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Troublesome Creatures

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A recent piece by Glynnis MacNicol of The Business Insider website led me to the conclusion that Shepard Smith deserves an award.  You might recognize Shep Smith as The Normal Guy at Fox News.  In case you haven’t heard about it yet, a controversy has erupted over a 20-minute crank telephone call made to Wisconsin Governor Scott Walker by a man who identified himself as David Koch, one of two billionaire brothers, famous for bankrolling Republican politicians.  The caller was actually blogger Ian Murphy, who goes by the name, Buffalo Beast.  In a televised discussion with Juan Williams concerning the controversy surrounding Wisconsin Governor Walker, Shep Smith focused on the ugly truth that the Koch brothers are out to “bust labor”.  Here are Smith’s remarks as they appeared at The Wire blog:

It’s all political isn’t it?  Isn’t it just 100% politics? … Have you looked at the list of the top 10 donors to political campaigns?  Seven of those 10 donate to Republicans.  The other three that remain of those top 10, they all donate to Democrats and they are all unions.  Bust the unions, it’s over … . And this started when?  It started with the Koch brothers.  The Koch brothers were organizing…

*   *   *

I’m not taking a side on this, I’m telling you what’s going on … The facts!  But people don’t want to hear the facts … let them get angry, facts are troublesome creatures from time to time.  The Koch brothers, and others, were organized to bust labor, it’s what big business wants to do … this isn’t a new concept.  So they gave a bunch of money to the governor’s campaign.  The governor’s campaign is over.  Now, away we go!  We’re going to try to bust this union up, and that’s what they’re doing … this is political and everyone in the middle is a pawn.

Those “troublesome creatures” called facts have been finding their way into the news to a refreshing degree lately.  Emotional rhetoric has replaced news reporting to such an extreme level that most people seem to have accepted the premise that facts are relative to one’s perception of reality.  The lyrics to “Crosseyed and Painless” by the Talking Heads (written more than 30 years ago) seem to have been a prescient commentary about this situation:

Facts all come with points of view
Facts don’t do what I want them to
Facts just twist the truth around
Facts are living turned inside out

Budgetary disputes are now resolved on an emotional battlefield where facts usually take a back seat to ideology.  Despite this trend, there are occasional commentaries focused on fact-based themes.  One recent example came from David Leonhardt of The New York Times, entitled “Why Budget Cuts Don’t Bring Prosperity”.  The article began with the observation that because so many in Congress believe that budget cuts are the path to national prosperity, the only remaining question concerns how deeply spending should be cut this year.  Mr. Leonhardt provided those misled “leaders” with the facts:

The fundamental problem after a financial crisis is that businesses and households stop spending money, and they remain skittish for years afterward.  Consider that new-vehicle sales, which peaked at 17 million in 2005, recovered to only 12 million last year.  Single-family home sales, which peaked at 7.5 million in 2005, continued falling last year, to 4.6 million.  No wonder so many businesses are uncertain about the future.

Without the government spending of the last two years — including tax cuts — the economy would be in vastly worse shape.  Likewise, if the federal government begins laying off tens of thousands of workers now, the economy will clearly suffer.

That’s the historical lesson of postcrisis austerity movements.  The history is a rich one, too, because people understandably react to a bubble’s excesses by calling for the reverse.  When Franklin Roosevelt was running for president in 1932, he repeatedly called for a balanced budget.

But no matter how morally satisfying austerity may be, it’s the wrong answer.

Leonhardt’s  objective analysis drew this response from Yves Smith of Naked Capitalism:

Did a memo go out?   Leonhardt almost always hews to neoclassical orthodoxy.  This is a big change for him.

Those “troublesome creatures” called facts became the subject of an opinion piece about the budget, written by Bill Schneider for Politico.  While dissecting the emotional motivation responsible for “a dangerous political arms race where the stakes keep escalating”, Schneider set about isolating the fact-based signal from the emotional noise clouding the budget debate:

Many of the programs targeted for big cuts by the House Republicans have a suspiciously ideological tinge:  Planned Parenthood, the Environmental Protection Agency, funds to implement the new health care reform law, National Public Radio, the Corporation for Public Broadcasting, President Bill Clinton’s AmeriCorps program, money for a White House climate change czar.  The Washington Post calls the House budget “an assault on bedrock Democratic priorities.’’

The public is certainly worried about the deficit.  But do people believe the deficit is a crisis demanding immediate and radical action?  That’s not so clear.

In a Pew Research Center poll taken this month, the public was split over whether the federal government’s priority should be reducing the deficit (49 percent) or spending to help the economic recovery (46 percent).  What economic issue worries people the most? Jobs tops the list (44 percent). Fewer than half that say the deficit (19 percent).

Yes, there is an economic crisis in the country.  The crisis is jobs.  So Republicans have to argue that spending cuts will create jobs — an argument that mystifies many economists.

Let’s hope that those “troublesome creatures” keep turning up at debates, “town hall” meetings and in commentaries.  If they cause widespread allergic reactions, let nature run its course.


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A Wake-up Call From Dennis Blair

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February 19, 2009

Although President Obama has been criticized for many of his appointments, the selection of retired Admiral Dennis Blair as Director of National Intelligence appears to have been a wise choice.  Blair graduated from the United States Naval Academy in 1968.  He attended Oxford University as a Rhodes Scholar contemporaneously with Bill Clinton.  (However, I doubt that Blair was standing next to Bill when the former President “didn’t inhale”.)  Blair retired from the Navy in 2002.

On Thursday, February 12, Blair appeared before the Senate Intelligence Committee and surprised his audience with his new threat assessment.  As Tom Gjelten reported for National Public Radio:

National Intelligence Director Dennis Blair’s dramatic report last week — that the economic crisis is now the United States’ top “near-term security concern” — caught some members of Congress by surprise.  But it makes sense.

The global economic downturn could easily change the world. Previously stable countries could become unstable.  The geopolitical lineup could shift sharply, some countries becoming more powerful while others get weaker.  Allies could turn into adversaries.

Pamela Hess of the Associated Press provided this account of the hearing:

Blair’s 49-page statement opened with a detailed description of the economic crisis.  It was a marked departure from threat briefings of years past, which focused first on traditional threats and battlefields like Afghanistan, Iraq and Pakistan.

“The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications,” he said in a written statement for the committee.

Blair cited the inability of other nations to meet their humanitarian obligations and hostility toward the United States for causing this crisis as potential causes for unrest, as this AFP report disclosed:

“Statistical modeling shows that economic crises increase the risk of regime-threatening instability if they persist over a one to two year period,” Blair said.

“Besides increased economic nationalism, the most likely political fallout for US interests will involve allies and friends not being able to fully meet their defense and humanitarian obligations.”

*   *   *

“It already has increased questioning of US stewardship of the global economy and the international financial structure,” Blair said, with trading partners already upset over a “Buy American” provision in a US stimulus bill.

Rosalie Westenskow of UPI noted Blair’s concern that the impact of climate change, coinciding with the economic crisis, could provide a troublesome combination to facilitate government instability:

“The impacts (of climate change) will worsen existing problems such as poverty, social tensions, environmental degradation, ineffectual leadership and weak political institutions,” Blair told senators last week.

As temperatures rise, scientists predict natural disasters like floods and drought will also increase and government instability worldwide is likely to follow, he said.

On February 17, during an interview in Tokyo with Martha Raddatz of ABC News, Secretary of State Hillary Clinton ratified Blair’s concern about the security threat posed by the global economic crisis:

“Yes, we have to look at this as part of our threat matrix,” the secretary of state said.  “I know some people have criticized him and said, ‘what does the economy have to do with terrorism.’ That’s a very short-sighted view.  I think what director Blair was saying is that we get fixated sometimes on the headlines of dangers, and that is not in any way to underestimate the continuing threat from terrorism, the instability in the Middle East and Afghanistan and Pakistan and elsewhere.”

“But this economic crisis, left unresolved, will create massive unemployment,” she said.  “It will upend governments, it will unfortunately breed instability, and I appreciated his putting that into the context of the threat matrix.”

It’s nice to know that we have an intelligence director who is not wedded to the Bush administration’s fixation on September 11 -style attacks.  As this February 16 editorial from the San Francisco Chronicle pointed out:

The new threat isn’t as easy to identify – or vilify – as al Queda, but that doesn’t mean it’s any less serious.

*    *    *

No one knows what form the next wave of instability will take. The United States must start making preparations now – by shoring up our own flailing economy and supporting our allies as much as we possibly can.  Blair’s warning shows how dangerous it will be for Washington to continue battling along the same tired ideological lines that it has for the last several weeks.  This economic crisis could be putting more than our wallets at risk.

Of course, we don’t really need another reason to stay awake at night and worry.  Fortunately, we now have someone in a crucial position, capable of identifying and focusing on new threats.  Thanks for the “heads up” Admiral Blair!

Clean-Up Time On Wall Street

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January 5, 2009

As we approach the eve of the Obama Administration’s first day, across America the new President’s supporters have visions of “change we can believe in” dancing in their heads.  For some, this change means the long overdue realization of health care reform.  For those active in the Democratic campaigns of 2006, “change” means an end to the Iraq war.  Many Americans are hoping that the new administration will crack down on the unregulated activities on Wall Street that helped bring about the current economic crisis.

On December 15, Stephen Labaton wrote an article for the New York Times, examining the recent failures of the Securities and Exchange Commission as well as the environment at the SEC that facilitates such breakdowns.  Some of the highlights from the piece included these points:

.   .   .    H. David Kotz, the commission’s new inspector general, has documented several major botched investigations.  He has told lawmakers of one case in which the commission’s enforcement chief improperly tipped off a private lawyer about an insider-trading inquiry.
*   *   *
There are other difficulties plaguing the agency.  A recent report to Congress by Mr. Kotz is a catalog of major and minor problems, including an investigation into accusations that several S.E.C. employees have engaged in illegal insider trading and falsified financial disclosure forms.
*   *   *
Some experts said that appointees of the Bush administration had hollowed out the commission, much the way they did various corners of the Justice Department.  The result, they say, is hobbled enforcement and inspection programs.

On December 18, Barack Obama announced his intention to name Mary Schapiro as the Chair of the Securities and Exchange Commission.  Many news outlets, including National Public Radio, presented an enthusiastic look toward the tenure of Ms. Schapiro in this office:

Speaking at the news conference on Thursday, Schapiro said there must be “consistent and robust enforcement” of regulations to protect investors, saying it will be her top priority as SEC chief.

On the other hand, in the December 18 Wall Street Journal, Randall Smith and Kara Scannell provided us with a more informative analysis of the SEC nominee’s track record:

She was credited with beefing up enforcement while at the National Association of Securities Dealers and guiding the creation of the Financial Industry Regulatory Authority, which she now leads.  But some in the industry questioned whether she would be strong enough to get the SEC back on track.
*  *  *
Robert Banks, a director of the Public Investors Arbitration Bar Association, an industry group for plaintiff lawyers  . . .  said that under Ms. Schapiro, “Finra has not put much of a dent in fraud,” and the entire system needs an overhaul. ” The government needs to treat regulation seriously, and for the past eight years we have not had real securities regulation in this country,” Mr. Banks said.

Since Ms. Schapiro took over Finra in 2006, the number of enforcement cases has dropped, in part because actions stemming from the tech-bubble collapse ebbed and the markets rebounded from 2002 to 2007.  The agency has been on the fringe of the major Wall Street blowups, and opted to focus on more bread-and-butter issues such as fraud aimed at senior citizens.

Out of the gate, Ms. Schapiro faces potential controversy.  In 2001 she appointed Mark Madoff, son of disgraced financier Bernard Madoff, to the board of the National Adjudicatory Council, the national committee that reviews initial decisions rendered in Finra disciplinary and membership proceedings.  Both sons of Mr. Madoff have denied any involvement in the massive Ponzi scheme their father has been accused of running.

It appears as though we might see Ms. Schapiro face some grilling about the Madoff appointment, when she faces her confirmation hearing.  Beyond that, the points raised by Randall Smith and Kara Scannell underscore the question of whether Mary Schapiro will really be an agent of change on Wall Street or just another “insider” overseeing “business as usual”.  To assuage such concern, many commentators have emphasized that Ms. Schapiro has never worked for a brokerage firm or investment bank.  Her Wall Street experience has been limited to regulatory activity.  Despite this, one must keep in mind a point made by Michael Lewis and David Einhorn in the January 3 New York Times:

It’s not hard to see why the S.E.C. behaves as it does.  If you work for the enforcement division of the S.E.C. you probably know in the back of your mind, and in the front too, that if you maintain good relations with Wall Street you might soon be paid huge sums of money to be employed by it.

Michael Lewis is the author of Liar’s Poker, a non-fiction book about his own Wall Street experience as a bond salesman.  With David Einhorn, he wrote a two-part op-ed piece for the January 3 New York Times.  The above-quoted passage was from the first part, entitled:  “The End of the Financial World as We Know It”.  The second part is entitled:  “How to Repair a Broken Financial World”.  The first section looked at the Bernie Madoff Ponzi scheme, using it to underscore this often-ignored reality about the Securities and Exchange Commission and its inability to prevent or even cope with the current financial crisis:

Indeed, one of the great social benefits of the Madoff scandal may be to finally reveal the S.E.C. for what it has become.

Created to protect investors from financial predators, the commission has somehow evolved into a mechanism for protecting financial predators with political clout from investors.  (The task it has performed most diligently during this crisis has been to question, intimidate and impose rules on short-sellers — the only market players who have a financial incentive to expose fraud and abuse.)

In the second section of their commentary, Lewis and Einhorn suggest six changes to the financial system “to prevent some version of what has happened from happening all over again”.  Let’s hope our new President, the Congress and others pay serious attention to what Lewis and Einhorn have said.  Cleaning up Wall Street is going to be a dirty job.  Will those responsible for accomplishing this task be up to doing it?

Palin Comparison

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September 1, 2008

In a perfect world, there would be a floor fight to take Sarah Palin off the ticket at the Republican Convention. It would make for some good TV this week.  On the Friday, August 29 program, Real Time with Bill Maher (HBO), National Public Radio’s Michel Martin made the strident claim that those who criticize Sarah Palin “do so at their peril”.  Sarah Palin is a Gumball.   There.  I will say it again, as well.  Although I would agree that anyone who resorts to sexist criticism of Palin does so at their own peril, there is plenty of room for reasoned dismay at McCain’s choice.  Meanwhile, Michel Martin’s claim that Palin’s experience is analogous to Tim Kaine’s experience, should have been made at Martin’s peril.  Actually, it was.  Tim Kaine is the Governor of a state that just happens to be next door to our nation’s Capitol.  Virginia’s population is 7,702,091 people.  The population of Alaska is less than one tenth of that at 683,478.  Although Kaine’s time served as Governor of Virginia is equivalent to the time served by Palin as Governor of Alaska, Kaine previously served four years as Lieutenant Governor of Virginia  — a job with similar day-to-day duties as those of the Vice-President of the United States.  You see, both the Lieutenant Governor and the Vice-President preside over a body called “the Senate”. The Lieutenant Governor presides over the State Senate and the Vice-President presides over the United States Senate.  The Gumball made the mistake of asking the question, into a TV camera, of what the everyday duties of the Vice-President might be.  Tim Kane learned the answer by presiding over the Virginia Senate for four years.  In case The Gumball doesn’t know (and she doesn’t, by her own admission) Kane’s duties as Lieutenant Governor matched those of the Vice President of the United States.  Michel Martin must be aware of this … she just might not want anyone else to be so aware.  Before Tim Kaine was Lieutenant Governor of Virginia, he was the Mayor of Richmond Virginia for four years.  Two years ago, The Gumball was the mayor of her home town:  Wasilla, Alaska (population 9,000).  Tim Kaine was the mayor of a city with a population over twenty times the size of Wasilla, Alaska, at 200,123 people.  Tim Kaine went to law school (Georgetown).  The Gumball didn’t, nor did John McCain.

The stupidity of this episode is “off the charts”.  On the heels of an outrageously successful Democratic Convention, McCain has made a desperate reach for those disgruntled supporters of Hillary Clinton.  At the same time, with his choice of The Gumball, McCain has sold out to the televangelist lobby in the hope of connecting with that ever-elusive Republican “base”.  The term “desperate” has been used by many commentators.  Jonathan Alter of Newsweek was kind enough to analogize the selection of Palin to a “Hail Mary” or “Hail Sarah” pass at the end of a close football game.  McCain’s media sycophants claim that McCain’s selection of Palin as his running mate, reinforces his “maverick” persona.  To the contrary, if McCain really were a maverick, he would be standing up to the televangelist lobby, rather than sucking up to it, as he is with this choice.

Sarah Palin (a/k/a “The Gumball”) is a “wing nut” who wants creationism to be taught in public schools and who refuses to believe that global warming has been caused by human activity.  To her credit, Palin went to term with a baby known to have Down Syndrome, based on her anti-abortion stance.  Her ability to do the anti-abortion walk as well as the anti-abortion talk will give her some degree of “street cred” with a limited population.

Nevertheless, with his choice of Palin, McCain has alienated his own “base” – the independents, moderate Republicans and centrists who believed that once elected President, McCain would tear off the rubber mask and return to his old self.  As Arianna Huffington said a while ago:  “The John McCain of 2000 is not a candidate in this election.”  McCain’s choice of The Gumball just drove that message home.

The fact that The Gumball was not adequately vetted, has become glaringly obvious to many Republicans.  She hasn’t been Governor of Alaska for two years and yet, she is already in trouble there. A special prosecutor has been appointed to investigate her activity.  She has been accused of “abuse of power”.  Our current Vice-President has that as his middle name.  This situation should make life easy for those writing the negative ads about the Republican ticket.

As long as Michel Martin has directed our attention to Tim Kaine, let’s remember where he was born:  a city named St. Paul, Minnesota.  If you want to find out what life is like there now, with the Republican Convention taking place, read Lindsay Beyerstein’s article, “Inside an RNC Raid” at Firedoglake.com.  It will make you sick, with reports of warrantless searches at homes — even one owned by a former military police officer.  When a woman staying at the house discussed in the story asked for a warrant, she was detained.  Local police were blended with apparent “contractors” or private Gestapo-for-hire.  Of course, this is all completely illegal in the United States where we have lived for all our lives.  Those in control of the 2008 Republican Party don’t care about the rule of law.  They make a point of promoting “leaders” who know nothing about it, either.  The reasons for this are obvious.