barack Obama and the Future of American Politics (Paradigm, 2008).
And twice in a dory ..., Thomas Rendell Curran, July 04 2009.
For all I know, Pierre Berton had it right when he declared that a Canadian is someone who knows how to make love in a canoe (How I Became A Real Canadian - June 27). Where I come from - Newfoundland - the best-known personal watercraft isn't the canoe, but the dory, a practical fore-and-aft wooden rowboat that was the mainstay of the inshore cod-fishery - now, sadly, more memory than reality.
Not to be outdone by our Canadian compatriots, we Newfoundlanders have a water-borne sex story of our own. Years ago, when the late Don Jamieson was still a radio journalist - he would later be a member of several of Pierre Trudeau's cabinets in various capacities - he made regular Christmas-season visits to retirement homes in Newfoundland, to speak with residents.
His chat with one feisty lady has long since passed into the realm of legend. Noting the lady's apparent good health at a very advanced age, Mr. Jamieson asked if she had ever been bed-ridden.
Her response was immediate, and garlanded with pride. "Yes, my son," she declared. "T'ousands of times. And twice in a dory."
Not addressable on-line
Zen and the art of creative architecture, Lisa Rochon, Saturday July 4 2009.
One of the biggest misconceptions out there is that all work takes place at the workplace. The truth is that the big ideas, the really bold experiments, are hatched outside the conventional office. Ask an architect where the fundamentals for a design are drawn, and learn about vast quantities of sketch paper floating through the cottage, the bedroom, even airplanes.
Funny, but the most potent ideas belong to simple, almost primitive spaces and pleasures. Le Corbusier often retreated during the month of August to Roquebrune-Cap-Martin, a village perched on the edge of the Mediterranean, where he designed monumental buildings and new urban districts in a wooden hut and wearing a bathing suit. He kept small animal bones, inspiring to him for their organic form, in wooden fruit crates.
Raw, creative freedom is what many architects seek. To drill down to his deepest intuition, Britain's Will Alsop paints in a shed at his family's country home on England's northeast coast. Toronto architect Janna Levitt says that when a design problem needs critical attention, she may suddenly wake up at 2 or 3 a.m., gaze at a painting by Norval Morrisseau for strength, and then draw for a few hours.
Bruce Kuwabara finds myriad sources of inspiration – including concerts at Roy Thomson Hall – adding that "the serious work is either at home alone, or at the office on a weekend. I'm just basically by myself at an empty table … I use China markers – you don't sharpen them, you unravel them from one end. I like them because you can't express any detail with them. They deny detail. They get the fundamental things."
The retreat into the creative mind is often described as a stolen moment. But, from what was it stolen? From the banality and harassment of technology? From long-winded conference calls and circular conversations at team meetings?
For Meg Graham, principal of superkül inc. architect in Toronto, there is the quiet pleasure of drawing, on her own, at cafés and restaurants. "I often feel like I'm stealing time," she says, "which makes it all that much sweeter a pleasure."
Then there are the times during weekends when Graham and her partner, Andre D'Elia, find design clarity without the noise of phones and e-mail alerts. "We sit across from each other, each with our own clutch of pens, either in the office at one of our work tables or in our apartment, sitting on the ground at the coffee table in the living room." This is how their award-winning 40R Laneway House in midtown Toronto was born, at their coffee table, with vast quantities of sketch paper strewn around.
Many architects (the late Arthur Erickson, Moshe Safdie) have used the airplane as a coveted place of stream-of-design consciousness. Toronto architect and artist Paul Raff has found much inspiration for ways to sculpt light with architecture by watching and photographing clouds seen from a plane. After studying a site and walking through it over a couple days in Phuket, Thailand, Raff designed a series of resort villas – faced in bamboo and delicately sited on a steep jungle site – during the 24-hour trip back to Toronto.
But Raff also finds creative Zen moments while sitting in his Spadina Avenue studio. That's where he happened to glance at a series of glass samples stacked on his windowsill – and was inspired by the reflection of light to create a glass screen suspended in front of the living room of a Forest Hill house; it was subsequently honoured with a design excellence award by the Ontario Association of Architects. Raff's sister company, RVTR, with Kathy Velikov, Geoffrey Thun and Colin Ripley, was awarded the Canada Council for the Arts $50,000 Professional Prix de Rome in Architecture last week.
Why don't the people who run our offices and factories build a little blue-skying into the daily regime? The North American boss looks around his workplace and smiles at the way the employee gobbles lunch without even looking up from the computer. Meanwhile, in Copenhagen, offices with more than a couple dozen employees are legislated to provide a fully catered lunch in a dining room. The Danish architecture firms I visited recently, including Lundgaard & Tranberg, BIG and 3XN, were serving roast beef or salmon, hot dishes and cold, and the lunchrooms were airy and colourful. Served up daily: not just a healthy midday meal, but a great milieu for exchanging creative ideas.
This is something that Montreal architect Gilles Saucier practises daily – eating out at a restaurant with his partner, André Perrotte or clients, where some of the best design ideas are exchanged. Hygge is a Danish word, badly translated as "cozy being together" and better understood as something ethereal that has captured the right mood, the perfect atmosphere; or, as Toronto architect Donald Chong puts it: "Hygge is everything you didn't realize you were after." For Chong, when there's hygge, he can come down to first principles of design. "It's me and my pen and my notebook. I don't have to be plugged in. I don't want to be on the Internet. I just want to rely on my head and my hands. If I can do that, then I'm good."
Is it wrong to work while lounging in bed? Too often, Canadians armed with a punch-the-clock and sit-at-your-desk mentality would scoff at such a notion. But French superstar designer Philippe Starck has produced countless concepts for hotels, housewares and furniture from his bed. The mediocre ones go in one basket; those worth pursuing are thrown in another.
A confession here: The idea for this column was not generated at my desk. It began about two weeks ago when I found myself walking along a winding path through a paper-birch-and-pine forest in central Finland. It was the path Alvar Aalto walked to get to his Experimental House (1954) on the island community of Muuratsalo in the middle of Lake Paijanne.
Travelling through leaves and over rocks, I imagined how walking the path helped transport the legendary architect away from the pressures of running his office in Helsinki to a more liberated state of mind. I passed by the 10-metre-long pine-and-mahogany boat he designed, called Nemo propheta in patria (No one is a prophet in his own land), a vessel he often took out to the lake in order to study the visual impact of his courtyard cottage and the island forest. Along the edge of the lake, I encountered the robust smoke sauna that Aalto created as a muscular log structure and a mono-pitched roof. This is where city life would have been sweated out.
rom the path, the summer house stands out as a surprisingly bright-white angled form rendered in brick. What begins with the promise of white modernism changes dramatically around the corner, where the bricks are deliberately opened like an eroding ruin to provide views into an atrium courtyard. This is where the house reveals itself as a place of steady, creative experimentation; Aalto was an architect who tested new ways to build. Wanting to reject conventional systems of creating foundations for the summer house, he devised a diagonal one of beams laid directly on the rocks embedded in the moraine ridge.
Inside the courtyard, dozens of patterns in ceramic and brick are laid up the walls and arranged in a variety of ways for the courtyard paving. Aalto itemized his experiments: normal brick on edge; narrow bricks end upward; Riihimaki tile, reverse side up, grooves against the earth; Riihimaki tile, right way up, darker.
If all of this sounds like a lot of work, maybe it was. But, it was done with a clear head and a full heart in the Nordic forest. As Aalto once said: "Between swims, I can work completely in peace."
The Ballad Of Frankie Lee And Judas Priest, Bob Dylan.
Well, Frankie Lee and Judas Priest
They were the best of friends.
So when Frankie Lee needed money one day
Judas quickly pulled out a roll of tens
And placed them on a footstool
Just above the plotted plain,
Sayin', "Take your pick, Frankie Boy,
My loss will be your gain."
Well, Frankie Lee, he sat right down
And put his fingers to his chin,
But with the cold eyes of Judas on him,
His head began to spin.
"Would ya please not stare at me like that," he said,
"It's just my foolish pride,
But sometimes a man must be alone
And this is no place to hide."
Well, Judas, he just winked and said,
"All right, I'll leave you here,
But you'd better hurry up and choose
Which of those bills you want,
Before they all disappear."
"I'm gonna start my pickin' right now,
Just tell me where you'll be."
Judas pointed down the road
And said, "Eternity!"
"Eternity?" said Frankie Lee,
With a voice as cold as ice.
"That's right," said Judas Priest, "Eternity,
Though you might call it 'Paradise.'"
"I don't call it anything,"
Said Frankie Lee with a smile.
"All right," said Judas Priest,
"I'll see you after a while."
Well, Frankie Lee, he sat back down,
Feelin' low and mean,
When just then a passing stranger
Burst upon the scene,
Saying, "Are you Frankie Lee, the gambler,
Whose father is deceased?
Well, if you are,
There's a fellow callin' you down the road
And they say his name is Priest."
"Oh, yes, he is my friend,"
Said Frankie Lee in fright,
"I do recall him very well,
In fact, he just left my sight."
"Yes, that's the one," said the stranger,
As quiet as a mouse,
"Well, my message is, he's down the road,
Stranded in a house."
Well, Frankie Lee, he panicked,
He dropped ev'rything and ran
Until he came up to the spot
Where Judas Priest did stand.
"What kind of house is this," he said,
"Where I have come to roam?"
"It's not a house," said Judas Priest,
"It's not a house . . . it's a home."
Well, Frankie Lee, he trembled,
He soon lost all control
Over ev'rything which he had made
While the mission bells did toll.
He just stood there staring
At that big house as bright as any sun,
With four and twenty windows
And a woman's face in ev'ry one.
Well, up the stairs ran Frankie Lee
With a soulful, bounding leap,
And, foaming at the mouth,
He began to make his midnight creep.
For sixteen nights and days he raved,
But on the seventeenth he burst
Into the arms of Judas Priest,
Which is where he died of thirst.
No one tried to say a thing
When they took him out in jest,
Except, of course, the little neighbor boy
Who carried him to rest.
And he just walked along, alone,
With his guilt so well concealed,
And muttered underneath his breath,
"Nothing is revealed."
Well, the moral of the story,
The moral of this song,
Is simply that one should never be
Where one does not belong.
So when you see your neighbor carryin' somethin',
Help him with his load,
And don't go mistaking Paradise
For that home across the road.
Bringing It All Back Home - Liner Notes, Bob Dylan, 1965.
i'm standing there watching the parade/
feeling combination of sleepy john estes.
jayne mansfield. humphry bogart/morti-
mer snerd. murph the surf and so forth/
erotic hitchhiker wearing japanese
blanket. gets my attention by asking didn't
he see me at this hootenanny down in
puerto vallarta, mexico/i say no you must
be mistaken. i happen to be one of the
Supremes/then he rips off his blanket
an' suddenly becomes a middle-aged druggist.
up for district attorney. he starts scream-
ing at me you're the one. you're the one
that's been causing all them riots over in
vietnam. immediately turns t' a bunch of
people an' says if elected, he'll have me
electrocuted publicly on the next fourth
of july. i look around an' all these people
he's talking to are carrying blowtorches/
needless t' say, i split fast go back t' the
nice quiet country. am standing there writing
WHAAT? on my favorite wall when who should
pass by in a jet plane but my recording
engineer "i'm here t' pick up you and your
lastest works of art. do you need any help
my songs're written with the kettledrum
in mind/a touch of any anxious color. un-
mentionable. obvious. an' people perhaps
like a soft brazilian singer . . . i have
given up at making any attempt at perfection/
the fact that the white house is filled with
leaders that've never been t' the apollo
theater amazes me. why allen ginsberg was
not chosen t' read poetry at the inauguration
boggles my mind/if someone thinks norman
mailer is more important than hank williams
that's fine. i have no arguments an' i
never drink milk. i would rather model har-
monica holders than discuss aztec anthropology/
english literature. or history of the united
nations. i accept chaos. I am not sure whether
it accepts me. i know there're some people terrified
of the bomb. but there are other people terrified
t' be seen carrying a modern screen magazine.
experience teaches that silence terrifies people
the most . . . i am convinced that all souls have
some superior t' deal with/like the school
system, an invisible circle of which no one
can think without consulting someone/in the
face of this, responsibility/security, success
mean absolutely nothing. . . i would not want
t' be bach. mozart. tolstoy. joe hill. gertrude
stein or james dean/they are all dead. the
Great books've been written. the Great sayings
have all been said/I am about t' sketch You
a picture of what goes on around here some-
times. though I don't understand too well
myself what's really happening. i do know
that we're all gonna die someday an' that no
death has ever stopped the world. my poems
are written in a rhythm of unpoetic distortion/
divided by pierced ears. false eyelashes/sub-
tracted by people constantly torturing each
other. with a melodic purring line of descriptive
hollowness -- seen at times through dark sunglasses
an' other forms of psychic explosion. a song is
anything that can walk by itself/i am called
a songwriter. a poem is a naked person . . . some
people say that i am a poet
(end of pause)
an' so i answer my recording engineer
"yes. well i could use some help in getting
this wall in the plane"
Bernie Madoff Is No John Dillinger, Frank Rich, July 4 2009.
THE judge condemned Bernie Madoff’s crimes as “extraordinarily evil.” The New York Daily News, whose publisher was a Madoff victim, chose “The Pariah” as its front-page headline and promised that the dastardly villain would suffer “everlasting consumption in the jaws of the devil.” The Times declared that the Madoff case, by attaching a human face to a financial meltdown that produced fear, panic and loss, had “put an entire era on trial.
But for all this rhetorical thunder, Madoff’s 150-year sentence still seemed an anticlimax, as if the trial of the century had ended without a verdict. There was no national catharsis. The news landed with something of a thud. On the most-watched network newscast, “NBC Nightly News,” it received second billing to Day Four of updates on Michael Jackson’s death.
Madoff, it turned out, was no Public Enemy No. 1 to rival John Dillinger, the Great Depression thug at the center of Hollywood’s timely release this holiday weekend, “Public Enemies.” In the context of our own Great Recession, Madoff’s old-fashioned Ponzi scheme was merely a one-off next to the esoteric and (often legal) heists by banks and bankers. They gamed the entire system, then took the money and ran before the bubble burst, sticking the rest of us with that fear, panic and loss.
The estimated $65 billion involved in Madoff’s flimflam is dwarfed by the more than $2.5 trillion paid so far by American taxpayers to bail out those masters of Wall Street’s universe. A.I.G. alone has already left us on the hook for $180 billion. It’s hard for those who didn’t have money with Madoff to get worked up about him when so many of the era’s real culprits have slipped away scot-free. Already some of those same players are up to similarly greedy shenanigans again now that the coast seems to be clear.
Washington had no choice but to ride to their rescue last fall to prevent even greater systemic catastrophe. But that rescue is tainted. As the economist Joseph Stiglitz wrote in this month’s Vanity Fair, “In the developing world, people look at Washington and see a system of government that allowed Wall Street to write self-serving rules which put at risk the entire global economy — and then, when the day of reckoning came, turned to Wall Street to manage the recovery. They see continued re-distributions of wealth to the top of the pyramid, transparently at the expense of ordinary citizens.”
Not just in the developing world, but in America. Look at what we saw last week alone.
To beat out the implementation of new regulations, banks are rapidly jacking up checking-account charges and credit card fees, even for those who have paid their bills on time. As Eric Dash of The Times reported on Thursday, the institutions that received the most bailout loot are often the biggest offenders.
That would include the too-big-to-fail Citigroup, which has so far received $45 billion in taxpayers’ money, along with guarantees on $300 billion in toxic assets, to mitigate its reckless risk-taking during the reign of such obscenely rewarded (and now departed) executives as Charles Prince and Robert Rubin. While taxpayers will soon own some 34 percent of Citi, it is not only increasing our credit card interest rates (to nearly 30 percent in some cases) but raising its own base salaries (by 50 percent) to work around Washington’s new restrictions on bonuses. New rules may come and go, but loopholes remain eternal.
We also have learned, from The Wall Street Journal on Thursday, that Goldman Sachs, another bailout recipient, is on track to pay its employees an average of $700,000 each in 2009, which, incredibly, is a bit higher than its compensation average in the pre-crash year of 2007. In a scathing and controversial new article in Rolling Stone, Matt Taibbi accuses Goldman of having earned such rewards by engineering “every major market manipulation since the Great Depression.”
What’s uncontroversial and indisputable is that Goldman alumni have played key roles in both the Bush and Obama administrations’ responses to the current crisis — even though Goldman has a big stake in the outcome. The dense revolving-door conflicts of interest are appalling. Goldman is howling about Taibbi’s article, but the bottom line was articulated last week by the economic blogger Felix Salmon of Reuters. He wrote that he couldn’t “think of a single government regulation over the past couple of decades which has remotely harmed Goldman Sachs” as opposed to the many that “have done it a world of good.”
Goldman also rules at the New York Fed, a supposed monitor of Wall Street. Until May the Fed’s chairman was serving simultaneously on the Goldman board; he resigned only after The Wall Street Journal reported that he was also still buying Goldman stock during his Fed tenure. At least that other failed watchdog, the Securities and Exchange Commission, has now cleaned house. But Politico reported last week that its new chairwoman, Mary Schapiro, had been the star draw at a lavish June banquet for the S.E.C. Historical Society, an independent organization that sold tables for up to $7,500 to “law and lobbying firms that do business with the S.E.C.” Among the buyers: Standard & Poor’s, a credit ratings agency that enabled the subprime bubble by giving its approval to wildly speculative derivatives.
It’s against this grand backdrop of business-as-usual at the top of the pyramid that we learned at week’s end that the speed of job losses is accelerating again. The government also reported that Americans who still do have jobs now have an average 33-hour workweek, the lowest since tracking began in 1964.
The Obama administration’s response to the economic crisis is rapidly facing its own stress tests. We will soon learn the ultimate fate and stringency of the regulatory package sent to Congress, including the consumer-protection agency the banks want to maim or kill. The stimulus’s ability to put Americans back to work remains an open question. Should we have a jobless recovery or, worse, a second-wave recession like the one that blindsided F.D.R. in 1937, it will be as catastrophic for the Democrats as it will be for the country.
Barney Frank seems to understand the political dynamic better than the White House. He told bankers back in February, “People really hate you, and they’re starting to hate us because we’re hanging out with you.” If the administration wants to be reminded of how quickly today’s already sour mood can turn rancid, Michael Mann’s haunting “Public Enemies” could not be a more apt refresher course. The casting alone tells you where the audience’s sympathies will lie: Dillinger is played by America’s reigning male sweetheart, Johnny Depp, while his G-man pursuer, Melvin Purvis, is in the hands of the thorny Christian Bale.
“Public Enemies” doesn’t make a federal case of parallels between its era and ours. It doesn’t have to. But it’s instructive to revisit the actual history. In the book that inspired the film, the journalist Bryan Burrough writes that Detective magazine polled movie theater owners during Dillinger’s yearlong spree of 1933-34, and found that in terms of drawing audience applause Public Enemy No. 1 beat out F.D.R. and Charles Lindbergh. Roosevelt ran with it. As Steve Fraser writes in his cultural history of Wall Street, “Every Man a Speculator,” F.D.R. “likened his Wall Street villains to ‘kidnappers and bank robbers’ eluding capture” in his 1936 re-election campaign. He knew Wall Street manipulators were the real targets of the public’s ire.
Another look at this much-chronicled past, “Dillinger’s Wild Ride,” by Elliott J. Gorn, a professor of history at Brown University, is the first to be published during our own hard times. In it you learn that ordinary law-abiding Americans even wrote letters to newspapers and politicians defending Dillinger’s assault on banks. “Dillinger did not rob poor people,” wrote one correspondent to The Indianapolis Star. “He robbed those who became rich by robbing the poor.”
Gorn writes that the current economic crisis helped him understand better why Americans could root for a homicidal bank robber: “As our own day’s story of stupid policies and lax regulations, of greedy moneymen, free-market hucksters, white-collar thieves, and self-serving politicians unfolds, and as banks foreclose on millions of families’ homes, workers lose their jobs, and life savings disappear, it becomes clear why Dillinger’s wild ride so fascinated America during the 1930s.” An outlaw could channel a people’s “sense of rage at the system that had failed them.”
As Gorn reminds us, Americans who felt betrayed didn’t just take to cheering Dillinger; some turned to the populism of Huey Long, or to right-wing and anti-Semitic demagogues like Father Coughlin, or to the Communist Party. The passions unleashed by economic inequities are explosive because those inequities violate the fundamental capitalist faith. It’s the bedrock American dream that virtues like hard work and playing by the rules are rewarded with prosperity.
In 2009, too many who worked hard and played by the rules are still suffering, while too many who bent or broke the rules with little or no accountability are back reaping a disproportionate share of what scant prosperity there is. The tepid national satisfaction taken in Bernie Madoff’s terminal prison sentence should be a warning to the White House. In the most devastating economic catastrophe since Dillinger’s time, many Americans know all too well that justice has yet to be served.
The case against The Crash conspiracy theory, Neil Reynolds, July 8 2009.
In a column earlier this week, New York Times op-ed writer Frank Rich perfectly articulates the dominant mythology of the 2008 market meltdown. Wall Street caused The Crash, he says, by manipulating the U.S. mortgage market in so vast and so venal a fashion that Bernard Madoff's criminal Ponzi scheme was insignificant in comparison - "merely a one-off next to the esoteric (and often legal) heists by banks and bankers." These bankers, Mr. Rich says, "gamed the entire system, then took the money and ran before the bubble burst, sticking the rest of us with fear, panic and loss."
As prevalent as this conspiracy theory is, it remains highly improbable. For one thing, it rests rhetorically on a loose use of the English language. Note Mr. Rich's caution in identifying Wall Street's actions as criminal - though simultaneously describing them as "heists." Webster defines "heist" as theft, robbery or any other "unlawful appropriation."
But the case against the conspiracy theory rests much more substantively on historical fact. Mr. Rich asserts, for example, that evil bankers "took the money and ran before the bubble burst." This is mythology. Writing in the current issue of Policy Review magazine, published by the Hoover Institution at California's Stanford University, Wall Street Journal columnist Holman W. Jenkins sets the record straight.
"[I]t isn't true that Wall Street made [subprime] mortgage securities just to dump them on the proverbial greater fool, or that the disaster was wrought by Wall Street firms irresponsibly selling investment products they knew or should have known were destined to blow up," Mr. Jenkins writes. "On the contrary, Merrill Lynch retained a great portion of subprime mortgage securities for its own portfolio (it ended up selling some to a hedge fund for 22 cents on the dollar). Citigroup retained vast holdings in [these securities]. Holdings of these securities brought down Bear Stearns and Lehman Brothers. AIG, one of the world's most admired corporations, made perhaps the biggest bet of all ... Wall Street can hardly be accused of failing to eat its own dog food."
Further, it is not true that Wall Street executives and CEOs had no "skin in the game," Mr. Jenkins says. Most of these big players held considerable personal wealth in the stock and the stock options of the companies they managed - which bet their own money on the mortgage securities. "Personal losses to top executives in banks that failed or whose share prices collapsed were in the millions, hundreds of millions, and in some cases, the billions," he writes. Richard Fuld (Lehman Brothers) lost $100-million (U.S.). James Cayne (Bear Stearns) lost nearly a billion dollars. Hank Greenberg (AIG) lost as much as $2-billion. "They had skin in the game," Mr. Jenkins says.
Further, it is not true that Wall Street manufactured mortgage securities "as a purblind bet that home prices only go up." The securities were explicitly designed to handle a large number of defaults - with a carefully calculated rise in the anticipated foreclosure rate. Wall Street, in other words, knew exactly what was in the dog food and willingly bet its own money on it.
Mr. Jenkins acknowledges that some hedge fund managers made fortunes by selling these securities short before The Crash. But there is a short seller in every market transaction - a seller as well as a buyer. Yet the hedge funds that profited from subprime skepticism were remarkably cautious, making their bets "only through elaborate, expensive, negotiated deals," he writes.
"Had [these investors] really seen what was coming, they could have saved themselves a great deal of expense and bother simply by shorting Citigroup, Bank of America, Lehman, Bear Stearns, etc.," Mr. Jenkins notes. "Their profits would have been huger, their ... hassle factor much less." Wall Street made its risk-assessment judgments as best it could - and paid the consequences. "Market efficiency is not market clairvoyance."
The more probable cause of The Crash, Mr. Jenkins finds, was government - especially the early and inept response to the subprime "snafu" by the U.S. Federal Reserve (which inflated the housing bubble in the first place) and the U.S. Treasury. Although the government did act with the best of intentions, it inadvertently set off a global panic. In the end, the Fed averted a cataclysmic collapse of its own making by swapping one disaster threat (market meltdown) for another (future inflation).
One result of the Federal Reserve role in mismanaging the crisis, Mr. Jenkins says, is Obamanomics, a platform "born in the inexperienced mind of a Chicago academic and state legislator." The greatest risk now, he says, is an economy with too little risk-taking, not too much - with the government making the important industrial decisions. President Barack Obama, for his part, "has all the hubris of a [Japanese] bureaucrat in the mid-1980s."
"It is likely to end badly," Mr. Jenkins concludes, "as such dirigiste overreaching always does." Dirigiste: Now there's a persuasive resort to rhetoric. From the French diriger (to direct), dirigiste means state control of an economy. In the United States these days, it's government policy.
The Financial Markets and Fear Itself, Holman W. Jenkins Jr., June/July 2009.
Why investor confidence plunged
Economists and journalists and business professors have struggled to explain the rush of Wall Street firms in the years 2004–06 into creating securities backed by mortgages to marginal borrowers, now seen as the genesis of a global financial panic and possibly a second “Great Depression.” Yet so many stipulations of the standard view are questionable, if not mythical, that the mystery of why we are suffering globally will not be solved by figuring whom to blame for subprime mortgage lending.
For instance, it isn’t true that Wall Street made these mortgage securities just to dump them on them the proverbial greater fool, or that the disaster was wrought by Wall Street firms irresponsibly selling investment products they knew or should have known were destined to blow up. On the contrary, Merrill Lynch retained a great portion of the subprime mortgage securities for its own portfolio (it ended up selling some to a hedge fund for 22 cents on the dollar). Citigroup retained vast holdings in its so-called structured investment vehicles. Holdings of these securities, in funds in which their own employees personally participated, brought down Bear Stearns and Lehman Brothers. aig, once one of the world’s most admired corporations, made perhaps the biggest bet of all, writing insurance contracts against the potential default of these products.
So Wall Street can hardly be accused of failing to eat its own dog food. It did not peddle to others an investment product that it was unwilling to consume in vast quantities itself.
Wall Street did not peddle to others an investment product that it was unwilling to consume in vast quantities itself.
Nor is it true that Wall Street executives and ceos had insufficient “skin in the game,” so that “perverse” compensation incentives created the mess. That story also does not pan out. Individuals, it’s true, were paid sizeable bonuses in the years in which the securities were created and sold. But most also had considerable wealth in the form of stock and stock options in their firms, which bet their own capital on these securities. Many also appear to have invested directly in funds to hold the subprime securities.
They had skin in the game. Personal losses to top executives in banks that failed or whose share prices collapsed were in the millions, hundreds of millions, and in some cases billions of dollars.
Richard Fuld, of failed Lehman Brothers, saw his net worth reduced by at least a hundred million dollars. James Cayne of Bear Stearns was reported to have lost nearly a billion dollars in a matter of a few months. aig’s Hank Greenberg, who remained a giant shareholder despite being removed from the firm he built by New York Attorney General Eliot Spitzer in 2005, lost perhaps $2 billion. Thousands of lower-downs at these firms, those who worked in the mortgage securities departments and those who didn’t, also saw much wealth devastated by the subprime debacle and its aftermath.
It isn’t true, either, that Wall Street manufactured these securities as a purblind bet that home prices only go up. The securitizations had been explicitly designed with the prospect of large numbers of defaults in mind — hence the engineering of subordinate tranches designed to protect the senior tranches from those defaults that occurred.
The designers of these securities, moreover, knew exactly where a disproportionate share of the underlying mortgages were coming from: a handful of counties in southern California, Arizona, and the environs of Las Vegas as well as Florida, where home prices had been rising vertiginously. Far from swallowing the supposed inviolability of the housing-only-goes-up rule, middle-aged mortgage securitization bankers knew that house prices can correct sharply, having lived through regional housing busts in the southwest in the late 1980s, and in New England and California in the early 1990s. Anyone who works in the business knows that the experience of the past half century has been increasing volatility in home prices and a steady rise in the foreclosure rate — a nine-fold increase that began in the 1960s and accelerated in the prosperous 1980s and 1990s.
Nor is it plausible that all concerned were simply mesmerized by, or cynically exploitive of, the willingness of rating agencies to stamp Triple-A on these securities. Wall Street firms knew what the underlying dog food consisted of, regardless of what rating was stamped on it. As noted, they willingly bet their firm’s money on it, and their own personal money on it, in addition to selling it to outsiders.
Risk is risk — it wouldn’t be risk–taking if things couldn’t go wrong, even disastrously wrong.
Ah, you say, but their risk models and assumptions never allowed for a national drop in home prices. Yes, for good reason — there’s no such thing as a national market for houses. Even well into the subprime implosion, as recently as the middle of 2008, the Federal Housing Finance Agency’s House Price Index was continuing to report stable or rising prices in about half of the 292 metropolitan areas it tracks. Half a million new houses are still going up a year — because people want houses where they want houses.
But, you say, didn’t a handful of shrewd hedge fund managers detect a bubble and clean up from betting against it? Yes, fund managers like John Paulson and Kyle Bass made huge fortunes betting against subprime. This doesn’t prove that all the signs were there to be read and so others must have behaved irresponsibly. Think about this: Somebody is always short something, just as others are long the same thing. For every buyer, there is a seller. But those who bet successfully against subprime did so through elaborate, expensive, negotiated deals to purchase credit default swaps or buy “put contracts” on subprime indexes. Had they really seen what was coming, they would saved themselves a great deal of expense and bother by simply shorting Citigroup, Bank of America, Lehman, Bear Stearns, etc. Their profits would have been huger, their workload and hassle factor much less. The reason they didn’t, it’s reasonable to suppose, is because no more than anyone else did they foresee the catastrophic consequences we now suppose were destined to flow from excessive issuance of subprime mortgages.
Risk is risk — it wouldn’t be risk-taking if things couldn’t go wrong, even disastrously wrong. Market efficiency is not market clairvoyance, or market omniscience. Investors and firms do not always have instantaneous or, even in this electronic age, timely information about what other investors and firms are doing. Notice that the “bubble” in subprime lending emerged and burst in a surprisingly short period of time — a number of months in 2005 and 2006. In the dotcom era, dropping a bundle on a new fiber network as the internet was taking off was not necessarily a bad idea. The decision by other people to do the same is what made it a bad idea. That’s what happened in housing too — helped by cheap money from the Federal Reserve and a credit-manufacturing process that gave too many homebuyers a one-way bet on home prices.
The resulting losses are large — estimated at $435 billion by mid-2008 — though not large in relation to the $167 trillion (to use a McKinsey estimate) global capital market that would have to swallow them. Wall Street perfidy there may have been (there usually is) but it hardly justified or caused a worldwide financial panic. Left unexplained is how, really, a housing boom mostly concentrated in a single, nearly contiguous blob reaching from Sacramento to the environs of Las Vegas and Phoenix was transmuted into a global financial disaster.
There may not be a national housing market, and certainly there isn’t a global one. But there is a national economy, as well as a global economy, and policy structure and political culture, and a media that communicates information and analysis and fears and expectations instantly and globally. Impossible to separate, then, are the precipitous drop of confidence in asset values and a precipitous drop in confidence in government policy, on which asset values necessarily in part depend.
Most of America wasn’t in a housing bubble — yet when confidence crumbled, when borrowers and lenders began retreating willy-nilly from risk, when financing for car sales dried up, when businesses stopped hiring and began laying off, foreclosures everywhere were destined to rise, even in communities where home prices had not grown unreasonably. When one bank is seen to be in trouble, suddenly all banks are in trouble — if depositors and creditors lose confidence in government’s willingness and ability to intervene effectively.
The moment the media and politicians began touting the risk of a “Second Great Depression,” firms and investors around the world began treating it as a real risk. Firms and investors, for the most part, are sophisticated enough to recall that the Great Depression of the 1930s was first and foremost a product of disastrous policy choices made by governments amid what might otherwise have been a normal correction in boomtime asset prices. Indeed, when government begins to aim Herculean measures at the economy, even if those measures are well meant and well designed, it behooves all decision-makers to become cautious. Businesses and consumers of necessity pull back and take stock of the strong possibility of sweeping changes in what had previously seemed reasonable expectations about the future.
None of this is meant, by the way, to exculpate Fannie Mae and Freddie Mac; their enablers in Congress; or the Federal Reserve, which fearing one disaster after the dotcom bubble inadvertently fed another in the housing market. But such errors are routine. They certainly played a role in creating the subprime bubble, but that’s not why we have a global crisis of confidence in asset value. For most of the 80s, after all, the financial world watched Washington mishandle the thrift crisis without melting down. In the 1990s, it watched the 1996 telecom law’s role in attracting hundreds of billions in wasted investment into the telecom business, as regulators tried to conjure a simulacrum of “competition” out of authorizing politically-connected start-ups to leech off the infrastructure of the existing local Bell monopolists. Firms and investors have thick hides for governmentally-induced uncertainty — most of the time.
For certain analytical purposes, Wall Street and Washington are not two things but one.
John Taylor, a Stanford and Hoover Institution economist, has emerged as one of the analytical poles in the post-crisis diagnostic debate. He focuses on the Federal Reserve as the initial cause of the housing bubble, for keeping interest rates low and policy loose too long after the 2001 recession. If the Fed had behaved differently, everything else might have been different. But the Fed’s leaders had good, conscientious reasons for the decisions, and errors, they made. In any case, there is little hope they won’t make errors in the future.
What is most striking about Taylor’s analysis, though, is the extent to which he shows that investors in the global panic were responding not to the exposure of subprime losses, or even the failure of Lehman Brothers, but to what we might call a sudden, sharp explosion of uncertainty about what government might do and what principles or expectations might guide its actions amid the crisis.
Lately a debate has raged over whether Wall Street or Washington is more to blame. But for certain analytical purposes, Wall Street and Washington are not two things but one. The decision to pour much of the nation’s risk capital into housing in the mid-2000s was certainly a joint production. But — at least since banker J.P. Morgan personally intervened in the 1907 Panic — only one party is responsible for systemic confidence anymore. That’s government. When systemic trust falters, all eyes turn in a single direction. Government necessarily becomes the only truly relevant actor, with all the perils and politicization that that portends.
“The only thing we have to fear is fear itself,” fdr said, naming the systemic trust challenge when he took power in the third year of the Depression. He perhaps should have stopped there. He went on to specify a “nameless, unreasoning, unjustified terror,” but fear is anything but “unreasoning” or “unjustified” in certain circumstances. It is a very reasoning and justified fear that money in the banks may not be safe; that when businesses with solid assets cannot raise cash to meet their obligations, they may become insolvent and lose their assets to their creditors. A loss of trust can bring a whole economy to the brink of collapse in a matter of weeks.
So — blame government, however unsatisfying and unjust that may seem, for allowing the subprime snafu to become a global panic. Government was the only party in a position to protect systemic confidence, but instead sent mixed signals — saving Bear Stearns, telling the world that there would be no disorderly failures of important financial institutions through bankruptcy; then letting Lehman fail through bankruptcy. It stepped up to save aig and pumped in improbable amounts of taxpayer cash — when it might just have nationalized the firm, declaring its debts sovereign debts, which would have stopped the collateral calls related to its subprime guarantees. How many more times could government possibly repeat the aig fiasco if other large firms needed rescuing? It was a rescue, but a far from credible one.
It didn’t help that the crisis came in the middle of a presidential election, creating even more uncertainty about the future of policy. So the sinews of trust unraveled with unholy speed. In the collapse of willingness of banks to finance international trade, the world witnessed a plummeting of industrial production far steeper than seen even in early 1930s. In Germany, Japan, Taiwan, and China, manufacturing fell by double digits in the last half of 2008. In America, auto production has all but stopped.
Yet at this writing, the major confidence panic does seem to have been overcome by the actions of the Federal Reserve and U.S. Treasury. This has been done, bluntly, through the government putting its ability to print money behind the banking system’s liabilities. Obligations will be honored by the financial firms that hold America’s liquid assets. Deposits will be protected. Dollars held by financial institutions in the names of their clients will be dollars those clients will have access to — though what those dollars will be worth in the future is a sore question. In essence, we’ve traded the threat of system-wide default for the threat of inflation. Most would say, under the circumstance, it was a good trade.
Another notable scholar of the debacle, Richard Posner, the federal appeals judge and University of Chicago polymath, puts his finger on the question that should preoccupy us in the aftermath. Blaming bankers and homebuyers for taking unwise risks won’t get us very far — risk-taking is expected behavior and, on the whole, a service to society. Getting rid of Fannie and Freddie and reducing the artificial stimulus to housing investment in the tax code certainly wouldn’t hurt, but these steps hardly mean dangerous panics won’t crop up in the future. The Federal Reserve should be encouraged to avoid monetary errors in the future — though serious monetary errors will continue to occur on an irregular schedule.
By definition, the failure that ignites a global panic comes unexpectedly — whatever we may tell ourselves after the fact. Judge Posner’s question is, How should we respond next time? One lesson, discomfiting to those who worry about “moral hazard,” or the quite reasonable fear bailouts today merely beget excessive risk-taking tomorrow, appears to be that confidence in a crisis is indivisible. If the goal is to show government can prevent systemically important firms from failing, it has to prevent them from failing. Trying to treat moral hazard at the same time as confidence is self-defeating. It confuses the message and invites disaster.
The major confidence panic does seem to have been overcome by the actions of the Federal Reserve and U.S. Treasury.
Equally discomfiting to admirers of democratic accountability, another lesson is that regulators need the tools and will to act — they can’t be running to Congress and the political process to decide what to do. The Bush administration unwisely did the latter when it suddenly sought $700 billion in funding from Congress in the wake of the Lehman debacle. Politicizing the bailout opened a can of worms. Onlookers knew it. Ask the hospitality industry or the corporate jet industry what congressional warfare on “banker’s perks” did to their business. Or what Congress’s showy war on bonuses, golden parachutes, and other emblems of “excessive compensation” did to banks struggling to hold to necessary staff. The bluff and hardy American consumer may not have been frightened by all the “crisis” talk on Capitol Hill — but he or she recognized that involving Capitol Hill meant the country’s politics were likely to become dangerously consumed in “bailout” recriminations for months and years to come.
At some reptilian level, official Washington understands all this. Up has gone a cry in the aftermath for some kind of “systemic regulator” to prevent a reoccurrence and spare the political class from having to vote for bailouts in the future — though, in an evasion of reality, this über-regulator is supposed to spot bubbles and unwise risk-taking before they blow up, sounding a whistle just when investors are at the most enthusiastic lest investors inflict more losses on themselves than Congress will decide in retrospect should have been permitted.
In reality, we already have a systemic regulator — the Federal Reserve, whose traditional mission, in the colloquial description, is to “take away the punch bowl just when the party is getting started.” The Fed has been imperfect in this task in the past and will be so in the future.
What Congress doesn’t want to admit is that it wants not a systemic regulator, but a systemic savior — an institution that can step forward and stop panic in its tracks. But we have one of those too — the Fed again. For all the arguments heard on Capitol Hill last fall that only a $700 billion appropriation stood between us and financial Armageddon, that $700 billion sum has proved a pittance compared to the resources the Fed, under Ben Bernanke, has deployed out of its hip pocket. The Fed has bought unwanted assets and issued guarantees to the tune of more than $1 trillion. It has created untold billions in excess bank liquidity through monetary policy. If we’re honest, the Fed’s ability to print money stands behind the fdic, which insures the nation’s bank deposits. It stands behind Fannie and Freddie, which are increasingly in the business of losing money on purpose to help the housing market. Even the U.S. Treasury has been edging sideways toward relying on the Federal Reserve to finance the exploding national debt.
We have a systemic savior — the Federal Reserve. And all that remains to be seen is how much its efforts this time will ultimately cost in the erosion of the purchasing power of the U.S. dollar.
The other cost, inevitably, will be in the loss of efficiency from greater government involvement in the economy, nominally necessitated by the lessons of the debacle and actually necessitated by political opportunism. The future of Wall Street, much debated, some in Congress wish to be settled in a replay of the so-called Pecora hearings of 1932, so-named for Ferdinand Pecora, an assistant district attorney for New York County, who was assigned by Congress to get to the bottom of Wall Street skullduggery that preceded the 1929 crash and, in the popular mind, created the Great Depression.
Pecora gave rise to a hulking new regulatory apparatus, including the Securities and Exchange Act, the Glass Steagall Act, and (fitting the temper of the fdr administration at the time) other restrictions mainly aimed at turning the banking system into a cartel at the expense of its customers. Paul Krugman and others call for a return to this “boring” banking of the 1950s, which means restricting what kinds of loans and investments banks can make, and restricting competition between banks and other financial firms for depositors funds. In the 1950s, for instance, it was against the law to pay interest on checking accounts.
Krugman will be disappointed. Competition for investor funds is out of the bag and global — from checkable mutual fund accounts to exchange traded funds. And Congress’s reregulatory urge already is headed in a different direction, in favor of gestures of consumer protection, such as restricting credit card interest rates and making it easier for homeowners to renege on their mortgages. Whatever its merits, this is the opposite of the “boring bank” formula — which essentially tried to secure the banking system by limiting competition and making it easier for banks to gouge their customers. Rather, the agenda now taking shape is one in which the government plays a bigger role in deciding who gets a loan and on what terms, with politics, not profit, being the uppermost consideration.
From the other end of the political spectrum, conservatives crave a cure for “too big to fail.” They will be disappointed too. Big government and big financial firms just go together — especially in a crisis. No matter how unwieldy and accident-prone Citigroup might be, Washington was only too glad to make it even bigger by having it absorb the struggling Wachovia — until officials decided to merge Wachovia with another giant, Wells Fargo, instead. The behemoth JPMorgan wasn’t asked to get smaller — it was asked to get bigger, taking over Bear Stearns and Washington Mutual. As for Bank of America, the Fed and the Treasury practically put a gun to its head to make it absorb Merrill Lynch. Previously, BofA had delighted the political class by taking over giant (and sagging) mortgage lender Countrywide Financial.
True, these initiatives in the direction of even greater bigness took place under the Bush administration. Yet Team Obama finds bigness also convenient, using its regulatory sway and direct investment stakes in the biggest banks (acquired through the misnamed Troubled Asset Relief Program), for instance, not to slim them down, but to make them instruments of government policy. Case in point: In an act of surpassing corporatism, Chrysler’s secured lenders, including Citigroup, Goldman Sachs, JPMorgan Chase, and Morgan Stanley, were pressured to relinquish their claims to aid the administration’s efforts to rehabilitate the carmaker for the benefit of its unionized workforce, led by the United Auto Workers, which invested $ 55 million in electing Democrats in the last election cycle.
Banks “too big to fail” are big enough to be useful to politicians. Even in their present straitened circumstances, the country’s biggest banks have increasingly become a soft touch for struggling businesses that can get the political class’s attention — Republic Windows and Doors, a Chicago firm whose employees took to the streets when BofA threatened to call a loan, is the prototypical case. As time goes on, we can expect more of this. The “stress tests” imposed on the 19 biggest banks, if you listened closely, were not aimed at curbing risk-taking. Team Obama sees the biggest banks as the primary source of capital in the future to make the economy grow. The administration wants the banks to lend, lend, lend — hence Treasury Secretary Tim Geithner’s demand that, with public money or private, banks beef up their capital so they can support more credit creation.
All this is sounding a bit Japanese — though not in the way meant by those who (like Krugman again) see Washington’s failure to get tough enough with the banks leading to a replay of Japan’s “lost decade” following its own property bubble of the 1980s. The problem in Japan was a political consensus to prop up the banks as a way to prop up their borrowers — to keep “zombie” manufacturers and real estate developers and department stores afloat. Japan’s entrepreneurs and healthy firms, waiting for a shakeout that never came, held back their own efforts and investment. The economy stagnated for a decade. Mercifully, with the exception of a few Washington-directed cases like the auto sector, U.S. banks act aggressively with deadbeat borrowers. Markets are allowed to clear. One Texas bank recently even foreclosed on a California real estate developer and, coldly calculating the cost to complete and maintain several dozen nearly finished McMansions, instead sent in the bulldozers.
If America suffers its own “lost decade,” it won’t be for the reason Japan did. It won’t be because of zombie banks.
No, if America suffers its own “lost decade,” it won’t be for the reason Japan did. It won’t be because of zombie banks. It will be because of government’s insistence on taking over the direction of capital to new investment purposes. Already mortgage lending and student loans are 100 percent government-owned industries in the wake of last year’s credit crunch. President Obama has let it be known that the proper use of America’s financial capital is to develop “green” energy. He intends to use government to lean heavily on the private sector through tax incentives, loan guarantees, and direct lending to make sure that happens. Entrepreneurs and disruptive innovators will be crowded out in favor of a centralized financial system, more Japan-like, focused on handful of giants banks serving as government’s assistants.
Not his finest moment, Alan Greenspan appeared before Congress last year and uttered comments widely seen as heralding the end of trust in unfettered capitalism. He seemed to admit to disillusionment with “the market” because of the surprising and disappointing discovery that financial firms had taken risks that caused some to fail.
As Judge Posner points out, to be in business, by definition, is to court failure. A firm so fearful of risk that it won’t chance failure is quickly buried by competitors who will. Such firms will refrain from pursuing novel projects or technologies or market opportunities and dooms itself to be left behind by an advancing economy.
The danger, with Washington playing a bigger role in allocating capital in the economy, is not too much failure, but not enough.
Predictably, the next crisis will be our Japanese “lost decade” crisis — when, for instance, the political class must vindicate at all cost its investment in gm and Chrysler, even if it means using import tariffs and mandatory unionization and environmental mandates to disadvantage their foreign-owned competitors. It has already begun: With its tough new fuel mileage mandates, Congress also authorized $25 billion in energy department loans to help automakers develop the required “green” cars — while drafting the rules to make sure only Ford, General Motors, and Chrysler would be eligible. Regardless of profit, Obama wants to march Americans into the cars not of their choice — small electric cars, along with the close-to-home lifestyles that go with them. An industry dependent on government to force people to buy its products is not an industry dynamically driven by changing opportunities in the marketplace and in the public’s desires and aspirations.
In the 1980s, America flirted with industrial policy and protectionism to meet what was regarded as a Japanese economic threat. But our entrepreneurial bias prevailed in the end: While the Japanese bureaucracy was directing that country’s technology giants to dominate the manufacture of computer memory chips, perceived as the “strategic” resource of the 21st century, Silicon Valley was mostly left to its own chaotic, mercurial devices — and ended up focusing on microprocessors, software, multimedia, and networking. Given birth were the personal computer industry and, in due course, the internet. Try to imagine Microsoft or Google springing from the plan of a bureaucrat at Japan’s Ministry of International Trade and Industry.
That’s a nonmistake we apparently won’t make again. With its vast ambitions across broad swaths of the economy — from health care to energy to education — look for endless acts of industrial favoritism from Obamanomics. President Obama, with his confident judgment that the future is “green” energy, that government can deliver “affordable” health care, that everyone can and should go to college, has all the hubris of a miti bureaucrat of the mid-1980s and little apparent appreciation that America’s strength is the decentralized economic agenda thrown up by entrepreneurs and inventors and opportunists whose every impulse Washington doesn’t try to corral and control with mandates and incentives.
In sum, the global financial panic sparked by the behavior of subprime mortgage loans is probably best understood as an unforecastable accident of history. Another accident, brought on by the first, is the empowering of the Obama agenda, born in the inexperienced mind of a Chicago academic and state legislator. It is likely to end badly, as such dirigiste overreaching always does.
Holman W. Jenkins Jr. is a columnist and editorial board member for the Wall Street Journal.