2009 - %3, January

Why Did Obama's Transition Team Ignore Bill Richardson's Long History of Dubious Dealings?

| Sun Jan. 4, 2009 2:52 PM PST

The wreck of Bill Richardson, who withdrew earlier today as President-elect Obama's nominee for Commerce Secretary, surely should have been anticipated by the Obama vetters. As previously reported by Mother Jones, the New Mexico governor has, over the last decade, left behind a wide trail of questionable business dealings, many of them involving the energy industry.

Obama's transition team apparently chose to ignore these past whiffs of scandal. They also seem to have been unfazed by the current federal investigation into a possible pay-to-play scandal, which was already well underway when Richardson's nomination was announced on December 3. Within two weeks of the nomination, the media was widely reportingthat Richardson was the subject of a grand jury probe in a "highly active stage."

Richardson insists that he and his administration "have acted properly in all matters" and that he is withdrawing his name from consideration only because "the ongoing investigation also would have forced an untenable delay in the confirmation process." But the accusations are pretty damning. The Washington Post reports:

The probe in New Mexico involves questions about a California firm, CDR Financial Products, and its president, David Rubin. The grand jury in Albuquerque is looking into whether the firm was given a contract with the New Mexico Finance Authority because of pressure from Richardson. CDR made $1.48 million advising the authority on interest-rate swaps and refinancing of funds related to $1.6 billion in transportation bonds issued by the agency, state officials confirmed.The firm and Rubin together gave $100,000 to two Richardson organizations shortly before winning those contracts.

Back in July 2007, when Richardson was a contender for the Democratic nomination, and was also being discussed as a possible vice-presidential pick for Hillary Clinton, I reported here on the considerable baggage Richardson carried when it came to his relationships in the private sector:

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Obama, Richardson Finger-Pointing Begins

| Sun Jan. 4, 2009 2:49 PM PST

Well, we've already got a lead on which of three possible explanations applies to this Richardson situation. Here's Jake Tapper:

Sources tell ABC News that officials on the Obama Transition Team feel that before he was formally offered the job of commerce secretary, New Mexico Gov. Bill Richardson was not forthcoming with them about the federal investigation that is looking into whether the governor steered a state contract towards a major financial contributor....

And the Richardson people respond as you would expect:

The Richardson camp says the governor was forthcoming, with sources close to the governor noting that there had been reports about the controversy in local media such as the Albuquerque Journal as far back as August 2008. The governor discussed the investigation with the Obama team, they say, and believes that he and his administration have done nothing wrong.

So it took, oh, less than three hours for the Obama and Richardson camps to begin pointing fingers at one another. Richardson has already fallen on his sword; it's probably better for everyone involved if both parties keep their mouths shut from this point forward. Assigning blame just prolongs the media's interest.

Update: Richardson sources are suggesting that they did tell the Obama team about the Governor's problems before he was nominated; they had hoped the Governor would be cleared in a fast-moving inquiry that failed to materialize.

Richardson Withdraws

| Sun Jan. 4, 2009 1:56 PM PST

There must be something legitimate to the allegation that New Mexico Governor Bill Richardson and/or his aides pushed state business to a company that was a ample supporter of Richardson's campaigns and other activities ($100,000 for Richardson and pals to travel to the Democratic Convention, for example). Richardson has withdrawn himself from Obama's future cabinet, where he was slated to become Secretary of Commerce, citing the desire to avoid a lengthy and distracting confirmation process. Here's part of a statement from Richardson that the Obama transition team released to the press.

...when the President-elect asked me to serve as Secretary of Commerce, I felt a duty to answer the call. I felt that duty particularly because America is facing such extraordinary economic challenges. The Department of Commerce must play an important role in solving them by helping to grow the new jobs and businesses America so badly needs.
It is also because of that sense of urgency about the work of the Commerce Department that I have asked the President-elect not to move forward with my nomination at this time. I do so with great sorrow. But a pending investigation of a company that has done business with New Mexico state government promises to extend for several weeks or, perhaps, even months.

More on Teaser Blogs

| Sun Jan. 4, 2009 12:39 PM PST

MORE ON TEASER BLOGS....Dave Munger responds to my annoyance with "teaser" blogs, which routinely make you click "continue" to read an entire blog post:

This really depends. I mean, if you've got a three-paragraph post, and you're asking people to click through to read one more paragraph, I agree. But what if you've got a post that's 8 or 10 paragraphs long? Or what if you're embedding some bandwidth-heavy content? Most people aren't going to click through, so this can save a lot of bandwidth. Yes, I'm biased, because that's what CogDaily does, but at least you know now why we do it.

FWIW, I don't have a problem with this. My problem is mostly with blogs that do this routinely and for no very good reason. I already mentioned Felix Salmon's blog, and others in the original thread called out Josh Marshall and the Firedoglake crew. Basically, it's a real pain in the butt to have to click "continue" constantly just to finish up a blog post, and there's no question that it reduces my reading of blogs that do this.

But I don't have any problem with doing it for a reason. Occasional long posts, especially ones that have a limited audience, are fine candidates for this treatment. Putting spoilers below the fold is fine. I'm not quite sure what kind of content would be so bandwidth heavy that this would be a good excuse, but I suppose this works too. And doing what CogDaily often does, which is to summarize a new piece of research in enough detail to let you know if you might be interested in reading the gory details, and then putting said details below the fold — that's fine too.

But my plea is to use some discretion here. Actually, use a lot of discretion. 600 words isn't that much, and there's no need to cut a post that long in half. Spoilers are uncommon unless you're running a movie review site. And scrolling past a post you aren't interested in only takes one or two seconds. So please: do this sparingly. The world will be a better place for it.

Quote of the Day - 01.04.09

| Sun Jan. 4, 2009 12:18 PM PST

QUOTE OF THE DAY....From Michael Goldfarb, lunatic pit bull and former McCain spokesman, on an Israeli bomb that killed the entire family of a Hamas leader:

The fight against Islamic radicals always seems to come around to whether or not they can, in fact, be deterred, because it's not clear that they are rational, at least not like us. But to wipe out a man's entire family, it's hard to imagine that doesn't give his colleagues at least a moment's pause. Perhaps it will make the leadership of Hamas rethink the wisdom of sparking an open confrontation with Israel under the current conditions.

This comes via a chain of links ending at Matt Yglesias, who says: "To be clear, he's not saying that it's sometimes okay to kill a bad guy's innocent children as part of a military operation directed against the guy. He's saying it's better to kill his children than it would be to avoid killing them."

VaR and the Black Swan

| Sun Jan. 4, 2009 11:05 AM PST

VaR AND THE BLACK SWAN....Joe Nocera has a good piece in the New York Times Magazine today about VaR, the risk model that established a virtual hegemony on Wall Street before the great financial implosion of 2007-08. Nassim Nicholas Taleb, author of The Black Swan, argues that the fundamental problem with VaR lies not in its technical guts, but in the fact that it's specifically designed to exclude potential catastrophes:

In its most common form, [VaR] measures the boundaries of risk in a portfolio over short durations, assuming a "normal" market. For instance, if you have $50 million of weekly VaR, that means that over the course of the next week, there is a 99 percent chance that your portfolio won't lose more than $50 million.

....VaR is often measured daily and rarely extends beyond a few weeks, and because it is a very short-term measure, it assumes that tomorrow will be more or less like today. Even what's called "historical VaR" — a variation of standard VaR that measures potential portfolio risk a year or two out, only uses the previous few years as its benchmark.

....Yet even faulty historical data isn't Taleb's primary concern. What he cares about, with standard VaR, is not the number that falls within the 99 percent probability. He cares about what happens in the other 1 percent, at the extreme edge of the curve....A good example was a credit-default swap, which is essentially insurance that a company won't default. The gains made from selling credit-default swaps are small and steady — and the chance of ever having to pay off that insurance was assumed to be minuscule. It was outside the 99 percent probability, so it didn't show up in the VaR number. People didn't see the size of those hidden positions lurking in that 1 percent that VaR didn't measure.

Taleb has been making this argument for quite a while, and obviously events have proven him prescient. But I've always had a couple of problems with his critique. First, our current economic crisis isn't really a black swan, is it? Things like this have happened fairly regularly during the past century (and before), on the order of once a decade at least, and maybe more often than that. Pretending that this was a wildly improbable event strikes me as nothing more than a sophisticated version of "nobody could have predicted." After all, if the crash of 2008 really was a one-in-a-hundred (or one-in-a-thousand) event, then it really is true that even reasonable people couldn't have been expected to foresee it.

Second, I've never seen Taleb explain what we should do about this. What's his advice? Here's Nocera: "Taleb likes to say that, as a trader, he has made money only three times in his life — in the crash of 1987, during the dot-com bust more than a decade later and now. But all three times he has made a killing." Fine. He's made money three times in the past two decades. But he knows perfectly well that this doesn't work on a broad scale. Ordinary trading desks have to make daily trades based on evaluation of ordinary risks. That's how global finance gets done. So the question is: given the fact that we need ordinary global finance, and not everyone can just sit around waiting to make a killing on black swans, what should all these ordinary trading desks be doing to protect themselves against possible meteor strikes?

Taleb doesn't seem to say (though maybe he has and I just haven't seen it), but this is what I'd like to hear more about, especially since he seems to have a lot of interesting and perceptive ideas about the behavioral basis of finance and financial crashes. In the meantime, Nocera's article is a good read, even if it doesn't really provide any answers.

UPDATE: Yves Smith pans Nocera's article here. I'm a little puzzled by a lot of what she says, since it strikes me that Nocera wrote at length about topics that she says he ignored, and in no way wound up "defending a failed orthodoxy." But maybe I'm missing something.

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| Sat Jan. 3, 2009 8:47 PM PST

FROST/NIXON....Becks went to see Frost/Nixon and wasn't impressed:

The movie is even worse than the play. I felt that it was total bullshit. I don't want to get too spoileriffic, but my main problem was that the movie cultivates an air of a faux documentary, trying to convince the readers that it's well-researched and based on actual events, and then completely invents a pivotal scene that is supposed to explain both Frost and Nixon's motivations. I was pissed enough that this went unmentioned in the movie (my recollection was that it's admitted in the play) but really turned against it upon learning of even more insidious manipulation of events from my fellow moviegoers after the show.

I haven't seen the film either, partly for this reason, and I'm beginning to wonder if Ron Howard is planning to make a habit of this. As I recall, he was praised for the accuracy of Apollo 13, but then he went and made A Beautiful Mind, which bore practically no resemblance to the book at all. Like all of us, I'm pretty used to movies taking dramatic liberties with the truth, but aside from the fact that it depicts a famous mathematician who later became mentally ill, the movie version of A Beautiful Mind might as well have been made on another planet from the one where the book was published. I've been suspicious of everything Howard has made since then, and it sounds like Frost/Nixon is more along the same lines.

Anybody else seen it? What did you think?

The Ownership Society

| Sat Jan. 3, 2009 1:13 PM PST

THE OWNERSHIP SOCIETY....The Washington Post reports that the Bush administration plans to sign an eleventh hour agreement allowing a timber company in Montana to pave roads passing through Forest Service land. Why? Apparently because we're suffering from a housing shortage:

The shift is technical but with large implications....As Plum Creek has moved into the real estate business, paving those roads became a necessary prelude to opening vast tracts of the company's 8 million acres to the vacation homes that are transforming landscapes across the West.

Scenic western Montana, where Plum Creek owns 1.2 million acres, would be most affected, placing fresh burdens on county governments to provide services, and undoing efforts to cluster housing near towns.

Impeccable timing as always from the Bush administration. What better time than now to provide a free gift to the homebuilding industry?

A Denver School Teacher Responds to the Bennet Appointment

| Sat Jan. 3, 2009 11:21 AM PST

Colorado Governor Bill Ritter's choice of Michael Bennet to replace departing Senator Ken Salazar (Salazar is leaving Congress' esteemed higher body to become Obama's Secretary of the Interior) is already drawing criticism. Bennet, the reform-oriented head of the Denver school system, has never run for office in his life and has never held a statewide position. There is little evidence that suggests he can hold onto the seat when challenged by a Republican in 2010.

A few weeks ago, when Bennet was generating buzz as a possible Secretary of Education, I spoke to a friend who is a charter school teacher in Denver. She was skeptical. Naturally, I asked her for her thoughts on Bennet's latest move. They are below.

A Former Blago-ite Fills In Some Blago/Burris History

| Sat Jan. 3, 2009 10:53 AM PST

A Capitol Hill-type who got his start interning for Blagojevich responds to a blog post from yesterday that raised the possibility that Blago appointed Burris because Burris helped Blago win the 2002 governor's race. Blago, who had no standing in the black community at the time, won the Democratic primary only because Burris stole some of the black vote away from a man named Paul Vallas who had assiduously courted the black community.

Sorry, no. Blago's not the kind of guy who returns favors, and Burris (a man who has built a lavish monument to himself listing his accomplishments) is not the kind of guy that would do a massive favor like this and then wait around 6 years for a Senate appointment that no one could have predicted in 2002. Burris ran because he thought he could get the nomination by having Vallas and Blago split the white/downstate vote, leaving Burris with the nomination in a year with a remarkably weak Republican party and candidate.
Why has Blagojevich picked Burris now? Because he needs 19 votes from State Senators to survive impeachment. 9 State Senators are black. I think Blago's hoping they're all getting calls from community leaders asking them to stand by him since he stood by them.