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In Which I Agree With Yuval Levin

| Tue Mar. 10, 2009 1:41 PM EDT
Hey, it was bound to happen sometime.  And of course, I only agree with him halfway.  But he's right when he says this about President Obama's decision to allow much broader federal funding of embryonic stem cell research:

What you think of his policy depends on what you think of the moral status of embryos....That legitimate dispute underlies the stem cell debate. But that is not the ground on which the president made his case yesterday. He argued that to deny free rein to stem cell science is to ignore and reject the promise of science as such. In a barely concealed swipe at his predecessor, he pledged that his administration would "make scientific decisions based on facts, not ideology."

The executive order Obama signed omits any mention of ethical debate....The issue, he suggested, is a matter of science, not politics.

Politics is politics, and presidents always frame their decisions in ways they think will be the most acceptable to the most people.  But this annoyed me when I read Obama's statement yesterday, and I don't blame Levin for being annoyed either.  If you think an embryo is a human life — and lots of people do — then you're going to be opposed to embryo research.  If, like me, you don't, then you're not likely to have any objection.  But although science can inform that debate, it can't resolve it.  Ethics and ideology will always be front and center.

I guess I wouldn't care too much about this except that Obama also issued a memo yesterday about eliminating political interference with science.  That's important, and it applies to important subjects like global warming, habitat protection, GM foods, Plan B, and other things.  But its impact is diluted if we pretend that everything is a scientific issue.  There's nothing wrong with admitting that both Bush's stem cell decision and Obama's have strong moral and ideological dimensions, and denying it tends to reduce our credibility when we insist on the underlying science of other issues that really are mostly scientific.  In this case, honesty really is the best policy.

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The Future of Abortion Providers

| Tue Mar. 10, 2009 12:33 PM EDT

Today's feminists need to blog less and work more. If women want reproductive choice to remain more than rhetoric, they'd better stop assuming these clinics will be there when they need them. Because like priests and nuns, abortion doctors are not reproducing. From NYT:

"We worry about that a lot," said Sally Burgess, executive director of the Hope clinic, who is also chairwoman of the National Abortion Federation, the main professional support group for abortion providers. "Younger women have always had access to abortion care, they don’t fully appreciate the battle that was fought to have it available to them. And more important, I don’t think they know how precarious the option is at this point, even with Obama's election."..."What I observe for women in their 20s and 30s — there are fewer who really have the fire in the belly for this,” she said. At 50, Ms. Burgess is the youngest member of the Hope clinic’s leadership team, which includes Ms. Baker; Debbie Wiehardt, 57, the office supervisor; and the two doctors performing abortions (the only men on the 30-person staff), who are both in their 60s. A recent survey of 273 abortion clinics published in the journal Contraception found that 64 percent of their doctors were at least 50 years old, and 62 percent were men."

It's dangerous and gloomy. The pay sucks. Lots of people think you're a murderer. And, yeah, you might get shot. But you young chicks maybe need to go the Northern Exposure route, sending folks to med school in exchange for a few years running an abortion clinic. That feminist fire in the belly? I gotta say: Pole-dancing, walking around half-naked, posting drunk photos on Facebook, and blogging about your sex lives ain't exactly what we previous generations thought feminism was. We thought it was about taking it to the streets.

Harsh, you say? Uninformed? OK. Tell me exactly what today's feminists are doing for the struggle. Besides posting disses against old chicks like me. You got that covered.

Bernanke on Leverage

| Tue Mar. 10, 2009 12:24 PM EDT
The title of this post is mostly whimsy: in his speech about financial reform today, Ben Bernanke barely even mentioned leverage as a problem.  In fact, his only use of the word (in the financial sense, anyway) came toward the end when he vaguely suggested that a new government agency might be set up to, among other things, assess the potential for "broad-based increases in financial leverage...to increase systemic risks."

Since I think massive abuse of leverage is at the heart of what turned an ordinary asset bubble into a global meltdown, I'm disappointed that he didn't spend more time on this.  But on a related matter, he did say this:

However, there is some evidence that capital standards, accounting rules, and other regulations have made the financial sector excessively procyclical — that is, they lead financial institutions to ease credit in booms and tighten credit in downturns more than is justified by changes in the creditworthiness of borrowers, thereby intensifying cyclical changes.

For example, capital regulations require that banks' capital ratios meet or exceed fixed minimum standards for the bank to be considered safe and sound by regulators. Because banks typically find raising capital to be difficult in economic downturns or periods of financial stress, their best means of boosting their regulatory capital ratios during difficult periods may be to reduce new lending, perhaps more so than is justified by the credit environment. We should review capital regulations to ensure that they are appropriately forward-looking, and that capital is allowed to serve its intended role as a buffer — one built up during good times and drawn down during bad times in a manner consistent with safety and soundness.

Capital ratios basically regulate the amount of leverage a bank is allowed to take on, and what Bernanke is suggesting here is that in good times, when animal spirits are high and anyone with a pulse is offered a no-down loan, capital ratios should be increased, thus reducing bank lending and keeping leverage within reasonable bounds.  In bad times, when animal spirits are moribund and deleveraging shuts down the credit pipeline, capital ratios should be decreased, allowing banks to loan more money.

This has always struck me as a good idea.  But Bernanke doesn't say how he thinks it should be done.  Would a board of some kind make these decisions twice a quarter, the way the Fed does with interest rates?  Or would there be some kind of automatic mechanism involved?  If the former, what confidence do we have that they'd really be willing to take the punch bowl away during boom times?  The Fed sure wasn't willing to do so during the 2002-07 expansion.  Overall, this is a good suggestion, but it could bear some fleshing out.

Parents' Worst Nightmare: The Season For Leaving Kids To Die In Cars Is Upon Us

| Tue Mar. 10, 2009 11:53 AM EDT

If you want to have your heart break, I mean really break into a million jagged pieces, read WaPo's hideous piece on parents who forget their kids in cars where they die horribly while Mom types 200 feet away.

Think it could never happen to you? Before I had kids, I would have been quite sure my answer would be not just no, but HELL no! But pizza chefs have done it. Rocket scientists have done it. People who spent years and hundreds of thousands of dollars on foreign adoptions have done it. Two kids later, I have to admit—yeah, it cudda happened to me. Thank god they're too big and too noisy now for that particular mistake. But God knows which other mistakes could easily befall even the best of us. So why are bloodthirsty DAs going after parents?

We're not talking here about parents who intentionally leave kids in cars so they can get their hair done and shop unencumbered. They are criminals and deserve punishment. We're talking about people who, almost entirely, had some change in the routines of their over-stressed lives and simply, honestly, forget their child was in the car. The piece is extremely well done and well researched, so check it out and resolve to look into every back seat you pass this summer. But prosecuting these folks for murder? It's not like there's any deterrent factor at play here. Good thing juries are composed of humans and not ambitious lawyers trying to make names for themselves.

Here's all it took for one jury to do the right thing. The attorney didn't put the mom on the stand because she refused to grovel and whimper in public. He played the 911 tape instead.

The tape is unendurable. Mostly, you hear a woman's voice, tense but precise, explaining to a police dispatcher what she is seeing. Initially, there's nothing in the background. Then Balfour howls at the top of her lungs, "OH, MY GOD, NOOOO!"

Then, for a few seconds, nothing.

Then a deafening shriek: "NO, NO, PLEASE, NO!!!"

Three more seconds, then:

"PLEASE, GOD, NO, PLEASE!!!"

What is happening is that Balfour [the mom] is administering CPR. At that moment, she recalls, she felt like two people occupying one body: Lyn, the crisply efficient certified combat lifesaver, and Lyn, the incompetent mother who would never again know happiness. Breathe, compress, breathe, compress. Each time that she came up for air, she lost it. Then, back to the patient.

After hearing this tape, the jury deliberated for all of 90 minutes, including time for lunch. The not-guilty verdict was unanimous.

These parents have suffered enough.

35 Counties Account for 50% of Foreclosures

| Tue Mar. 10, 2009 11:36 AM EDT
USA Today points out that, last year, just 32 counties accounted for one half of all foreclosures in the United States. Those counties are outlined in red below. Even among them, there are some areas that are worse than others: "Eight counties in Arizona, California, Florida and Nevada were the source of about a quarter of the nation's foreclosures last year."


And yet, California is, on average, the happiest state in the nation. Weird how things work. (H/T The Electoral Map)

More Losses

| Tue Mar. 10, 2009 2:00 AM EDT
Here's your chart of the day, courtesy of McClatchy:

America's five largest banks, which already have received $145 billion in taxpayer bailout dollars, still face potentially catastrophic losses from exotic investments if economic conditions substantially worsen, their latest financial reports show.

Citibank, Bank of America, HSBC Bank USA, Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31. Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.

Meanwhile, the Wall Street Journal reports that U.S. officials are "examining what fresh steps they might need to take to stabilize [Citibank] if its problems mount, according to people familiar with the matter."  This is in case Citi "takes a sudden turn for the worse," which, they say hearteningly, "they aren't expecting."  Good to hear.

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Quants

| Mon Mar. 9, 2009 9:56 PM EDT
Dennis Overbye has a piece in the New York Times today about "quants," the geeks and nerds who have converged on Wall Street in recent years and tried to use mathematical models to outsmart the market and generate vast sums of risk-free cash for their employers.  I've read a bunch of stories in this genre, and most of them have something in common that's always slightly puzzled me.  See if you can guess what it is based on these excerpts from Oberbye's piece:

Emanuel Derman....left particle physics for a job on Wall Street...."it had the quality of physics"....forerunner of the many physicists and other scientists who have flooded Wall Street....physics Web site arXiv.org....“My Life as a Quant: Reflections on Physics and Finance”

....Asked to compare her work to physics....There are a thousand physicists on Wall Street....Physicists began to follow the jobs from academia to Wall Street in the late 1970s....Lee Smolin, a physicist at the Perimeter Institute for Theoretical Physics in Waterloo....J. Doyne Farmer, a physicist and professor at the Santa Fe Institute.

....“I think physicists should go back to the physics department and leave Wall Street alone”....Eric R. Weinstein, a mathematical physicist....Nigel Goldenfeld, a physics professor at the University of Illinois....too many physicists on Wall Street.

Did you figure it out?  What's the deal with physicists?  They always seem to be at the center of these stories, but the fundamental tool of the quants is math.  So why not mathematicians instead of physicists?

Overbye suggests a couple of possibilities.  #1 is the glut theory: "Physicists began to follow the jobs from academia to Wall Street in the late 1970s, when the post-Sputnik boom in science spending had tapered off and the college teaching ranks had been filled with graduates from the 1960s. The result, as Dr. Derman said, was a pipeline with no jobs at the end."

#2 is the affinity theory: "The Black-Scholes equation resembles the kinds of differential equations physicists use to represent heat diffusion and other random processes in nature. Except, instead of molecules or atoms bouncing around randomly, it is the price of the underlying stock."

Those both sound plausible, if incomplete, so here's another thing to think about.  Even among the number crunching set, physics has a reputation as the most aggressive, male dominated branch of geekdom: only 14% of physics PhDs are women, the lowest of any of the sciences.  (Math is pretty male dominated too, but pales compared to physics: 29% of math PhDs are women.)  If the first thing that "aggressive and male dominated" reminds you of is the big swinging dick world of high finance, give yourself a gold star.  Call this the testosterone theory: physicists are attracted to Wall Street because they like the atmosphere.

Any other theories?  Leave 'em in comments.

Happy 50th, Barbie

| Mon Mar. 9, 2009 8:22 PM EDT
I never got into Barbies. I did once babysit for a little girl who liked to pretend her Barbies were going out on dates to a restaurant called the Sweetheart Date Residence, a dining experience that always ended the same way: Barbie and Ken tried to order something awesomely romantic, like steak or spaghetti, but all the waiter would bring them was a big bowl of dirt. Which he then poured over their heads. Poor Barbie and Ken could never catch a break.

Banal though my own Barbie memories may be, the famously disproportionate plastic princess holds a special place in most ladies' hearts. Yesterday was Barbie's 50th birthday (an event NY Times op-ed contributor Porochista Khakpour excellently refers to as "cougarrific"). To mark this milestone, the Times offered not one, but (at least) two Barbie-themed bits: the aforementioned Op-Ed, "Islamic Revolution Barbie," which is actually a really nice little memoir of how the dolls didn't help the writer transition from her childhood in Iran to adolescence in the States. The best part her description of Sara and Dara, the Muslim equivalents of Barbie and Ken:

Van Jones To Be Green Jobs Czar?

| Mon Mar. 9, 2009 7:18 PM EDT

Word has it that environmental advocate Van Jones is going to be offered a position in Obama's cabinet. Not sure yet exactly what it'll be; some say green jobs czar, but Grist's source says that's "an overstatement."

Title aside, Jones has the necessary chops: He founded the green jobs nonprofit Green for All, and what with all his recent speaking gigs, book tours, and buzz, he's got the connections. When we interviewed Jones last year, he talked about government's role in creating a green economy:

MJ: How do we get to the tipping point where the rules change. Does it have to come from the very highest levels?

Yet More on AIG

| Mon Mar. 9, 2009 7:09 PM EDT
Here's an odd new twist on the AIG situation.  ABC News has gotten hold of a memo AIG wrote a few days ago arguing that the Treasury needed to provide it with additional bailout funds because a failure of the company "would cause turmoil in the U.S. economy and global markets, and have multiple and potentially catastrophic unforeseen consequences."

No surprise there.  It might even be true.  But what's odd is where they say the problem is centered.  Not in AIG's high-flying CDS business, with all those counterparties demanding their billions of dollars in payouts, but in the stodgy old life insurance business:

The systemic risk is principally centered in the “life insurance” business because it is this subsector that has the greatest variety of investments and obligations that are subject to loss of value of the underlying investments....Over the past decade, the voluntary termination rate on individual policies declined remarkably (to six percent by 2007) as consumers could obtain liquidity from numerous other sources.

A significant rise in surrender rates — inspired by consumers’ needs for cash or because of rumored or real failure of insurance companies — could be disastrous. Because of widespread loss of liquidity, the industry would struggle to raise adequate cash to meet surrender requests. A “run on the bank” in the life and retirement business would have sweeping impacts across the economy in the U.S....State insurance guarantee funds would be quickly dissipated, leading to even greater runs on the insurance industry.

The claim here is that a weak economy has already left strapped consumers with fewer places to obtain traditional loans, which in turn means that people are increasingly likely to cash in their life insurance policies in order to scrounge up a bit of ready cash.  That's bad enough, but if AIG were to fail — or if there were even a rumor of failure — everyone would start lining up to cash in their policies at once.  This would cause a panic and customers of other insurance companies would start lining up too.  Since reserves aren't big enough to pay off everyone at once, this would cause massive, cascading failures in the entire life insurance business.

There's plenty more in the memo about the global catastrophe that would accompany an AIG failure, but it's mainly in bullet points and doesn't provide much backup for their claims.  So I don't have any good way to judge whether or not it's true.

But the life insurance claim is a new one on me, so I thought it was worth passing along.  I'll be very interested indeed to hear the reaction to AIG's "run on the bank" claim from people with experience in the business.