Kevin Drum

What Does "Pass" Mean to You?

| Thu Apr. 9, 2009 11:37 AM EDT

This is a peculiar story from the New York Times:

For the last eight weeks, nearly 200 federal examiners have labored inside some of the nation’s biggest banks to determine how those institutions would hold up if the recession deepened.

....Regulators say all 19 banks undergoing the exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs “exceptional assistance,” the government, that is, taxpayers, will provide it.

....Regulators recognize that for the tests to be credible, not all of the banks can be winners. And it is becoming increasingly clear, industry insiders say, that the government will use its findings to press certain banks to sell troubled assets. The hope is that by cleansing their balance sheets, banks will be able to lure private capital, stabilizing the entire industry.

So what have we learned here?  First: all 19 banks will pass.  Second: not all the banks can be winners.  Third: the ones that pass — but aren't winners! — will be propped up by taxpayers.  Fourth: no, they won't be propped up by taxpayers, they'll be forced to sell assets and raise private capital.

Huh?  Which is it?  If by "pass," regulators merely mean that a bank won't be instantly seized and its management defenestrated, then I guess this makes sense.  Awards for all!  On the other hand, the prospect of a bank getting a "needs improvement" grade and then successfully selling a big stock issue to raise private capital is just fanciful.  Even banks that pass with flying colors will have trouble doing that.

So what's going on here?  Why are Treasury officials privately telling reporters that everyone is going to pass but that some banks will receive a pass-minus and may be required to do things that are almost certainly impossible?  Are they just trying to lay the groundwork for failure and temporary nationalization later on?  Or what?

I'm having a harder and harder time figuring out what's going on as time goes by.  If everything is on the up and up, it doesn't make sense.  If there are hidden wheels, though, I'm not sure they make sense either.  Just what is Treasury up to?

Advertise on MotherJones.com

Tradecraft Update

| Thu Apr. 9, 2009 10:57 AM EDT

A new entry in the annals of epic fails:

Bob Quick, Britain's most senior counterterrorism officer, was forced to stand down today after an embarrassing security leak resulted in a major anti-terror operation, designed to foil an alleged al-Qaida plot to bomb Britain, being rushed forward.

....Police were forced to carry out raids on addresses in the north-west of England in broad daylight yesterday, earlier than planned, after Quick, the Metropolitan police's assistant commissioner, was photographed carrying sensitive documents as he arrived for a meeting in Downing Street.

A white document marked "secret", which carried details of the operation being planned by MI5 and several police forces, was clearly visible to press photographers equipped with telephoto lenses.

The Guardian helpfully reproduces an enlarged, rotated, redacted version of the document here.

Tweet!

| Thu Apr. 9, 2009 10:16 AM EDT

Tom Lee is unhappy about journo-twittering:

As a cheap and fun SMS interface for media outlets I have no beef with it; as a means of personal marketing for journalists, the pretense and lack of honesty is dismaying....I'd say the median journotweet is something like "getting ready to sit down for an i/v w @spalin. the lady is a tough cookie!" when in fact it should be closer to "complaining abt blogs in line to pick up kids @ sidwell frnds. no poor people around!"

Peter Suderman concurs that journo-tweeting is "almost universally vapid and uninforming."  No argument from me on that score, but I suppose there's nothing really all that wrong with journalistic self-promotion either.  Having watched their demographics grow ever more AARP-ish for years, and having missed several boats already to get younger readers/viewers interested in their product, I suppose the news industry really, really doesn't want to miss yet another one.  They probably figure that Twitter is helping them capture the news consumers of the future.

Plus there's the fact that every once in a great while, a reporter puts something useful up.  And even if it happens only once in a thousand tweets, that still means you'd better be participating so you don't miss out.  There's nothing worse in DC than having someone ask "Have you heard about ______?" and being forced to admit that you haven't.  Especially if the reason you haven't heard it is simply because you're too neanderthal and out of touch to have the right technology.  Thus are boomlets born.

(But is Twitter a bubble?  For those of you who think bubbles are easy to spot while they're happening, you need to answer Right Now.  And show your work, please.  In a couple of years we'll find out which of you was right.)

Connecting the Taliban

| Thu Apr. 9, 2009 1:00 AM EDT

The Washington Post reports on the propensity of Islamic extremist groups to host their internet presence on American servers:

The Taliban's account was pulled last week when a blogger noticed the connection and called attention to it. But the odd pairing of violently anti-American extremists and U.S. technology companies continues elsewhere and appears to be growing. Intelligence officials and private experts cite dozens of instances in which Islamist militants sought out U.S. Internet firms — known for their reliable service and easy terms that allow virtual anonymity — and used them to incite attacks on Americans.

"The relatively cheap expense and high quality of U.S. servers seems to attract jihadists," said Rita Katz, co-founder of the Site Intelligence Group, a private company that monitors the communications of Muslim extremist groups. Even al-Qaeda has sometimes paid American companies to serve as conduits for its hate-filled messages, said Katz, who has tracked such activity since 2003.

We may be infidels, but at least we're technically adept infidels.

Sugar Tariffs and the Bible

| Thu Apr. 9, 2009 12:11 AM EDT

What can Passover teach us about international relations?  Dan Drezner explains.

Quote of the Day - 4.8.09

| Wed Apr. 8, 2009 10:54 PM EDT

From Major Randy Schmeling, a 43-year-old Army National Guardsman who commands the American police mentoring teams in Ghazni, on the endemic corruption in Afghanistan:

Right now, there is no meritocracy here. It's, "Hey, your sister has a pretty mouth — do you want to be a general?"

There's nothing in this article to be surprised about if you've been paying even the slightest attention to Afghanistan.  But you should read it anyway, just to remind yourself all over again of just what we're up against there.

Advertise on MotherJones.com

Unemployment Armageddon

| Wed Apr. 8, 2009 7:47 PM EDT

According to the minutes of the latest Fed meeting, their staff economists believe that weaker than expected economic growth will result in "the projected path of the unemployment rate rising more steeply into early next year before flattening out at a high level over the rest of the year."  An artist's conception of unemployment growing steeply all the way through the first quarter of 2010 is shown below.  I sure hope the Fed economists are just kidding about this.

Caving on Auctions

| Wed Apr. 8, 2009 1:17 PM EDT

That Washington Post reports that the Obama administration has all but caved on the principle of auctioning 100% of emission credits in a cap-and-trade system:

The Obama administration might agree to postpone auctioning off 100 percent of emissions allowances under a cap-and-trade system to limit greenhouse gas pollution, White House science adviser John P. Holdren said today, a move that would please electricity providers and manufacturers but could anger environmentalists.

...."The idea, obviously, is to end up with a bill that reflects both the thinking of Congress and the administration, a bill that the president can sign," Holdren said, adding that when it comes to a 100 percent auction, "Whether you get to start with that or get there over a period of time is something that's being discussed."

Getting there over time is what the Europeans tried, of course, and it was a disaster.  Basically, it meant nearly a decade of wasted effort until they finally got close to a 100% auction.  Blecch.  Still, at this point I suppose I'll be grateful if we put any kind of plan in place at all, since I assume the one thing we will get 100% of is Republican opposition.

Franken-Coleman

| Wed Apr. 8, 2009 11:00 AM EDT

Generally speaking, I don't blame Norm Coleman for doing everything he can to win his razor-close Senate race against Al Franken.  If there are legal avenues open during a recount, candidates have the right to use them.

But that's getting harder and harder to defend.  Minnesota's election procedures may not be perfect (whose are?), but there's never been any serious evidence of widespread fraud or favoritism, and Franken's lead has increased at every step.  Even Scott Johnson, a conservative Minnesota attorney, writing in National Review today, agrees.  Coleman's recount strategy may have been poor, he says, but Franken "didn’t steal the election."

Coleman has nothing left now except an equal protection claim so poorly conceived that it plainly has no chance at either the state or federal level.  In a system where votes are counted and tallied locally, there will inevitably be small differences in procedure, but Coleman has no plausible evidence that a class of voters was mistreated or that election officials were systematically biased against him.  Even conservatives are finally starting to admit that, as much as they dislike Franken, Coleman's effort has turned into little more than a shabby campaign of retribution and spite.  It's past time to let it go, guys.

Charts Charts Charts

| Wed Apr. 8, 2009 12:22 AM EDT

CFR's Paul Swartz has a whole passel of horrifically grim charts for you today.  Bottom line: our current recession is the worst since World War II by practically every measure.  And on some measures, it's even worse than that.  U.S. trade, for example, is now collapsing at nearly Great Depression velocity.  Eichengreen and O'Rourke concur.  The only good news is that we're responding to events better than our ancestors did.  We hope.