2008 - %3, October

The Politics of Esthetics

| Tue Oct. 7, 2008 11:26 AM EDT

THE POLITICS OF ESTHETICS....Ezra Klein is agog at Sarah Palin's campaign rhetoric:

I can't remember George W. Bush engaging the culture war with anything even approaching this ferocity in 2004.

McCain and Palin are running on fumes. There's just nothing left for them to talk about aside from unpatriotic liberals, sneering urbanites, and how the mainstream media hates them. The politics of esthetics is all they have left.

It has truly been a remarkable campaign. If you put a gun to my head and forced me to choose between John McCain and George Bush as president, I don't know who I'd pick — and that's something that would have been inconceivable as recently as a year ago. I wonder if McCain has any idea just how thoroughly he's going to exit this campaign with his reputation permanently soiled and his life story in tatters?

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Can the Fed Stop a Bank Run?

| Tue Oct. 7, 2008 10:34 AM EDT

The Fed Reserve, in a desperate action this morning to stop a bank run and preserve commercial liquidity, is pouring money into short term markets. As the AP reported an hour ago:

The US Federal Reserve opened up its coffers Tuesday to companies hit by the credit crunch with a new program that will buy up commercial paper, short-term debt critical for many corporate operations.
The latest effort in an all-out war against the credit crunch creates a new "liquidity backstop" for corporate finance and was established after the US Treasury determined it was "necessary to prevent substantial disruptions to the financial markets and the economy," the central bank said.

"Substantial disruptions to the economy" is a nice way of saying that without access to commercial paper, commerce in the the United States would grind to a halt.

Two days ago, Nouriel Roubini, the respected NYU economics professor, market expert, and editor of the RGE Monitor, had already made these urgent recommendations to stop a liquidity run. In an October 5 interview with the Council on Foreign Relations, Roubini advised the following moves:

Will McCain Go Negative In Tonight's Debate?

| Tue Oct. 7, 2008 10:15 AM EDT

That's the question of the day. The McCain campaign has decided to go negative on Barack Obama in the last month of the campaign, invoking Bill Ayers and Jeremiah Wright in recent days. It's easy, though, to raise attacks like those at a campaign rally filled with sympathetic listeners or in a newspaper column with one sympathetic listener. It's much harder to do so while standing face to face with your opponent, in front of a neutral crowd. It took a number of debates before Obama, Hillary Clinton, and John Edwards had the famous slugfest in South Carolina in which Clinton dropped the Rezko bomb and Obama taunted Hillary for her husband's antics by saying "I can't tell who I'm running against sometimes."

But McCain knows how to get rough. In a Republican debate in New Hampshire, he took the lead in a tag team assault on Mitt Romney, sticking the shiv in so many times that Romney was left pleading for civility, saying, "Senator, is there a way to have this about issues and not about personal attacks?"

Doonesbury Continues the Crusade

| Tue Oct. 7, 2008 10:06 AM EDT

We mentioned yesterday that Doonesbury is running with a theme Mother Jones wrote about a few weeks back, namely that John McCain slams the role lobbyists have played in the financial meltdown while keeping dozens of Wall Street lobbyists on his campaign payroll. Here's yesterday's strip:

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Doonesbury © 2008 G. B. Trudeau. Used by permission of Universal Press Syndicate. All rights reserved.

Today, strip author Garry Trudeau continues the theme. Trudeau is naming, on average, 7.5 lobbyists in each strip. One wonders if he's in this for the long haul...

Anti-Obama Book Author Corsi Arrested in Kenya

| Tue Oct. 7, 2008 9:54 AM EDT

Kenyan authorities have arrested Jerome Corsi, the author of a hit book on Obama, "Obama Nation," on immigration violations, the AP reports:

The American author of a best-selling book attacking Barack Obama is being detained in Kenya because he does not have a work permit, a senior immigration official said Tuesday.
Jerome Corsi, who wrote "The Obama Nation: Leftist Politics and the Cult of Personality," was being held at immigration headquarters in Nairobi after police picked him up from his hotel Tuesday, said Carlos Maluta, a senior immigration official in charge of investigations.
"We still haven't decided what to do with him," Maluta told The Associated Press. ...

Commercial Paper

| Tue Oct. 7, 2008 1:58 AM EDT

COMMERCIAL PAPER....Banks, finance companies, and large corporations routinely finance their ongoing operations by issuing short-term debt known as commercial paper. It's denominated in large amounts (typically a million dollars or more), it's unsecured, it's low cost, it matures quickly (typically in 30 days or so), and it can be issued easily because it doesn't have to be registered with the SEC. Without access to commercial paper, large modern corporations would seize up and die.

Which, unfortunately, is what's happening right now. The commercial paper market is essentially frozen, and as notes mature and need to be rolled over, companies are finding it impossible to get routine financing. (This is how "Wall Street problems" turn into "Main Street problems.") So today, the Fed announced plans to step in:

As pressure built in the credit markets and stocks spiraled lower around the world on Monday, the Federal Reserve was considering a radical new plan to jump-start the engine of the financial system.

....The Fed plan is intended to renew the flow of credit on which the economy depends. Under its plan, the central bank would buy unsecured commercial paper, essentially short-term i.o.u.'s issued by banks, businesses and municipalities.

And there's more:

On Monday, the Fed announced that it would once again redouble one of its key emergency lending programs, increasing the size of its Term Auction Facility to $600 billion, from $300 billion. On top of that, the central bank plans to provide an additional $300 billion to banks to meet their end-of-the-year cash needs.

To pay for its burgeoning responsibilities, the Fed has no choice but to keep printing more money. To prevent that flood of new money from reducing the central bank's overnight interest rate to zero, the Fed also announced on Monday that it would start paying interest on the excess reserves that banks keep on deposit at the Fed.

Paying interest on reserves allows the central bank to set a floor on interest rates and retain at least some control over monetary policy. In its announcement on Monday, the Fed said it would pay an interest rate of 1.25 percent — three-quarters of a point below its target of 2 percent for the overnight Federal funds rate.

That's a lot of activity for one day, no? Normally, I'd say that stepping into the commercial paper market is a pretty stunning move for the Fed, which is decidedly not in the business of financing corporate operations. But after the events of the past year it seems almost anticlimactic. Before long you'll be getting your auto loans directly from the Fed.

Just to put this in perspective, though, it might actually be a bigger deal than the bailout bill we just spent the past two weeks going berserk over. But it will happen with hardly a peep regardless. I don't think anybody's in the mood to peep right now.

And one other note: remember that $7 billion that California governor Arnold Schwarzenegger wanted to borrow from the Fed because the credit markets were frozen? That was for the purchase of Revenue Anticipation Notes, which are routinely used to finance ongoing operations while the state is waiting for tax revenue to arrive in the spring. Unless I'm wrong (and I might be), this is basically a form of commercial paper, which means that California might get its wish. Instead of issuing the RANs privately and paying high rates (if there are any buyers at all), California may be able to make use of the new Fed facility instead. Frankly, I'm not sure we deserve it, but who said life was fair?

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Capitalization

| Mon Oct. 6, 2008 7:01 PM EDT

CAPITALIZATION....Speaking of bank capitalization, if it turns out that the only solution to the credit crisis is a massive injection of capital into the financial system, just how much capital are we talking about? A trillion dollars? Two trillion? Anybody got a decent guess?

Bagging on the Bailout

| Mon Oct. 6, 2008 6:54 PM EDT

BAGGING ON THE BAILOUT....Atrios is annoyed:

If we remember way back to about 2-3 weeks ago, Hank Paulson was promising that there would be NO MORE BAILOUTS. Then, suddenly, we needed a giant BAILOUT RIGHT NOW. The media typically responded by using the Dow as a proxy for the economy/magnitude of the crisis in order to help hype the necessity of a massive bailout. And since the bailout passed, the Dow has tanked.

OK, point taken, but there's a big dollop of unfairness here. It's not as if Paulson and Bernanke just changed their minds for no reason, after all, or that a systemic bailout was a dumb response, or that the Dow is meaningless. Remember the sequence of events here.

Three weeks ago Paulson and Bernanke announced that they wouldn't bail out Lehman Brothers. Maybe that was a risk worth taking, maybe it wasn't, but in any case it didn't pan out. In fact, it was a disaster. So unless they wanted to sit and watch the U.S. financial system melt down completely, P&B didn't have any choice but to change their minds. Better that than to stubbornly cling to their free market principles no matter what the consequences, right? And while the Dow may not be a great proxy for the entire economy, the credit markets really are in big trouble and the Dow reflects that. What's more, the S&P 500 reflects it even better, and it's fallen even further than the Dow. Finally, today's drop is almost certainly a reaction to European problems and the inability of the EU to offer a coordinated response, not a reaction to the Paulson plan.

Now, the Paulson plan may turn out to be bad policy. Plenty of economists think a pure recapitalization scheme would be a better bet. But the mere fact that P&B responded to events and offered up a systemic plan after a solid year of dike-plugging efforts and a final scary-as-hell week hardly counts against them.

And as long as we're on the subject, here's another question: is the problem with the credit markets fear or is it bank capitalization? If the problem really is capitalization, then it's not fear that's keeping banks from making loans. The problem is that they just don't have the money. And yet plenty of economists who think capitalization is the fundamental problem also talk as though fear is really the driving force behind the panic. Which is it?

A Paleo-Feminist on Transgender Sexism Studies

| Mon Oct. 6, 2008 5:49 PM EDT

An extremely 'well intentioned' young white guy I work closely with said to me the other day that, appalled as he was by this "new" notion of white privilege he'd just heard of, thank god he'd never been its beneficiary. Others had, of course, but not him and man! would such a thing suck if it actually did exist.

While trying not to either laugh at him or slit his throat, I informed him about a study done by U of Chicago and MIT professors. In that study, identical resumes were sent in response to their local papers' want ads. Identical, that is, but for names like "Jennifer" v. "Tanisha," and "Jamal" v. "Joe". Let's just sum it up thusly:

The authors find that applicants with white-sounding names are 50 percent more likely to get called for an initial interview than applicants with African-American-sounding names. Applicants with white names need to send about 10 resumes to get one callback, whereas applicants with African-American names need to send about 15 resumes to achieve the same result.

"Testers" (fake applicants sent out to rent apartments, buy cars, etc.) find basically the same results.

He could only stare at me in silent bewilderment that his white skin had ever, ever helped him. Him, with his Martin Luther King T shirts, pants sagging off his ass, and tongue stud but white bread name, let alone skin. I love the kid but he doesn't yet know that anybody can cover up their piercings, but only some of us can lose melanin for the brief duration of an interview. C'mon white folks. Tim Wise can't do it alone. Get a clue already.

Now comes an equally delicious way of proving that sexism and male privilege are all too alive and well (hat tip: Andrew Sullivan.) From Time: