Printing Money

| Tue Jan. 13, 2009 12:13 PM EST

PRINTING MONEY....Ben Bernanke says the Fed still has "powerful tools" at its disposal to fight the recession even though interest rates are already down to zero. Felix Salmon is unimpressed:

The natural response to this is simple: if you still have powerful tools at your disposal, why haven't you used them already? And why did you enact that final rate cut to zero, which necessarily comes accompanied by all manner of nasty consequences in the repo markets and at money-market funds? That decision certainly made it seem as though the Fed believes a marginal further reduction in the Fed funds rate is still far more effective than any of its other policies.

If I had to guess, I'd say that Bernanke believes there's a price to be paid for taking extraordinary measures, and it's a price he'd rather not pay unless he absolutely has to. Printing money may be within his authority, but there's no surer way of admitting that literally everything else has failed and you're now on your last legs. I don't blame him for not wanting to go there if there's even the slightest chance he doesn't have to.

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Phil Gramm Will Wonder Aloud: What Did I Ever Do?

| Tue Jan. 13, 2009 12:02 PM EST

The American Enterprise Institute, a conservative think tank and haven for discredited neoconservatives, is hosting a discussion next Friday titled "Is Deregulation a Cause of the Financial Crisis?" Here's the description:

During the recent campaign season, the Democrats blamed the financial crisis on "Republican deregulation," in particular the Gramm-Leach-Bliley Act of 1999 (GLBA) and the Commodity Futures Modernization Act of 2000 (CFMA). The GLBA repealed the provisions of the Glass-Steagall Act of 1933 that prevented affiliations between commercial and investment banks, and the CFMA, among other things, exempted credit default swaps and other derivatives from regulation by the Commodity Futures Trading Commission. Although both acts were backed by the Clinton administration, Senator Phil Gramm (R-Texas)--then the chairman of the Senate Banking Committee--was the key congressional sponsor of the legislation. Is it plausible to connect the GLBA and the CFMA with the current financial crisis?

Guess who has been tabbed to answer the question of whether or not Phil Gramm screwed up the financial industry? That's right, Phil Gramm. He's AEI top guest for the evening. Fortunately, we can save you the trouble of going to this thing, because we've already answered the question. In summer 2008, David Corn published a piece called "Foreclosure Phil" that began:

Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Sen. Phil Gramm.

Visit AEI in a week and a half for a whole bunch of rationalization and self-justification or take a quick gander at David's excellent piece over your lunch break. Your choice.

Quote of the Day - 01.13.09

| Tue Jan. 13, 2009 11:52 AM EST

QUOTE OF THE DAY....From Peter Schrag, former editorial page editor of the Sacramento Bee, on the California GOP:

With each passing day, Republicans look ever more like a suicidal cult than a political party.

Oddly enough, this really isn't hyperbole. It's a pretty sober statement of consensus reality right now in the Golden State.

Trade Deficits

| Tue Jan. 13, 2009 11:48 AM EST

TRADE DEFICITS....Atrios comments on our financial predicament:

As all good economists "know," one day our trade gap will have to shrink....

I wonder what those scare quotes are supposed to mean? Is it a way of suggesting that the conventional wisdom about trade deficits is wrong? That economists are idiots? Perhaps a comment on the ultimate ineffability of true knowledge? What? Sometimes it's like trying to decipher Peking wall posters over there.

Showing Who's Boss

| Tue Jan. 13, 2009 11:19 AM EST

SHOWING WHO'S BOSS....Israeli Prime Minister Ehud Olmert explains how he gets things done when the U.S. State Department is pushing to vote for a UN resolution he opposes:

"I said, 'Get me President Bush on the phone,' " Mr. Olmert said in a speech in the southern Israeli city of Ashkelon, according to The Associated Press. "They said he was in the middle of giving a speech in Philadelphia. I said I didn't care: 'I need to talk to him now,' " Mr. Olmert continued. "He got off the podium and spoke to me."

....Mr. Olmert claimed that once he made his case to Mr. Bush, the president called [Condoleezza] Rice and told her to abstain. "She was left pretty embarrassed," Mr. Olmert said, according to The A.P.

There are, of course, many things you could say about this. But the question that most piques my curiosity is: Why? Why would Olmert tell this story? Sure, he's bragging for a local audience, but what's the point? It's not as if he's running for anything these days. And he has to know that a story like this will embarrass the American government on a whole bunch of different levels. So why do it? Is he an idiot? Does he just not care anymore? What's the deal?

UPDATE: The most obvious comment about Olmert's story, of course, is this one:

"This is terrible for the United States," said Daniel Levy, a former Israeli peace negotiator. "This confirms every assumption they have in the Arab world about the tail wagging the dog. . . . It's a story you're likely to hear quoted there for years to come."

I'd say that's a pretty fair guess. Thanks a lot, Mr. Prime Minister.

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Israel's Power

| Tue Jan. 13, 2009 9:30 AM EST

I really don't want to ignite a firestorm in the comments by posting this, but the degree to which Israel's leaders see America as in their back pocket is pretty remarkable. When people across the Arab world feel like they will never get a fair shake from America, it is in part because of episodes like this.

Prime Minister Ehud Olmert of Israel said Monday that Secretary of State Condoleezza Rice had been forced to abstain from a United Nations [cease fire] resolution on Gaza that she helped draft, after Mr. Olmert placed a phone call to President Bush. "I said, 'Get me President Bush on the phone,'" Mr. Olmert said in a speech in the southern Israeli city of Ashkelon, according to The Associated Press. They said he was in the middle of giving a speech in Philadelphia. I said I didn't care: 'I need to talk to him now,'" Mr. Olmert continued. "He got off the podium and spoke to me." ...
Mr. Olmert claimed that once he made his case to Mr. Bush, the president called Ms. Rice and told her to abstain. "She was left pretty embarrassed," Mr. Olmert said, according to The A.P.

Forget what you think about Israel: no country in the world should have this sort of sway over our president and secretary of state. (H/T Andrew)

Guantanamo Update

| Tue Jan. 13, 2009 1:45 AM EST

GUANTÁNAMO UPDATE....The latest on Guantánamo:

President-elect Barack Obama plans to issue an executive order on his first full day in office directing the closing of the Guantánamo Bay detention camp in Cuba, people briefed by Obama transition officials said Monday.

But experts say it is likely to take many months, perhaps as long as a year, to empty the prison that has drawn international criticism since it received its first prisoners seven years ago this week. One transition official said the new administration expected that it would take several months to transfer some of the remaining 248 prisoners to other countries, decide how to try suspects and deal with the many other legal challenges posed by closing the camp.

This doesn't surprise me in either respect. That is, it doesn't surprise me that Obama plans to issue the order immediately, and it also doesn't surprise me that he thinks it will take upwards of a year to actually complete the shutdown. It will.

So far, Obama has been as good as his word on a wide variety of subjects, which means he deserves the benefit of the doubt here. Figuring out what to do with detainees at Guantanamo really is a tough problem, and suggesting that it will take several months to resolve is just a recognition of reality. Still, we'd all like something a little better than "trust us," and Hilzoy suggests a couple of things that would help:

Luckily, the Obama administration can help us out here, by doing a couple of things that would clearly demonstrate good faith, and that the administration could do by fiat. First, it could suspend ongoing trials under the existing system of military commissions. That system is a joke. There is no reason to go on using it.

Second, it could accept the Uighurs into the United States. The Uighur detainees at Guantanamo have been found not to be enemy combatants. They have never taken up arms against the United States. The Uighur community in DC is prepared to help them out, as are religious communities in DC and Tallahassee. A judge has ordered them to be released into this country. There is no earthly reason not to do so; after holding them for seven years, it's the least we can do.

Last month the Washington Post reported that several European countries have quietly made it known that once Obama takes office they're willing to consider resettling some of the Guantanamo detainees who can't be returned to their home countries. But one thing they want first is for the United States to take at least a few of the refugees itself as a show of goodwill that will help them sell the program to their own citizens. Apparently, though, the Bush White House has resisted the idea:

In interagency discussions, the State Department has argued that the Uighurs be brought to the United States to help persuade Europe to resettle other detainees. But a State Department official, who spoke on the condition of anonymity because of the sensitivity of the issue, said the departments of Homeland Security and Justice, as well as White House officials, considered resettlement in the United States a "red-line" issue.

Hopefully Obama can remove this red line, resettle the Uighurs, and get this program going.

Video: Corn on Hardball Debating Gitmo

| Mon Jan. 12, 2009 9:51 PM EST

AP reported on Monday that President-elect Barack Obama, after moving into the White House next week, will issue an executive order to begin the process that would lead to the closing of the U.S. military prison at Guantanamo Bay. With that in the news, I was asked to appear on Hardball to debate conservative talk-show host Michael Smerconish, who supports the use of waterboarding. Here's the clip:

At least Smerconish, a lawyer, agreed with one basic point: the US government, despite what the Bush-Cheney administration has contended, has no right to hold anyone--not even enemy combatants--indefinitely. Perhaps Obama is right: conservatives and liberals--that is, those of us who don't take our constitutional advice from Dick Cheney's office--can find some common ground.

Is America Post-Racism?

| Mon Jan. 12, 2009 7:00 PM EST

Short answer: No.

CNN reports the latest study showing anti-black racism in action. It's one of those scenarios where a white says something horribly racist after the lone black leaves the room and none of the whites react. The beauty part of this study, though, was later asking participants who they wanted to be paired with on another exercise—the black who'd been dissed 'without his knowledge,' or the white who'd done the racist dissing. Guess who most whites chose.

It's reasonable to expect lots of folks not to speak up when hearing racist doggerel, even if they object to it. But to then choose the racist as a partner over the black he insulted pretty much settles the question.