2009 - %3, August

Need To Read: August 27, 2009

Thu Aug. 27, 2009 7:00 AM EDT

Today you're getting one torture-related link and a lot on the death of Sen. Ted Kennedy:

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We're Still at War: Photo of the Day for August 27, 2009

Thu Aug. 27, 2009 7:00 AM EDT

Senior Airman Brenton Swift watches as Staff Sgt. Michael Hebron monitors the needle insertion site during a platelet donation at the Air Force Theater hospital July 24 at Joint Base Balad, Iraq. Fifty percent of donations collected are used outside the wire. Airman Swift is a 332nd Expeditionary Aircraft Maintenance Squadron aircraft armament systems journeyman, and Sergeant Hebron is a 332nd Expeditionary Medical Support Squadron aphaeresis technician. (U.S. Air Force photo/Senior Airman Nicole Enos)

Eco-News Roundup: Thursday August 27

| Thu Aug. 27, 2009 6:36 AM EDT

Sugar Pills: Turns out placebos work better in some countries than others.

Ted Kennedy: With the Liberal Lion gone, healthcare reform seems even more distant.

Yellow Pages: Does anyone ever use phone books anymore? Then why does Kevin Drum get four of them every year?

Foxes in Danger: The creepy-looking, probably gamey-tasting flying foxes are in danger from legal hunting. [MongaBay]

Passing the Torch: Who will take Kennedy's seat? And when?

Put a Cork In It: There's a new campaign to get Americans to recycle their corks, just like those nice Canadians up the street. [Consumerist]

PO 101: Don't know what the Public Option is? Get a primer from Nikki Gloudeman.

"Socially Useless"

| Thu Aug. 27, 2009 1:28 AM EDT

Now here's a bank regulator who's talking like he's found religion.  The Guardian glosses an interview in the British Prospect:

Lord Turner, chairman of the Financial Services Authority, warned bankers that he would support a new wave of taxes on the City to prevent excessive profiteering if they continue to take excessive risks.

In a searing critique of the industry, Lord Turner described much of the City's activities as "socially useless" and questioned whether it has grown too large...."The really fundamental question is whether the overall level of financial services pay is a consequence of the swollen financial sector which has resulted from oversimplistic financial deregulation. This is not a question that any of the politicians have focused on but I think it's an important and legitimate issue of public concern," he said.

....He told Prospect: "If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit. Higher capital requirements against trading activities will be our most powerful tool to eliminate excessive activity and profits.

"And if increased capital requirements are insufficient I am happy to consider taxes on financial transactions — Tobin taxes."

Italics mine.  The FSA didn't exactly cover itself in glory during his predecessor's term, so maybe Turner is just talking tough because he wants to keep his job.  But if that's what it takes to turn a technocrat into a populist, then that's what it takes.  I sure wouldn't mind hearing a harangue like this from an American regulator once in a while.

As for the transaction tax, I don't know how practical that is.  But if it can be made to work, it's a good idea.  Not only would it raise some money, but it would put a crimp in some of the most highly leveraged investment schemes, which fundamentally depend on tiny returns multiplied by billions of dollars.  A transaction tax would make a lot of them unprofitable.  So it's a twofer.

Ben's Second Term

| Wed Aug. 26, 2009 9:23 PM EDT

What do we have to look forward to from Ben Bernanke's second term as chairman of the Fed?  The New York Times asked a bunch of economists for their predictions.  Here's Mark Thoma:

My worry is that as time passes, we’ll forget how bad things were and the desire to impose necessary new regulation will fade. Here’s where I think Mr. Bernanke’s experience will be crucial. He was there at every step in the development of the Fed’s response to the crisis and he will not soon forget the problems he faced (nor repeat his mistakes), making it more likely that he’ll be a forceful and passionate advocate for new regulation before Congress. [Italics mine.]

Boy, do I hope this is true.  But it strikes me as woefully wishful thinking.  One of the reasons I opposed reappointing Bernanke is that I'd like to have someone running the Fed who's serious about reregulating the financial industry, both at a macro and a consumer level.  With Bernanke, though, we're taking a flyer.  We're hoping that the crisis of the last two years has fundamentally changed his view of market self-regulation, and that he'll apply the same suppleness and creativity he showed dealing with the meltdown to dealing with post-crisis regulatory issues.  And maybe he will.  But people rarely change lifelong worldviews even after they've lived through a catastrophe, and Bernanke has done nothing to make us think he's an exception.  Contra Mark, my guess is that when it comes to actual, concrete legislation and rulemaking, he'll revert to the same Ben Bernanke he's always been.  When that happens, we'll have missed our only chance for years to really reform our financial system.

And here's former Fed economist Vincent Reinhart with another prediction:

The White House will likely learn that a Fed chaired by Ben Bernanke will follow a policy uncomfortably tight as the 2012 election looms into sight. [Italics mine.] Bernanke has espoused a commitment to low inflation over his entire career. He also is a democratic and consultative chairman, so the voices of monetary conservatives among Fed officials will be heard loudly and frequently.

Now this one I believe.  That's what Fed chairmen usually do to Democratic presidents, after all.

Uncloaking the Fed's Bailout

| Wed Aug. 26, 2009 8:15 PM EDT

In a major victory for the business press and anyone who longs for more transparency at the Federal Reserve, a federal judge in New York ruled on Tuesday that the Fed must fork over  financial rescue records to two Bloomberg journalists. The reporters, Mark Pittman and Craig Torres, had sued the Fed's board of governors after it refused to hand over bailout-related documents. What's more, the Fed had refused to search for certain information relating to its actions in early 2008—namely, when the Fed's New York branch loaned JPMorgan Chase nearly $13 billion to buy Bear Stearns. (JPMorgan and Bear Stearns ended up paying back the $13 billion loan plus $4 million in interest.)

The Fed's bailout manuevers have come under criticism from members of Congress (especially Rep. Alan Grayson (D-Fla.)) and the media, including our own Nomi Prins. Like when the Fed let Goldman Sachs use investment-bank risk models even after it had converted into a bank holding company in order to qualify for bailout funds, allowing Goldman to make big-time, risky bets with taxpayers' money.

Needless to say, this is an important victory for the press covering the bailout, and for shedding some light on the incredibly opaque actions the Fed has taken to rescue the financial system.  The decision's timing couldn't be better. It comes right after Fed chairman Ben Bernanke was nominated for a second term, so closer scrutiny of his decisions when the economy was near rock-bottom will be in the spotlight. The decision also comes as the Treasury Dept. weighs letting the Fed play a larger role in financial regulation by monitoring those "too big to fail" banks in our system—an idea I and others strongly oppose. I'll be curious to see what those two crusading Bloomberg reporters turn up.

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Robotic Warfare

| Wed Aug. 26, 2009 7:02 PM EDT

Matt Yglesias muses on what the growing use of drone aircraft means for the Air Force:

The military [...] is an institutional culture that puts a great deal of stock on honor, courage, and difficult physical work. A service that consists of guys sitting in cubicles playing video games is going to have trouble holding its head high amidst a warrior ethos. And consequently, the Air Force is tending to resist the technological imperative to go more remote. Ultimately, however, that resistance is doomed and it’s not really clear what will come of it.

There's another side to this: what happens when drones become really, really good?  Right now they're at about the technological phase that airplanes were in during World War I: nice tools in specific circumstances, but not really overall game changers.  But that won't be true for much longer.  Advances in drone technology are likely to come pretty quickly, and the result is going to be a very large fleet of drones that are bigger, faster, stealthier, more maneuverable, have better optics, and can accomodate far more — and more effective — weaponry than today's models.  And since they're relatively cheap and using them runs no risk of loss of life, there's going to be very little institutional or public  pressure against using them.  This is likely to mean they'll get a lot of use.

You see the same two-edged sword with police officers being armed with tasers.  It's great that they have a nonlethal alternative to shooting people, but the fact that they have a nonlethal alternative also means they have less reason to avoid using it.  Result: lots of people being tasered.

It's not just drones, of course.  It's the entire robotic revolution in warfare.  When we get to the point where one side is able to conduct war effectively with virtually no fear of loss of life, does that mean that public pressure against war will start to fade away?  After all, demand curves slope downward.  When war becomes cheaper, we'll get more war.  Right?

Fiji Water Deemed 'Despicable'

| Wed Aug. 26, 2009 7:01 PM EDT

Anna Lenzer's Fiji Water exposé has made quite a splash: It's a top search term on AOL, and has been mentioned on dozens of blogs and media sites, including both NYTimes.com and LATimes.com. Now it's gotten a spot on New York magazine's "approval matrix." Anna's tale of how Fijian police threatened to imprison her while reporting was rated as both "highbrow" and "despicable" by the New York staff. I have to say I agree with them on both counts. But as LeVar Burton used to say, You don't have to take my word for it. You can read Anna's entire story for yourself here.

Are Teachers Too Hard to Fire?

| Wed Aug. 26, 2009 6:19 PM EDT

Steven Brill writes in the New Yorker about "rubber rooms," where Big Apple teachers accused of incompetence spend years sitting around collecting paychecks while their cases are adjudicated.  But that's only a symbol of what reformers think is the larger problem: namely that virtually no one is ever fired for poor job performance after their three-year probationary period is up and they have tenure.

In seven years [...] unsatisfactory ratings for tenured teachers have risen from less than one per cent to 1.8 per cent. “Any human-resources professional will tell you that rating only 1.8 per cent of any workforce unsatisfactory is ridiculous,” [Dan] Weisberg says.

Is this prima facie evidence that the system isn't working?  Based on my experience, I'd say yes.  On the other hand, I'd also say that, at least in the places I'm familiar with, virtually everyone who got fired was let go within the first year or two they were with the company.  Very few who had been around for more than three years got fired.  On the third hand, occasional layoffs often provided excuses to get rid of poor performers, so perhaps that shrank the pool of people who would otherwise have eventually been axed.

So....I dunno.  Opinions?

What the Heck's a Public Option?

| Wed Aug. 26, 2009 5:35 PM EDT

A recent poll reveals that most Americans don't know what in health care reform's name the public option is—less than 4 in 10 can accurately describe it.

Is this supposed to be surprising?

After all, the health care debate has been dominated much more by town hall hysteria and death panel talk than actual substance. For all the buzz about public option bickering—Pelosi v. McCain v. Obama v. Grassley!–politicians and the media have provided scant information about how exactly it would work or the impact it would have.