Author: mhasegawa

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After the G-20

The meeting seemed to go well.  The world leaders fell all over themselves to get pictures with President Obama who was his usual cool self even though he didn’t get the Europeans to cough up  stimulus/recovery money of their own.  They seem to like the idea of regulations a lot more.  

 I wrote a piece a few weeks ago on the Gramm, Leach, Bliley Act as an example of degegluation that led to things like AIG.  I think the Europeans at the G-20 would like us to reinstitute some things like a version of the Gramm, Leach, Bliley Act.  Are the Administration and Congress really waiting to see the economy stabilize before the begin to write regs, or is it just a big stall hoping we will forget about it? 

Paul Krugman wrote an interesting op-ed yesterday in which he tied bankers/financiers salaries to bad stuff happening. 

Thirty-plus years ago, when I was a graduate student in economics, only the least ambitious of my classmates sought careers in the financial world. Even then, investment banks paid more than teaching or public service — but not that much more, and anyway, everyone knew that banking was, well, boring.

In the years that followed, of course, banking became anything but boring. Wheeling and dealing flourished, and pay scales in finance shot up, drawing in many of the nation’s best and brightest young people (O.K., I’m not so sure about the “best” part). And we were assured that our supersized financial sector was the key to prosperity.

Instead, however, finance turned into the monster that ate the world economy.

This is a cycle that began during the Great Depression

Before 1930, banking was an exciting industry featuring a number of larger-than-life figures, who built giant financial empires (some of which later turned out to have been based on fraud). This highflying finance sector presided over a rapid increase in debt: Household debt as a percentage of G.D.P. almost doubled between World War I and 1929.

During this first era of high finance, bankers were, on average, paid much more than their counterparts in other industries. But finance lost its glamour when the banking system collapsed during the Great Depression.

So now we have the heads of AIG, CitiBank (or whatever they call themselves now) saying they deserve their money and bonuses even though they contributed mightily to the current recession.  Even Larry Summers is fat and happy from feeding out of the financial trough.  Robert Sheer writes in The Nation

Not surprisingly, Lawrence Summers is convinced that he deserved every penny of the $8 million that Wall Street firms paid him last year. And why shouldn’t he be cut in on the loot from the loopholes in the toxic derivatives market that he pushed into law when he was Bill Clinton’s treasury secretary? No one has been more persistently effective in paving the way for the financial swindles that enriched the titans of finance while impoverishing the rest of the world than the man who is now the top economic adviser to President Obama.

It is especially disturbing that Summers got most of the $8 million from a major hedge fund at a time when such totally unregulated rich-guys-only investment clubs stand to make the most off the Obama administration’s plan for saving the banks. The scheme, as announced by Treasury Secretary Timothy Geithner, a Summers protégé, is to clean up the toxic holdings of the banks using taxpayer money and then turn them over to hedge funds that will risk little of their own capital. At least the banks are somewhat government-regulated, which cannot be said of the hedge funds, thanks to Summers.

 It was Summers, as much as anyone, who in the Clinton years prevented the regulation of the hedge funds that are at the center of the explosion of the derivatives bubble…

So do we have the makings of another crisis rather than a solution?  Here is Krugman again

The banking industry that emerged from that collapse was tightly regulated, far less colorful than it had been before the Depression, and far less lucrative for those who ran it. Banking became boring, partly because bankers were so conservative about lending: Household debt, which had fallen sharply as a percentage of G.D.P. during the Depression and World War II, stayed far below pre-1930s levels.

Strange to say, this era of boring banking was also an era of spectacular economic progress for most Americans.

The bottom line is we need to make banking boring again by regulating it so the Larry Summers of the world don’t get all the gain and the rest of us can do well also in our more modest way.

And finally, in case you missed it, is Paul Krugman on the Rachel Maddow show.

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Election updates

Remember Minnesota where poor Amy Klobachar is trying to fill the the shoes of two Senators?  The election may be coming to a close – finally.  While Norm Coleman is going to appeal to the Minnesota Supreme Court it doesn’t seem likely that they will overturn the results of the panel of judges that has been overseeing things.  At this point, Al Franken’s lead is 312 votes. 

This from Franken’s lawyer on April 7

At post-court press conference, lead Franken attorney Marc Elias commented that the election contest is essentially over, with Al Franken the winner after the court had 351 previously-rejected ballots counted, which boosted Franken’s lead from 225 votes to 312.

“Today is a very important step, as we now know the outcome of the election contest,” said Elias, “and that is the same outcome as the recount, which is that Al Franken has more votes than Norm Coleman.”

When asked whether he expected Coleman to appeal, Elias said: “That’s a question at this point for former Sen. Coleman. I guess I would say the same thing about his appeal as I said about his case: That the U.S. court system is a wonderful thing, as it’s open to people with non-meritorious claims.”

It really is time for Norm Coleman to hang it up.

 

 

 

 

 

In Illinois, there was no surpise in the 5th Congressional District.  Michael Quigley, a Democrat, replaced Rahm Emanuel, another Democrat.

The other close election is in New York State’s 20th Congressional District.  Politico’s Scorecard  reports as of today

According to the latest unofficial combined machine and paper results released this afternoon, Democrat Scott Murphy has a 35-vote lead over Republican Jim Tedisco in New York’s 20th District.

The following counties have finished counting their domestic absentee ballots: Delaware, Essex, Greene, Otsego, and Rensselaer counties. No numbers have been reported to the state from Saratoga and Washington counties

The interesting thing about this is comparing the counties left to be counted and Nate Silver’s analysis.  Washington County is heavily Democratic while Saratoga is Republican.  Saratoga, however, had fewer absentee ballots.

One thing that seems fairly clear is that there tend to be a relatively higher proportion of absentee ballots returned in counties where Murphy performed well on election night. For example, Columbia County, where Murphy won 56.3 percent of the of the vote last week, accounted for 9.8 percent of ballots on election night, but accounts for 15.3 percent of absentees. Conversely, Saratoga County, which is a Tedisco stronghold, represented 36 percent of ballots on election night but only 27.2 percent of absentees:
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If I simply apportion the absentee ballots based on the distribution of the election day vote in each county, I show Murphy gaining a net of 173 ballots during the absentee counting phase. In addition, as Michael Barone has noted, although a plurality of the absentee ballot returns are Republican, they are somewhat less Republican than registration in the district as a whole.

If Murphy hangs on, it looks like a trifecta for the Dems.  Two holds and one gain.

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Cutting the Defense Budget

How do you tell someone their favorite defense program is no longer going to be funded?  Secretary Gates did it as well as anyone could have when he made his announcement earlier this week.  I think that will turn out to have been the easy part.

So what are people saying about his proposals?

From the Boston Globe  article titled “Deep Cuts, New Chances”

For the defense sector, which in recent years has posted big profits from a rapid run-up in military spending, the new focus was a mixed message. Big programs appear to be in jeopardy, but others may be built up under Gates’ plan.

“This budget represents an opportunity, one of those rare chances to match virtue to necessity, and ruthlessly separate appetites from real requirements,” Gates said of his $534 billion spending plan for the 2010 fiscal year.

Many defense stocks jumped Monday even as the broader market fell. Shares of Lockheed Martin Corp. and Northrop Grumman Corp. each rose nearly 9 percent. Analysts said the big gains, which occurred as Gates made his early afternoon speech, were likely because the budget cuts were not as bad as some investors had anticipated.

The New York Times said the reaction was mixed

Members of Congress and advocates for the armed services pushed back on Tuesday against Defense Secretary Robert M. Gates’s plans to pare billions of dollars from a variety of Pentagon weapons systems, but others said that the cuts were prudent and that fights over them would be limited to several leading programs.

Military analysts said the biggest lobbying campaigns would be focused on Mr. Gates’s proposed cutbacks in the F-22, the advanced stealth fighter that critics call a relic of the cold war, as well as his trimming of the Army’s $160 billion modernization project, called the Future Combat Systems.

Members of Congress from Georgia and Oklahoma, where the jet and the Army project mean jobs, promised a fight. The arguments, which were frequently directed by Republicans against one of their own — Mr. Gates, one of two Republicans in President Obama’s cabinet — were cast in terms of national security and moral responsibility.

But the best commentary is from Jon Stewart in a segment titled “Full Metal Budget”

The fight between regions, technologies and the future of the military has begun.

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Credit Card Blues

Like most Americans I use credit cards.  I use them to buy online and to save the hassle of carrying cash.  Mostly these days I use my debit card but credit cards are great if your stove dies and you need to pay a repairperson or buy a new stove.  Or help with expenses if you are going to graduate school late in life as I did.  But they are a trap.  I remember a time when I cringed if I didn’t pay off the balance each month.  Those days are long gone.

James Surowiecki wrote a great piece for the New Yorker’s  Financial Page  in which he explains very clearly why credit cards companies need regulation as badly as the other financial markets.

It’s little wonder, then, that credit-card companies are now scrambling to shed the customers they think are most likely to default, and to limit the amount that others can spend. In effect, they’re trying to follow the advice given by Larry Selden and Geoffrey Colvin in a book called “Angel Customers & Demon Customers.” Not all customers are equal, it turns out: some are tremendously profitable, while others, like the guy who calls customer service six times a day to check his account balance, cost more than they’re worth. To boost profits, you must cultivate the angels and protect yourself against the demons.

That sounds easy enough. But credit-card companies have created a strange business, in which there’s a fine line between good and bad customers. Their best customers aren’t those who dutifully pay off their balance every month; instead, they’re the ones who charge a lot and pay only a little every month, carrying a sizable balance and racking up interest charges and late fees. These are the “revolvers,” and the credit-card business feeds on them. Credit-card companies don’t necessarily want revolvers to pay off their debts; if they did, there’d be no interest or fees to collect. They want their loans to be, in the words of a banking regulator, “a perpetual earning asset.”

One of the things that credit card companies are doing is increasing interest rates – even on money borrowed at a lower rate.

This increase is partly a response to the greater risk of default, but it also takes advantage of the recession. Many cardholders don’t have enough money to pay off their balance in full, so when interest rates rise they aren’t able to just close their account and get a different card. Effectively, they’re captive customers. And since credit-card companies, unlike most lenders, are allowed to change the terms of their loans at any time, people who borrowed a big chunk of money at, say, nine per cent may now be paying seventeen per cent on the loan.

These tactics are not going to improve the credit-card industry’s dismal reputation. They’re also not going to help an economy in recession, since reduced credit lines take away an important cushion for consumer spending, and higher interest rates and increased fees are likely to drive more people to default. But the odd thing is that while less access to revolving credit is a bad thing for us in the short run, having people rely less on credit cards is a good thing in the long run.

Will Congress and the administration step up to help ease this transition?  A good first step would be higher rates only on new balances to let people pay off the old ones at a reasonable rate – both time and interest.

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Vermont Makes Four: Another state votes for marriage equality

What a last few days!  First Iowa and then Vermont.  The important thing about Vermont is that this happened, not through the courts, but through legislation.  Shap Smith, Speaker of the Vermont House, is quoted in Newsweek as saying, ” People here have seen what it looks like and realized it doesn’t harm anybody.”

John Nichols  reported in the Nation

While progress in Iowa came via the judicial route, and is likely to spark ongoing political struggles, the victory in Vermont was a political one that comes at the culmination of a long struggle in a state that nine years ago was the first in the nation to authorize civil unions for same-sex couples.

The final stage of that struggle came on Tuesday, after Republican Governor Jim Douglas had vetoed legislation allowing gays and lesbians to marry.

To override the veto, supporters of the legislation needed to muster two-thirds of the vote in the state House and Senate.

They did that with relative ease.

The vote in the House was 100 to 49 in favor of overriding the veto and enacting what was dubbed “An Act to Protect Religious Freedom and Promote Equality in Civil Marriage.”

The vote in the Senate was an even more lopsided 23-5.

Democrats, who control both chambers, Republicans, independents and members of the state’s Progressive Party — members of which have long championed marriage rights — all voted for the override.

NPR has a great interactive map showing the progress of marriage equality.

As Bob Dylan once wrote, “the times they are a-changin'”.

 

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Rita Dove, Beethoven, and Bridgetower

This is another story I would have missed except for reading the print edition of the New York Times.

Haydn almost certainly encountered him as a child in a Hungarian castle, where the boy’s father was a servant and Haydn was the director of music, and Thomas Jefferson saw him performing in Paris in 1789: a 9-year-old biracial violin prodigy with a cascade of dark curls. While the boy would go on to inspire Beethoven and help shape the development of classical music, he ended up relegated to a footnote in Beethoven’s life.

Rita Dove, the Pulitzer Prize-winning former United States poet laureate, has now breathed life into the story of that virtuoso, George Augustus Polgreen Bridgetower, in her new book, “Sonata Mulattica” (W. W. Norton). The narrative, a collection of poems subtitled “A Life in Five Movements and a Short Play,” intertwines fact and fiction to flesh out Bridgetower, the son of a Polish-German mother and an Afro-Caribbean father.

Beethoven wrote what we now know as the Kreutzer Sonata for Bridgetower.  Originally titled Sonata Mullatica, Beetoven changed the name

…apparently in a fit of pique after a quarrel over a woman, Beethoven removed Bridgetower’s name from a sonata the composer had dedicated to him, Bridgetower being the mulatto of “Sonata Mulattica.” The two men had performed it publicly for the first time in Vienna in 1803, with Beethoven on piano and Bridgetower on violin.

By the time it was published, in 1805, it had morphed into the “Kreutzer” Sonata, dedicated to the French violinist Rudolphe Kreutzer, who disliked it, however, saying it was unplayable, and never performed it.

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Bridgetower’s story is a corrective to the notion that certain cultural forms are somehow the province of particular groups, said Mike Phillips, a historian, novelist and former museum curator who contributed a series of essays to part of the British Library’s Web site (at www.bl.uk/onlinegallery/features/blackeuro) that profiles five 19th-century figures of mixed European and African heritage, including Bridgetower, Alexandre Dumas and Pushkin. He also wrote the libretto for “Bridgetower: A Fable of London in 1807,” an opera in jazz and classical musica performed by the English Touring Opera, which had its premiere in 2007 in London.

“Bridgetower flourished in a time when the world outside Africa was like a huge concentration camp for black people,” Dr. Phillips said in an e-mail message. He noted that while Bridgetower got a music degree at Cambridge and managed to earn a living as a musician, for much of his life the trans-Atlantic slave trade was at full throttle.

 I find it fascinating that Bridgetower, a mulatto, and Beethoven also presumed to be mulatto performed together.  Add to the mix Thomas Jefferson who was in Paris with Sally Hemmings and it becomes even more interesting.  It seems that we have long been able to hold contradictory ideas about race.  The “all [insert race or ethnicity] are scum except you and you aren’t because you are [my friend, superior, different, etc.] syndrome at work.  Is that, I wonder, how many feel about our President?  That he is an exception.

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Final Four and Opening Day

Last week Amalie Benjamin wrote in the Boston Globe

FORT MYERS, Fla. — It’s almost six weeks into spring training, and already one member of the Red Sox has had surgery, pitchers are headed toward five innings at a clip, and my bracket is shredded beyond recognition. (No, I’m not bitter at all.)

That’s where I am this morning.  My bracket is shredded but for North Carolina (Go Heels!) and it’s gonna rain on opening day at Fenway.  So let’s look at this picture of the grounds crew on a perfect April Saturday two days before opening day.

The season opener at Fenway Park might be a washout on Monday, but groundscrew members John Driscoll pounds down the dirt around homeplate while Jeremy Fuller smooths the gravel in the the area on Saturday morning.

This is also from the Globe.

And about the men’s championship game no matter what happens kids can admire Tyler Hansboough.  He’s called the “player you love to hate” because of his agressive play but he stayed in school for four years and whether you are a North Carolina fan or a Michigan State fan you have to love that. 

There will be two Hall of Famers watching tonights finals (no rainouts in basketball).  This from the New York Times

Magic Johnson will be in attendance at Ford Field on Monday, pulling for Michigan State, which he led to a national title in 1979. Michael Jordan, he hit the game winning shot in North Carolina’s 1982 title-game victory, is expected to be in the crowd, too.

And in my one minute of fame, I was there in New Orleans when Carolina beat Georgetown on the last second errant pass by Brown and the shot by Jordan.  It was a blur, but I believe that James Worthy was in there somehow. Great game and great result.

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Making Sense of the G-20

OK.  All the leaders of all these countries got together in London.   Before the meeting it looked like the bad boy from Dick Cheney’s “old Europe”, Mr. Sarkozy of France, would walk out, leave the meeting in a huff.  Never happened.  Instead, President Obama, the new kid, got France and China to agree on some critical language on tax havens.  The world seemed astonished that a president of the United States of America could actually walk and chew gum. 

I first saw this in Friday’s print addition of the New York Times (yes, I still love that newsprint and reading without staring into a lit screen.) and after some searching found the online link and it turns out it is actually a blog turned into print.  Go figure.  Anyway, this story was titled “On a Scale of 1-10, G-20 scores a 7.” 

For someone like me who is struggling to understand the details of the economic crisis it helped decode the G-20 meeting by lisiting the 10 issues which needed to be addressed and how they did in addressing them.   The authors are Edward Hadas and Christopher Hughes.

The G-20 deserves a mark of seven out of 10. The London summit meeting, which concluded Thursday, hasn’t solved everything. But it has made important strides in both battling the current crisis and preventing future ones.

The score comes by grading the world’s leaders on the top 10 issues the G-20 faced. Each issue was scored with a zero, half a point or a whole point. But note that this is not a finely calibrated exercise. Zero doesn’t mean the G-20 achieved absolutely nothing; equally, a whole point doesn’t mean perfection.

The high scores went to fiscal stimulus, trade finance, preventing financial crisis, tax havens and confidence.  I think this last one is important because the part of the global fiscal crisis is created by uncertainty and fear.

The zero went to trade imbalances, while the rest got half points: making banks healthy, fighting protectionism, increasing the International Monetary Fund, and exit strategy.

In his Friday column about China and the dollar, Paul Krugman ended with this

The bottom line is that China hasn’t yet faced up to the wrenching changes that will be needed to deal with this global crisis. The same could, of course, be said of the Japanese, the Europeans — and us.

And that failure to face up to new realities is the main reason that, despite some glimmers of good news — the G-20 summit accomplished more than I thought it would — this crisis probably still has years to run.

I think the sticking point is that pesky financial regulation issue never mind stimulus money.  Jordan Stancil put it this way in the Nation

Abelshauser [Werner Abelshauser, an economic historian at the University of Bielefeld in Germany and a leading expert on differences in transatlantic economic cultures] argued that it’s hard to change these deeply rooted practices; therefore, Europe can’t succeed under deregulated finance, since it destroys the stability on which Europe’s economy relies. Abelshauser thought a positive outcome of the crisis would be that Europe would return to its proven model of finance.

This is an important point, because it underscores the extent to which the crisis for Europeans is fundamentally about re-establishing a financial system they think serves their interests. Thus the Euro- American debate isn’t really about whether to do stimulus or regulation first–it’s about whether the United States is going to do regulation at all.

America lacks credibility on this count, partly because Obama has not taken a strong stand against the power of finance in the United States. On the contrary, he plans to use taxpayer dollars to subsidize purchases of “toxic assets”–now renamed “legacy assets.” Against that background, the newly stern rhetoric of erstwhile deregulators like Larry Summers is not convincing because it’s clear that the Obama administration is not using the collapse to reorganize American banking along healthier lines. Instead, the US position calls to mind a line from Rousseau’s Confessions: “I pretended to reproach myself for what I had done, in order to excuse what I was going to do.”

The significance of this has not been missed in Europe. Jacques Attali, a key economic wise man in France who has advised both Socialist and conservative governments, told a business daily, “The bankers [in the United States] are going to accept a minimum of regulation. Not more. We see this clearly with the Geithner plan, which reinforces the mechanisms that led to the crisis…. Besides, do you think it’s normal to have taxpayers loaning money to investors so the investors can make profits?” According to Attali, there will be no fundamental change in US behavior on questions like leverage, securitization and debt because “the Anglo-Saxon world lives off that.”

I think this is the big problem.  Will the Obama administration listen only to people like Larry Summers and Tim Geithner who believe in the  American Capitalism free for all or will we move on to a more regulated system that protects the middle class and creates more equality?  Or will he also isten to France and Germany and Paul Krugman?  I thought a hallmark of the Obama administration was to be the ability to listen to opposing points of view before making a decision.

The compromise between France and China on tax havens negotiated by President Obama shows that we could compromise also.  Regulation in the United States could land closer to Europe without us becoming, to the horror of Republicans, just like Europe.  I’m not sure this is an either or situation, but we do need more regulation of the financial industry.  Congress and the President just need to act soon.