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Doonesbury, Cont'd.

| Thu Oct. 9, 2008 11:18 AM EDT

Here's yesterday's strip:

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And here's a link to today's. The crusade continues.

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Calendars Show Gov. Palin's Foreign Policy Experience: About 20 Meetings for About 12 Hours

| Thu Oct. 9, 2008 11:17 AM EDT

In her first interview after John McCain picked her to be the GOP's vice presidential nominee, Alaska Governor Sarah Palin claimed that her foreign policy credentials were enhanced because "you can actually see Russia from land here in Alaska." She also pointed out that she had experience dealing with trade delegations. Later, asked by CBS News' Katie Couric if she had ever participated in negotiations with Russia, Palin said, "We have trade missions back and forth. We—we do—it's very important when you consider even national security issues with Russia ."

But the calendars tracking Palin's official meetings during her tenure as governor contain not one listing indicating she ever met with a Russian official. In fact, the 562 pages of her daily schedules—obtained by Mother Jones under Alaska's Open Records Act—indicate that Palin had few meetings at all with any foreign representatives and rarely dealt with any topic related to foreign policy. The schedules include about 20 meetings, events, or phone calls in which Palin interacted with foreign officials. And in many instances, these interactions were cursory or ceremonial and did not involve policy details. According to the schedules released, Palin spent roughly 12 hours over the course of 19 months on these meetings. (This doesn't count what happened during a four-day trip she took to Kuwait to visit members of the Alaska National Guard. The schedules for those days do not detail whom she met.) The calendars show no meetings between her and a trade delegation from any nation.

It's possible that the calendars are not fully accurate reflections of what happened—perhaps some meetings ran longer (or shorter) than scheduled. And it's possible that in her off hours, Palin pored over Foreign Affairs, held unofficial chats with foreign officials, and sought out foreign policy experts. Also, there is a six-week gap in her calendars—from mid May through the end of June 2007—due to what her office calls a "computer failure." But according to the schedules, throughout her stint as governor, Palin has devoted merely a few hours to anything of a foreign relations nature, and most of her contact with foreign officials came through discussions with Canadian officials about a natural gas pipeline involving a Canadian company.

Here is a complete list of all of Palin's official calendar entries for events or meetings in which she had to interact with a foreign representative. The missing weeks aside, this list represents the sum of the foreign policy experience she obtained while serving as governor.

The Rumble in the Corner

| Thu Oct. 9, 2008 2:51 AM EDT

THE RUMBLE IN THE CORNER....As regular readers know, I'm a fan of NRO's The Corner, which I think of as sort of a direct pipeline into the conservative id. Lately, as an Obama victory has become more and more likely, the Cornerites have started going completely around the bend, venting their frustration in lunatic conspiracy theories and manic love notes that are increasingly untethered from the real world. This afternoon, after reading their latest bunch of posts about Obama being a secret Maoist, I thought maybe I should finally write something about it. In the end I was too lazy to do it, but luckily Hilzoy came through with a post that hits all the high points I was going to make anyway. Go check it out to get a sense of how the impending doom of an Obama victory is sending conservatives into cloudcuckooland.

But why are they going so stone batty? My theory is that Obama is driving them crazy the same way that Ali drove Foreman crazy in the Rumble in the Jungle. You remember that fight, don't you? Foreman was the heavy favorite, a brawler who had dropped Joe Frazier in two rounds and seemed likely to beat Ali to a pulp. But Ali won by playing mind games on Foreman. He sat on the ropes, took hit after hit, and then taunted Foreman in the clinches to hit him even harder. An enraged Foreman kept swinging wildly, but nothing worked. Ali took everything he could dish out, and the furnace-like heat finally did Foreman in. In the eighth round, drained and exhausted, he was knocked cold by an Ali combination that ended the fight.

The same thing is happening to McCain and his supporters. They're throwing everything they have at Obama, and he's just taking it. Nothing seems to have an effect, so they keep swinging ever more wildly. But that isn't working either, and it's driving them crazy. Who is this guy? Why won't he go down? It's enraging. They just can't believe they're losing to this punk. And so they become ever more unhinged, making up wilder and wilder stories and becoming more and more enraged when they can't get any traction with them. At this rate, their next stop is a padded cell at Arkham.

Personally, I wish Obama were doing more than playing rope-a-dope: it's going to win him an election, but it might not win him the war. Still, it is pretty likely to win him the election, and it's driving lots of conservatives crackers at the same time. We could do worse, I guess.

Another Finger in the Dike

| Thu Oct. 9, 2008 12:59 AM EDT

ANOTHER FINGER IN THE DIKE....A couple of days ago we learned the startling news that AIG has already blown through $61 billion of its $85 billion bailout cash. What to do? Answer: give 'em more money:

The Federal Reserve Board said Wednesday that it would provide up to $37.8 billion to the embattled insurer the American International Group to help it deal with a rapidly dwindling supply of cash.

....A.I.G. said Wednesday that it would use the $37.8 billion from the Fed to improve the liquidity of its securities lending business, which is losing cash rapidly. By stopping that flow, A.I.G. said, it would be able to preserve more of the Fed loan and use that money more effectively to wind down the affairs of A.I.G.'s troubled structured finance division, known as the financial products unit.

"Financial products unit" = credit default swaps, just in case the terminology is a little opaque here. That one unit was basically responsible for bringing down the entire company.

Top 5: New Music

| Wed Oct. 8, 2008 10:33 PM EDT

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In this edition, Kanye reacts to a broken heart by putting tarps on all his furniture, Pitbull steals an Italian techno track and makes it even better, Chad Vangaalen lets his freak-folk flag fly, The Streets returns with a delicate ballad, and Brightblack Morning Light whisper something about the spirit of the Buffalo, or something.

1. Kanye West – "Love Lockdown"

I'm not immediately loving this song like I (and everybody else) did with "Stronger" and "Good Life," for instance, but I'm definitely fascinated by it. Musically, this is about as minimal as possible, just three tuned bass drum noises, joined later by simple piano chords and what sounds like African percussion. It's nowhere near as leftfield as M.I.A.'s triple-time African drum tribute, "Boyz," but it's still pretty crazy, and the video's dreamlike imagery only adds to the strangeness.

2. Pitbull – "Krazy"

Didn't I write a while back about how dance beats are taking over hip-hop? Well, this is the most extreme example yet: a few years back, Italian producer Frederico Franchi put out a storming track called "Cream," whose simple, wobbling melody and thudding breakbeat made it totally infectious. (It was one of the first tracks featured in an epic Simian Mobile Disco DJ set I wrote about last year.) Along comes Miami rapper Pitbull to put some raise-the-roof lyrics over the top, and you've got one of the most fun (and unlikeliest) hits of 2008.

After the jump: Canadians croon, Mikey Skinner hits the skids, and hippies hypnotize me.

More Capitalization

| Wed Oct. 8, 2008 6:36 PM EDT

MORE CAPITALIZATION....Speaking of capitalization, I see that Justin Fox answers a question today that's been on my mind for a while. The bailout plan passed last week was designed to buy up troubled assets, but are the powers it gives to the Secretary of the Treasury so broad that the funds can be used to directly recapitalize banks instead? Apparently so:

Did anybody else notice that when Hank Paulson was describing in his press conference today what the Emergency Economic Stabilization Act enables Treasury to do, the first thing he listed was "to inject capital into financial institutions"?

That wasn't how Treasury initially advertised its Troubled Asset Relief Program. It was sold as a way to get the market for mortgage securities moving (or, to use the jargon, liquid). Lots of academic economists objected that liquidity wasn't the problem, it was insolvency. What Treasury needed to do was recapitalize financial institutions and take equity stakes in return.

....Yesterday Ben Bernanke hinted that a change in emphasis might be in the offing for the TARP. And today Paulson seemed to confirm it....I take it as one more sign that we're headed toward a Swedish solution of our banking crisis — recapitalization and temporary nationalization of much of the banking system. This is the right thing to do, I think. But I'm still a little bit confused as to why Paulson had to back into this instead of asking for it in the first place. Maybe because he thought President Bush would never sign a bill to nationalize the banks? Just a thought.

Very interesting.

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Capitalization

| Wed Oct. 8, 2008 6:23 PM EDT

CAPITALIZATION....A couple of days ago I complained about pundits and economists who (seemingly) couldn't make up their minds about whether the real problem preventing banks from making loans in the current market was (a) fear or (b) lack of capitalization. I got a few emails asking me what I was talking about, and it occurs to me that a lot of people are just assuming that all us non-economists understand why capitalization is important. But that's certainly not the case, so here's the kindergarten version of what it means.

Suppose that Acme Bank has $2 billion in capital and is leveraged at 20:1. This means they have $40 billion in assets, primarily consisting of loans of one kind or another.

Now, suppose that due to trading losses their capital is reduced to $1 billion. Unless they want to increase their leverage even further, that means they need to reduce their loan portfolio to $20 billion.

But it's worse than that. 20:1 is an insane amount of leverage. It ought to be closer to 10:1, and lots of banks are now in the process of deleveraging to get there. But with $1 billion in capital and leverage of 10:1, Acme can only have $10 billion in outstanding loans.

In other words, over the course of a few months, they need to reduce their loan portfolio from $40 billion to $10 billion (for example, by declining to roll over commercial paper when it comes due), and until they get there they can't loan out any more money. It doesn't matter if the borrower has a AAA rating. It doesn't matter if Acme's CEO is calm or frightened. Until they get their asset base down to $10 billion, they can't make any more loans.

(The grown-up version of this is way beyond my pay grade and includes a working knowledge of things like Basel risk-weighted asset requirements and our own local version of them. Obviously you're not going to get that from me. But hopefully the kindergarten story at least provides the basic picture.)

This is the theory behind recapitalizing banks rather than buying up their bad assets, as the Paulson plan does. If the government buys a bunch of preferred shares in Acme in return for $1 billion, then its capital is, once again $2 billion. They still need to deleverage, but that's going to happen regardless. The happy news is that even at 10:1, the extra capital expands their lending capacity by $10 billion.

Now, fear is obviously still a part of the picture. That capital injection doesn't do any good if Acme has so many toxic assets that it barely knows what its capital base is in the first place. Maybe it's so close to insolvency that it's going to go bust next week regardless. And even if that's not the case, they still won't want to lend money to other banks if they don't know how strong those banks are.

Still, one is primary and one is secondary. If capitalization is the fundamental problem, then calming down the markets won't do any good. There still won't be any money to loan out. If it's not, then confidence building measures are obviously of some value. Most likely, the story is somewhere in between. But it's kind of scary that nobody really seems to know for sure, isn't it?

UPDATE: Why do banks like high leverage? Because it allows them to make lots of loans, and therefore lots of money, with only a little bit of capital at stake. In good times, high leverage is a great way to make fantastic investment returns.

In bad times, though, it's not so great. The problem is that even small losses on a highly leveraged portfolio can wipe out your capital completely and make you insolvent. This is what's happening now, and it's why more stringent regulations on allowable leverage ratios are a good idea. Good times never last forever, after all.

Attack Ads vs. Attack Debates

| Wed Oct. 8, 2008 5:46 PM EDT

ATTACK ADS vs. ATTACK DEBATES....A lot of people seem to be surprised that John McCain didn't pull out all the stops last night and lay down a barrage of attacks against Barack Obama for palling around with terrorists, taking loans from crooks, abandoning our troops, and so forth. But I think this misses something important: debates are a terrible place to do this.

TV ads are a different story. In fact, they've been practically conventionalized over the years with their grainy photos, creepy music, and scary sounding announcers. Sure, at the end you have to say "I'm John McCain and I approve this message," but that's not much. The ad still seems almost completely impersonal. It's an attack, but it's not really an attack from anyone.

But a debate is a whole different story. The stage is a small, intimate setting, and if you want to attack somebody, it has to come straight out of your mouth and it has to be directed against someone standing just a few feet away. People react way differently to that than they do to an ad, and for the most part they react badly. It's like watching married friends arguing with each other: it makes you uncomfortable and edgy. You just want it to stop.

That's probably why McCain didn't light into Obama last night. Despite what I said yesterday, it's not that he didn't want to, but that he's smart enough to know that unless you pull it off perfectly, all you accomplish is to make yourself unsympathetic. And whatever else you can say about him, John McCain is very much not a guy who can pull this off perfectly.

McCain Recommends Voters Review His Record Via Nonprofits Linked to His Campaign

| Wed Oct. 8, 2008 4:44 PM EDT

At Tuesday's town hall-style presidential debate at Tennessee's Belmont University, an audience member named Theresa Finch asked the candidates a question that has no doubt been weighing on the minds of many Americans: "How can we trust either of you with our money when both parties got us into this global economic crisis?" When it came time for McCain to respond, he said, "I can see why you feel that cynicism and mistrust, because the system in Washington is broken. And I have been a consistent reformer." He said he had a clear record of taking on special interests and reaching across the aisle to get things done in Washington. "So let's look at our records as well as our rhetoric," he said. "That's really part of your mistrust here. And now I suggest that maybe you go to some of these organizations that are the watchdogs of what we do, like the Citizens Against Government Waste or the National Taxpayers Union or these other organizations that watch us all the time."

It's not surprising that McCain directed Finch to Citizens Against Government Waste or the National Taxpayers Union. Both anti-spending organizations are ideologically aligned with the Arizona Senator and have ties to his presidential campaign. But if Finch were to take McCain's advice and visit the NTU's web site to look up its most recent congressional scorecard, she would find "N/A" next to the candidate's name, for he didn't vote on enough bills in the 110th Congress to qualify for a rating. (Obama receives an F. In past years, McCain's NTU rating has ranged from B-minus to A.)

Lies, Damn Lies, etc.

| Wed Oct. 8, 2008 4:07 PM EDT

LIES, DAMN LIES, ETC....Does intellectual property infringement really cost the United States 750,000 jobs and $250 billion? Where do these frequently cited estimates come from, anyway?

Julian Sanchez and Ars Technica investigated, and the answer turns out to be: (1) an offhand and completely unsupported estimate from Commerce Secretary Malcom Baldridge in 1986, and (2) an offhand and completely unsupported estimate from Forbes in 1993. For the full story on how these two figures have managed to achieve iconic status anyway, click the link.