2009 - %3, June

Did a Secret Wall Street Memo Make Geithner Go Soft on Derivatives?

| Mon Jun. 1, 2009 10:20 PM PDT

Given that credit default swaps caused the largest financial crisis since the Great Depression, you'd think that the folks responsible for them, people who are now surviving on the taxpayer dime, might be laughed out of Washington if they were to suggest that they be the ones to decide how to regulate them. Sadly, it's the opposite.

On Monday, the Times' Gretchen Morgenson published a little-noticed but excellent piece about the CDS Dealers Consortium, a group created in November by the nine biggest participants in the derivatives market to lobby against stricter regulation of derivatives. The move came a month after five of them had received bailout money. The group's head lobbyist, Edward J. Rosen, who was paid $450,000 by the banks for four months, wrote a secret policy memo that he shared with the Treasury Department and leaders on Capitol Hill. A few months later Tim Geithner released a suspiciously similar regulatory plan. 

It gets much worse: in February Rosen testified before Congress on derivaratives without disclosing his ties to the CDS Dealers Consortium. From 2007 to 2008, five banks in the consortium spent a combined $47.7 million on campaign donatations and lobbying.

Geithner's bank-friendly plan to regulate derivatives would force them to be traded on a privately-managed clearinghouse, rather than on an open exchange, similar to the stock market, where many experts believe that they'd be less subject to manipulation. Morgenson reports:

Critics in both the financial world and Congress say relying on clearinghouses would be problematic. They also say Mr. Geithner's plan contains a major loophole, because little disclosure would be required for more complicated derivatives, like the type of customized, credit-default swaps that helped bring down A.I.G. A.I.G. sold insurance related to mortgage securities, essentially making a big bet that those mortgages would not default. . .

But increased transparency of derivatives trades would cut into banks' profits — hence the banks' opposition. Customers who trade derivatives would pay less if they knew what the prevailing market prices were.

The Times piece is long, but reading it goes a long way towards understanding what is often a huge gulf between the Obama Administration's rhetoric and its tepid approach to bank regulation.

 

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China and North Korea

| Mon Jun. 1, 2009 9:59 PM PDT

It's true, as Anne Applebaum says, that China is the only country in the world with any real influence over North Korea.  So why do they put up with Kim Jong-il's antics?  The usual answer is that they're afraid of pushing too hard lest his regime collapse and send millions of refugees streaming across the border into Manchuria.  Applebaum, however, speculates that that isn't it at all.  China actually wants North Korea to continue its hotheaded ways:

Despite the risks, there are good reasons for the Chinese to prod Kim Jong-il to keep those missiles coming. By permitting North Korea to rattle its sabers, the Chinese can monitor Obama's reaction to a military threat without having to deploy a threat themselves. They can see how serious the new American administration is about controlling the spread of nuclear weapons without having to risk sanctions or international condemnation of their own nuclear industry. They can distract and disturb the new administration without harming Chinese-American economic relations, which are crucial to their own regime's stability.

And if the game goes badly, they can call it off. North Korea is a puppet state, and the Chinese are the puppeteers. They could end this farce tomorrow. If they haven't done so yet, there must be a reason.

I don't really have much to add to this.  It's just that the refugee explanation of Chinese behavior has always struck me as moderately unconvincing, so I'm sort of interested in alternatives — even if they do come wrapped in some variant of "China must be stopped!" fearmongering.  Which this one does.  But it's worth a thought anyway.

The U-Turn on the Photos

| Mon Jun. 1, 2009 9:32 PM PDT

Why did Barack Obama reverse course a couple of weeks ago and decide not to hand over those additional detainee abuse photos that the ACLU is fighting to get released?  Conventional wisdom says it was because of pressure from the Pentagon, but McClatchy reports today that it was actually because of pressure from Iraqi prime minister Nouri al-Maliki:

When U.S. officials told Maliki, "he went pale in the face," said a U.S. military official, who along with others requested anonymity because of the matter's sensitivity.

The official said Maliki warned that releasing the photos would lead to more violence that could delay the scheduled U.S. withdrawal from cities by June 30 and that Iraqis wouldn't make a distinction between old and new photos. The public outrage and increase in violence could lead Iraqis to demand a referendum on the security agreement and refuse to permit U.S. forces to stay until the end of 2011.

Maliki said, "Baghdad will burn" if the photos are released, said a second U.S. military official.

A U.S. official who's knowledgeable about the photographs told McClatchy that at least two of them depict nudity; one is of a woman suggestively holding a broomstick; one shows a detainee with bruises but offered no explanation how he got them; and another is of hooded detainees with weapons pointed at their heads.

If the ACLU wins its suit, they better hope this is just a bunch of spin from administration sources trying to make the boss look good.

Religious Teens Have More Abortions

| Mon Jun. 1, 2009 6:53 PM PDT

Unwed teens and 20s who attend or have graduated from private religious schools are more likely to obtain abortions than their peers from public schools.

New research suggests that while religiosity (defined as religious involvement, frequency of prayer, and perception of the importance of religion) influences the attitudes of young women towards abortion, it does not affect their actual behavior.

In other words, even religious women, if unmarried and pregnant, resort to abortion—particularly women in their teens. This according to new research published in the Journal of Health and Social Behavior.

Hypocrisy sucks.
 

The Triumph of Narrative

| Mon Jun. 1, 2009 5:28 PM PDT

Ta-Nehisi Coates isn't too happy with a new HBO documentary that tries to puncture the mythology surrounding Muhammad Ali:

The core problem with this doc, as it is with most correctives, is that it subscribes to the same sort of moralistic, heavy-handed, simple-minded logic that it allegedly seeks to debunk. Thus while the public image of Ali as this gleaming unvarnished hero is ridiculous, Thrilla's answer is to offer an equally ridiculous image of Ali as a scheming villain who didn't really win the two fights against Frazier, and robbed him of his rightful place as the greatest of all time.

I have a long post in mind about our (seemingly) increasing addiction to simplistic narratives and the (seemingly) increasing difficulty in finding writers who even try to avoid it these days.  But since I haven't written it yet, you won't have to suffer through it right now.  Maybe someday, though.

Digital Revolution from Tehran to Tiananmen Square

| Mon Jun. 1, 2009 3:13 PM PDT

Guest blogger Mark Follman writes frequently about current affairs and culture at markfollman.com.

June 2009 could be a big month for democracy on the world stage, with digital technology playing no small part.

With a landmark speech in Cairo on Thursday, Barack Obama will continue his quest to connect with the Muslim world and repair the grave damage done to U.S. standing under George W. Bush. It remains to be seen how much he might also press for government reform by Hosni Mubarak. Egypt is considered a crucial U.S. ally in the Middle East, but more light has been shed on its dark human rights record particularly since 2007, when a video circulated on the Internet showed a man being sodomized with a stick in a Cairo police station.

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Stimulus: Your Chance to Act Locally

| Mon Jun. 1, 2009 2:37 PM PDT

Our story on architect Ed Mazria's "14x" plan noted that the building sector guzzles about three-quarters of the nation's electricity and half of our overall energy—and is responsible for almost half of America's carbon emissions.

Not only that, CO2 emissions have also risen fastest (details below) in that sector, which consumes energy not just for construction but also to light, heat, and cool buildings, heat water, cook food, recharge your iPod, and all that good stuff. To break it down, about 8 percent of the nation's power goes toward construction and building materials—what Mazria called "embodied energy"—while 42 percent is consumed by the aforementioned activities. (Also see our May/June 2008 package, "The Future of Energy.")

Oprah and America

| Mon Jun. 1, 2009 1:43 PM PDT

Ezra sez:

I didn't exactly wake up this morning thinking, "what I need to read is a brutal, almost overwhelming, takedown of the pseudoscience and snake oil that has come to define a large chunk of Oprah Winfrey's show and brand." But I'm sure glad I did.

Really?  I've popped out of bed on many mornings thinking exactly that.  And this week's cover story in Newsweek delivers.

In fairness to Oprah, she's not really any worse than the thousands of other purveyors of freak show voyeurism, inane pop psychology, and pseudoscientific nonsense that practically define the modern media universe.  But she's by far the most influential.  Anyone who's responsible for foisting even more of Jenny McCarthy on the world deserves whatever Newsweek can dish out.

Obama White House Shows Progressives Not Much Love

| Mon Jun. 1, 2009 1:14 PM PDT

The crowd at this year's Campaign for America's Future annual conference--think of a DC-based ProgFest for liberal activists and policy wonks from across the country--was much smaller than in years past. The conference, which opened on Monday, seemed to have about one-fourth the attendees of last year, when about 2000 people turned up for the "Take Back America" shindig. This year's event was dubbed "America's Future Now!"

The drop-off is not surprising. In fact, it's the cost of success. Now that George W. Bush is long gone (even if the same cannot be said for Dick Cheney) and Barack Obama, the onetime community organizer, is in The House, it's natural that some of the fire on the left is gone. Winning can demotivate a political side. And I remember that in 1994, after the Democrats lost the House to the Republicans for the first time in decades, Representative Barney Frank told me that it was more fun to be in a fired-up opposition.

On Hanging Out With Anti-Abortion Extremists in Wichita

| Mon Jun. 1, 2009 12:35 PM PDT

In January, 2007, I visited the Wichita, Kansas, abortion clinic operated by Dr. George Tiller, who was shot to death in church yesterday by an anti-abortion crusader. Tiller's clinic had just become the last one in town. A shuttered clinic nearby had been purchased by an anti-abortion group, Operation Rescue, which was in the process of converting it into its headquarters, complete with a prayer garden and a memorial to the 50,000 unborn children that the group claims were murdered there. Over the next two days, I learned a lot about Wichita's radical hothouse of abortion foes.

Troy Newman, Operation Rescue's charismatic leader, who some have suspected is partly to blame for Tiller's murder, drove around town with me and vented his rage that nobody had yet shut down Tiller, who he called "the abortionist to abortionists."  A few days earlier, Wichita's district attorney, Nola Foulston, had moved to dismiss indictments against Tiller that had been filed by the state's outgoing attorney general. She later conducted her own investigation of Tiller and found he'd complied with the law, but Newman believed Tiller's clinic had killed a woman. "Our field plan is to expose the lies and misdeeds that they do," he said. "It's pretty simple: They're scum of the earth, they're dirtbags."

It struck me that Newman was deeply disillusioned with the legal system. "All laws are thrown out the window once you talk about abortion," he complained. "In the movement, we call it 'abortion distortion.'"

The next morning, at a bright cafe in the heart of town, Newman and two women discussed how to turn up the pressure on Foulston. Operation Rescue is famous for a strategy of harassing its foes outside their homes. "People have a public identity that they like to keep seperate from their private identity," Newman explained, "but we believe you can't separate the two when you are talking about killing babies. And people are more likely to listen to what you say and be influenced when you bring the issue home to where they work and live." It was a full-court press of constant annoyance: "You poke, poke, poke until they scream," he added, "and then you just keep poking some more."

Despite Newman's tough tactics, he was civil and professed to have  friends who disagreed with him on abortion. After spending two days with him, I'm willing to take him on his word that his pro-life views extend to grown humans, even abortion doctors. But it was easy to see the militaristic rhetoric of Newman, who is the son of an army recruiter, was goading people on towards something more extreme. "A lot of what we do is demoralize the enemy," he said. "This is a battle, and that's the strategy."

Later that afternoon I drove to Tiller's clinic and was promptly booted from the parking lot by a security guard. It was too dangerous to allow lone men inside, I was told when I called the clinic on my cell phone. So I parked on the curb, next to a "truth truck" that displayed a giant billboard of an aborted fetus.

Arrayed on the grassy median in front of Tiller's walled building were rows of white crosses and the plastic figurines of a nativity scene. Writen on chalk near the building's drivway was Psalm 94:20: "Can unjust judges be allied with you God? No!" Anti-abortion activists sat alongside the driveway in lawn chairs and pounced at any cars that tried to enter. As a frightened young woman was driven inside, one of them commented, "Another parent bringing in their daughter to have their grandchild killed."

An abortion protester who would only give his name as Brian spoke favorably of an array of local anti-abortion groups in town. He declined to give his affiliation, but pointed out that a group called Operation Save America had bought a house just across the street from Tiller's office. "Everybody has got a different approach," he said, "a different style."

Those words seem much more chilling when you consider the multiple attempts on Tiller's life. Newman's world is also one in which David Leach, publisher of the Prayer and Action News, which printed essays by Tiller's alleged murderer, can tell the New York Times that "To call this a crime is too simplistic. . .There is Christian scripture that would support this." Religious fundamentalism is still alive and well in the heartland, and isolation and defeat is likely to make some of its radicals even more desperate.