Tuesday, January 27, 2009


I am amused by all the howling and moaning by Republican Congressmen about just where in the United States the Obama administration will relocate the Guantanamo prisoners. I am especially amused by the howling and moaning of Senator Sam Brownback of Kansas.

The federal prison at Ft. Leavenworth, Kansas, is the most obvious candidate for detainee relocation -- to Senator Brownback's dismay. Brownback has introduced legislation to forbid the use of federal funds to transfer the Guantanamo detainees to Leavenworth. (I am not sure how to transcribe the sound of flatulence, but that's what should be inserted here.)

It seems that the residents of Kansas are concerned that the Guantanamo detainees will attract terrorist activity to their extremely large, flat, and rectangular state. Figuring that the average car bomb impacts about 1000 square feet, and that the population density of the city of Ft. Leavenworth is 935 per square mile, the average car bomb would kill or injure about one-third of a person. Nine tenths of that third of a person is a devoted Christian, and hence would proceed immediately to heaven. So, what's the problem?

Well, the Republicans seem to think Alcatraz would be a better choice. Granted, with a population density of about 16000 per square mile, the human toll of a car bomb in San Francisco would be considerably more extensive than that of a bomb in Ft. Leavenworth -- but since the victims would probably be Democrats (or, better yet, gay Democrats), God's justice certainly would be better served.

I'm starting to feel a little better about Obama's approach to the Republicans, especially since the Republicans are behaving like such total assholes. Go ahead, Barack... reach out to them. Then, when they refuse to budge... well, fuck 'em.

Friday, January 23, 2009

Speaking of zombies...

Okay, here's a thought. AIG, at this point, is as zombielike as any financial company you can name. Even after two bailout attempts, it remains as good as dead. It's also sucked up enough government money to be mostly nationalized already. So, here's the idea:

Why not nationalize it completely, wiping out the shareholders completely? Shares have so little value left, most shareholders hardly would notice. Break the company in half, with General Insurance, Life Insurance and Retirement Services, and Asset Management in one part, and Financial Services in the other. Sell the first half, which continues to make money, and recover many of the billions of taxpayer dollars now sunk in the AIG swamp.

The Financial services sector then should be taken into bankruptcy, wiping out the debts owed on credit default swaps. Banks that continue to count CDSs from AIG as assets then would be obliged to write them down, and everybody would have a much better idea of just how well capitalized those banks may or may not be.

It's a safe bet that some more zombies would emerge from the shadows. Those, too, should be nationalized by some RTC-like agency, and their remaining assets sold when things start getting back to normal.

I understand that not all financial stocks are held by hedge funds and wealthy fat cats. I have no doubt that both my pension fund and my 403(b) would suffer further losses, but neither one stands much chance of recovery until a lot more light is shone into the obscurity of derivatives markets. Since AIG turned out to be such a central player, AIG seems like a great place to start.

Thursday, January 22, 2009

And now the banks...

...again. Or, more to the point, still.

Yes, it's nice to see the ass end of Henry Paulson exiting the Department of the Treasury, but it's also a little disconcerting to see Tim Geithner on his way in. As President of the New York Fed, he was pretty much Alan Greenspan's right-hand man -- anyway, I can't remember him voting against any significant Greenspaniana. Should we assume that Greenspan's mea culpa applies to Geithner as well? I'd be a lot happier if I were sure Obama didn't select Geithner based solely on a recommendation by Robert Rubin.

(Hmmm... What have we heard about Rubin lately?)

So according to all the usual sources, Obama's choices for dealing with the banking crisis come down to these:
  • Infuse even more taxpayer money into the major banks, perhaps with requirement that they actually lend it out this time.
  • Have the Treasury create one glorious, taxpayer financed "bad bank," which would buy all those "toxic assets" from the private banks. This is, essentially, Paulson's original plan.
  • "Fence off" the toxic assets by guaranteeing their value, so that banks can go back to doing business as usual without worrying about further write-downs.
  • Figure out which banks are "zombies" -- failed banks that will struggle on only with continued large infusions of taxpayer money -- and nationalize them.
The "bad bank" idea has been gaining in popularity because it embodies the traditional American approach of socializing all losses while privatizing profits. It rewards the greed and stupidity of those who created the mess, at taxpayer expense, since the only way it could truly save zombie banks is by paying them substantially more than their toxic assets are worth.

Also a contender is "fencing off" toxic assets by guaranteeing their value -- in essence, writing insurance policies on sinking ships. Proponents of this approach don't like to mention it, but there is a less folksy name for that kind of insurance -- credit default swaps, the same kinds of financial instruments that helped get us into this mess. Haven't the taxpayers already eaten enough of those when we bailed out AIG?

Nationalization, of course, is a dirty word. It's the kind of thing those, those Europeans do, after all, and hence completely unAmerican. The fact that it worked very nicely back in the 1990s, when the Resolution Trust Corporation was formed to resolve the Savings and Loan crisis, is being studiously ignored.

Geithner, at least, says that this time we won't be leaping in head first without taking the trouble to see whether or not there's water in the pool. Free market ├╝ber alles ideology has taken a beating recently, and Barney Frank's leadership of the Financial Services Committee is some cause for comfort. We'll see what happens.

Monday, January 19, 2009

Turning point?

"Comes the revolution," my mother used to say, imitating her grandfather's Yiddish accent, "we'll all eat pitches and krim."

It was my introduction to irony, and, as a young child, I totally didn't get it. We ate peaches (canned) and cream (sour) as often as we liked -- and George Washington had won the revolution way back in olden times. I caught on later, though, in the sixties, when my radical friends and I were busy changing the world -- and it seems that Mom first heard the phrase from great-grandpa back in the thirties, when she and her radical friends were busy changing the world.

A sizable chunk of the population of the United States seems to think the revolution will be starting tomorrow, at the Obama inauguration -- to which I reply, "pitches and krim." Disappointment, I'm afraid, is inevitable. George Washington really did win the revolution -- the bourgeois revolution -- way back in "olden times," and the plutocrats have been firmly in charge ever since.

This is not to say that some revolutionary change didn't take place in the thirties, with the coming of welfare capitalism, or in the sixties, with the expansion of the welfare state and the gains accomplished for civil rights. It's just that the changes didn't match the expectations. They never do.

So what can we expect of Obama? Anybody who's been paying attention can see that while he speaks like an idealist, his actions are guided entirely by pragmatism. He will not expend "political capital" fighting the health care lobby, so we will not have the single-payer health insurance system we so desperately need. He will not stand up to the financial industry, weakened as it is, so we will continue the long-standing practice of socializing losses and privatizing profits. (Yes, taxpayers, you soon will own a shitload of "toxic assets.") He will not instruct his Justice Department to prosecute the leaders of the outgoing administration for war crimes, and he's likely to entagle us in Afghanistan just as thoroughly and painfully as Kennedy entangled us in Vietnam.

I think the best we can hope for is the reversal of some of the catastrophic mistakes of Reagan, Bush, Clinton, and Bush II -- although nearly thirty years of free-market excess aided and abetted by government is not likely to disappear in eight, despite the clear failure of Milton Friedman/Alan Greenspan economics. Still, all of us can be happy that The Worst President In The History Of The United States Of America will no longer be around to make things even worse.

Is that enough of a "turning point" for you? I hope so.

Friday, January 9, 2009

"Half-assed" defined: "compromising" with assholes

So much for the definition -- on to the case in point: Obama's economic recovery plan.

Let's say you're a hospital administrator. A majority of the doctors at your hospital think patients with infections should be treated with antibiotics. A minority -- a loud minority -- believe those patients should be leached or, better yet, bled. Only in that way, they maintain, will the foul humours be released. (Note: they recommend bleeding no matter what the patient's condition, from robust health to death rattle.)

"I know," you proclaim, "let's compromise! We'll cut the dose of antibiotics in half, and we'll placate the minority with some bleeding! That way everybody will like me, and the bleeders won't shout quite so loud when they go on Fox News."

Listen, Barack, stop being such a goddamned pansy. A half dose of antibiotics (spending) and a half dose of bleeding (tax cuts) ensures that the patient dies. If you're re-elected in four years, it won't be because you knuckled under to a pack of loud-mouthed Republican troglodytes. You don't have to compromise, because if they won't go along with a real stimulus package, it simply means that they hate America. You are the goddamned popular president (albeit not yet especially popular with me), so use the goddamned popularity you worked so hard to win and get us out of this mess.

Tax cuts -- $500 for individuals and $1000 for couples -- will not stimulate anything. The money will go straight to the banks to pay down debt, which was exactly what was done with the last stimulus package. There is NO economic reason to promulgate stupid little tax cuts, except to push more public money at the very same people who created the current crisis. Did a Republican ever espouse bipartisanism? Even when goddamned Bush lost the popular vote, did it ever occur to him to compromise with Democrats?

I'm not saying helping people get out of debt is a bad idea, but a tax cut is the wrong way to do it. The average household owes over $9000 in credit card debt, with interest rates from the mid to high teens. Those who have missed a payment or two may find themselves paying interest rates in the upper twenties.

Once upon a time -- that is, before 1978 -- rates that high were illegal in every state but Delaware and Nevada. All the other states protected their residents with anti-usury laws. Then came the Marquette decision, in which the Supreme Court ruled that banks could charge borrowers in any state whatever interest was legal in the state where the bank was based.

As you might expect, banks from all over the country started relocating their corporate offices to Delaware and Nevada; then, so as not to lose their banking industries, all the other states overturned their anti-usury laws. If the new administration wants to help people get out of debt, trying to get a federal anti-usury law through Congress would be a great way to do it. At the very least, there should be a limit on interest charged by banks taking federal bailout money.

The money that Obama wants to blow in tax cuts would be much better spent in direct aid to the states. State tax revenues are crashing, and state governments are responding with budget cuts. That means job losses for workers in state and local government -- clerks, secretaries, teachers, fire fighters, librarians, social workers, trash collectors and, if things get bad enough, police. Thirty-seven states are required by their constitutions to balance their budgets, so governors will have no choice if they don't get help right away.

Yes, money for infrastructure projects is a fine thing, and should help put many of those in the construction trades back to work, but helping to support state payrolls should not be ignored -- and the twenty-two Republican governors will appreciate it every bit as much as the twenty-eight Democrats.

Wednesday, January 7, 2009

Israel in Gaza

As long as images like this are appearing in the New York Times, Israel can't expect a lot of sympathy.

Do Hamas fighters mix in among the civilian population, intentionally drawing Israeli fire on children? Of course they do. Today, Hamas managed to draw fire on a UN sponsored school, which led to Israel racking up two dozen more civilian deaths. "But there were two dead militants too," Israel complained. "They were firing rockets!"

It doesn't matter. Tomorrow's Times will have pictures of more dead Palestinian children. If Israel hopes to compete for the hearts and minds of the rest of the world, it had better start rushing Israeli children into the paths of Hamas rockets. The only politically useful response to the other guy's dead children are dead children of your own.

So, suppose you're a member of the Israeli Knesset, and you think sending Israeli children to be blown up by Hamas rockets might not be too popular among your constituents. The "Hamas War," however well planned, is shaping up to be no more successful than the "Hezbollah War." What's to be done?

Sadly, you're likely to see the problem in political terms. Netanyahu and his Likud party have been leading in the polls lately, so Barak and his Labor Party are determined to show they can be even more belligerent than Likud. Kadima, still reeling from Olmert's problems, needs both Labor and the religious zealots of Shas to cling to power. It begins to look like peace isn't a viable option, unless some real pressure comes from an unlikely source -- the United States.

Nobody of any consequence in American government has ever dared criticize Israel, thanks to AIPAC and to wealthy American Jews who have been big contributors to political campaigns. This is not to say that Israel has not deserved American support -- it has, most of the time. Nevertheless, even one's best friends screw up royally from time to time, and real friendship demands that we stop enabling their self-destructive behaviors.

Right now, Israel claims it is trying to stop Hamas rocket attacks. Anybody actually paying attention, however, can see that Israel is engaged in a probably futile effort to destroy Hamas -- just as it tried to destroy Hezbollah when it invaded Lebanon in 2006.

Hamas won't be destroyed by a military incursion. Every dead Palestinian child will serve to recruit many more Hamas militants, and Iran and Syria will find ways to provide them with arms. The only way to destroy Hamas is to delegitimatize it, and the only way to do that is to help Fatah grow strong enough to become a viable alternative.

Mahmoud Abbas does not enjoy much respect in the Muslim world, primarily because he's been unable to win any real concessions from Israel. Israeli settlements continue to expand in the West Bank, movement from place to place remains severely restricted, and economic growth is impossible. Israeli political leaders, afraid to stand against religious fanatics and land hungry immigrants from the former Soviet Union, refuse to do anything that might help Abbas gain some legitimacy among the people he allegedly leads.

The incoming Obama administration could make a difference if it is willing to exercise some of the power three billion dollars a year in military aid ought to give the United States over Israel. Whatever the outcome in Gaza, and whatever the outcome of the elections that will be held in Israel next month, the United States must persuade Israel that its own interests will best be served by significantly improving the lives of Palestinians of the West Bank -- and making sure that Mahmoud Abbas gets the credit.

Abbas has made significant efforts to cooperate with both Israel and the United States, and it is time he got some cooperation in return. The only route to a two-state resolution of the Palestinian problem is letting Fatah succeed in helping Palestinians lead better lives. Killing Palestinian children -- no matter what justifications are offered -- is not the answer.