December 23, 2008

Happy Holidays!

May you be safe and warm, filled with joy, and surrounded by friends and family. (In the best possible way - not in the cops-encircling-desperadoes-holed-up-in-a-warehouse-with-hostages kind of way.)

Have a wonderful holiday season. Sensen No Sen will return in 2009.

December 20, 2008

Some Questions on the Credit Crunch

Friday brought news that U.S. Treasury Secretary Henry Paulson believes Congress should release to him the second $350 billion (of $700 billion total) for the Trouble Assets Relief Program (TARP), so it can be distributed to banks and lenders. Meanwhile, President Bush announced that he would use the remaining $17.4 billion of the first TARP installment to shore up troubled automakers General Motors (GM) and Chrysler, with an eye toward their rapid restructuring by March of 2009.

Increasingly, though, there are doubts about the way the TARP money has been utilized. Initially, it was - as the name suggests - intended to fund direct purchase by the government of illiquid, "toxic" securities and mortgages from banks. The goal of such purchases was to simply remove liabilities from bank balance sheets and return those institutions to full fiscal health. Public resistance to this plan, however - as well as the actions of foreign governments in addressing their own financial crises - convinced Secretary Paulson to pursue another path.

As a result, TARP has been used to buy interests in financial giants like Citigroup and American International Group (AIG), with the idea that this infusion of cash will allow them to begin lending again, something that is crucial to the workings of the American economy. Ostensibly, taxpayers would be afforded some protection through the purchase of equity stakes, since, as the banks recover, their stock prices will rise, and it might even be possible for the public to make a profit.

All well and good, but it's entirely unclear that the sort of strictly disciplined approach needed to make this plan work has been undertaken. In addition to serious concerns about the lack of oversight on TARP, there are some very legitimate questions about whether or not the financial sector has simply gotten a nice, fat government subsidy with no obligation to resume doing what needs to be done to keep the credit markets flowing.

Banks still aren't lending, and the plight of the car companies, for instance, is at least somewhat directly tied to that fact. With the Bush Administration's insistence on removing a key provision regulating executive pay, bonuses and dividends for TARP recipients - as well as the GOP's clear intent to use the automobile industry's tremulous state to try and defang the United Auto Workers (UAW) - it is increasingly difficult to be certain that efforts to confront the consequences of massive deregulation are being made in good faith.

Which brings me to some key questions.

First, why aren't we pushing for more financial institutions to do what Credit Suisse is doing? The Swiss bank has announced that it will pay executive bonuses in illiquid assets, rather than cash, equity or options:
The bank will use leveraged loans and commercial mortgage-backed debt, some of the securities blamed for generating the worst financial crisis since the Great Depression, to fund executive compensation packages, people familiar with the matter said. The new policy applies only to managing directors and directors, the two most senior ranks at the Zurich-based company, according to a memo sent to employees today.

“While the solution we have come up with may not be ideal for everyone, we believe it strikes the appropriate balance among the interests of our employees, shareholders and regulators and helps position us well for 2009,” Chief Executive Officer Brady Dougan and Paul Callelo, CEO of the investment bank, said in the memo.

The securities will be placed into a so-called Partner Asset Facility, and affected employees at the bank, Switzerland’s second biggest, will be given stakes in the facility as part of their pay. Bonuses will take the first hit should the securities decline further in value.

“It’s monstrously clever,” said Dirk Hoffman-Becking, an analyst at Sanford C. Bernstein Ltd. in London who has a “market perform” rating on Credit Suisse stock. “From a shareholders’ perspective it’s great because you’ve got rid of some of the assets and regulators will be pleased because you’ve organized a risk transfer.”

For employees, “there’s some upside in there and if the alternative is nothing, it’s a lot better than nothing,” Hoffman-Becking said.
Second, why are we allowing financial firms to maintain and distribute massive bonus pools? Any company that needs to turn to public financing in order to survive has no business handing out bonuses to anyone, no matter how well workers may have performed against their individual goals for the fiscal year. The justification for these bonuses - that they are vital for the retention of good employees - is utterly ludicrous in the face of company performance, the current job market, and the fact that these once-mighty financial titans are teetering on the brink of collapse.

Third, why are we lowering interest rates effectively to zero and aiming to pump more cash into the financial sector? Dropping interest rates might ease the reluctance of a few banks to lend, but the much larger effect is to drive demand for loans and mortgage refinancing without doing anything that encourages lending. There is already more than enough unmet desire for credit and new terms on housing loans, and pushing money into institutions that will not, in turn, lend it, accomplishes little other than to provide a lifeline to struggling companies that have shown an unwillingness to make tough restructuring choices and who continue to hand out large bonuses on the taxpayer's dime.

Perhaps it is time the for the government to simply bypass the banks that won't lend and set up a program whereby it makes commercial and even personal loans at a rate slightly higher than that set by the Federal Reserve. Such an approach would guarantee that the government will never offer rates that banks - at least in principle - cannot also meet, or even better. Companies that have maintained strong balance sheets, such as Wells Fargo, will have no trouble competing, but banks that are currently hoarding cash (especially public cash) will be cut out of the market unless they loosen their purse strings. More crucially, such a program wouldn't fuel excess demand for credit or push policies that don't address that demand, and individuals and firms that need loans would get them.

Finally, and perhaps most importantly, why are we ignoring the root of the problem and failing to address subprime mortgages directly? If banks are forced to lock in adjustable rate mortgages (ARMs) at the introductory rate - or even one only somewhat higher - the majority of homeowners who are struggling to make their payments would then be able to do so, and lenders would still make money, although not as much. It would certainly take some effort, but reader lokywoky lays out a plan of action in comments on a previous post:
Identify and map ALL the subprime loans back to their originators. De-link them from the derivative pools and nullify all the credit default swaps (which are worthless pieces of paper anyway). TELL the banks that they WILL renegotiate these loans - whether they are in default or not. The terms will be a 30-year fixed rate at the original "teaser" rate the buyer got when they signed the loan documents. The banks will write down any and all fees, late charges, foreclosure costs, etc. The principal of the loan would remain as it was after the most recent payment. If there are extenuating circumstances, the loan term may be extended to 35 or 40 years.
Anyway, liquidity at the bottom is what will fix this problem, not pouring money into the black hole of derivatives and designer crapshoot paper Ponzi schemes. Once the credit market is fixed, presto - no more bailouts for the auto companies will be needed. No more trillion dollars disappearing money from the treasury. And - my solution doesn't take one dime from the taxpayers. How about that!
Now that we are $350 billion in the hole for TARP, it appears that Congress will be asking Secretary Paulson some tough questions when he returns to Capitol Hill for more money. These should be among them.

December 15, 2008

Getting the History Right

Over at Vanity Fair, Nobel Prize-winning economist Joseph Stiglitz has a short, easy-to-read article on the major decisions that led to the current economic crisis., highlighting five that he believes are the most important:
  1. Firing Paul Volcker - Federal Reserve Chairman Volcker had been successful in his position by any measure, but he also believed that markets should be regulated. Uncomfortable with that viewpoint, President Ronald Reagan replaced him with Alan Greenspan, who eventually presided over two massive bubbles - technology and housing - and in so doing, essentially failed at his primary duty: maintaining the stability of the financial system.

  2. The repeal of the Glass-Steagall Act - Glass-Steagall was a product of the Great Depression, and was meant to "curb the excesses of that era, including grave conflicts of interest." The central mechanism of Glass-Steagall was to investment banks and their tolerance for high risk separate from commercial banks, which depend on stability. Its repeal - the result of a $300 million lobbying campaign and headed by former Senate Banking Committee Chairman (and McCain campaign adviser) Phil Gramm - led directly to the clamor for consistent high rates of return which only risky investing can produce.

  3. The Bush tax cuts of 2001 - The Bush tax cuts actually did very little to stimulate the economy in the face of steadily increasing energy prices. Because of that, the Federal Reserve was forced to keep the wheels greased with low interest rates and lots of liquidity, which in turn fueled the housing bubble. Further, easy money for housing encouraged leverage, allowing those who would not normally have been able to purchase a home to not only do so, but then borrow against it, fanning the flames of over-extension and driving the household rate of savings in the United States into steeper decline, and ultimately, negative territory.

  4. Faking the numbers - In 2002, in response to the collapse of Enron and WorldCom, the Sarbanes-Oxley (SOX) Act was passed in an effort to shore up public trust in the accounting numbers reported by corporations. Unfortunately, while SOX confronted the most flagrant abuses, it failed to address accounting for stock options, which in turn provided an incentive for top management to mis-report results in an effort to drive up the price of equity. This in turn was fed by the fact that the securities ratings companies were being paid by the same firms they were charged with evaluating, and the end result - manifested today in the credit market turmoil - is a crippling absence of trust in the financial system.

  5. The financial sector bailout - The hastily assembled bailout package cobbled together by Treasury Secretary Hank Paulson has been a model of ad hoc reactiveness. Worse, when Treasury began providing banks with the funds they needed, it was done in a way that both cheated American taxpayers and failed to ensure that the money would be used for lending, which was desperately needed to kick start the credit markets. (Banks were permitted to continue paying dividends to their shareholders as public money was being poured money in to keep them afloat, and a restriction on limiting pay for executives at companies receiving federal dollars was removed by the Bush Administration.)
Dr. Stiglitz concludes with the following:
The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting* and that the role of government should be minimal. Looking back at that belief during hearings this fall on Capitol Hill, Alan Greenspan said out loud, “I have found a flaw.” Congressman Henry Waxman pushed him, responding, “In other words, you found that your view of the world, your ideology, was not right; it was not working.” “Absolutely, precisely,” Greenspan said. The embrace by America - and much of the rest of the world - of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.
A commenter on a previous post opined that this sort of exercise in root cause analysis can be traced simply to human greed, and amounts to little more than finger-pointing. I concur with the first portion of that statement, but take issue with the second, as does Dr. Stiglitz. In fact, he states that the purpose of his piece is to "get the history right" so as to not only avoid repeating the same mistakes in the future, but to ensure that the policies and people who have driven us to the brink are removed from the levers of power. That will only be the case if we refuse to let free market fundamentalists mythologize what has taken place.

* Regular readers of Sensen No Sen will know that I agree with this point, although I think it is important to note that Dr. Stiglitz's language is imprecise. Markets ARE, in fact, self-adjusting, but because collapses and wild swings are part of that self-adjustment, they can more properly be regarded as not TOLERABLY self-adjusting.

Meanwhile, Mark Fiore does a wonderful job capturing the attitude of "crybaby capitalism" in the animation below:

December 10, 2008

Huckabee's Tired Arguments Get Slapped Down

Last night, former Arkanas governor and Republican presidential candidate Mike Huckabee joined Jon Stewart on The Daily Show to discuss his new book, "Do the Right Thing." The book focuses on what Governor Huckabee sees as a need for his party to hew even further to the right in response to its sweeping electoral defeat, and with the implosion of the GOP, he is clearly trying to position himself as the standard-bearer for the tattered conservative movement in the 2012 elections.

Unfortunately for the governor, his tired and hollow arguments against same-sex marriage run smack into Jon Stewart:

December 6, 2008

Poor, Persecuted Persecutors

Amid ongoing protests against the passage of California's Proposition 8, an organization called The Becket Fund for Religious Liberty placed a full-page ad in the New York Times decrying the violent intimidation of Mormon (LDS) and Catholic institutions - as well as businesses and individuals - who supported the measure. The Becket Fund, which describes itself as a non-profit, non-partisan, interfaith public interest law firm dedicated to protecting the freedom of religious expression, makes a valid point: violence has no place in a civilized society.

Having said that, the vast, overwhelming preponderance of activism against Proposition 8 has been entirely peaceful. There are always a few fringe-dwellers in any movement, but while same-sex couples - who have been relegated to second class status by Prop 8 - have every right to be bitter and angry, the idea that the backlash against Prop 8 is one characterized by organized violence and systematic intimidation is unquestionably false.

To get a sense of the Becket Fund's methodology, it's worth noting that it is behind a new website (which is also home to their full-page ad) called, ominously, And this passage from the ad makes clear that it is merely one more religious organization working to claim victimhood when sectarian bigotry is decried for what it is:
Let's be clear: even the crudest anti-religious propaganda isn't illegal, and may not constitutionally be outlawed. But it's nevertheless wrong. It has no place in civilized society.
As the Human Rights Campaign noted, the idea that the LDS is the offended party is pretty difficult to substantiate:
When did the LDS Church become the victim? It’s hard to believe, but that is exactly what it is trying to convince the public of. It is continuing to spend an excess of dollars in an attempt to mislead the public and transform its image. But the truth is that this is the same church that conducted a national broadcast to every temple, calling on members to organize and write checks to the Prop 8 campaign. The same church that donated more than half of the $40 million behind Prop 8, even though California Mormons represent just 2 percent of the state's population. Yes, it’s the same church.
The hypocrisy required to champion a constitutional effort to deny consenting adults the right to marry, but then claim injury when there are repercussions, is pretty tough to stomach. I'm not religious myself, but I seem to recall a biblical admonition about reaping what one sows, and Friday's Washington Blade reported that the California Fair Political Practices Commission (FPPC) is investigating whether the Mormon church violated state law by failing to report all contributions supporting Proposition 8.

The backlash against the passage of Prop 8 continues and a recent poll indicates that fully 8% of voters who supported it would vote against it if it were on a ballot today. That's a swing large enough to have defeated the measure, and a sign that this egregious dehumanization of same-sex couples, which does nothing but cheapen our society, may not be long for the political world.

For added perspective, please be sure to view this classic clip from the Daily Show, which aired after Massachusetts legalized same-sex marriage in 2005, and check out the Prop 8 musical featuring Jack Black.

December 1, 2008

The Man Who Got Zarqawi Comes Out Against Torture

I have written extensively about the use of torture in the interrogation of prisoners in U.S. custody; it is one of the blackest marks - in a long, long list of black marks - left on our country by President George W. Bush. Not only does it stain our reputation and run counter to the ideals or our nation, it isn't even vaguely reliable, and it has placed American lives in danger by aiding recruitment among terrorist organizations.

Nonetheless, individuals like the disgraceful William Kristol believe that the use of torture by the United States should be forgiven - if not praised, outright - despite the obvious and ugly hypocrisy necessary to take such a position when the Allies prosecuted Germans after World War II for following orders "in good faith" and for ignoring crimes committed around them:

One last thing: Bush should consider pardoning - and should at least be vociferously praising - everyone who served in good faith in the war on terror, but whose deeds may now be susceptible to demagogic or politically inspired prosecution by some seeking to score political points. The lawyers can work out if such general or specific preemptive pardons are possible; it may be that the best Bush can or should do is to warn publicly against any such harassment or prosecution. But the idea is this: The CIA agents who waterboarded Khalid Sheikh Mohammed, and the NSA officials who listened in on phone calls from Pakistan, should not have to worry about legal bills or public defamation. In fact, Bush might want to give some of these public servants the Medal of Freedom at the same time he bestows the honor on Generals Petraeus and Odierno. They deserve it.
In a bit of timely coincidence, however, Matthew Shephard, the man who led the team of interrogators that found Abu Musab al-Zarqawi - without resorting to torture - puts all of this in stark perspective in an article in yesterday's Washington Post. The entire article is well worth reading, but I found the following passages striking:

I'm not some ivory-tower type; I served for 14 years in the U.S. Air Force, began my career as a Special Operations pilot flying helicopters, saw combat in Bosnia and Kosovo, became an Air Force counterintelligence agent, then volunteered to go to Iraq to work as a senior interrogator. What I saw in Iraq still rattles me - both because it betrays our traditions and because it just doesn't work.
Amid the chaos, four other Air Force criminal investigators and I joined an elite team of interrogators attempting to locate Zarqawi. What I soon discovered about our methods astonished me. The Army was still conducting interrogations according to the Guantanamo Bay model: Interrogators were nominally using the methods outlined in the U.S. Army Field Manual, the interrogators' bible, but they were pushing in every way possible to bend the rules - and often break them. I don't have to belabor the point; dozens of newspaper articles and books have been written about the misconduct that resulted. These interrogations were based on fear and control; they often resulted in torture and abuse.

I refused to participate in such practices, and a month later, I extended that prohibition to the team of interrogators I was assigned to lead. I taught the members of my unit a new methodology - one based on building rapport with suspects, showing cultural understanding and using good old-fashioned brainpower to tease out information. I personally conducted more than 300 interrogations, and I supervised more than 1,000. The methods my team used are not classified (they're listed in the unclassified Field Manual), but the way we used them was, I like to think, unique. We got to know our enemies, we learned to negotiate with them, and we adapted criminal investigative techniques to our work (something that the Field Manual permits, under the concept of "ruses and trickery"). It worked. Our efforts started a chain of successes that ultimately led to Zarqawi.
I know the counter-argument well - that we need the rough stuff for the truly hard cases, such as battle-hardened core leaders of al-Qaeda, not just run-of-the-mill Iraqi insurgents. But that's not always true: We turned several hard cases, including some foreign fighters, by using our new techniques. A few of them never abandoned the jihadist cause but still gave up critical information. One actually told me, "I thought you would torture me, and when you didn't, I decided that everything I was told about Americans was wrong. That's why I decided to cooperate."

Torture and abuse are against my moral fabric. The cliche still bears repeating: Such outrages are inconsistent with American principles. And then there's the pragmatic side: Torture and abuse cost American lives.

I learned in Iraq that the No. 1 reason foreign fighters flocked there to fight were the abuses carried out at Abu Ghraib and Guantanamo. Our policy of torture was directly and swiftly recruiting fighters for al-Qaeda in Iraq. The large majority of suicide bombings in Iraq are still carried out by these foreigners. They are also involved in most of the attacks on U.S. and coalition forces in Iraq. It's no exaggeration to say that at least half of our losses and casualties in that country have come at the hands of foreigners who joined the fray because of our program of detainee abuse. The number of U.S. soldiers who have died because of our torture policy will never be definitively known, but it is fair to say that it is close to the number of lives lost on Sept. 11, 2001. How anyone can say that torture keeps Americans safe is beyond me - unless you don't count American soldiers as Americans.
If you are new to Sensen No Sen - or remain unconvinced by my previous posts on this topic - consider this thought experiment from Barry Eisler at The Heart of the Matter. I think the answers to Barry's questions are readily apparent, if we're honest with ourselves:

... If instead of American soldiers and Arab detainees, the photos and videos from Abu Ghraib were of American POWs and, say, Iranian guards, what would be the American reaction? Note the linguistic choices in the previous sentence, which would be automatic: Arabs are denied the dignity of being designated Prisoners of War. They're not even prisoners. They're merely "detainees" (I'm half-surprised we haven't started calling them "guests"). The Americans holding them are "soldiers"; were the shoe on the other foot, the enemy captors would doubtless receive the less exalted term, "guards." Would there be any debate about whether the practices revealed in the photos were "outrages upon human dignity," as prohibited by the Geneva Conventions and U.S. law? Would we describe the practices as "abuse?" Or would they obviously, and rightly, be called "torture?" If Americans were taken against their will and spirited away by Iranian government forces, would we call the practice "rendering," or would we recognize it as "kidnapping?" Would we call the places to which Americans were secreted and where they were held without acknowledgment to their families or even to the Red Cross "detention centers?" Or would we call such a system a gulag?
President-elect Obama has promised to (re-)outlaw the practice of torture. Ending a practice that is effective only in endangering American lives, diminishing standing of the United States in the eyes of the world, and aiding our enemies can't come soon enough.

November 27, 2008

Happy Thanksgiving

Have a wonderful Thanksgiving holiday!

November 24, 2008

Civic Literacy

The Intercollegiate Studies Institute (ISI) is an educational organization founded in 1953 "to further in successive generations of American college youth a better understanding of the economic, political, and ethical values that sustain a free and humane society." The ISI is ostensibly non-partisan, although it approaches education, history and economics with a conservative bent.

Last week, the ISI released its third annual report on what it terms "civic literacy" - the economic, historical and political knowledge of U.S. citizens. The results were disturbing, if not surprising, given the presidency of George W. Bush (emphasis mine):
More than 2,500 randomly selected Americans took ISI’s basic 33-question test on civic literacy and more than 1,700 people failed, with the average score 49 percent, or an “F.” Elected officials scored even lower than the general public with an average score of 44 percent and only 0.8 percent (or 21) of all surveyed earned an “A.”
If you'd like to see how you'd do on the ISI Civic Literacy test, it can be found here. In my opinion, it is fair, grounded in fact, and unbiased.

November 19, 2008

Arm Yourself

I work in the private sector, I have an MBA, and I believe in the power of the market. I believe that, left to its own devices, it will seek equilibrium naturally over time, and that eventually, all bubbles will burst, all recessions will end, and the most competitive companies will survive and thrive.

I also have an undergraduate degree in Government, I have worked on Capitol Hill and in the not-for-profit sector, and I have been a member of the working poor, albeit with hope of advancement. I have toiled 4o hours a week waiting tables and tending bar - without health insurance or a car or a savings account, or, in one 10-month stretch, a single day off - so I could work another 40 hours a week someplace else, often for free, to get my foot in the door. I believe that the degree to which markets can swing, and the length of time it often takes corrections to occur, are only acceptable if we don't care about the human costs - poverty, unemployment, social upheaval and the like - of that volatilty.

Academically, I have always believed to one degree or another that government has a crucial role in regulating markets, but it is probably my own personal history that has made me sure of it. For me, if regulations mean that every last possible dollar cannot be wrung from a given company or industry or sector, so be it; if - by blunting some of the peaks - we keep the troughs shallow enough to avoid wreaking economic disaster on wide swaths of the population, it is a sacrifice well worth making if we believe we are all in this together. It is with this Keynsian worldview, therefore, that I recently read Naomi Klein's The Shock Doctrine: The Rise of Disaster Capitalism. Having finished it last week, I recommend it in the strongest possible terms.

The Shock Doctrine is a groundbreaking and eye-opening account of the manner in which the brand of free-market capitalism we see today - manifested in the housing crisis and the current economic meltdown - has propagated throughout the world. It details extensively that - contrary to popular mythology - laissez-faire doctrine did not spread because it has triumphed fairly in the marketplace of ideas and demonstrated that it is good for the many. Rather, it has too often been imposed through stealth, extortion and exploitation, and more often than not, for the benefit of the few.

Based on extensive historical research and years of firsthand reporting from war and disaster zones, The Shock Doctrine vividly demonstrates that what Ms. Klein terms "disaster capitalism" – the rapid, corporate-backed re-engineering of societies still reeling from massive, systemic shock – traces its roots back more than five decades, to both CIA-sponsored psychological experiments and the economics department at the University of Chicago under Nobel laureate Milton Friedman. These policies were based on the same premise underpinning the mental health treatments of the day - that dysfunctional societies (or those perceived to be), like the mentally ill, could be "wiped clean" and re-started from scratch. When economic or political crises hit, the "Chicago Boys," as they came to be known, were ready to take advantage of societal shock. As Dr. Friedman put it:
Only a crisis, real or perceived, produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.
It was this foundational concept that was behind the exploitation of post-catastrophe disorientation, and which was used to ram through radical free-market policies that would never have been enacted democratically. Chile, Argentina, Bolivia, Brazil and Indonesia in the fifties and sixties; Poland and China in the eighties; Russia and South Africa in the nineties; the United States in the wake of 9/11; the Iraq War; the aftermaths of Hurricane Katrina in New Orleans and the tsunami that devastated Sri Lanka, Indonesia and Thailand in 2004 - all of these bear the mark of the Chicago School ideologues.

The result - in literally every case - has been widespread disenfranchisement, massive increases in poverty and unemployment, the destruction of shared wealth, and the tremendous enrichment of a very few. It is a legacy of shame, coercion and hypocrisy that provides a telling insight into the tension between developed and developing nations, and one with which every American who doesn't understand why the rest of the world doesn't love us unconditionally needs to become intimately familiar.

Today, we see the result of uncompromising free market ideology and corporatism in the housing collapse, the financial sector crisis, the privatization of the war in Iraq, and what appears to be the imminent failure of the American automobile industry . The gap between the wealthiest and the poorest grows ever larger, and even today, as we face the crumbling foundations of our entire economy, that very crisis is being used to provide cover - yet again - for unpopular and dangerous policy changes.

The Shock Doctrine is an important, well-researched book that brings to light a perspective vital to understanding the world we live in today. It exposes a "multifaceted ideological trend that has successfully served the most powerful corporate interests in society for half a century," and it is giving those same interests fits. Critics of Ms. Klein's book were notably silent until recently - apparently hoping she would go away - but they have now resorted to a barrage of straw man arguments and a campaign of blatant dishonesty in an effort to protect the myth that democracy and free markets are inexorably intertwined. It is a credit to Ms. Klein's thoroughness and rigor that those attacks have failed to scratch the armor plate on her highly documented and compellingly cohesive work. If you read only one "serious" book this year, this one should top your list.

November 13, 2008

The Depths of Their Affection, Not the Gender of Their Beloved

California's Proposition 8 - a ballot measure amending the state constitution to define marriage solely as between one man and one woman - passed on November 4th, appearing almost as some sort of horrible karmic balance of societal regression against Barack Obama's landmark election to the presidency. With its core function to actively discriminate against same sex couples, Prop 8 was contentious, and its passage can largely be atttibuted to the enormous amount of money that poured into California from out of state. The Utah-based Church of Jesus Christ of Latter-Day Saints (LDS) and the Roman Catholic Church were both major supporters of the initiative, and the end result was that, while the United States made a significant stride in overcoming longstanding prejudice in its choice of chief executive, its most populous state ended up codifying bigotry against homosexuals.

In the wake of passage, it appears that California Governor Arnold Schwarzenegger - formerly indifferent to Proposition 8, but perhaps recognizing the horrible dichotomy in progress between the course of racial equality and gay rights - has voiced his hope that the measure will be overturned in the courts. Meanwhile, large-scale protests against Prop 8 have broken out across California, and although people like the Tony Perkins of the Family Research Council (FRC) have attempted to paint these protests as violent mobs working against the will of the people, they have been anything but.

The Mormons - suddenly under the spotlight in ways they now wish they were not - have faced demonstrations at their places of worship in both California and their home state of Utah, but apparently miss the towering irony in their complaints that intrusion into their personal religious matters is inappropriate. Catholic leadership, meanwhile, has sallied forth with a stomach-churning and transparently false claim that "Proposition 8 is not against any group in our society. Its sole focus is on preserving God's plan for people living upon this earth throughout time."

Such declarations aside, let's be perfectly clear: "will of the people" or not, Proposition 8 specifically - and discrimination against same sex couples who want to marry, in general - is unconstitutional, illogical, and immoral.

It is unconstitutional because the Fourteenth Amendment to the United States Constitution states, very clearly and with express intention of preventing descrimination against minorities, that:
All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
Proposition 8 is illogical, because - as detailed in the famous "Open Letter to Doctor Laura" - the religious justification for banning same-sex marriage and persecuting homosexuals cherry picks one portion of the Old Testament and ignores many others. Marriage is also not nearly the immutable institution organizations like the FRC would have the public believe, and the Bible very clearly countenances polygamy as a fact of life. Further, claims that Proposition 8 is rooted in protecting the "sanctity of marriage," are obviously false; on the basis of volume alone, the divorce rate among heterosexuals is a far greater threat to matrimony than homosexual marriage is, or ever will be, and no one is working to ban divorce.

Finally, this measure is immoral, because, as Barry Eisler eloquently explains at The Heart of the Matter:
If you oppose gay marriage, try to imagine that as strongly as you feel, that's just how strongly backers of Jim Crow felt in the 1950's and 1960's. Segregationists, who are now recognized as the racists they were, felt just as strongly about blacks marrying whites as you feel about two men or two women marrying each other. They had their arguments, as you have yours. And yet, looking back, we know they were wrong. When people look back at supporters of Prop 8, they'll recognize that Prop 8 supporters were wrong, too.
Fortunately, the fight against Proposition 8 is not over. Already, seven same-sex couples - legally married in the Golden State prior to Prop 8's passage - have filed suit to overturn the measure. Further, the California Supreme Court has been petitioned to overturn Proposition 8 on the grounds that the ballot initiative process was improperly used in an effort to gut the state constitution's core commitment to equality. And perhaps best of all, businesses and individuals who financially backed Proposition 8 are being held accountable through protests and boycotts.

As big a setback as the passage of California Proposition 8 is, however, I truly believe that - no matter what the short term outcome of court cases and legal challenges - efforts like this one exist on borrowed time. Given that Arizona and Florida also enacted bans on same sex marriage, it may be that my outlook has been affected by optimism associated with Senator Obama's election, but I'm not so sure. Arizona and Florida aren't the bellwether states that California is, and it's worth noting that today, Connecticut began licensing homosexual couples for marriage. Injustice for minorities clearly still exists in the U.S., but the mere existence of a President Obama makes it much more difficult for discrimination to withstand scrutiny.

Unquestionably, Prop 8 is a defeat for those who believe that equality before the law is a fundamental American principle, and it is one that deserves an active and vigorous response. But just as we have elected a president based on the content of his character rather than the color of his skin, we will someday - in the near future - support equal marriage rights for all consenting adults based on the depth of their affection, rather than the gender of their beloved. We owe it to our fellow Americans, who have been made second class citizens by Proposition 8, and we owe it to ourselves.

November 8, 2008

Obama's Game Face

Like many people, I'm still awed by Barack Obama's historic election to the presidency, and having spent the past couple of years venting my spleen over the terrible conduct of the Bush Administration (and how good will it feel to stop writing the words "Bush" and "administration" next to one another?), it's likely that I will take a small breather, posting shorter posts here at Sensen No Sen for a week or two. Nonetheless, here are a few things I thought worth sharing.

The first is the series of photos at left [h/t April Winchell], taken at the Obama post-election rally in Chicago's Grant Park. With the Obama presidency, there will be whole generation of kids - including these two - who will grow up having had a black president, and while that fact will in no way erase the ongoing, institutional racism in America, it is unquestionably a step in the right direction. Suddenly, something that seemed like an insurmountable obstacle - something that just couldn't occur - has happened, and it can't help but change us as a people.

Another thing I found striking during Senator Obama's speech was the contrast between his demeanor and that of the crowd. There were jubilation and tears and joy among the assembled, but aside from a few quick smiles that appeared directed at close friends, the president-elect was deeply serious, perhaps even moreso than he had been during the campaign. In sports parlance, he already had his game face on, and that's something that makes me feel good about my vote.

On a personal level, I would have liked to see the president-elect enjoy the moment of his accomplishment, to see him smile broadly. But the more I reflect on it, the more I have come to appreciate that the next man to occupy the Oval Office clearly understands that the election itself was only step one, and that there are challenges facing this country every bit as historic as his political ascent. The manner in which he has hit the ground running in the days following the election have only confirmed my opinion, and for me, while the election of the first black man to the Presidency of the United States of America is truly amazing, what matters even more is that we have a disciplined, pragmatic leader who is serious about taking on the monumental issues confronting our nation.

Finally, take a glance at this post from Bill Wolfrum. It satirizes beautifully the utter, craven stupidity of the Republican arguments against electing Barack Obama. (Warning: Like a lot of good comedy, it's a little profane.) After you've had a moment to savor it, pause and reflect how wonderful it is that we have marginalized the moronic screwheads, idiot racists and hysterical fear mongers of the hardcore rightwing by our vote on Tuesday. Whatever happens in the next four years, at the very least, the orgy of accusation and self-destruction that the Republican Party has just begun visiting on itself will not only be tremendously enjoyable to watch for anyone who has observed, with knotted stomach, what the GOP has done to our country, but it will also have very little effect on the business of the nation.

And that, is a very good thing, indeed.

November 4, 2008

November 3, 2008

Pre-Election Night Visual Aids

The clock is ticking down to Election Day, and despite the media's strong desire to portray the campaigns of John McCain and Barack Obama as nearly neck and neck, all signs point to not just a strong finish for Senator Obama, but a potential landslide. Senator McCain's desperate attacks on his opponent's "association" with radicals and his substanceless claims of widespread voter fraud - which even they now admit have never materialized - appear to be falling not so much on deaf ears, but on the ears of a public too jaded and fed up with imperial Republican mis-rule to pay them heed.

Nonetheless, it is worth talking briefly about a couple of things: the need to close the deal and ensure that everyone who supports Mr. Obama actually casts a ballot, and the gut-level arguments that may sway the remaining undecideds to put their votes behind the Democratic nominee. With that in mind, I have cobbled together a few (only somewhat tongue-in-cheek) visual aids to keep in mind and share with any friends who may still be sitting on the fence.

First, Sarah Palin is not "just like you and me" and she is woefully unprepared to assume a leadership role in national or world politics:

Second, paying taxes is not socialism, and the active participation of government, in partnership with the private sector, has a very strong track record in the United States:

Third, the modern Republican Party has made its bones by convincing people to vote against their own interests. It is in the economic interest of the vast majority of Americans to vote for Senator Obama:

Fourth, think about where the country was before the ascension of George W. Bush. The Onion was tragically prescient when it satirically reported in 2000 that President-elect Bush had declared, "Our Long National Nightmare Of Peace And Prosperity Is Finally Over". Even the guys from Budweiser's carefree "Wassup" campaign have noticed that the past 8 years haven't gone very well for anybody who isn't at the top of the income heap:

Finally, remember that EVERY vote must count, and make sure that yours does, too. We have come too far and worked too long to let John McCain - or anyone else - steal this election:

I have detailed in previous posts why I am voting for Barack Obama (here, here and here). While he is certainly not perfect, I believe that he is a far superior candidate to John McCain on the issues, and because of where we currently sit within the broad arc of national history. As we reach the finish line of this election - an end to the beginning, if you will - I have also come to believe increasingly that Senator Obama has the potential to be a truly transformative president; one who has a chance to actually attain some of the lofty and difficult aims he has laid out for himself and for the country.

I'm not alone. As corny as it sounds, hope is a powerful force that, well-managed, can bring about wholesale improvements in the lives of everyday people, and transform individuals:

I've learned that this election is about the heart of America. It's about the young people who are losing hope and the old people who have been forgotten. It's about those who have worked all their lives and never fully realized the promise of America, but see that promise for their grandchildren in Barack Obama. The poor see a chance, when they often have few. I saw hope in the eyes and faces in those doorways.

My wife and I went out last weekend to knock on more doors. But this time, not because it was her idea. I don't know what it's going to do for the Obama campaign, but it's doing a lot for me.

It may be that we never reach the goals expressed in Mr. Obama's platform, but it is certain that we will fail if we embrace the status quo of John McCain either directly, or worse, through the apathy of non-participation.

Please vote tomorrow. We're all in this together, and we need your help.

October 29, 2008

The Tragedy of the Commons Still Holds

Last week, former Chairman of the Federal Reserve Alan Greenspan dropped a series of epically-proportioned bombshells on fanatical free market ideologues and Republican politicians. The man at the helm of the Fed for 18 years - and one of the heroes of financial deregulation - admitted that he had been wrong to believe that self-regulation was the best way to police the excesses of America's financial sector. Mr. Greenspan, testifying before the House Committee on Oversight and Government Reform, said in reference to the current financial crisis, “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief."

Mr. Greenspan further conceded, in an exchange with committee chairman Henry Waxman, that his personal faith in the ideology of Milton Friedman had led him to ignore sound advice on regulation:
“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”
Chairman Greenspan's final salvo was reserved for Republicans, who have attempted to provide political cover for the collapse of modern conservative ideology as it applies to Wall Street by attempting to lay the financial crisis at the feet of Fannie Mae and Freddie Mac, focusing on Democratic resistance to reform of those two quasi-public companies:
But Mr. Greenspan, who was first appointed by President Ronald Reagan, placed far more blame on the Wall Street companies that bundled subprime mortgages into pools and sold them as mortgage-backed securities. Global demand for the securities was so high, he said, that Wall Street companies pressured lenders to lower their standards and produce more “paper.”

“The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of the crisis) would have been far smaller and defaults accordingly far lower,” he said.
While all of this is edifying, what is most striking about Alan Greenspan's mea culpa is the willful blindness that apparently underpinned his thoughts on deregulation. In a speech at Georgetown University earlier in the month, Mr. Greenspan made it clear even then that he placed no value on market regulation:
“In a market system based on trust, reputation has a significant economic value,” Mr. Greenspan told the audience. “I am therefore distressed at how far we have let concerns for reputation slip in recent years.”
He reiterated these same sentiments throughout his tenure as Fed chief, and, in direct response to a 1994 congressional study that identified "significant gaps and weaknesses" in the regulation of the derivatives market, noted:
Risks in financial markets, including derivatives markets, are being regulated by private parties... There is nothing involved in federal regulation per se which makes it superior to market regulation.
Flatly, only a naif with no knowledge of human nature or history - or a corrupt shill - would look at Wall Street, and think to himself, "Yes. These guys are all about collective responsibility." The crucial - but obvious - thing that Mr. Greenspan missed (or refused to see) was that, for those most concerned with amassing as much wealth as possible in as short a period as possible, it is only the appearance of responsibility that has economic value.

The absence of regulation creates a lack of transparency that makes it impossible to tell if an institution is exercising real responsibility or merely cultivating the image of doing so. As long as there was no requirement for genuine accountability - and as long as there were enough people driven by greed to the exclusion of all else - investors were left to cross their fingers that financial institutions were sound, and it was only a matter of time before the meltdown we are seeing today took place.

As infuriating as this is however, it is no more maddening than the fact that Mr. Greenspan himself warned that derivatives could magnify financial crises because they link the fortunes of seemingly independent institutions:
“The very efficiency that is involved here means that if a crisis were to occur, that that crisis is transmitted at a far faster pace and with some greater virulence,” he said... But he called that possibility “extremely remote,” adding that “risk is part of life.”
He was amazingly prescient in his analysis of the inherent risks, but just as amazingly tin-eared on the odds of catastrophe.

For all of the smoke and mirrors surrounding the alleged complexities of derivatives and the financial meltdown, there is a very simple fundamental question here that was either ignored or overlooked. Specifically, if derivatives like mortgage-backed securities are instruments for transferring risk (and making money in the process), and the market is driven by self-interest manifested as the desire to accumulate profits (in the best tradition of Milton Friedman), what other outcome, other than eventual collapse, was there going to be if risk was effectively removed as a consequence to either short term finances or institutional reputations?

The idea that one party can lend money to another that it has no intention of - or even concern about - ever collecting, and that this practice can be made the norm, is patently ludicrous. While Mr. Greenspan's assessment that risk is "part of life" is dead on, he missed the obvious fact that if everyone wrongly believes there is no risk to themselves in a given pursuit, it encourages risky behavior on the part of an increasing number of people. The distribution or sharing of risk, then - as in the securitization of subprime mortgages - becomes meaningless; in the aggregate, once past a point of equilibrium, more people taking lots of small risks is no better than a few people taking horrendous gambles. Regulation is designed to ensure that such tipping points are never reached. Without it, the market frequently over-corrects, destroying lives, wealth and sometimes even the entire economy as it seeks to stabilize on its own.

Although the bloom is clearly off the rose of Alan Greenspan's legacy, even his meager acknowledgment that he was culpable in bringing about the current crisis on Wall Street through blindered ideology is at least laudable. Personally, my impression of Mr. Greenspan is that he is an honorable man who did what he thought was best; unfortunately, what he thought best was too-easily recognizable as foolhardy to have been left unchallenged as it was. But while his good intentions and his narrow admission of complicity place him head and shoulders above the rest of the right wing cult of no-accountability, the terrible damage from his steady determination to let the foxes police the hen house remains.

All of this is not to say that free markets don't work; they do, but they are cold and dispassionate beasts with no affection for people. A market will indeed naturally seek balance if left to its own devices, but it will also often inflict tremendous human costs in the process. The tragedy of the commons - in which individuals acting independently in their own self-interest ultimately destroy a shared resource from which they mutually benefit - cannot be averted through laissez-faire policy, and we are facing dire consequences in order to prove once again a lesson we should have learned for good, a long time ago.

October 23, 2008

A Visit to the Lone Star State

I'm off to Dallas with my wife to visit friends and family, so there will no posts until next week. Have a great weekend!

October 19, 2008

The Fraudulent Threat of Voter Fraud

During the presidential debate last Wednesday, Republican candidate John McCain pressed his ongoing attack on the Association of Community Organizations for Reform Now (ACORN), an organization focused on advocacy and voter registration for low- and middle-income families, claiming that ACORN "may be perpetrating one of the greatest frauds in voter history in this country, maybe destroying the fabric of democracy." Friday, his running mate, Sarah Palin, kept up the heat, continuing GOP efforts to both tar ACORN as corrupt, and tie the group to Democratic nominee Barack Obama, warning, "We can’t allow leftist groups like ACORN to steal this election."

The press is also reporting breathlessly that ACORN has submitted a raft of blatantly false voter registrations, including one for Mickey Mouse in Florida, enough to cover the starting line-up for the Dallas Cowboys in Nevada, and seventy-two for one man in Ohio. Thursday brought leaked word that the Federal Bureau of Investigation (FBI) has launched an investigation to determine whether ACORN fosters registration fraud systematically, but as too often occurs with the majority of our ineffectual press corps, the real issues are being missed.

First and foremost, it is important to recognize the difference between voter registration fraud and voter fraud. The former means that a phony name is registered as an active voter; the second that a vote is successfully cast by someone who should not have been allowed to do so. With a minimum of reflection, it is crystal clear that, absent proper identification, Mickey Mouse will not be voting, nor will players for the Dallas NFL franchise, (except, presumably, in their home districts, and then only with proper identification) and despite having registered 72 times, the man from Ohio will not get to cast an equal number of ballots.

Second, ACORN pays its canvassers by completed voter registration. While there isn't really a more attractive alternative, it's clear that this compensation structure provides an incentive for dishonest workers to submit phony registrations with the aim of padding their paychecks. In most states, ACORN is required to submit all collected registrations - imagine the outcry if it was learned that completed registrations were being withheld! - so the group works to separate and flag for official review those that appear suspicious before they are turned in to state authorities. The result is that ACORN is reporting almost all of the fraudulent registrations itself, and far from creating an opportunity to defraud the election system, it is actually the target of financial fraud from a few dishonest employees. (13,000 ACORN employees have registered 1.3 million voters for this election cycle; the number of registrations that are fraudulent is a tiny fraction.)

Third, despite being a frequent target of the Republican Party, there has never been a single conviction against ACORN, because on the rare occasions when investigations have led to court proceedings, no one has ever been able to prove that false registrations are an effort to defraud the electoral process. Spurious registrations are about money for dishonest individual workers, and they are about defrauding ACORN, but they are certainly not about "destroying the fabric of democracy."

The voter fraud described by Senator McCain and Governor Palin would require a massive operation that warehouses fake voter data and hires thousands of operatives - each devoted to cheating the system at the risk of federal prosecution - to cast ballots posing as these phony voters. It is wholly impractical, it is impossible to carry out, and recent reports in states like Missouri - which has had zero voter fraud in the last 10 years - bear this out.

So why is ACORN an issue at all? Well, if there is one thing that the Bush years have taught us, it is this: If the Republican Party is vociferously attacking the actions of some group, you can be just about certain that it is deeply and nefariously involved in something close to that which they accuse others of doing. That is the case here, as well.

While using a docile press corps to help stoke the fires of outrage among the Republican base, - outrage that has now spilled over into the vandalism of ACORN offices and intimidation of ACORN workers - the GOP is actively working to suppress as many Democratic-leaning votes as possible. The ACORN faux scandal is one part of that scheme - casting doubt on the validity of massive registrations for lower-income citizens who tend to vote Democrat - but the other piece of the puzzle is the widespread effort to disenfranchise minorities and the poor. For instance:
  • In Michigan, the state GOP had planned to challenge the eligibility of voters who had lost their homes through foreclosure, but were stymied by press attention and a successful lawsuit that appears to have stopped their plan.

  • The Montana state Republican party moved to challenge 6,000 registrations in Democratic-leaning counties, once again, ostensibly to combat "voter fraud". The challenge was ultimately dropped because of public controversy.

  • In Texas, a report by a rightwing think tank alleged, in an effort to stir up both anti-immigrant sentiment and generate a voter fraud controversy, that as many as 333,000 non-citizens were likely registered to vote in the state. An investigation by county election administrators, however, debunked the report declaring that there is no evidence whatsoever of widespread voter fraud.
While the examples above represent efforts that (at least for now) have been unsuccessful, it must not be forgotten that the strategy of disenfranchising opposition voters in a wholesale manner has a long history in the Republican Party. Further, it goes directly to the heart of the recent U.S. Attorney scandal, which saw qualified and high-performing federal prosecutors fired for demonstrating insufficient zeal in pursuing voter fraud allegations made by GOP politicians against Democrats. David Iglesias, perhaps the best known of the dismissed U.S. Attorneys - and a Republican himself - believes that there are a host of red flags associated with the attention being paid to ACORN and the FBI's investigation. As reported by Talking Points Memo Muckraker:
"I'm astounded that this issue is being trotted out again," Iglesias told TPMMuckraker. "Based on what I saw in 2004 and 2006, it's a scare tactic." In 2006, Iglesias was fired as U.S. attorney thanks partly to his reluctance to pursue voter-fraud cases as aggressively as DOJ wanted - one of several U.S. attorneys fired for inappropriate political reasons, according to a recently released report by DOJ's Office of the Inspector General.

Iglesias, who has been the most outspoken of the fired U.S. attorneys, went on to say that the FBI's investigation seemed designed to inappropriately create a "boogeyman" out of voter fraud.

And he added that it "stands to reason" that the investigation was launched in response to GOP complaints.
As we noted earlier, last year, Senator Dianne Feinstein publicly highlighted changes made to DOJ's election crimes manual, which lowered the bar for voter-fraud prosecutions, and made it easier to bring vote-fraud cases close to the election.

Speaking today to
TPMMuckraker, Iglesias called such changes "extremely problematic."

The way in which the news was revealed today - Associated Press sourced its report to two "senior law enforcement officials" who "spoke on condition of anonymity because Justice Department regulations forbid discussing ongoing investigations particularly so close to an election" - is also raising eyebrows.

Both Iglesias and Bud Cummins - another of the U.S. attorneys who, according to the IG report, was also fired for political reasons - told TPMMuckraker that DOJ guidelines do allow U.S. attorneys to speak publicly about an investigation, even before bringing an indictment, if it's to allay public concern over an issue.

But that certainly wouldn't cover anonymous leaks. "If you can't say it with your name on it, it's fair to say you should not be saying it," Cummins told TPMMuckraker.
To be blunt, the Republican Party has this down to a science. Voter rolls are purged right before the election, with the result that duly-registered voters arrive at their polling place to discover they can't vote, and are then forced to use provisional ballots which are almost never counted and routinely discarded at the earliest opportunity. Meanwhile, easily-hackable electronic voting machines - manufactured by companies headed by partisan GOP supporters and already switching early votes from Obama to McCain in West Virginia - are forced on the public, and laws requiring photo IDs at the polls are put into effect, all despite the fact that there is almost no evidence of voter fraud at all, never mind voter fraud on a grand scale.

Yesterday, the Obama campaign sent a letter to Attorney General Michael Mukasey explicitly linking the very real U.S. Attorney scandal with the very much less real ACORN controversy, and calling for an investigation into the manner in which ACORN is being targeted by the federal government at the behest of the Republican Party. Robert Bauer, Senator Obama's general counsel, writes:
History is repeating itself. As Election Day approaches - just as in 2004 and 2006 - Republican Party officials and operatives nationwide, including the candidates themselves, are fomenting specious vote fraud allegations, and there are disturbing indications of official involvement or collusion.
Gerry Hebert, a former acting head of the Department of Justice's voting rights section, agrees, calling the FBI investigation "a continuation of injecting DOJ into what has clearly become a political issue." In a follow-up conference call, Mr. Bauer declared :
This is a sham anti-fraud campaign that comes 24-hours after John McCain’s dramatic pronouncement about tearing the fabric of democracy and now you have a leak of this supposed fraud from the Department of Justice. It’s creating an environment of fear and intimidation.
But then, that's the whole idea behind the fraudulent threat of voter fraud.

For a sense of the anger that the McCain campaign has stirred up among the Republican rank and file over the ACORN "issue" - the same anger that is now turning to violence and threats - take a look at the video below.