Friday, April 3, 2009

David Brooks Said What?

Are my eyes deceiving me, or is David Brooks arguing that Gramm-Leach-Bliley wrecked the economy and wondering if it was greed or stupidity that killed it?
Jerry Z. Muller wrote an indispensable version of the stupidity narrative in an essay called “Our Epistemological Depression” in The American magazine. What’s new about this crisis, he writes, is the central role of “opacity and pseudo-objectivity.” Banks got too big to manage. Instruments got too complex to understand. Too many people were good at math but ignorant of history.

The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.

Both schools agree on one thing, however. Both believe that banks are too big. Both narratives suggest we should return to the day when banks were focused institutions — when savings banks, insurance companies, brokerages and investment banks lived separate lives.

We can agree on that reform. Still, one has to choose a guiding theory. To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand.
Granted, it only took him 16 months into this economic disaster for him to actually figure out what the problem was, but that's progress for the Village. I completely disagree with him that stupidity was the problem and not greed, the banksters knew exactly what they were doing with these securitized pieces of garbage and tried to outsmart everyone in the room in order to make craploads of money.

Still, I can't take too much away from Brooks on this one. He's right: banks got too big no matter how you look at it.

Cause And Effect

Another mass shooting, this one in NY state.
A gunman opened fire on a room where immigrants were taking a citizenship exam in downtown Binghamton on Friday, killing as many as 13 people before committing suicide, officials said.

Gov. David Paterson said at a news conference that 12 or 13 people had been killed. The suspected gunman carried identification with the name of 42-year-old Jiverly Voong of nearby Johnson City, N.Y., a law enforcement official said.

The suspect's body was found with a self-inflicted gunshot wound in an office of the American Civic Association building, said the official, who was not authorized to speak publicly and was talking on condition of anonymity.

Gunning down immigrants taking a citizenship exam. Nice. What kind of sicko fixates so much on scapegoating immigrants...

Oh wait. People who fixate on scapegoating immigrants are called Republicans.

Bonus Wingnut Stupidity from Pammycakes:

"If NY didn't have such draconian, anti-second amendment gun laws and one of those hostages was carrying - this nightmare would be over. Gun control laws kill innocent people."
I'm sure the coroner will put on the death certificate "blunt legislative trauma". The only way to solve people killing with guns is to kill them with guns!

You Spin Me Wrong Round Baby Wrong Round

It's the real estate death spiral, and in the Miami condo game, everybody gets a spin.
Rust pokes through the peeling paint on the railings, pest control has been curtailed and the palm trees are no longer being fertilized at the 1940s-era Miami Modern condominium building in Miami Beach.

The condo association has been forced to cut expenses because the owners of 11 of the 28 apartments in the modest two-story building are delinquent, victims of a mammoth U.S. real estate collapse that has hit Florida especially hard.

With so many cash-strapped owners failing to pay their monthly fees for upkeep, the condo board last year had to raise $40,000 with a special levy to fill a giant hole in the $80,000 annual budget, but only managed to collect $19,000 from the owners who are still able to pay their bills.

Florida's condominium and homeowners' associations are facing what experts call a trickle-down disaster from the property crisis. Dozens and perhaps hundreds of condo buildings have budget shortfalls as thousands of owners, under water on their mortgages or in foreclosure, stop paying monthly fees.

"I call it a death spiral," Miami Beach city commissioner Jerry Libbin said. "It's a catastrophe in the making."

Nearly half of Florida's 18 million residents live in condo or homeowners associations, communities where owners pay monthly fees for common expenses like cleaning, landscaping, pool maintenance and building insurance.

When a unit owner stops paying monthly fees, which can range from $150 in a small building to over $1,000 in a luxury tower, a condo board must collect money from other owners to make up the shortfall. Rising fees or special assessments, or levies, can drive other vulnerable owners into insolvency.

We're getting to the point where real estate has taken such a hit in some parts of the country like Florida that we're past the point of no return. You can replace "condo buildings" with "neighborhoods" or "subdivisions" but the results are the same: vacancy, deliquency, and foreclosure rates are so high, and so many blighted properties are for sale, that the property owners that are left find themselves in a situation where they're below the critical mass for a stable community. Shops, gas stations, grocery stores, all the things that sprout up around a neighborhood go under too. The whole place turns into a ghost town.

The same principle for Miami condos applies to your local mall in the commercial real estate game too. Enough stores at the mall close, the entire mall goes under.

We're seeing these systemic losses in both residential and commercial real estate, where developments, malls, condos, hotels, and entire neighborhoods are simply no longer going concerns.

Death spiral, headed down the drain. The housing depression continues unabated.

A Faustian Contract

CNBC reports that the fastest growing-segment of the employed are contract workers: freelancers with few if any benefits and no real hope of getting anywhere. If you want to see what Wall Street wants the American workplace to look like, take a peek behind the curtain.
Friday's employment report showed that the number of people forced to work part-time for "economic reasons" rose by 423,000 in March, to 9 million. And a new study by the Human Capital Institute showed that one third of the US workforce is now comprised of non-traditional "contract" workers. The study says the pool of part time workers is growing at more than twice the rate of the regular workforce.

Cash-strapped American companies are taking advantage of the situation. More than 90 percent of US firms use contract talent, with spending on them doubling in the past six years, to more than $120 billion.

It's a trend that experts in the field say will continue even as the economy recovers.

"It's a paradigm shift," says Dennis Nason, CEO of Nason and Nason, an executive search firm based in Coral Gables, Florida. "Contractors have been used by companies successfully, and it's changed the relationship between worker and management."

If you want to know why the U-6 is growing so quickly, there you go. Fire your staff, replace them with contract workers with no bennies.

But there are some obvious drawbacks for temporary workers. They have to look for another position if their part time job ends. And if they are feelancing, they have to be searching for new clients.

Workers are also not part of a pension plan or matching 401k and they might need to buy health insurance, if say there's no working relative that can put them on their policy.

However, Nason points out that today's benefits are transportable. "With 401ks, people are not trapped as before in companies," says Nason. "Being a portable professional has become an intregal part of the economy."

And as for health care, the COBRA plan allows laid off workers to buy coverage for up to a year after being leaving their full time job help make the transition from full time to part time. And the Obama stimulus plan allows government coverage of up to 65 percent of COBRA costs.

"Portable professionals" is a polite term for "migrant worker with an iPhone". American businesses would love nothing more than to have a sea of contract workers they can fire with almost no notice, don't have to pay benefits for, and don't have to promote or show any loyalty to. Meanwhile, contract workers get paid less, have to pay for health care and retirement themselves, and can't make any long term plans due to the mercurial position they are in. If you're a banker, are you going to give a mortgage loan to a contract worker? If you're a contract worker, are you going to buy a home? How is that going to help stabilize the economy? It won't, of course...but it'll sure fatten the bottom lines of the Masters of the Universe.

The just-in-time delivery world of work is now being stretched to the logical endpoint: just-in-time employment. By taking away long-term stability and loyalty, we'll have even less influence over the path of our lives, reduced instead to digital nomads wandering the country at the whim of employers. Benefits? Health care? You're lucky to have a job, wage slave.

No sense of community, no property, no stability, Cincinnati is as good as Newark is as good as Minneapolis is as good as Denver. Imagine trying to raise a family like that. Migrant workers of the 21st century...that's where we're all headed. Maybe you work this month. Maybe you don't. Maybe you're in another company this month. Maybe you're in another state. This is why home prices will continue to fall for a long, long time.

Traditional employment is dead and gone, folks. Our standard of living is going with it. Your employer would love to do nothing more than to replace you with a contract worker with no benefits. More than ever we need the Employee Free Choice Act, universal health care, and true progressive legislation.

It's a Faustian contract, for sure.

The GOP, The Budget, And You

BooMan theorizes that by unanimously voting against Obama's budget in both the House and the Senate, the GOP will be frozen out of universal health care, a mistake they'll be paying for for a long, long time.
If they had prevailed on this issue of budget reconciliation, they could have adopted a strategy of helping to pass a health care bill this year, but wielding the threat of a filibuster to kill off a public option. They could take some credit for expanding health care coverage and still protect the HMO's and other private insurers.

But they didn't try to lure the Democrats into a trap. They telegraphed their intentions to be rawly partisan and to act in bad faith, and that sealed their fate. The Democrats will simply enact health care through the budget reconciliation process in the fall where they will only need 50 rather than 60 votes to pass it. The Republicans no longer need to be consulted on any aspect of the legislation because there is no need for any of their votes and little incentive to give them any avenue for taking credit. They shut themselves out of the process of creating the most significant legislation in three generations. They didn't even try to outsmart the Democrats.

However, I think BooMan is wrong. The GOP doesn't have to outsmart the Dems. Obama's final budget vote will be scuttled (and health care and cap-and-trade along with it) by Evan Bayh's Conservadems.

Evan Bayh's crew is exactly who I'm worried about. I forsee them holding up the final bill at 49 votes and taking the country hostage in order to kill cap-and-trade, health care, and everything else. The GOP clearly anticipates this, and then saying "Well now Mr. President, you told us our votes didn't matter. Your own party killed your budget. Now, it's our turn."

For instance, if Evan Bayh can get the same 9 other Dems to go along with all 41 Republicans that went along with the budget amendment to give a $250 billion estate tax cut over ten years, then he'll have the 51 votes he needs to hold Obama's budget hostage.

If you're curious, the other 9 Dems were Max Baucus (D-MT), Maria Cantwell (D-WA), Mary Landrieu (D-LA), Blanche Lincoln (D-AR), Patty Murray (D-WA), Bill Nelson (D-FL), Ben Nelson (D-NE), Mark Pryor (D-AR), and Jon Tester (D-MT).

If Bayh can get these same votes on the final budget, he wins. He can then hold the budget hostage and strip health care, cap-and-trade, and anything else out of the budget he can. If health care and climate change legislation die, it's going to be because the Democrats killed it.

If these ten Dems are willing to give a $250 billion tax break to the richest Americans, money that could be used for universal health care instead, they are the ones who will turn around and say "Sorry, we can't possibly fund health care at this time." They are the ones who will kill it in the reconciliation process.

Obama needs to watch his back. The GOP isn't killing him. His own party is.

[UPDATE] Ezra Klein recounts the long, strange career of Evan Bayh. New tag, because I specifically complain about this douchebag enough: Evan F'ckin Bayh.

The Most Obvious Plan In The Universe

Michael Wolff gives the GOP some freebie advice with this observation:
The most elemental fact about the Limbaugh career might be that, outside of seriously corrupt dictatorships, nobody has made as much money from politics as Rush Limbaugh. Since this Top 40 D.J. and local talker in Sacramento went national, in 1988, as a right-wing voice, he has made hundreds of millions of dollars in salary, bonuses, participation in advertising revenue, and the sale of his show to the Sam Zell–controlled Jacor radio production company (Zell, a real-estate entrepreneur, now controls the Chicago Tribune), which was then sold to Clear Channel. His new contract, signed last summer, is worth a reported $400 million over eight years. There are, too, his newsletter, his paid Internet site with its voluminous traffic, his blockbuster best-sellers, his speaking fees, his half-dozen cars, including a Maybach 57S, his Gulfstream G550, and his Palm Beach estate with five houses.

Rush’s business plan seriously impacts on the future of the Republican Party.

Indeed, the extraordinary thing Rush has done, something arguably never before accomplished in the history of the co-dependent relationship of media and politics, is manage to keep his media day job while assuming something rather close to direct political power. Every other entertainer who has discovered a political mission—from Ronald Reagan to Sonny Bono to Al Franken—has had to quit show business and run for office. Not Rush.

Rather, one hand ably washes the other.

Has it occurred to anyone in the GOP that the worse the Republicans do in the elections and in the polls and as a result the more political power they lose as an also-ran minority regional party, the more power and money Rush Limbaugh manages to acquire?

Suits Rush just fine to run the party into the ground, you know.

Son Of Jor-El, Kneel Before Sharia Zod!

Thers at FireDogLake promptly kills the whole "Obama bowed to the MUSLIM Saudi King at the G20 summit and HAS NOW DESTROYED AMERICA" thing with this:


Bear In A China Shop

The Kroog on the complicated China/US relationship: (emphasis moi)
The big news last week was a speech by Zhou Xiaochuan, the governor of China’s central bank, calling for a new “super-sovereign reserve currency.”

The paranoid wing of the Republican Party promptly warned of a dastardly plot to make America give up the dollar. But Mr. Zhou’s speech was actually an admission of weakness. In effect, he was saying that China had driven itself into a dollar trap, and that it can neither get itself out nor change the policies that put it in that trap in the first place.

Some background: In the early years of this decade, China began running large trade surpluses and also began attracting substantial inflows of foreign capital. If China had had a floating exchange rate — like, say, Canada — this would have led to a rise in the value of its currency, which, in turn, would have slowed the growth of China’s exports.

But China chose instead to keep the value of the yuan in terms of the dollar more or less fixed. To do this, it had to buy up dollars as they came flooding in. As the years went by, those trade surpluses just kept growing — and so did China’s hoard of foreign assets.

Now the joke about fraudulent securities was actually unfair. Aside from a late, ill-considered plunge into equities (at the very top of the market), the Chinese mainly accumulated very safe assets, with U.S. Treasury bills — T-bills, for short — making up a large part of the total. But while T-bills are as safe from default as anything on the planet, they yield a very low rate of return.

Was there a deep strategy behind this vast accumulation of low-yielding assets? Probably not. China acquired its $2 trillion stash — turning the People’s Republic into the T-bills Republic — the same way Britain acquired its empire: in a fit of absence of mind.

And just the other day, it seems, China’s leaders woke up and realized that they had a problem.
$2 trillion in foreign currency, 70% of it in dollars, and the dollar is going straight to hell due to Helicopter Ben's printing press.

You see the problem here? China's expecting us to save them by buying all their exports and not wrecking the dollar. We're expecting China to buy our debt and save us instead. Something's going to give, and somebody's going to be very, very disappointed...and very, very broke.

Running The Ball Forward

A unanimous decision in Iowa's supreme court says that the state's "one-man, one-woman" marriage clause is unconstitutional under the equal protection clause.
The decision makes Iowa the first Midwestern state, and the fourth nationwide, to allow same-sex marriages. Lawyers for Lambda Legal, a gay rights group that financed the court battle and represented the couples, had hoped to use a court victory to demonstrate acceptance of same-sex marriage in heartland America.

The Iowa Supreme Court’s Web site was deluged with more than 350,000 visitors this morning, in anticipation of the ruling, a Judicial Branch spokesman said this morning.

Steve Davis, a court spokesman, said administrators added extra computer servers to handle the expected increase in Web traffic. But “this is unprecedented,” Davis said.

Richard Socarides, a former senior adviser to President Bill Clinton on gay civil rights, said today’s decision could set the stage for other states. Socarides was was a senior political assistant for Iowa Sen. Tom Harkin in the early 1990s.

“I think it’s significant because Iowa is considered a Midwest sate in the mainstream of American thought,” Socarides said. “Unlike states on the coasts, there’s nothing more American than Iowa. As they say during the presidential caucuses, 'As Iowa goes, so goes the nation.’”
Four down, 46 to go.

Speaking Of Trillions

Congress passed the outline of the President's budget yesterday, now it goes to reconciliation between the House and Senate versions. The devil's in the details.

Voting along party lines, the House and Senate approved budget blueprints that would trim Obama's spending proposals for the fiscal year that begins in October and curtail his plans to cut taxes. The blueprints, however, would permit work to begin on the central goals of Obama's presidency: an expansion of health-care coverage for the uninsured, more money for college loans and a cap-and-trade system to reduce gases that contribute to global warming.

The measures now move to a conference committee where negotiators must resolve differences between the two chambers, a prelude to the more difficult choices that will be required to implement Obama's initiatives. While Democrats back the president's vision for transforming huge sectors of the economy, they remain fiercely divided over the details.

There is no agreement, for example, on how to pay for an overhaul of the health-care system expected to add more than $1 trillion to the budget over the next decade, nor is there consensus on how to spend the hundreds of billions of dollars the government stands to collect by setting limits on greenhouse gas emissions and forcing industry to buy permits to pollute. Those issues will be decided in committees where lawmakers have begun the torturous work on the specifics of Obama's broad plans.


"Democrats in the House and, I think, the Senate are shoulder to shoulder with the president in trying to make the big decisions we need to make in this country," said Rep. Chris Van Hollen (D-Md.). But, he said, "Hammering out the details will require everyone to roll up their sleeves."

Still, we'll see where this ends up. It's in the commitees that Evan Bayh and his ilk will be able to do the most damage.


663,000 jobs lost in March, 8.5% unemployment (U-3), a whopping 15.6% U-6 for the country. We've lost 3.3 million jobs in the last 5 months. Worst numbers since 1983, and if rates increase like they have been, we're looking at some very bad numbers by 2010.

Going to get even worse from here. We really are on pace to lose a good 8 million jobs this year. Do I think the job losses will continue at this rate nationally for another 9 months? I don't know, honestly. Obama's stimulus should provide some additional jobs, but at this point we're still losing two-thirds of a million jobs a month even with the stimulus. April, May, June numbers will tell. Unless they get under 500,000 losses a month and soon, we're going to go off the rails into depressionary numbers.

We're deep into the death spiral now. Another stimulus package will be needed, and I don't think Obama will have the votes for it.

[UPDATE] Labor Department says the percent of the total population employed has fallen under 60% for the first time July 1985 (h/t Atrios).

The Comedy Stylings Of The Alaskan GOP

Add Sister Sarah to the list of Alaska Republicans who are calling for Democratic Senator Mark Begich's immediate resignation and a special election so that Ted "Series of Toobs" Stevens can get his job back after being exonerated due to the Worst Prosecutors On Earth.

After all, people who vote Democratic are clearly either insane, gullible, or crooked and aren't mainstream "real" Americans (despite being a large majority.) Therefore if a Republican wins, the will of the people must be enforced. If a Democrat wins, the Republican must immediately be given a special election to try to overturn the will of the people.

Clearly, the only reason Ted Stevens lost was because the Bush Justice Department was trying to railroad a Republican, and Mark Begich just happened to be there! Ergo anyone who wasn't Ted Stevens would have won that election, meaning that Mark Begich has no real mandate to represent the Alaskan people, because the rest of Alaska is just as qualified to not be Ted Stevens! And since he has no mandate of the people, he should resign now and allow a fair election to take place between Not Ted Stevens and Ted Stevens so Stevens can prove he has a mandate to serve, Q.E.D.

It's the only fair thing to do if a Republican ever loses an election due to prosecutorial misconduct of a Republican administration railroading a Republican. In The End, It's Somehow Always The Democrats' Fault(tm).

[UPDATE] Not even the wingnuts are buying the Alaskan argument and opine that the GOP is far, far better without Ted Stevens and his corruption.


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