In Breaking the Bank, FRONTLINE producer Michael Kirk (Inside the Meltdown, Bush's War) draws on a rare combination of high-profile interviews with key players Ken Lewis and former Merrill Lynch CEO John Thain to reveal the story of two banks at the heart of the financial crisis, the rocky merger, and the government's new role in taking over -- some call it "nationalizing" -- the American banking system.
Watch Frontline's "Breaking the Bank":
It all began on that fateful weekend in September 2008 when the American economy was on the verge of melting down. Then-Secretary of the Treasury Henry Paulson, his former protégé John Thain, and Ken Lewis, one of the most powerful bankers in the country, secretly cut a deal to merge Bank of America and Merrill Lynch.
The merger of the nation's largest bank and Merrill Lynch was supposed to help save the American financial system by preventing the imminent Lehman Brothers bankruptcy from setting off a destructive chain reaction. But it became immediately clear that it had not worked. Within days, the entire global financial system was collapsing.
7.19.2009
7.18.2009
Bush's House of Cards
Dean Baker correctly predicts the bursting of the housing bubble. In an article entitled, "Bush's House of Cards," published in the Nation Magazine in 2004, Professor Baker outlines the causes and failures of the Bush economy. Why was his voice ignored? I don't know, but this article by Mr. Baker correctly correlates housing prices with rents. Peter Schiff as well as other noted economists and financial gurus also note the increasing housing prices with the rent prices. Dean Baker was yet another, in a long line of smart economists that warned of the financial meltdown, credit crisis and housing market bubble. 
Dean Baker writes on August 9, 2004: The latest data on growth suggest that the economy may again be faltering, just when President Bush desperately needs good numbers to make the case for his re-election. As bad as the Bush economic record is, it would be far worse if not for the growth of an unsustainable housing bubble through the three and a half years of the Bush Administration. 
The housing market has supported the economy both directly--through construction of new homes and purchases of existing homes--and indirectly, by allowing families to borrow against the increased value of their homes. Housing construction is up more than 17 percent from its level at the end of the recession. Purchases of existing homes hit a record of 6.1 million in 2003, more than 500,000 above the previous record set in 2002. Each home purchase is accompanied by thousands of dollars of closing costs, plus thousands more spent on furniture and remodeling.The indirect impact of the housing bubble is at least as important. Mortgage debt rose by an incredible $2.3 trillion between 2000 and 2003. This borrowing has sustained consumption growth in an environment in which firms have been shedding jobs and cutting back hours, and real wage growth has fallen to zero, although the gains from this elixir are starting to fade with a recent rise in mortgage rates and many families are running out of equity to tap.
The red-hot housing market has forced up home prices nationwide by 35 percent after adjusting for inflation. There is no precedent for this sort of increase in home prices. Historically, home prices have moved at roughly the same pace as the overall rate of inflation. While the bubble has not affected every housing market--in large parts of the country home prices have remained pretty much even with inflation--in the bubble areas, primarily on the two coasts, home prices have exceeded the overall rate of inflation by 60 percentage points or more.
The housing enthusiasts, led by Alan Greenspan, insist that the run-up is not a bubble, but rather reflects fundamental factors in the demand for housing. They cite several factors that could explain the price surge: a limited supply of urban land, immigration increasing the demand for housing, environmental restrictions on building, and rising family income leading to increased demand for housing.
The housing enthusiasts, led by Alan Greenspan, insist that the run-up is not a bubble, but rather reflects fundamental factors in the demand for housing. They cite several factors that could explain the price surge: a limited supply of urban land, immigration increasing the demand for housing, environmental restrictions on building, and rising family income leading to increased demand for housing.
A quick examination shows that none of these explanations holds water. Land is always in limited supply; that fact never led to such a widespread run-up in home prices in the past. Immigration didn't just begin in the late nineties. Also, most recent immigrants are low-wage workers. They are not in the market for the $500,000 homes that middle-class families now occupy in bubble-inflated markets. Furthermore, the demographic impact of recent immigration rates pales compared to the impact of baby boomers first forming their first households in the late seventies and eighties. And that did not lead to a comparable boom in home prices.
Environmental restrictions on building, moreover, didn't begin in the late nineties. In fact, in light of the election of the Gingrich Congress in 1994 and subsequent Republican dominance of many state houses, it's unlikely that these restrictions suddenly became more severe at the end of the decade. And the income growth at the end of the nineties, while healthy, was only mediocre compared to the growth seen over the period from 1951 to 1973. In any event, this income growth has petered out in the last two years.
Environmental restrictions on building, moreover, didn't begin in the late nineties. In fact, in light of the election of the Gingrich Congress in 1994 and subsequent Republican dominance of many state houses, it's unlikely that these restrictions suddenly became more severe at the end of the decade. And the income growth at the end of the nineties, while healthy, was only mediocre compared to the growth seen over the period from 1951 to 1973. In any event, this income growth has petered out in the last two years.
The final blow to the argument of the housing enthusiasts is the recent trend in rents. Rental prices did originally follow sale prices upward, although not nearly as fast. However, in the last two years, the pace of rental price increases has slowed under the pressure of record high vacancy rates. In some bubble areas, like Seattle and San Francisco, rents are actually falling. No one can produce an explanation as to how fundamental factors can lead to a run-up in home sale prices, but not rents.At the end of the day, housing can be viewed like Internet stocks on the NASDAQ. A run-up in prices eventually attracts more supply. This takes the form of IPOs on the NASDAQ, and new homes in the housing market. Eventually, there are not enough people to sustain demand, and prices plunge.
The crash of the housing market will not be pretty. It is virtually certain to lead to a second dip to the recession. Even worse, millions of families will see the bulk of their savings disappear as homes in some of the bubble areas lose 30 percent, or more, of their value. Foreclosures, which are already at near record highs, will almost certainly soar to new peaks. This has happened before in regional markets that had severe housing bubbles, most notably in Colorado and Texas after the collapse of oil prices in the early eighties. However, this time the bubble markets are more the rule than the exception, infecting most of real estate markets on both coasts, as well as many local markets in the center of the country.In this context, it's especially disturbing that the Bush administration has announced that it is cutting back Section 8 housing vouchers, which provide rental assistance to low income families, while easing restrictions on mortgage loans. Low-income families will now be able to get subsidized mortgage loans through the Federal Housing Administration that are equal to 103 percent of the purchase price of a home. Home ownership can sometimes be a ticket to the middle class, but buying homes at bubble-inflated prices may saddle hundreds of thousands of poor families with an unmanageable debt burden.
As with the stock bubble, the big question in the housing bubble is when it will burst. No one can give a definitive answer to that one, but Alan Greenspan seems determined to ensure that it will be after November. Instead of warning prospective homebuyers of the risk of buying housing in a bubble-inflated market, Greenspan gave Congressional testimony in the summer of 2002 arguing that there is no such bubble. This is comparable to his issuing a "buy" recommendation for the NASDAQ at the beginning of 1999. More recently, Greenspan has done everything in his power to keep mortgage rates as low as possible, at one point even offering markets the hope that the Fed would take the extraordinary measure of directly buying long-term Treasury bonds. The man who testified that the Bush tax cuts were a good idea apparently has one last job to perform for the President.Source: Nation, 4 August 2004, by Dean Baker.
7.17.2009
Goldman Sachs: Pirates of Wall Street
In the New York Times article, "The Joy of Sachs" by Paul Krugman, Mr. Krugman states: The American economy remains in dire straits, with one worker in six unemployed or underemployed. Yet Goldman Sachs just reported record quarterly profits — and it’s preparing to hand out huge bonuses, comparable to what it was paying before the crisis. What does this contrast tell us?First, it tells us that Goldman is very good at what it does. Unfortunately, what it does is bad for America.
Second, it shows that Wall Street’s bad habits — above all, the system of compensation that helped cause the financial crisis — have not gone away.
Third, it shows that by rescuing the financial system without reforming it, Washington has done nothing to protect us from a new crisis, and, in fact, has made another crisis more likely.
Let’s start by talking about how Goldman makes money.Over the past generation — ever since the banking deregulation of the Reagan years — the U.S. economy has been “financialized.” The business of moving money around, of slicing, dicing and repackaging financial claims, has soared in importance compared with the actual production of useful stuff. The sector officially labeled “securities, commodity contracts and investments” has grown especially fast, from only 0.3 percent of G.D.P. in the late 1970s to 1.7 percent of G.D.P. in 2007.
Such growth would be fine if financialization really delivered on its promises — if financial firms made money by directing capital to its most productive uses, by developing innovative ways to spread and reduce risk. But can anyone, at this point, make those claims with a straight face? Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.
Goldman’s role in the financialization of America was similar to that of other players, except for one thing: Goldman didn’t believe its own hype. Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages — then made a lot more money by selling mortgage-backed securities short, just before their value crashed. All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers.
And Wall Streeters have every incentive to keep playing that kind of game.The huge bonuses Goldman will soon hand out show that financial-industry highfliers are still operating under a system of heads they win, tails other people lose. If you’re a banker, and you generate big short-term profits, you get lavishly rewarded — and you don’t have to give the money back if and when those profits turn out to have been a mirage. You have every reason, then, to steer investors into taking risks they don’t understand.
And the events of the past year have skewed those incentives even more, by putting taxpayers as well as investors on the hook if things go wrong.
I won’t try to parse the competing claims about how much direct benefit Goldman received from recent financial bailouts, especially the government’s assumption of A.I.G.’s liabilities. What’s clear is that Wall Street in general, Goldman very much included, benefited hugely from the government’s provision of a financial backstop — an assurance that it will rescue major financial players whenever things go wrong.
You can argue that such rescues are necessary if we’re to avoid a replay of the Great Depression. In fact, I agree. But the result is that the financial system’s liabilities are now backed by an implicit government guarantee.
Now the last time there was a comparable expansion of the financial safety net, the creation of federal deposit insurance in the 1930s, it was accompanied by much tighter regulation, to ensure that banks didn’t abuse their privileges. This time, new regulations are still in the drawing-board stage — and the finance lobby is already fighting against even the most basic protections for consumers.If these lobbying efforts succeed, we’ll have set the stage for an even bigger financial disaster a few years down the road. The next crisis could look something like the savings-and-loan mess of the 1980s, in which deregulated banks gambled with, or in some cases stole, taxpayers’ money — except that it would involve the financial industry as a whole.
The bottom line is that Goldman’s blowout quarter is good news for Goldman and the people who work there. It’s good news for financial superstars in general, whose paychecks are rapidly climbing back to precrisis levels. But it’s bad news for almost everyone else.
The New York Times
7.16.2009
Wall Street Insider's Revolution
March 2009 Democracy Now with Amy Goodman interview with Rolling Stone Magazine, journalist Matt Tabbi takes an in-depth look at the story behind AIG. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup détat, writes Taibbi. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.
Wall Street Insiders Are Using the Bailout to Stage a Revolution-1/2
The Big Takeover
Matt Taibbi reports in the Rolling Stone, in his article entitled, "The Big Takeover" that "the global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution."
Mr. Taibbi writes: "It's over — we're officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire."
Liddy made AIG sound like an orphan begging in a soup line, hungry and sick from being left out in someone else's financial weather. He conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.
Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the afterdawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.
People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.
The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.
The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.
Rachel Maddow Show: Matt Taibbi on Why Financial Institutions Should Be Broken Up
Mr. Taibbi writes: "It's over — we're officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire."
The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).
So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: "The marketplace is a pretty crummy place to be right now," he said. "When the world catches pneumonia, we get it too." In a pathetic attempt at name-dropping, he even whined that AIG was being "consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down."
So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: "The marketplace is a pretty crummy place to be right now," he said. "When the world catches pneumonia, we get it too." In a pathetic attempt at name-dropping, he even whined that AIG was being "consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down."
Liddy made AIG sound like an orphan begging in a soup line, hungry and sick from being left out in someone else's financial weather. He conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.
Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the afterdawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.
People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.
The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.
Rachel Maddow Show: Matt Taibbi on Why Financial Institutions Should Be Broken Up
7.15.2009
Bruce Bartlett: No Longer A Bush Fan
From June 11, 2006 7:03 PM, CBS Morning Show
Watch CBS Videos Online
Economist and Reaganite Bruce Bartlett discusses his new book Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.
Watch CBS Videos Online
Wall Street’s Newest Product Is Tale of Denial
Commentary by David Reilly, published on July 8, 2009 in Bloomberg.
Most people wonder how the financial crisis will end. For some, the story of how it began is just as important.
Control of that tale will help determine how we respond to the past two years of market mayhem. At stake is the financial industry’s business model and billions of dollars in annual profits.
No wonder Wall Street executives are spinning the causes of the crisis, downplaying their roles in inflating the housing and credit bubbles while presenting themselves as integral to any solution.
This is part of an industry wide effort to return to some semblance of the pre-crisis status quo. The strategy will be tested this month when Congress holds hearings on aspects of Barack Obama’s proposed overhaul of the financial regulatory system.
Another tactic is to pin blame on short sellers who try to profit from falling stock prices.
Taken together, the message is clear: the credit crunch didn’t occur because the financial system was rotten. No, instead it was swamped by an epic storm worsened by investors looking to profit from misery. And if Wall Street says it’s not to blame, can anyone argue with that?
Yes. That scenario flies in the face of what really happened: banks intentionally used too much borrowed money to make bad loans and investments in inflated assets while regulators turned a blind eye to runaway financial engineering and investors took it on trust that everything would be fine. Decay had indeed set in.
‘It Wasn’t Us’
Acknowledging this would cause a lot of pain on Wall Street. “There is an enormous incentive for all the people who have responsibility for what happened to turn around and say, ‘Oh, no, it wasn’t us,’” says Barry Ritholtz, chief executive of research firm FusionIQ and author of “Bailout Nation.”
To sell its story line, the financial industry has been lobbying policy makers while trying to beat back anti-Wall Street sentiment.
The Street’s largest trade group has started a campaign to convince the public that the securities industry is “part of the solution,” according to a confidential Securities Industry and Financial Markets Association memo described in a recent article by Bloomberg News reporter Robert Schmidt. SIFMA is paying $85,000 a month for polling, lobbying and public relations to counter the lynch mob, according to the memo.
Fictional Account
The “We’re here to help” yarn is a tough sell, and the folks at Sifma know it. The group’s memo noted that its PR offensive must be sensitive to its own members’ “disparate views on difficult topics such as the need for the industry to acknowledge responsibility for various aspects of the financial crisis.”
In other words, no one will buy it if we say Wall Street isn’t to blame but our members want to try anyway. Who knows where such thinking will lead. Maybe we’ll soon see “Hug a Banker Today” bumper stickers.
The real hugs that bankers and traders want are, of course, from Congress and the administration as they consider the biggest overhaul of the U.S. financial system in 75 years. That’s where the Street’s take on the crisis becomes particularly important.
‘Nothing to Learn’
“The once-in-100-years-storm story means that there’s nothing to learn here, it just happens every now and then and we have to accept it,” says Joseph Mason, professor of banking at Louisiana State University. “That absolves banks and regulators from responsibility for reforming in a meaningful fashion financial regulation.”
An added bonus is that lawsuits against financial executives are easier to defend against if the crisis wasn’t due to specific company actions, Mason adds.
There’s another reason for the industry to push the idea that it isn’t responsible for the financial crisis -- it’s a canard that bolsters market confidence.
If the crisis really did start with banks and their regulators, why should investors now believe Citigroup Inc. or Bank of America Corp. are exercising proper judgment when estimating potential future losses on their loan books?
It’s much more comforting to think that firms such as Lehman Brothers Holdings Inc. and Bear Stearns Cos. failed because of so-called bear raids on their stocks.
That helps explain why the Securities and Exchange Commission and others are considering various restrictions on short selling. On their own, those moves probably wouldn’t be calamitous. Yet they are dangerous if taken as a sign that short sellers were to blame for our problems, not gaping holes in balance sheets caused by reckless investments.
British Prime Minister Winston Churchill once said that history would be kind to him because, as a victor, he intended to write it. Even though Wall Street supposedly lost out in the financial crisis, it wants very much to emulate him.
Control of that tale will help determine how we respond to the past two years of market mayhem. At stake is the financial industry’s business model and billions of dollars in annual profits.
No wonder Wall Street executives are spinning the causes of the crisis, downplaying their roles in inflating the housing and credit bubbles while presenting themselves as integral to any solution.
This is part of an industry wide effort to return to some semblance of the pre-crisis status quo. The strategy will be tested this month when Congress holds hearings on aspects of Barack Obama’s proposed overhaul of the financial regulatory system.
Another tactic is to pin blame on short sellers who try to profit from falling stock prices.
Taken together, the message is clear: the credit crunch didn’t occur because the financial system was rotten. No, instead it was swamped by an epic storm worsened by investors looking to profit from misery. And if Wall Street says it’s not to blame, can anyone argue with that?
Yes. That scenario flies in the face of what really happened: banks intentionally used too much borrowed money to make bad loans and investments in inflated assets while regulators turned a blind eye to runaway financial engineering and investors took it on trust that everything would be fine. Decay had indeed set in.
‘It Wasn’t Us’
Acknowledging this would cause a lot of pain on Wall Street. “There is an enormous incentive for all the people who have responsibility for what happened to turn around and say, ‘Oh, no, it wasn’t us,’” says Barry Ritholtz, chief executive of research firm FusionIQ and author of “Bailout Nation.”To sell its story line, the financial industry has been lobbying policy makers while trying to beat back anti-Wall Street sentiment.
The Street’s largest trade group has started a campaign to convince the public that the securities industry is “part of the solution,” according to a confidential Securities Industry and Financial Markets Association memo described in a recent article by Bloomberg News reporter Robert Schmidt. SIFMA is paying $85,000 a month for polling, lobbying and public relations to counter the lynch mob, according to the memo.
Fictional Account
The “We’re here to help” yarn is a tough sell, and the folks at Sifma know it. The group’s memo noted that its PR offensive must be sensitive to its own members’ “disparate views on difficult topics such as the need for the industry to acknowledge responsibility for various aspects of the financial crisis.”In other words, no one will buy it if we say Wall Street isn’t to blame but our members want to try anyway. Who knows where such thinking will lead. Maybe we’ll soon see “Hug a Banker Today” bumper stickers.
The real hugs that bankers and traders want are, of course, from Congress and the administration as they consider the biggest overhaul of the U.S. financial system in 75 years. That’s where the Street’s take on the crisis becomes particularly important.
‘Nothing to Learn’
“The once-in-100-years-storm story means that there’s nothing to learn here, it just happens every now and then and we have to accept it,” says Joseph Mason, professor of banking at Louisiana State University. “That absolves banks and regulators from responsibility for reforming in a meaningful fashion financial regulation.”An added bonus is that lawsuits against financial executives are easier to defend against if the crisis wasn’t due to specific company actions, Mason adds.
There’s another reason for the industry to push the idea that it isn’t responsible for the financial crisis -- it’s a canard that bolsters market confidence.
If the crisis really did start with banks and their regulators, why should investors now believe Citigroup Inc. or Bank of America Corp. are exercising proper judgment when estimating potential future losses on their loan books?
It’s much more comforting to think that firms such as Lehman Brothers Holdings Inc. and Bear Stearns Cos. failed because of so-called bear raids on their stocks.
That helps explain why the Securities and Exchange Commission and others are considering various restrictions on short selling. On their own, those moves probably wouldn’t be calamitous. Yet they are dangerous if taken as a sign that short sellers were to blame for our problems, not gaping holes in balance sheets caused by reckless investments.
British Prime Minister Winston Churchill once said that history would be kind to him because, as a victor, he intended to write it. Even though Wall Street supposedly lost out in the financial crisis, it wants very much to emulate him.
Book Review: Bailout Nation
Bailout Nation is reviewed by Damien Hoffman, published in Wall St. Cheat Sheet. As of the end of spring 2009, I still get carpet bombed with the same question: “How did this financial crisis happen?” No matter how many times I repeat the same two minute recap, apparently people need to see the facts in print (to their credit, the story does have a lot of actors, locations, and other variables). Alas, the savior to your dry mouth and bewildered faces has arrived: Barry Ritholtz’s Bailout Nation.Bailout Nation is the Educated Idiot’s Guide to the Financial Crisis. Barry does an excellent job of chronologically tracing through the history of economic cycles, the greedy a*holes who always destroy asset prices, and the ignorant elected/appointed officials who amplify the destruction. He shows us how we started snowboarding down a slippery slope (without a helmet) when the government bailed out the first private corporation, Lockheed Aircraft, ruined by so-called captains of industry. He gently guides us through the creation and mechanisms of the Federal Reserve. He cites speeches in which Fed Reserve Chairmen Alan Greenspan and Ben Bernanke completely contradict themselves. He points out that the Commodity Futures Modernization Act of 2002 “removed derivatives and credit default swaps [the financial weapons of mass destruction that torched the global financial system] from any and all state and federal regulatory oversight.” He objectively reveals that “the tragic financial events of 2008 and 2009 are not an unfortunate accident. Rather, they are the results of a conscious SEC decision to allow these firms to legally violate net capital rules that had existed for decades, limiting broker-dealers’ debt-to-net-capital ratio to 12-to-1 [and subsequently allowing them to lever up 30, 35, even 40 to 1].” And then, like Great Grand-Pappy who lived through the first Great Depression, he gives it to us with the simplest of common sense:
“There was a reason why some people in the past had been denied credit: They simply could not afford the homes they tried to purchase. Any mortgage structure that ignores the borrower’s ability to service the loan is destined for failure.”
If you watch too much CNN or FOX news, or you religiously follow one political party, you will need to keep some horse-sized blinders nearby as you are enlightened to the numerous facts that get covered in a dung pile of spin by tabloid imbeciles on the major networks. But if you genuinely want to see the truth in all its naked glory, then prepare for an adventurous trip explained by a master story-teller.
Successful hedge fund manager Bill Fleckenstein’s Foreword summarizes the book perfectly:
“This book is the history of how the United States evolved from a rugged, independent nation to a soft Bailout Nation, one in which too few question why we ask the taxpayers ‘to allow financial firms to self-regulate, but then pony up trillions to bail them out.’”
Although I don’t want to give too much more summary of Barry’s book, I will say he is one of the few who thoroughly show how everyone is to blame. In the media, the politicians blame Wall St., Wall St. blames the public, and the public blames the political party they didn’t vote for. The beauty of Barry’s book is once we truly understand the causes of our economic problems (which lead to social and household problems), we can start addressing how to prevent this repetitive cycle from perpetuating. Armed with the facts from Bailout Nation, we can prevent crises before they happen rather than wasting precious time and money cleaning up after unnecessary shit storms. I am part of a generation that has lived through two bubbles and market crashes since graduating college. If we are to have any faith the system is worth working for, we must end this pattern. We all know what Pavlov proved.
Barry’s keen insights, thorough lawyerly research, and witty explanations make this book a must-read. In fact, I expect college professors to utilize the book as a great tool to educate students in an entertaining way. For example, Barry is full of sweet one-liners such as “If you could fog a mirror, you qualified for a mortgage.” Sad, but true.
Although the release of the book was a tad delayed (because original publisher McGraw-Hill didn’t want Barry to expose subsidiary Standard & Poor’s key role in the crisis), it’s the perfect summer read for those who are looking for thought provoking knowledge wrapped in a “who done it” suspense tale. Unfortunately, this comic tragedy has affected real people in the real world.
California Nightmare
Flashback: From the Los Angeles Times, "Blame Bush in State Fiscal Crisis" by Robert Scheer, Robert Scheer on July 01, 2003:
The other day a woman asked me to sign a petition calling for the recall of California Gov. Gray Davis. Why, I asked. Because he bankrupted the state, she said. When I begged to differ that it was the Bush administration and its buddies at companies like Enron that had put the state into an economic tailspin, she said she was being paid according to the number of petitions signed and didn't really care. But voters should care because Davis is being used as a fall guy for problems that are beyond his control.
Remember Enron and those other scandals that cost folks their jobs and their 401(k) savings? They were a result of deregulation, the mantra of the Republicans. Deregulation was most disastrous for California's energy market, in which a crisis cost jobs and threw the world's fifth-largest economy into long-term disruption. This was not the normal workings of the market but the result of market manipulation by officials of Enron and other energy companies, some of whom are on their way to trial.
Still out cruising the boulevards is our president's once close friend, Kenneth "Kenny Boy" Lay. A major contributor to Bush family political campaigns and former Enron chief executive, Lay invented the energy trading game. It was made possible by his successful lobbying for the 1992 Energy Policy Act, signed into law by the elder Bush. That law allowed a minor Texas company to mushroom into the world's largest energy titan before it went poof.
Daddy Bush also tended to Enron's rise by appointing Wendy L. Gramm to head the Commodity Futures Trading Commission, which promptly exempted electricity trading from the regulatory oversight covering other commodities. Gramm went on to serve on Enron's board of directors and its so-called auditing committee. Her husband, Phil Gramm, then a GOP senator from Texas, later pushed through legislation further deregulating the industry.
When the younger Bush ran for president, he turned to Lay, who became the single biggest contributor to Bush's campaign. George W. returned the favor big-time by appointing to the Federal Energy Regulatory Commission members who looked the other way when Enron and its fellow swindler companies were fleecing California. These appointees insisted that California's problems were of its own making and would have to be solved without the imposition of the wholesale energy price caps that would have saved taxpayers from a crushing burden.
The other day a woman asked me to sign a petition calling for the recall of California Gov. Gray Davis. Why, I asked. Because he bankrupted the state, she said. When I begged to differ that it was the Bush administration and its buddies at companies like Enron that had put the state into an economic tailspin, she said she was being paid according to the number of petitions signed and didn't really care. But voters should care because Davis is being used as a fall guy for problems that are beyond his control.
Remember Enron and those other scandals that cost folks their jobs and their 401(k) savings? They were a result of deregulation, the mantra of the Republicans. Deregulation was most disastrous for California's energy market, in which a crisis cost jobs and threw the world's fifth-largest economy into long-term disruption. This was not the normal workings of the market but the result of market manipulation by officials of Enron and other energy companies, some of whom are on their way to trial.
Still out cruising the boulevards is our president's once close friend, Kenneth "Kenny Boy" Lay. A major contributor to Bush family political campaigns and former Enron chief executive, Lay invented the energy trading game. It was made possible by his successful lobbying for the 1992 Energy Policy Act, signed into law by the elder Bush. That law allowed a minor Texas company to mushroom into the world's largest energy titan before it went poof.
Daddy Bush also tended to Enron's rise by appointing Wendy L. Gramm to head the Commodity Futures Trading Commission, which promptly exempted electricity trading from the regulatory oversight covering other commodities. Gramm went on to serve on Enron's board of directors and its so-called auditing committee. Her husband, Phil Gramm, then a GOP senator from Texas, later pushed through legislation further deregulating the industry.
When the younger Bush ran for president, he turned to Lay, who became the single biggest contributor to Bush's campaign. George W. returned the favor big-time by appointing to the Federal Energy Regulatory Commission members who looked the other way when Enron and its fellow swindler companies were fleecing California. These appointees insisted that California's problems were of its own making and would have to be solved without the imposition of the wholesale energy price caps that would have saved taxpayers from a crushing burden.
Why We Should Listen to Peter Schiff's Bad News
Peter Schiff is loud--a decibel or 12 above everybody else. And it's hard to get him to stop talking. Ask the man a simple question and you get a 10-minute harangue in response. This harangue is likely to feature libertarian political opinions that are by Schiff's own admission pretty extreme--inherited as they were from a father currently in prison (at age 81!) for refusing to pay income tax.Yet Schiff, 46, is not just some opinionated boor. He possesses a self-awareness that renders him a bit less obnoxious than I've described, and he happens to have done a better job than just about anyone else of forecasting in 2006 and early 2007 what was about to happen in U.S. financial markets. This wasn't a broken-clock-is-right-twice-a-day thing: Schiff appeared on the national scene just as the credit bubble was reaching maximum inflation and offered a critique of the nation's unsustainably debt-fueled economic trajectory that is now--after the fact--widely accepted.
As markets collapsed late last year, Schiff, who runs the Connecticut-based brokerage firm Euro Pacific Capital, briefly got to bask in the glory of his spectacular call. He ran a victory lap of sorts on the cable news networks. A fan put together a 10-minute YouTube clip of his precrash predictions on CNBC and Fox News--complete with smirking and dead-wrong rebuttals from the likes of Arthur Laffer and Ben Stein--that has been watched more than 1.3 million times. ("What makes that clip so good is not so much me as everybody else," Schiff says. "People like laughing at people.")
This year, though, Schiff's TV bookings are down 75% to 85%,. . . His investment record surely can't be the reason for his fall from media grace.
No, the main issue with Schiff seems to be that he hasn't changed his tune--and it isn't a pleasant tune to listen to. He thinks the "phony economy" of the U.S. is headed for even harder times. He believes that the crisis-fighting measures coming out of Washington are merely delaying the inevitable, debasing the dollar and loading future taxpayers with huge debts.
. . .I happen to disagree with most of Schiff's economic views. But there's a thriving line of academic research showing that including divergent opinions and models of how the world works makes groups better at solving problems. Our society failed spectacularly this decade at solving the problem of how to price houses and mortgage bonds. It would have done better if people had paid more attention to skeptical voices like Schiff's. "The fact that he was right this time doesn't mean he's going to be right the next time, but somebody will be," says University of Michigan social scientist Scott Page. "All models are wrong, and that's why you want a diversity of models." Seconds Schiff: "You're never going to get these correct calls coming from the mainstream. It's not even possible." Schiff's current predictions may well turn out to be all wrong. But that's no reason not to listen to them.
source: Time, "Why We Should Listen to Peter Schiff's Bad News" by Justin Fox. Monday, Jun. 01, 2009
Peter Schiff on the Daily Show
Peter Schiff believes Americans should return to a basic economy that grows based on savings, not consumer credit.
| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c | |||
| Peter Schiff | ||||
| ||||
6.21.2009
6.19.2009
The House Capitalism Built
Newsnight investigates the sudden rise in commodities prices and the fall in equity despite the recent promise by the Federal Reserve to inject a further 200Bn US$ into the US Banking system.
Report and review interviewing Stephen King (Chief Economist HSBC) and Sushil Wadhwani (Wadhwani Asset Management).
Followed by a Panel discussion by Jeremy Paxman, including Gillian Tett (Assistant Editor Financial Times), Dr. Irwin Stelzer (Senior Fellow, Hudson Institute) & Prof. Robert Reich (Author of "Supercapitalism").
Part 1:
Part 2:
Report and review interviewing Stephen King (Chief Economist HSBC) and Sushil Wadhwani (Wadhwani Asset Management).
Followed by a Panel discussion by Jeremy Paxman, including Gillian Tett (Assistant Editor Financial Times), Dr. Irwin Stelzer (Senior Fellow, Hudson Institute) & Prof. Robert Reich (Author of "Supercapitalism").
Part 1:
Part 2:
FOOL’S GOLD by Gillian Tett
FOOL’S GOLD: How the Bold Dream of a Small Tribe at J. P. Morgan Was Corrupted by Wall Street Greed and Unleashed a CatastropheBy Gillian Tett (293 pages. Free Press. $26)
The New York Times reviewed this book in an article entitled, "Greed Layered on Greed, Frosted With Recklessness" by Michiko Kakutani (read the entire review here).
In her useful new book, Gillian Tett of The Financial Times writes that the global financial meltdown, which economists estimate could result in total losses from $2 trillion to $4 trillion, was “self-inflicted.” Unlike many banking crises, she adds, “this one was not triggered by a war, a widespread recession, or any external economic shock.” Rather, the “entire financial system went wrong as a result of flawed incentives within banks and investment funds, as well as the rating agencies; warped regulatory structures; and a lack of oversight.”
To put it another way, the crisis was, in the words of the Newsweek business columnist Daniel Gross, “a man-made product that turned out to be immensely toxic and damaging” — not, as so many in the “Smart Money crowd” insisted, “a random, once-in-a-lifetime thing that fell out of the sky.”
It was also a disaster, he notes, with “plenty of blame to go around,” including “poor regulation, eight years of a failed Republican economic philosophy, Wall Street-friendly Democrats who helped stymie reform, misguided bipartisan efforts to promote home ownership, Wall Street greed, corrupt C.E.O.’s, a botched rescue effort” and poor judgment calls on the part of the Fed, and top bankers who in many cases did not even understand the derivatives their firms were trading in.
In short the current global financial crisis is a story about people who thought they were the smartest guys in the room and who turned out to be remarkably naïve, reckless or, in some cases, downright stupid. It’s a story — novelistic in its narrative and moral arc — about hubris and greed and heedlessness, about people, as Fitzgerald wrote in “The Great Gatsby,” who “smashed up things and creatures and then retreated back into their money or their vast carelessness” and “let other people clean up the mess they had made.”
6.02.2009
Shameless Paparazzi
Poor Prince Harry can't even have a private comfort break in one of those classy Port-O-Potties.
GOP's Double Standards
The Washington Post writes, "Double Standard: Funny how the achievements on Sonia Sotomayor's resume suddenly count for so little."
ON PAPER, Supreme Court nominee Sonia Sotomayor resembles one of her would-be colleagues on the high court: Princeton undergrad, Yale Law School, an editor on the Yale Law Journal, experience as a prosecutor and years of service on the federal bench.
Yet Judge Sotomayor, President Obama's pick to replace retiring Justice David H. Souter, is not being compared by some conservatives to Princeton/Yale alum Samuel A. Alito Jr., widely acclaimed as smart and qualified when he was nominated. Instead, they are trying to peg her as "President Obama's Harriet Miers," after the nominee of President George W. Bush who took herself out of contention as conservatives savaged her reputation and raised doubts about whether she was smart enough for the job.
Why is that? After all, Judge Sotomayor boasts the very qualifications that these conservatives claimed Ms. Miers lacked. Ms. Miers was in part lambasted by conservatives -- unfairly, we noted at the time -- because she did not meet the now-cliched criteria of graduation from elite schools and experience as a judge. Judge Sotomayor's educational pedigree is top-notch, and she served six years on the U.S. District Court for the Southern District of New York before spending the past 11 years on the U.S. Court of Appeals for the 2nd Circuit.
Ms. Miers, conservative critics complained, lacked a substantial paper trail, leading some to worry about whether she was more liberal than her record let on. Judge Sotomayor can't be tagged as a stealth candidate, given her two-decade track record of opinions on topics as varied as immigration, eminent domain, corporate law and the First Amendment.
Because it is difficult to dismiss her academic credentials and her professional experience, some on the right have resorted to the politics of personal destruction. Curt Levey of the Committee for Justice said in a radio interview that Judge Sotomayor was picked because "she's a woman and Hispanic, not because she was the best qualified." Former congressman Tom Tancredo sank to even greater depths when he called Judge Sotomayor a "racist" for her past affiliation with the Hispanic advocacy group, the National Council of La Raza; Mr. Tancredo called La Raza "a Latino KKK without the hoods or the nooses."
Former Bush adviser Karl Rove implicitly questioned Judge Sotomayor's intelligence, saying in an interview with PBS host Charlie Rose that "I know lots of stupid people who went to Ivy League schools." No doubt, but would Mr. Rove have said the same thing in connection with Justice Alito?
There are plenty of lines of inquiry that should be explored to better discern Judge Sotomayor's qualifications and judicial philosophy. We look forward to a vigorous debate about Judge Sotomayor's more controversial and consequential cases. We would like to hear more from Judge Sotomayor on how gender and ethnicity might help -- as she put it -- a "wise Latina" judge come to a "better" conclusion in some cases than a white, male jurist. (The president recently said Judge Sotomayor regretted her choice of words.) Above all, we'd welcome a confirmation process that sets aside rancid stereotypes and sexist assumptions in order to explore the record and philosophy of a woman whose work could affect the country for some time to come.
ON PAPER, Supreme Court nominee Sonia Sotomayor resembles one of her would-be colleagues on the high court: Princeton undergrad, Yale Law School, an editor on the Yale Law Journal, experience as a prosecutor and years of service on the federal bench.
Yet Judge Sotomayor, President Obama's pick to replace retiring Justice David H. Souter, is not being compared by some conservatives to Princeton/Yale alum Samuel A. Alito Jr., widely acclaimed as smart and qualified when he was nominated. Instead, they are trying to peg her as "President Obama's Harriet Miers," after the nominee of President George W. Bush who took herself out of contention as conservatives savaged her reputation and raised doubts about whether she was smart enough for the job.
Why is that? After all, Judge Sotomayor boasts the very qualifications that these conservatives claimed Ms. Miers lacked. Ms. Miers was in part lambasted by conservatives -- unfairly, we noted at the time -- because she did not meet the now-cliched criteria of graduation from elite schools and experience as a judge. Judge Sotomayor's educational pedigree is top-notch, and she served six years on the U.S. District Court for the Southern District of New York before spending the past 11 years on the U.S. Court of Appeals for the 2nd Circuit.
Ms. Miers, conservative critics complained, lacked a substantial paper trail, leading some to worry about whether she was more liberal than her record let on. Judge Sotomayor can't be tagged as a stealth candidate, given her two-decade track record of opinions on topics as varied as immigration, eminent domain, corporate law and the First Amendment.
Because it is difficult to dismiss her academic credentials and her professional experience, some on the right have resorted to the politics of personal destruction. Curt Levey of the Committee for Justice said in a radio interview that Judge Sotomayor was picked because "she's a woman and Hispanic, not because she was the best qualified." Former congressman Tom Tancredo sank to even greater depths when he called Judge Sotomayor a "racist" for her past affiliation with the Hispanic advocacy group, the National Council of La Raza; Mr. Tancredo called La Raza "a Latino KKK without the hoods or the nooses."
Former Bush adviser Karl Rove implicitly questioned Judge Sotomayor's intelligence, saying in an interview with PBS host Charlie Rose that "I know lots of stupid people who went to Ivy League schools." No doubt, but would Mr. Rove have said the same thing in connection with Justice Alito?There are plenty of lines of inquiry that should be explored to better discern Judge Sotomayor's qualifications and judicial philosophy. We look forward to a vigorous debate about Judge Sotomayor's more controversial and consequential cases. We would like to hear more from Judge Sotomayor on how gender and ethnicity might help -- as she put it -- a "wise Latina" judge come to a "better" conclusion in some cases than a white, male jurist. (The president recently said Judge Sotomayor regretted her choice of words.) Above all, we'd welcome a confirmation process that sets aside rancid stereotypes and sexist assumptions in order to explore the record and philosophy of a woman whose work could affect the country for some time to come.
Prolifers Condone Extralegal Vigilantism?
The unhinged GOP base condones extralegal vigilantism?
Vigilantism does have deep roots in the USA. Let's see, Emmit Till, Medgar Evers, Malcolm X, JFK, Robert Kennedy, Martin Luther King, Jr., Abraham Lincoln, The Uni-bomber, Timmothy McVey.......I guess it's just the American way. Forget the laws, forget the court system, just sell military grade weapons and gin-up the bitter gun-toting GOP base.....and insto presto dead doctors in churches all across America.
Shoud we sing "America the Beautiful" or "God Bless America" for our special brand of vigilantism.
Frank Schaeffer Exposes "Pro-Life" Movement's Domestic Terror Role
Up from the Projects
Richard Cohen of the Washington Post writes: With the nose of a trained columnist, I detect the whiff of elitism-cum-racism emanating from the nomination of Sonia Sotomayor to the Supreme Court. The whiff does not come -- Rush Limbaugh and Newt Gingrich notwithstanding -- from Sotomayor's own statements; nor does it come from her controversial decision upholding race-based affirmative action. It comes, instead, from the general expression of wow about her background. Imagine, someone from the projects is a success!"Nobody expects you to be chosen someday for the Supreme Court when your father was a welder with a third-grade education," wrote Richard Lacayo in Time magazine. He is right -- the expectations are all otherwise. You can see them on display in many of the reports about Sotomayor's background. She was raised in public housing projects. She grew up in the Bronx, which the average person must think of as a particularly nasty part of Mumbai, and she is, finally and incriminatingly, Puerto Rican. This is all, apparently, very hard to imagine.
It once was not. It was generally recognized that being poor was not necessarily destiny. This was the gift of liberalism, especially New York City-style liberalism. The city would provide housing -- about 400,000 now live in public housing -- and it would provide good schools, and later, with good grades and the proper attitude, it would offer an excellent higher education: City College, Brooklyn College, Queens College and my own beloved Hunter College. The vast poor were the city's oil fields. Any kid could be a gusher.
The New York Times recently supplied us with the names of some public housing alumni. They included Jay-Z, the rapper, and Wesley Snipes, the actor, and Mike Tyson, the brute. They also include Gary Ackerman, the wittiest person in Congress (sorry, Barney), and Lloyd C. Blankfein, who runs Goldman Sachs. Howard Schultz, who conceived the current Starbucks, came out of the projects and so did Ursula M. Burns, who is black and a woman and now is the CEO of Xerox. Copy that, please.
The projects also produced Kareem Abdul-Jabbar and the former Caryn Elaine Johnson, who performs as Whoopi Goldberg. She lived in the Chelsea Houses. The Times mentioned them both. It did not mention, though, Millie Torado, who grew up in the Redfern projects and is an old, old family friend, or Joel Klein, the New York City school chancellor, who lived in Woodside Houses (Queens) and was told when he entered Columbia University that not all that much was expected of him. He disappointed by going on to Harvard Law School. No mention was made either of Ken Auletta, the media writer for the New Yorker. Obviously, there are far too many to list.
Inevitably, what these people have in common are one or two dedicated parents or guardians who knew that housing, public or otherwise, is where your body spends its time. Your mind can live anywhere. In the case of the young Sotomayor, it was between the covers of Nancy Drew novels and watching Perry Mason on television. She imagined she could become a lawyer. Now, maybe, a girl like her can imagine becoming a Supreme Court justice.
Franklin D. Roosevelt was a true American aristocrat, rich and landed, yet the poor never had a greater champion. The man who preceded him in the presidency, Herbert Hoover, was raised in poverty yet forgot who he had been. He feared government welfare programs would sap the poor of their industry. It's always dangerous to generalize. It is impossible to predict.
I do not agree with Sotomayor on the New Haven affirmative-action case and have written a column saying why. But if it can be said she sided with minorities over white men, recognize that two of the New Haven firefighters unjustly affected on the basis of race are Hispanic. But I agree with what Sotomayor meant when she said in her famous 2001 speech, "I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn't lived that life." Yes, in some cases. That is the virtue of diversity. You're instructed by your own life.
Sotomayor's life instructs her that the projects are chock-full of people like her. They are propelled by the greenest of fuels, their indomitable parents, and they are nourished by wonderful teachers, determined principals -- and the opportunities provided by a generous government. Sotomayor's coming out of the projects is no miracle. The tragedy is that we think it is.
The GOP's Feigned Outrage
From the editorial pages of Wall Street Journal: Those who followed news coverage of the "tea party" protests last month will recall that one target of the partiers' ire was the TARP bailout of the banking system -- a policy of the Bush administration that President Obama has carried on.
And yet, in a television interview last month, we find no less a representative of the late administration than former Vice President Dick Cheney endorsing the protesters' accusations with what is, for him, considerable enthusiasm. "I thought the tea parties were great," he told Fox News's Sean Hannity. "It's basically a very healthy development."
Former House Speaker Newt Gingrich, one of the Republican Party's few remaining stars, has also cheered the public's willingness to "fight back against Wall Street and Washington insiders."
A Republican who wants to fight Wall Street! A Bush official who thinks protesting Bush policies is "great"! Contemplating these curiosities, we begin to realize how easy it has been for conservatives to swing back into full-throated opposition only months after their cataclysmic defeat. And also to understand why the obituaries for the GOP might be just a tad premature.
After all, there's something about conservatives' ferocious "No" that precisely fits the temper of the times. For all the past year's Democratic victories, the GOP still owns outrage, still has an enormous capacity to summon up offense, to elevate every perceived slight into an unprecedented imposition upon both the hard-working citizen and freedom itself.
What really dazzles the observer, though, is conservatives' fury over things for which they are themselves responsible.
As an example of this habit of mind, consider the essay that Mr. Gingrich published in Human Events last week. "The current liberal bloodlust over interrogations," he wrote, referring to the Nancy Pelosi-CIA flap, is merely "the Left's attempt to hunt down and purge its political opponents." And yet, in a different essay he published on the very same day (this one in the Washington Times), Mr. Gingrich regretted that, in all the years of Republican rule, "there was a strategic failure to root out the left and the special interests of the left."
Mr. Gingrich's side failed to "root out" and destroy their opponents; now he imagines that this is what is being done to his team.
Psychotherapists might call this "projection," and something similar pervades the essay the remarkable Mr. Gingrich published only two days later in the Washington Post. Here the former speaker can be found calling for a populist revolt in the "great tradition of political movements rising against arrogant, corrupt elites."
A healthy sentiment, to be sure, except for the fact that "elites" are exactly what decades of conservative rule gave us by unleashing the banks, smashing the unions, and funneling the economy's gains into the hands of the rich.
Then there are the "lobbyists" whom Mr. Gingrich accuses of running state governments here and there. By this he means "lobbyists for the various unions" who get their way "through bureaucracies seeking to impose the values of a militant left."
Even so, rule by lobbyists is a subject Mr. Gingrich should know well. It was while he was House speaker, for example, that his No. 3, Tom DeLay, launched the famous "K Street Strategy," which sought to make Gucci Gulch the exclusive preserve of the Republican Party.
It was Mr. Gingrich's own beloved House freshmen of 1994, the last bunch of conservative populists to come down the pike, who made the Republican Revolution into a fundraising bonanza. And it was public outrage over the conspicuous purchase of government favors by the moneyed that led to the Democratic triumphs of 2006 and 2008.
Turning to the government of New York state, Mr. Gingrich declares that it has "impoverished the Upstate region to the point where it is a vast zone of no jobs and no opportunities." Oddly, Mr. Gingrich appears to believe that deindustrialization is the direct result of governance by a political machine in Albany.
In fact, deindustrialization also occurred all across the Midwest. As it ground on through the Reagan years and the '90s, it was the investor class who called the shots, not the hirelings of organized labor.
And as our factories and steel mills were shuttered an army of politicians and management theorists assured us that the waning of industrial America was the next stage in human development, the coming of the glorious age of information. The most ecstatic and even otherworldly of these was, of course, Newt Gingrich.
In his much-discussed speech last Thursday, Mr. Cheney intoned, "We hear from some quarters nothing but feigned outrage based on a false narrative." And so we do: A form of protest that persistently misses the point, a type of populism that only empowers the elite, and a brand of idealism that cohabits comfortably with corruption. (source: The Wall Street Journal)
And yet, in a television interview last month, we find no less a representative of the late administration than former Vice President Dick Cheney endorsing the protesters' accusations with what is, for him, considerable enthusiasm. "I thought the tea parties were great," he told Fox News's Sean Hannity. "It's basically a very healthy development."
Former House Speaker Newt Gingrich, one of the Republican Party's few remaining stars, has also cheered the public's willingness to "fight back against Wall Street and Washington insiders."
A Republican who wants to fight Wall Street! A Bush official who thinks protesting Bush policies is "great"! Contemplating these curiosities, we begin to realize how easy it has been for conservatives to swing back into full-throated opposition only months after their cataclysmic defeat. And also to understand why the obituaries for the GOP might be just a tad premature.
After all, there's something about conservatives' ferocious "No" that precisely fits the temper of the times. For all the past year's Democratic victories, the GOP still owns outrage, still has an enormous capacity to summon up offense, to elevate every perceived slight into an unprecedented imposition upon both the hard-working citizen and freedom itself.
What really dazzles the observer, though, is conservatives' fury over things for which they are themselves responsible.
As an example of this habit of mind, consider the essay that Mr. Gingrich published in Human Events last week. "The current liberal bloodlust over interrogations," he wrote, referring to the Nancy Pelosi-CIA flap, is merely "the Left's attempt to hunt down and purge its political opponents." And yet, in a different essay he published on the very same day (this one in the Washington Times), Mr. Gingrich regretted that, in all the years of Republican rule, "there was a strategic failure to root out the left and the special interests of the left."
Mr. Gingrich's side failed to "root out" and destroy their opponents; now he imagines that this is what is being done to his team.
Psychotherapists might call this "projection," and something similar pervades the essay the remarkable Mr. Gingrich published only two days later in the Washington Post. Here the former speaker can be found calling for a populist revolt in the "great tradition of political movements rising against arrogant, corrupt elites."
A healthy sentiment, to be sure, except for the fact that "elites" are exactly what decades of conservative rule gave us by unleashing the banks, smashing the unions, and funneling the economy's gains into the hands of the rich.
Then there are the "lobbyists" whom Mr. Gingrich accuses of running state governments here and there. By this he means "lobbyists for the various unions" who get their way "through bureaucracies seeking to impose the values of a militant left."
Even so, rule by lobbyists is a subject Mr. Gingrich should know well. It was while he was House speaker, for example, that his No. 3, Tom DeLay, launched the famous "K Street Strategy," which sought to make Gucci Gulch the exclusive preserve of the Republican Party.
It was Mr. Gingrich's own beloved House freshmen of 1994, the last bunch of conservative populists to come down the pike, who made the Republican Revolution into a fundraising bonanza. And it was public outrage over the conspicuous purchase of government favors by the moneyed that led to the Democratic triumphs of 2006 and 2008.
Turning to the government of New York state, Mr. Gingrich declares that it has "impoverished the Upstate region to the point where it is a vast zone of no jobs and no opportunities." Oddly, Mr. Gingrich appears to believe that deindustrialization is the direct result of governance by a political machine in Albany.
In fact, deindustrialization also occurred all across the Midwest. As it ground on through the Reagan years and the '90s, it was the investor class who called the shots, not the hirelings of organized labor.
And as our factories and steel mills were shuttered an army of politicians and management theorists assured us that the waning of industrial America was the next stage in human development, the coming of the glorious age of information. The most ecstatic and even otherworldly of these was, of course, Newt Gingrich.
In his much-discussed speech last Thursday, Mr. Cheney intoned, "We hear from some quarters nothing but feigned outrage based on a false narrative." And so we do: A form of protest that persistently misses the point, a type of populism that only empowers the elite, and a brand of idealism that cohabits comfortably with corruption. (source: The Wall Street Journal)
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