2008 - %3, October

Pearlstein's Prize

| Thu Oct. 2, 2008 10:05 AM PDT

PEARLSTEIN'S PRIZE....Atrios has declared Washington Post business columnist Steven Pearlstein "Wanker of the Day" for his performance during a bailout Q&A on Wednesday. As Glenn Greenwald documents, Pearlstein was indeed a bit of a dick, reminding everyone about his Pulitzer Prize and dismissing opposition to the bailout as little more than ignorance and mindless partisanship from demented bloggers. "Oh how we long for the Glory Days when the Steve Pearlsteins had their Supreme Wisdom honored and never had to hear anyone talking back," Glenn snarks.

Unfortunately, I'd say Pearlstein deserves the abuse. He must have been having a rough week or something. At the same time, it turns out he did address the questions Glenn highlights. Here, for example, he acknowledges that lots of academic economists oppose the Paulson plan and then explains why he thinks they're wrong:

Academic economists very widely believe that if the government would simply recapitalize the banks somehow, it will solve the problem by giving banks the room to borrow more and lend more, and by bringing in additional private capital. In a well functioning market, that would happen. But it ignores the reality that this is not a well functioning market, which is the basic problem we are trying to solve with this legislation. First, a dollar of new capital would not allow the banks to leverage it 10 times and lend out $11 because the market is not willing to lend at decent rates even to well-capitalized banks. Second, even if they had the money, banks are hoarding and unwilling to make loans because they are gripped by the same fear and panic as everyone else, particularly because they have assets on their books that have gone down in value every quarter for a year now and are likely to decline in the quarters to come. So the simple recapitalize the banks solution isn't going to cut it. That needs to be part of the solution, and but it is not sufficient at the moment.

And he also addresses the issue of whether we should bail out homeowners instead of Wall Street bankers:

We have already passed legislation to "bail up," several months ago, using an idea that I was one of the first people to push (refinancing involving a reduction of principal in return for equity stake in the house). We might want to expand that program even further, but it is simply not true that we haven't done anything. We put $300 billion of refinancing into that, thanks to Congressman Frank, who you would villify.

....The obvious problem is that, if you say you'll do it prospectively, then everyone will make themselves delinquent if they think they can get a better deal, and we'll have a huge bill. My guess is that it will also be politically unacceptable when people see that their taxes are being used to help out the guy next door who took on too much debt.

Pearlstein's tone is unusually snotty in this Q&A, and he should watch himself. Bloggers aren't the only ones pissed off about the bailout, the issues are genuinely complex, and insulting critics as morons is hardly a way to build support for the Paulson plan. Still, he did generally answer the questions put to him. There's plenty of substance there to go along with the snark.

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A Sign the Obama Campaign May Have Too Much Money on Its Hands

| Thu Oct. 2, 2008 9:00 AM PDT

Channel 73 of the Dish Network is now labeled "OBAMA" and reportedly plays nothing but Obama's two-minute ad on the bailout. One ad, on a loop.*

What's next? Dudes walking around swing states wearing Obama sandwich boards? Product placement in movies? They certainly seem to have the cash lying around...

* The Obama campaign is now reportedly diversifying the channel's content.

Final (?) Excerpt From the Palin-Couric Interview

| Thu Oct. 2, 2008 7:58 AM PDT

The final excerpt (reportedly) from Katie Couric's interview with Sarah Palin aired yesterday. As a number of people have noted, Palin is unable to identify a Supreme Court ruling that she disagrees with other than Roe v. Wade. In fact, she looks hard pressed to identify another Supreme Court ruling. The really uncomfortable part is the last minute of the video below, but the whole thing is worth watching.


Watch CBS Videos Online

And Kevin notes that Palin's statement that the Constitution includes a right to privacy is a bit odd. She agrees that there is a Constitutional right undergirding Roe, but then asserts that the right ought to be regulated or addressed by the states. Huh?

Staring Into the Abyss

| Wed Oct. 1, 2008 11:49 PM PDT

STARING INTO THE ABYSS....Joe Nocera has a pretty readable tick-tock about the events that led up to the unveiling of the Paulson bailout plan. It started on Monday the 15th when Lehman Brothers was allowed to go bankrupt, accelerated on Tuesday when the Reserve Primary Fund broke the buck, and went critical on Wednesday:

Since the Bear Stearns bailout, Treasury and Fed officials had discussed what a broad government intervention might look like....Almost from the start, they concluded the best systemic solution was to buy hard-to-sell mortgage-backed securities.

On Wednesday morning, during a conference call with other top officials, including Jean-Claude Trichet, the president of the European Central Bank, Mr. Bernanke sounded them out on a big government bailout. The other officials sounded relieved; their main questions were about whether Congress could act quickly.

That evening, Mr. Bernanke told Mr. Paulson during a conference call: "You have to go to Congress. This is pervasive." Mr. Paulson agreed.

.... [On Thursday evening], Mr. Paulson and Mr. Bernanke trooped up to Capitol Hill for a somber session with Congressional leaders. "That meeting was one of the most astounding experiences I've had in my 34 years in politics," Senator Schumer recalled.

As the members of Congress and their aides listened, the two laid out their plan. They would begin offering federal insurance to money market funds immediately, in order to stop the run on money funds.

In addition, the S.E.C. would institute a ban on short-selling of financial stocks. Although Treasury officials concede that the move was mostly symbolic — investors can still buy put options that have the same effect as shorting stocks — they did it mainly "to scare the hell out of everybody," as one official put it.

After Mr. Bernanke made his remark about the possibility that there might not be an economy on Monday without this plan, you could hear a pin drop.

"I gulped," Mr. Schumer said.

Whether you like the bailout plan or not, it's worth reading the whole thing to get a good sense of what prompted it.

Are Fluorescents Really Better?

| Wed Oct. 1, 2008 9:53 PM PDT

544px-Compact-Flourescent-Bulb.jpg Not necessarily. Not all parts of the world stand to benefit by switching from incandescent lightbulbs to compact fluorescents (CFLs). California does not. New Mexico does. Much of South America does not. Estonia does. Why? Because some places produce more mercury emissions by switching to fluorescent lighting, thereby trading fewer greenhouse gas emissions for more toxic mercury pollution.

A Yale study found the effectiveness of the switch varies by region depending on how heavily each area depends on coal, on the chemical makeup of the coal by region (some coal has mercury), and whether or not recycling programs exist for CFLs. In general, the cleaner the energy environment already in place the more detrimental the switch to CFLs. Youch.

Compact fluorescents are four times more energy-efficient than incandescent and last up to 10 times longer. But they also contain mercury, a toxin that can be released during manufacturing and disposal.

Bailout Bill Update

| Wed Oct. 1, 2008 7:21 PM PDT

BAILOUT BILL UPDATE....The bailout bill has passed the Senate 74-25. Now it's on to the House.

....And the Dodgers are winning. Things are looking up!

UPDATE: Dodgers win 7-2. Hooray!

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Palin on Privacy

| Wed Oct. 1, 2008 7:20 PM PDT

PALIN ON PRIVACY....From Katie Couric's interview with Sarah Palin tonight:

Couric: Do you think there's an inherent right to privacy in the Constitution?

Palin: I do. Yeah, I do.

Couric: The cornerstone of Roe v. Wade.

Palin: I do.

Hmmm. This is decidedly not the opinion of most conservatives, is it? Privacy is mentioned nowhere in the constitution, but in 1965 Justice William O. Douglas wrote in Griswold v. Connecticut that "specific guarantees in the Bill of Rights have penumbras, formed by emanations from those guarantees" — and that the right of privacy was one of them. This has since become a much mocked phrase among conservatives, an archetype of the kind of "judicial activism" that they loathe. But Palin says she supports it. Hmmm.

Mark To Movement

| Wed Oct. 1, 2008 4:13 PM PDT

MARK TO MOVEMENT....Yesterday the SEC modified mark-to-market accounting rules. I have a question about this, but it's not the one you might think it is. First, though, here's the background.

M2M itself is a simple concept: it means that banks have to value the securities they hold at their actual market price. If those prices plunge, as they have recently, it means the bank's asset base also plunges. This is obviously bad for banks, so it's understandable that bankers don't like M2M.

The alternative is to allow banks to value securities at their face value until they're sold, or to use sophisticated models to project their value upon maturity. The problem is that this allows banks (and corporations like Enron) huge leeway to cook their books and paper over real losses. Eventually, when the check comes due, everything collapses.

Now, there are legitimate arguments about M2M on both sides. In a panic, for example, the market for some securities can become very thin. How can you mark to a market that barely exists? This is especially a problem with complex modern instruments like CDOs, which are all custom built and might end up with a market price of zero if no one wants your particular CDO at this particular instant of time. (Yesterday's SEC action was in response to just this situation.)

In the end, I come down on the side of M2M. Yes, it can cause balance sheet volatility in a turbulent market, but overall it's the most accurate and least exploitable way of truly valuing assets. Allowing model-based games just puts us where Japan was in the 90s, where accounting gimmicks allowed firms to continue to exist like zombies for years even though everyone knew they were really bankrupt. It's better to write down losses honestly and then deal with the fallout than it is to keep desperately hoping that maybe values will return when things turn up.

That said, here's my question: why have movement conservatives suddenly made a fetish out of suspending M2M? I know this isn't unusual: movement wingnuts frequently find obscure topics that they're convinced hold the key to economic salvation. But of all things, why M2M? Even if you think mandating M2M was a mistake in the first place, you can't possibly think that suspending it now, after prices have collapsed, would help anything — can you? Sure, it would technically take some pressure off banks to recapitalize, but it would be such an obvious accounting game that it would simply make investors even more paranoid. Any bank that took advantage of a suspension of M2M to pretty up its balance sheet would surely end up instantly on every investor's permanent shitlist, wouldn't it?

One of my readers suggested that maybe there was a tax angle to M2M that explained this. In other words, the movement folks didn't really care about suspending M2M itself, it was just a stealth method to cut taxes. That doesn't sound right to me (M2M has tax consequences for individuals, but not banks, as far as I know), but maybe I'm missing something. Anyone know?

UPDATE: Just for the record, I should add something. In an email to a friend a few minutes ago I said this: "Despite what I just wrote, I'm hardly dead set against modifying M2M on a temporary basis. If it helps in an emergency, maybe we swallow hard and do it. Just like we're swallowing the bailout. But the idea that this is somehow a positive good, not a temporary and desperate band aid, seems crazy."

I'd need to be talked into suspending M2M, of course, and there are other temporary emergency measures that I could be talked into too. But in any case, let's not fool ourselves into thinking they're anything other than what they are.

The Duhks: Green Music You Can Dance To

| Wed Oct. 1, 2008 3:00 PM PDT
The Duhks (pronounced "ducks") have a style that's hard to classify: They describe it as a blend of "Gospel, Celtic, Old time, Zydeco, Country, Latin, French-Canadian and sheer Rock & Roll." Sure, the band was nominated for a Grammy in a country music category, but as anyone who has heard them knows, they're hardly boot-in-your-ass CMT stars.

Country or not, one label that applies is "green." As claw-hammer banjo adept Leonard Podolak explained to me after one recent show, even musicians need to pull their environmental weight if we're going to solve our society's sustainability problems.

To that end, the band—which spends 75 percent of their time on the road—has invested in a biodiesel van to reduce their environmental footprint. (Podolak acknowledges that biofuels are not a perfect solution, just the best they can do for now.) The band is also spreading their message through Green Duhks, their sustainability project. Environmentally-minded fans can join the "Flock" and support The Duhks Sustainability Project by purchasing a "very limited edition original art poster" printed with recovered ink on 100% recycled paper.

"We've forgotten what is sacred in this fast paced world," sings Sarah Dugas. "We take, and keep taking, without thinking of what we're given." It's true, and it's not just her sirenic voice that's got me convinced. Here's "Fast Paced World," the title track of The Duhks' latest album:

My New Favorite Streaming Radio Station: Montreal's CISM

| Wed Oct. 1, 2008 2:04 PM PDT

mojo-photo-cism.jpgAllo, le Riff. I just got back from a quick little DJ tour of Canada, eh, and on this jaunt I had the opportunity to play in Montreal for the first time. Turns out Montreal isn't unlike San Francisco, strangely at odds with North America but not quite European, culturally vibrant but chock full of homeless, except there they ask for change in French. In addition to Paul's Boutique and tasty Portuguese grills, one of my happiest Montreal discoveries was CISM/89.3 FM, the radio station of l'Université de Montréal. I'm not sure why it was so good, exactly; perhaps its focus on musique en français works as a kind of limiting factor allowing a wider creative freedom within that zone, or maybe French music in general is just really awesome right now. But there was something uniquely Quebecois about CISM's playlist--with Paris obsessed with the latest fashions in dance music, CISM is a happily grungy alternative, shifting between soaring indie rock, wobbly dancehall, avant-garde electro and bouncy hip-hop. My French is terrible, but the DJs' Quebec accents are strong enough to be amusing even to the uninitiated, which is a little bonus bit of entertainment. Thankfully, the station is actually kind of professional, with some solid production and a good compressed sound. Moreover, if you don't catch the name of that last song, they include archived playlists on their website for your convenience. Of course I wouldn't be telling you this if they didn't have a high-quality online stream: go to their website and click "écouter en direct." Alternately, after the jump, check out some of the Quebecois artists I heard over the course of a couple days' listening.