Ben's Second Term

What do we have to look forward to from Ben Bernanke's second term as chairman of the Fed?  The New York Times asked a bunch of economists for their predictions.  Here's Mark Thoma:

My worry is that as time passes, we’ll forget how bad things were and the desire to impose necessary new regulation will fade. Here’s where I think Mr. Bernanke’s experience will be crucial. He was there at every step in the development of the Fed’s response to the crisis and he will not soon forget the problems he faced (nor repeat his mistakes), making it more likely that he’ll be a forceful and passionate advocate for new regulation before Congress. [Italics mine.]

Boy, do I hope this is true.  But it strikes me as woefully wishful thinking.  One of the reasons I opposed reappointing Bernanke is that I'd like to have someone running the Fed who's serious about reregulating the financial industry, both at a macro and a consumer level.  With Bernanke, though, we're taking a flyer.  We're hoping that the crisis of the last two years has fundamentally changed his view of market self-regulation, and that he'll apply the same suppleness and creativity he showed dealing with the meltdown to dealing with post-crisis regulatory issues.  And maybe he will.  But people rarely change lifelong worldviews even after they've lived through a catastrophe, and Bernanke has done nothing to make us think he's an exception.  Contra Mark, my guess is that when it comes to actual, concrete legislation and rulemaking, he'll revert to the same Ben Bernanke he's always been.  When that happens, we'll have missed our only chance for years to really reform our financial system.

And here's former Fed economist Vincent Reinhart with another prediction:

The White House will likely learn that a Fed chaired by Ben Bernanke will follow a policy uncomfortably tight as the 2012 election looms into sight. [Italics mine.] Bernanke has espoused a commitment to low inflation over his entire career. He also is a democratic and consultative chairman, so the voices of monetary conservatives among Fed officials will be heard loudly and frequently.

Now this one I believe.  That's what Fed chairmen usually do to Democratic presidents, after all.

In a major victory for the business press and anyone who longs for more transparency at the Federal Reserve, a federal judge in New York ruled on Tuesday that the Fed must fork over  financial rescue records to two Bloomberg journalists. The reporters, Mark Pittman and Craig Torres, had sued the Fed's board of governors after it refused to hand over bailout-related documents. What's more, the Fed had refused to search for certain information relating to its actions in early 2008—namely, when the Fed's New York branch loaned JPMorgan Chase nearly $13 billion to buy Bear Stearns. (JPMorgan and Bear Stearns ended up paying back the $13 billion loan plus $4 million in interest.)

The Fed's bailout manuevers have come under criticism from members of Congress (especially Rep. Alan Grayson (D-Fla.)) and the media, including our own Nomi Prins. Like when the Fed let Goldman Sachs use investment-bank risk models even after it had converted into a bank holding company in order to qualify for bailout funds, allowing Goldman to make big-time, risky bets with taxpayers' money.

Needless to say, this is an important victory for the press covering the bailout, and for shedding some light on the incredibly opaque actions the Fed has taken to rescue the financial system.  The decision's timing couldn't be better. It comes right after Fed chairman Ben Bernanke was nominated for a second term, so closer scrutiny of his decisions when the economy was near rock-bottom will be in the spotlight. The decision also comes as the Treasury Dept. weighs letting the Fed play a larger role in financial regulation by monitoring those "too big to fail" banks in our system—an idea I and others strongly oppose. I'll be curious to see what those two crusading Bloomberg reporters turn up.

Robotic Warfare

Matt Yglesias muses on what the growing use of drone aircraft means for the Air Force:

The military [...] is an institutional culture that puts a great deal of stock on honor, courage, and difficult physical work. A service that consists of guys sitting in cubicles playing video games is going to have trouble holding its head high amidst a warrior ethos. And consequently, the Air Force is tending to resist the technological imperative to go more remote. Ultimately, however, that resistance is doomed and it’s not really clear what will come of it.

There's another side to this: what happens when drones become really, really good?  Right now they're at about the technological phase that airplanes were in during World War I: nice tools in specific circumstances, but not really overall game changers.  But that won't be true for much longer.  Advances in drone technology are likely to come pretty quickly, and the result is going to be a very large fleet of drones that are bigger, faster, stealthier, more maneuverable, have better optics, and can accomodate far more — and more effective — weaponry than today's models.  And since they're relatively cheap and using them runs no risk of loss of life, there's going to be very little institutional or public  pressure against using them.  This is likely to mean they'll get a lot of use.

You see the same two-edged sword with police officers being armed with tasers.  It's great that they have a nonlethal alternative to shooting people, but the fact that they have a nonlethal alternative also means they have less reason to avoid using it.  Result: lots of people being tasered.

It's not just drones, of course.  It's the entire robotic revolution in warfare.  When we get to the point where one side is able to conduct war effectively with virtually no fear of loss of life, does that mean that public pressure against war will start to fade away?  After all, demand curves slope downward.  When war becomes cheaper, we'll get more war.  Right?

Anna Lenzer's Fiji Water exposé has made quite a splash: It's a top search term on AOL, and has been mentioned on dozens of blogs and media sites, including both NYTimes.com and LATimes.com. Now it's gotten a spot on New York magazine's "approval matrix." Anna's tale of how Fijian police threatened to imprison her while reporting was rated as both "highbrow" and "despicable" by the New York staff. I have to say I agree with them on both counts. But as LeVar Burton used to say, You don't have to take my word for it. You can read Anna's entire story for yourself here.

Steven Brill writes in the New Yorker about "rubber rooms," where Big Apple teachers accused of incompetence spend years sitting around collecting paychecks while their cases are adjudicated.  But that's only a symbol of what reformers think is the larger problem: namely that virtually no one is ever fired for poor job performance after their three-year probationary period is up and they have tenure.

In seven years [...] unsatisfactory ratings for tenured teachers have risen from less than one per cent to 1.8 per cent. “Any human-resources professional will tell you that rating only 1.8 per cent of any workforce unsatisfactory is ridiculous,” [Dan] Weisberg says.

Is this prima facie evidence that the system isn't working?  Based on my experience, I'd say yes.  On the other hand, I'd also say that, at least in the places I'm familiar with, virtually everyone who got fired was let go within the first year or two they were with the company.  Very few who had been around for more than three years got fired.  On the third hand, occasional layoffs often provided excuses to get rid of poor performers, so perhaps that shrank the pool of people who would otherwise have eventually been axed.

So....I dunno.  Opinions?

A recent poll reveals that most Americans don't know what in health care reform's name the public option is—less than 4 in 10 can accurately describe it.

Is this supposed to be surprising?

After all, the health care debate has been dominated much more by town hall hysteria and death panel talk than actual substance. For all the buzz about public option bickering—Pelosi v. McCain v. Obama v. Grassley!–politicians and the media have provided scant information about how exactly it would work or the impact it would have.

Phone Books

Claire Thompson asks:

When was the last time you looked up something in the phone book? What did you do the last time you got a free phone book dropped off on your doorstep—did you recycle it? If you’re like most people these days, your answers to those questions are probably “I don’t remember” and “No.”

Well, in my case the answer is "last year" and "yes" — the latter because we all have recycling bins in my neighborhood, so pretty much everything gets recycled with no effort on my part.

But I certainly don't use phone books much.  In fact, even that time last year wasn't for my own benefit.  It was for my Korean neighbor, who knocked on our door late one night and told us he'd locked himself out of his house and could he please use our phonebook to find a locksmith?  So I called a few locksmiths for him.  (And, along the way, learned that most "24-hour locksmiths" are anything but.)

The really mysterious part of all this, though, is that despite the fact that phone books seem like they ought to be a dying breed, there are more of them than ever.  I just looked, and we have not one, not two, not three, but four different yellow pages directories.  One from Verizon, one from Yellowbook, and two from AT&T (they come in two different sizes for some reason).  They're all crammed with ads, which must mean people are using them, but I do sort of wonder who that is sometimes.  I use the web almost exclusively for this kind of thing these days, and I imagine that most people in my upscale neighborhood do too.  So why all the phone books?

On the back of today's Mother Jones investigation into the government's $75 billion, largely taxpayer-funded foreclosure relief program—a program shaping up to be a massive bust yet doling out millions and even billions to some questionable mortgage servicers—the Center for Public Integrity has released its own analysis of the program, the Home Affordable Modification Program. CPI found that of the top 25 HAMP servicers, at least 21 "were heavily involved in the subprime lending industry." Of the tens of billions allocated to HAMP, much "is going directly to the same financial institutions that helped create the subprime mortgage mess in the first place," says CIP executive director Bill Buzenberg. The fox, in other words, is guarding the heavily mortgaged hen house.

By all measurements, HAMP has been a bust. As I write in a story published today on MotherJones.com:

Industry experts are now questioning how many of the program’s estimated 235,000 modifications will actually benefit homeowners in the long term, and say that homeowners clamoring to participate in HAMP have created an industrywide logjam for mortgage servicers, resulting in substantial delays and backed-up customer service support. ...

The Treasury’s first servicer performance report (PDF), covering March to July 2009, found that servicers had offered modifications to just 15 percent of eligible delinquent homeowners, and initiated them for just 9 percent of that group...  Lawmakers in Washington, including Sen. Dick Durbin (D-Ill.) and Rep. Barney Frank (D-Mass.), chairman of the powerful House financial services committee, have begun to voice doubts over whether HAMP servicers are doing enough to help homeowners. Now Frank and Durbin are revisiting the idea of allowing bankruptcy court judges to modify mortgage terms, an option called “cramdown” that the Senate rejected earlier this year.

One of the great and bitter lessons of Senator Edward M. Kennedy's political career is also the most timely for House Democrats: The need to seize the political moment on health care reform.

Republicans and Democrats have never been as close to fixing health care as they were in 1973, when the Nixon administration was engulfed in the Watergate scandal and eager to change the subject. Knowing that Ted Kennedy would soon introduce a politically potent plan for nationalized health care, Nixon charged Caspar Weinberger, his Health Education and Welfare secretary, with crafting a bill that would "regain the initiative in the health arena." What Weinberger came up with looks positively Marxist compared to the way Republicans are slandering Obamacare: The plan, unveiled in Nixon's State of the Union address, would have required employers to provide health insurance and offered federally-financed coverage to many low-income Americans.

Though that sounds pretty good in the context of Washington's diminished expectations these days, Kennedy publicly opposed it at the time as a potential windfall for private insurance interests. A few months later, he announced his own plan, a single-payer system that would nonetheless preserve a role for private insurers as fiscal intermediaries and providers of supplementary benefits. Presidential historian Alvin Felzenberg, an adjunct professor at George Washington University, believes Kennedy could have negotiated an historic compromise with Weinberger, but gave in to pressure from the labor unions to wait for a better deal under a new administration. (Kennedy later gained a reputation for pragmatism in negotiating bills like No Child Left Behind). "Kennedy said that was his biggest regret," Felzenberg told me today, "because he had a Republican president willing to dance with him."

The death of that era, embodied by Kennedy's passing today, is truly sobering. Kennedy and his labor allies could hardly be blamed for thinking that the tide of progressivism was still on the rise, or that the potential for honest debate was a given. Who could foresee that the GOP, far from chastened by Watergate, would become ever more beholden to Nixon's polarizing Southern Strategy? Or that American pragmatism would give way to the politics of fear, lies, and ideology that we've seen in the recent town halls?

Ultimately, Obama and progressives in Congress will sign on to some sort of health bill; the stakes are too high for them to take a pass. The question is under what terms they'll be able to shore up the effort in years to come. With the political pendulum on an uncertain arc, what cause now for Kennedy's famous optimism?