Blogs

Will Ken Starr Defend Prop 8 in CA Supreme Court?

| Mon Nov. 24, 2008 3:52 PM EST

ken%20starr.jpgOverheard last week in DC at a right-wing legal convention: "We've all but confirmed that Ken Starr is going to take the case."--Jordan Lorence, senior counsel, Alliance Defense Fund.

The involvement of the former Clinton special prosecutor in efforts to preserve California's new ban on gay marriage really wouldn't come as much of a surprise. Two years ago, Starr, now dean of the Pepperdine law school, represented a bunch of anti-gay marriage groups, including the Mormon Church, in amicus briefs in some of California's gay marriage litigation. He's been involved in the issue for a while, now. Given the intense interest in other people's sex lives that Starr demonstrated during his investigation of the Lewinsky scandal, he seems a perfect fit for the job.

Of course, when I asked him at the Federalist Society conference to confirm the gossip, he said with a laugh, "No comment." Later, I asked Lorence whether he had indeed confirmed Starr as counsel. Looking a bit shocked that he'd been caught blabbing out of school, he pleaded ignorance, suggesting that he had no intelligence on the matter whatsoever, despite his earlier boasts to a Harvard law student about his inside line to Starr. He did confirm that he would not be doing the arguing himself, nor would another lawyer from the alliance who has argued such cases before. I take all this to mean that Starr is likely to take the case.


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Scouring the Budget

| Mon Nov. 24, 2008 3:00 PM EST

SCOURING THE BUDGET....Barack Obama rolled out his economic team today: Tim Geithner at Treasury, Christina Romer to head up the CEA, Larry Summers to head the White House Economic Council, and Melody Barnes as chair of his domestic policy council. Ben Bernanke, of course, is already in place as Fed chief. But what about Peter Orszag? Why wasn't he up on stage with the rest of them? Ben Smith provides a clue:

Obama's staff won't elaborate, but the President-Elect said just now that he'd roll out a plan to cut the federal budget tomorrow — something both presidential candidates said they'd do, but neither detailed.

"[T]o make the investments we need, we'll have to scour our federal budget, line-by-line, and make meaningful cuts and sacrifices as well — something I'll be discussing further tomorrow," Obama said.

I'm not sure why Obama wants to have a whole separate rollout for this — maybe he just wants more than one day's worth of headlines? — but obviously Orszag will be the star of that particular show. Via Taegan Goddard.

Admitting the Problem

| Mon Nov. 24, 2008 2:38 PM EST

ADMITTING THE PROBLEM....James Joyner bemoans the lack of substance in the conservative blogosphere:

Part of the reason I'm drawn to the center-left blogs [...] while finding it increasingly difficult to find center-right blogs worth my time is that the former are much more likely to get beyond the debates of the 1980 election. There's almost no serious analysis of health care reform, urban planning, education, and many other issues that regularly crop up on the best lefty blogs on their conservative counterparts. If we read about those issues at all, they're framed as if Ronald Reagan were still aspiring to high office: Say No to socialism! Abolish the Department of Education! Government IS the problem!

Right. The world has changed in the past 20 years but conservatism doesn't really seem willing to accept it. Take global warming. Here's the rough conservative reaction to it starting in the early 90s:

  1. It doesn't exist.

  2. It exists but it isn't manmade.

  3. It's manmade, but it's too expensive to do anything about.

Even this is a generous assessment. A lot of conservatives are still stuck at #2, and sizeable chunk at #1. What this means is that they're basically shut out of the conversation entirely. Which is too bad, because I'd actually be sort of interested to hear a conservative take on how to address global warming that accepts both its reality and the necessity of doing something about it. If we really are facing a global environmental catastrophe, what shape would a conservative solution take? I don't think anyone knows. Likewise, conservative reaction to wage stagnation and growing income inequality has gone down a similar road:

  1. It doesn't exist.

  2. It exists, but consumption inequality is what really matters.

  3. ??

Our current financial meltdown has pretty much wiped out #2 as a plausible explanation, since the stagnating middle class can no longer borrow to keep up their consumption. But what's #3? Will it be yet another attempt to deny that the problem even exists? Or some kind of interesting conservative take on what to do about it?

Global warming and skyrocketing income inequality are problems that didn't even exist in 1980, which means there is no "Reaganite" solution to appeal to. There might still be conservative takes on these things, but they won't do any good until conservatives actually accept that these are real problems that people genuinely care about. That day still seems pretty far off.

Obama and Iraq

| Mon Nov. 24, 2008 1:38 PM EST

OBAMA AND IRAQ....Ross Douthat suggests that perhaps liberals ought to be happy with the relative hawkishness of Barack Obama's national security team:

By putting the job in the hands of Robert Gates and Hillary Clinton — a Republican appointee and a primary-season rival who attacked him from the right on foreign policy — Obama has effectively given realists and liberal hawks partial ownership of whatever happens in Iraq between now and 2011. In a best-case scenario for progressives, Gates and Clinton will play the role Colin Powell played in the run-up to the Iraq War (except with a better final outcome, obviously): Their association with the policy will help keep non-progressives on board when things get dicey, and then once the job is done they'll be pushed aside and someone like Susan Rice will take over Obama's post-occupation foreign policy.

Obviously I don't really think it will work out quite like that. But just as the neoconservative agenda was better-served, at least in the short run, by having Powell as one of the public faces of Iraq War hawkery (rather than, say, John Bolton), I think there's at least a plausible scenario in which the progressive movement ends up being better off in the long run if Hillary Clinton, rather than someone to her left, is at the helm when a spasm of violence pushes Iraq back on to the front pages, and Republicans start accusing the Obama Administration of squandering the Bush-Petraeus gains with a too-precipitous withdrawal.

My own problem isn't with one or two of Obama's rumored appointees, but with the fact that his team doesn't seem to have even token representation from the liberal wing of the party. That said, though, I think Ross is right about this. If the Iraqi parliament approves the SOFA agreement later this week, then Obama will have almost perfect cover for withdrawing from Iraq: he'll be doing it under a deal approved by George Bush, and the withdrawal itself will be implemented by Republicans and centrist Democrats. Under the circumstances, it will be virtually impossible for conservatives to accuse him of "losing" the war in Iraq.

There's no telling if this is actually what Obama has in mind, or if he's putting together a centrist foreign policy team because he genuinely wants a centrist foreign policy. It could be a bit of both. And in any case, in the end Obama's foreign policy will be set by....Barack Obama. Tea leaf reading will have to wait a while longer, I guess.

Obstructionism

| Mon Nov. 24, 2008 1:08 PM EST

OBSTRUCTIONISM....Matt Yglesias on the possibility of Republican Party obstructionism:

If the Senate GOP minority blocks needed stimulus and the economy fails to recover, I think the odds are good that the Democratic president and congressional leadership will be the ones to pay the price at the polls. Voters are pretty good at identifying who the incumbent party is, but not very good at assigning specific blame for specific policy outcomes.

This gets to one of my pet peeves about the media: when legislation fails, the headline is usually something along the lines of "Congress fails to pass _____," which doesn't give the casual reader any clue of who voted against it. It's just "Congress." What's worse, sometimes even the non-casual reader can have trouble figuring out who voted how, since it's buried pretty deeply inside the story.

That said, things might be a little different now. If Democrats end up with 58 or 59 seats in the Senate, and can hold their caucus together, then the only way Republicans can block legislation is by literally voting unanimously to do so. That's a pretty dramatic action, and even lazy headline writers are likely to take note. In the end, I don't think the GOP will be able to do this, but if they do, the average voter is liable to have a better idea than usual that they're doing it.

Hillary to State Appears a Done Deal, But What About Bill's Overseas Donors?

| Mon Nov. 24, 2008 12:07 PM EST

bill-clinton-250x200.jpg

It appears to be a done deal: President-elect Barack Obama will appoint Senator Hillary Clinton to be his secretary of state. But while the Obama camp's vetting of Bill Clinton's foreign entanglements and activities continues, there is one thorny matter that needs to be addressed publicly: the identity of the donors to Bill Clinton's foundation and presidential library.

The former president has raised millions of dollars from overseas officials and corporations for his foundation and library--while also pocketing mega-speaking fees from businesses abroad. (He's also struck an unusual deal with transnational mining conglomerate head Frank Giustra.) All of this raises potential conflicts and ethics questions. The basic dilemma: can Bill Clinton receive millions of dollars from foreign nations and corporations that may have an interest in US foreign policy while his wife oversees US foreign policy? Unless Clinton opts out of his (often admirable) globe-trotting activities, this situation seems almost too knotty to be untied.

But aides to Obama and Bill Clinton aides are trying to work out rules that would govern the former president's actions. Last week, The Washington Post reported:

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Stimulus Update

| Mon Nov. 24, 2008 2:51 AM EST

STIMULUS UPDATE....Jake Tapper reports that Barack Obama wants to hit the ground running, stimulus-wise:

Democratic sources tell ABC News that President-elect Obama's transition team is working with lawmakers on Capitol Hill so that on Obama's first day in office, Jan. 20, 2009, an economic stimulus package has passed both houses of Congress and is awaiting his signature.

And how big will the package be? The Washington Post speculates:

New Jersey Gov. Jon Corzine (D), an Obama adviser, and Harvard economist Lawrence H. Summers, whom Obama has chosen to lead his White House economic team, both raised the possibility of $700 billion in new spending. Yesterday, Obama adviser and former Clinton administration Labor secretary Robert Reich and Sen. Charles E. Schumer (D-N.Y.) also called for spending in the range of $500 billion to $700 billion.

....Austan Goolsbee, a spokesman for Obama on economic issues who is in line to serve on the White House Council of Economic Advisers, yesterday acknowledged that Obama's jobs plan will cost substantially more than the $175 billion stimulus program he proposed during the campaign. "This is as big of an economic crisis as we've faced in 75 years. And we've got to do something that's up to the task of confronting that," Goolsbee said on CBS's "Face the Nation." "I don't know what the exact number is, but it's going to be a big number."

This is a welcome sign of pragmatism from Obama's team, but not everyone is happy. Check this out:

"Democrats can't seem to stop trying to outbid each other — with the taxpayers' money," House Minority Leader John A. Boehner (R-Ohio) said in a statement. "We're in tough economic times. Folks are hurting. But the American people know that more Washington spending isn't the answer."

Jeebus. No wonder Republicans have lost 50 House seats in the past two elections. There's not even a hint that Boehner realizes we're facing a massive financial meltdown, not just business as usual. Somebody asked him about a Democratic spending plan, so he consulted the index cards that have been implanted in his brain for the past 30 years and spit out a robotic statement decrying "Washington spending." How out of touch can you get?

Citigroup Bailed Out

| Mon Nov. 24, 2008 2:21 AM EST

CITIGROUP BAILED OUT....The feds have finally agreed on a plan to bail out Citigroup. The Wall Street Journal has the details:

Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies — the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. — will take on any additional losses, though Citigroup could have to share a small portion of additional losses.

....In exchange for that protection, Citigroup will give the government warrants to buy shares in the company. In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion that Citigroup recently received as part of the the broader U.S. banking-industry bailout.

....The government didn't require Citigroup to make changes to its executive ranks or its board in return for government assistance. However, Citigroup agreed to "comply with enhanced executive compensation restrictions," the government said Sunday, and also will implement a government-backed plan to modify distressed mortgages that is designed to curb foreclosures.

First take: this appears to be a pretty sweet deal for Citi: $20 billion in new capital and a potentially huge asset guarantee, all at what looks to be a pretty small price. My guess is that the distressed mortgage stuff and the "enhanced executive compensation restrictions" are little more than window dressing, and considering that the feds are handing over $20 billion to a company whose entire market cap at the moment is around $20 billion, the preferred shares they're giving up in return are a good deal for Citi unless they pretty much wipe out the equity of its current shareholders. And since the New York Times reports only that the shares "will slightly erode the value of shares held by investors," it looks like Uncle Sam isn't getting anywere near enough to do that.

What else? The government is guaranteeing 90% of all losses above $29 billion out of a $306 billion pool, which means that Citigroup now has about $250 billion in government-guaranteed assets in that pool. Presumably this can be turned into cash at a very favorable rate indeed, which should do wonders for Citi's liquidity.

So that's that. But I guess I have one more question. Up until a couple of days ago, Citigroup was insisting that they were very adequately capitalized, thankyouverymuch. But tonight they accepted $20 billion in fresh capital. So either (a) their position deteriorated a lot in the past 48 hours, (b) the government's terms were so spectacularly generous that they figured they'd be stupid to turn it down, (c) Paulson insisted they take it even though they didn't want it, or (d) they've been lying. Which do you think it is?

27 Votes

| Sun Nov. 23, 2008 8:31 PM EST

27 VOTES....Nate Silver says that in Minnesota precincts where no challenges have been raised, Al Franken is gaining votes. In precincts with more challenges, he's not doing as well:

In other words, the fewer the number of challenged ballots, the better Franken is doing....We can address this phenomenon more systematically by means of a regression analysis....The independent variables considered in the regression are as follows: t...c_f...c_c...In addition, the regression analysis contains interaction terms between each combination of two variables, as well as an interaction term for all three variables.

....Now, we can attempt to solve this equation at the statewide level. When we plug in a t of .499956 — Franken was picked on just slightly very less than half of the ballots during the initial count — we get a value for franken_net of .837. That is, Franken will gain a net of .837 votes for every 10,000 cast. With a total of 2,885,555 ballots having been recorded in the initial count, this works out to a projected gain of 242 votes for Franken statewide. Since Norm Coleman led by 215 votes in the initial count, this suggests that Franken will win by 27 votes once the recount process is complete (including specifically the adjudication of all challenged ballots).

I will just say this. If this turns out to be right — if Al Franken really does win by 27 votes — then I suggest we eliminate elections entirely and simply allow Nate Silver to tell us who our congressional and presidential winners are in the future. It would be a lot cheaper, and probably just as accurate.

POSTSCRIPT: Nate weasels a bit at the end, warning us that "the error bars on this regression analysis are fairly high." Sure, sure. I'm not buying. Franken by 27 votes, my friends.

Capital Losses

| Sun Nov. 23, 2008 3:39 PM EST

CAPITAL LOSSES.....This post is a couple of months old, but John Hempton says that our ongoing financial crisis is not a problem of bank capitalization:

Nobody I know calculates the total system losses plausibly above 2 trillion dollars....If I add the private equity disasters, GSE losses and things like car loans to [all the mortgage losses] I still can't get end credit losses above 1.5 trillion.

That is a vast amount of money — enough for instance to solve most of Africa's education and water problems. But in the context of the huge industry that is America's finance system it is just not that big.

So far financial institutions have raised (well) above 400 billion in fresh capital – its probably nearing 500 billion. The Federal Government has absorbed losses through the takeover of Fannie, Freddie, contingent liabilities on Wachovia, AIG and others of maybe 50-200 billion (lets use the low number).

The pre-tax, pre-provision operating profit of S&P financials used to be above 400 billion and is probably still above 350 billion. Two years of that and there is another 700 billion.

The banks had some capital to start with — in some cases excess capital against regulatory standards.

All up — we have almost certainly raised or passed to the government — or within two years will have earned — something approaching 1.5 trillion.

There is no capital shortage. Get used to it.

Mark Thoma says of this, "I don't agree with his diagnosis of the fundamental problem," but doesn't explain further. I myself don't have the smarts to either agree or disagree. Still, Hempton's observation here is one that's been bugging me for a while. It's true that in this particular post he doesn't seem to be taking account of forced selling and systemic deleveraging, which would be causing problems even if overall capitalization were adequate. What's more, even if overall capitalization were OK, it might still be the case that the capitalization of the big money center banks is inadequate, and those banks occupy a special place in our financial system.

So I'm not sure. But I'd still like to have some idea — even a vague, provisional idea — of just what the experts think the capital position of the American banking system is right now. How big are the losses so far? How much uncertainty is there in these estimates? Why? Is it because banks don't provide the needed information, even to regulators, or because it's fundamentally difficult to calculate regardless? As a layman, it's been pretty eye opening over the past few months to realize just how little even the experts seem to know about what's really going on and what the scope of our current problems are, but certainly a basic understanding of the scale of banking system losses is an absolute minimum piece of information we need before we can figure out what to do next. Isn't it?