Blogs

Phil Gramm's Culpability, Acknowledged

| Fri Feb. 20, 2009 4:25 PM EST

Phil Gramm won't be able to wash this stink off of him.

Time magazine has published a list called "25 People to Blame for the Financial Crisis" and second on the list is our buddy Phil, the man who headed the Senate Banking Committee during the federal government's deregulatory bonanza in the late '90s. Gramm passed or affected two key pieces of legislation that eventually helped create the financial meltdown we are experiencing today. The first of the two was the 1999 Gramm-Leach-Bliley Financial Services Modernization Act, which repealed the Depression-era Glass-Steagall Act and allowed financial institutions to merge like crazy and ignore longtime regulations and limitations. The second was something that Mother Jones uncovered in summer 2008. Here's Time:

[Gramm] also inserted a key provision into the 2000 Commodity Futures Modernization Act that exempted over-the-counter derivatives like credit-default swaps from regulation by the Commodity Futures Trading Commission. Credit-default swaps took down AIG, which has cost the U.S. $150 billion thus far.

Right. As David Corn reported for Mother Jones, Gramm's sly move gave rise to an entire industry of financial products, like credit default swaps, that acted like insurance for the toxic mortgage-backed securities that got passed around Wall Street. Investors who thought they were protected made more and more and worse and worse financial bets, all away from regulatory oversight. Eventually, it caught up with them.

The result is the mess we're in today. And it appears the public is able to trace culpability all the way back to Gramm, because in voting on Time's website, Gramm has been fingered by readers as the most guilty party in this disaster. To read more about credit default swaps and how "Foreclosure Phil" created our crisis, see David's article here.

Advertise on MotherJones.com

Stream New U2 Album at MySpace

| Fri Feb. 20, 2009 4:12 PM EST

It's becoming de rigueur: a few weeks before the release of your highly-anticipated new album, post the whole thing to your MySpace page, and hope that discourages early leaks & downloads. [Edit: Oops, they were too late.] Irish combo U2 is the latest to jump on board, posting their upcoming album No Line On the Horizon in its entirety right over here (click on the "playlist" drop-down menu in the player and select the album). 

I've already said lead single "Get On Your Boots" is kind of a pale imitation of Queens of the Stone Age, so how's the rest of the album? Well, also kind of aimless, although it's hard to tell through MySpace's crappy 96kbps filter. The title track opens the set, and it sounds a little like Coldplay trying to rough things up a little. There's a standard mid-tempo beat, a big fuzzy guitar, a not-so-memorable chorus, then an unearned epic bridge of big Bono "ohs." Track two, "Magnificent," intrigues with its plucky synth opening and wide-open Edge guitar riffs, but that word is embarrassingly cheesy when you sing it. Just try it. "Magniiiii-fi-cent." Yuck, right? "I was born to sing for you," claims Bono, but these lazy lyrics make "It's a beautiful day" seem like Shakespeare.

It's a little odd to remember that U2 was one of my favorite bands, for a really long time, from October through The Joshua Tree. Rattle and Hum lost me, like it lost everybody, but the redemptive masterpiece Achtung Baby won me back. I look at 2000's All That You Can't Leave Behind and 2004's How to Dismantle an Atomic Bomb as "post-U2" albums, which I judge by an easier standard than the band's first 20 years, and in that context, they succeed: "Elevation," "City of Blinding Lights," and "Beautiful Day" are grand, sweet, pretty pop songs; they dissolve into nothing if you look too closely, so just don't do that. But even by that generous standard, Horizon fails: it willfully avoids hooks, but its lyrics are ridiculous—"Stop helping God across the road like a little old lady"?—and its riffs crib Led Zeppelin shamelessly. Despite its edgy, minimalist cover art, Horizon makes the same mistakes as Rattle and Hum, aping the bombast and ego of classic rock without the creativity or soul. No wonder Rolling Stone liked it. I will say it ends on a slight "up" note, with a few thoughtful ballads, and it's like a tiny glimmer of hope: maybe their next album will be another Achtung Baby?

Friday Cat Blogging - 20 February 2009

| Fri Feb. 20, 2009 2:52 PM EST | Scheduled to publish Fri Feb. 20, 2009 3:07 PM EST
Today's theme is "Looking Skyward."  On the left, Inkblot is reacting to a bird flying overhead.  On the right, Domino is bonding with a potted plant.

And speaking of birds flying overhead, the Guardian reports that 200 British cats are being outfitted with a device called "catnav" to track their predatory habits.  "Some experts believe Britain's 9m cats could be killing more than 150m birds, mice, rabbits, moles and other creatures every year," they warn us.  "We know what cats do in our homes — they sleep," says one of the researchers, "But we have virtually no idea of what they get up to outdoors, particularly at night. Now we can find out."

Well.  I'd just like to take this opportunity to quantify Inkblot and Domino's contribution to this bird and mole carnage.  That would be zero.  Jasmine once dragged in an already wounded bird and allowed Inkblot to play with it, but neither Inkblot himself, nor our pudgy little Domino, is capable of anything more than dreaming about such things.  Domino, in fact, can barely find her own food bowl at times.  (Inkblot has no such difficulty.)  The Irvine pest population may rest easy.

Legalizing Marijuana Now More Popular than the Republican Party

| Fri Feb. 20, 2009 2:25 PM EST
It's true. Percentage of Americans who believe marijuana ought to be legalized: 41 percent. Percentage of Americans who approve of the Republican Party: 31 percent.

Other things that are less popular than legalizing weed, according to Open Left: Congress, the war in Iraq, privatizing Social Security, and John Boehner.

Smoke and Mirrors

| Fri Feb. 20, 2009 2:15 PM EST | Scheduled to publish Fri Feb. 20, 2009 2:24 PM EST
No more smoke and mirrors for the Obama administration!

For his first annual budget next week, President Obama has banned four accounting gimmicks that President George W. Bush used to make deficit projections look smaller. The price of more honest bookkeeping: A budget that is $2.7 trillion deeper in the red over the next decade than it would otherwise appear, according to administration officials.

The new accounting involves spending on the wars in Iraq and Afghanistan, Medicare reimbursements to physicians and the cost of disaster responses. But the biggest adjustment will deal with revenues from the alternative minimum tax, a parallel tax system enacted in 1969 to prevent the wealthy from using tax shelters to avoid paying any income tax.

....“The president prefers to tell the truth,” said [Peter R. Orszag, director of the Office of Management and Budget], “rather than make the numbers look better by pretending.”

This is good.  Seriously.  It really is.  The cynical among us, however, might note that highballing the current deficit also makes it a lot easier to show progress in reducing it in the future.  Not that that ever occurred to them, I'm sure.

Eric Holder Thinks Barack Obama Is Kidding Himself

| Fri Feb. 20, 2009 1:45 PM EST

I'm glad Dayo Olopade wrote about Eric Holder's speech to his staff at the Department of Justice. Holder tackles race in America in a remarkably straight-forward and clear-eyed way. Dayo calls it "confrontational," and indeed, it's hard to read sentences like these -- "in things racial we have always been and continue to be, in too many ways, essentially a nation of cowards" -- without thinking that perhaps Eric Holder has been holding something inside that he's wanted to yell at the top of his lungs for a long time.

These lines from Holder --

"On Saturdays and Sundays, America in the year 2009 does not, in some ways, differ significantly from the country that existed some 50 years ago."

"The history of the United States in the nineteenth century revolves around a resolution of the question of how America was going to deal with its black inhabitants."

"This nation has still not come to grips with its racial past nor has it been willing to contemplate, in a truly meaningful way, the diverse future it is fated to have..."

-- are so clearly at odds with Obama's re-telling of American history as a shared journey and his vision of America's future as one of shared sacrifice (and a resulting shared success) that it almost feels as though Holder is very slyly calling his boss a liar.

But we always knew that Obama's vision of race in this country, and his implied suggestion that different races could come together because of his election, was a bit too fanciful, didn't we? I think a lot of liberals knew that Eric Holder's America is the real America, but chose to believe instead in Barack Obama's America. And maybe that's not a politician using the self-deception of millions of Americans for his own gain. Maybe that's a leader inspiring people to see a better and more just alternative.

Advertise on MotherJones.com

Inflating Your Troubles Away

| Fri Feb. 20, 2009 1:43 PM EST
Michael Kinsley is understandably skeptical that once we've stimulated our way out of the recession we'll all suddenly see the light and begin saving more and consuming less.  So what will happen instead?

There is another way. If it's not the actual, secret plan, it will be an overwhelming temptation: Don't pay the money back. So far, even as one piggy bank after another astounds us with its emptiness, there have been only the faintest whispers about the possibility of an actual default by the U.S. government. Somewhat louder whispers can be heard, though, about the gradual default known as inflation. Just three or four years of currency erosion at, say, 10 percent a year would slice the real value of our debt — public and private, U.S. bonds and jumbo mortgages — in half.

Inflating away debts is a time honored tradition, but hasn't its time passed in the developed world?  Most domestic debts (adjustable mortgages, credit card rates, etc.) are tied to LIBOR or the prime rate, which generally follow the inflation rate.  So if inflation goes up, so do your payments.  No help there.  As for foreign debt, inflation would weaken the dollar — assuming arguendo that other countries all kept their inflation in check at the same time — but that would cause interest rates to rise in response.  A weaker dollar would help exports and reduce domestic consumption, which is good, but higher interest rates on treasury bonds would make our fiscal situation worse, not better.  So there's no help there either.

Do I have this right?  Or is Kinsley right to be concerned?  Isn't inflation hedging too built in to our current economic system to offer the kind of benefit he suggests?

Abortion Legislation Update

| Fri Feb. 20, 2009 1:34 PM EST

Yesterday two measures included in the slew of bills across the country that would require women to view an ultrasound before having an abortion were shot down in a Virginia Senate committee. One measure would have required women to look at an image of the fetus on the day of the abortion; the other would have forced doctors to offer to anesthetize the fetus.

In related abortion news, the North Dakota House gave fertilized human eggs the legal rights of human beings. The bill now goes to the Senate for review.

The Chicago Tea Party

| Fri Feb. 20, 2009 1:01 PM EST

I guess this is the rant of the day: Rick Santelli on CNBC calling for a "Chicago Tea Party" because Barack Obama has the temerity to want to help underwater homeowners.  Ezra Klein comments:

Santelli sells himself as a sort of financial sector Howard Beale: He's mad as hell, and he's not going to take it anymore. The financial industry is tired of having to clean up after someone else's mess!

....But watching the traders bray and cheer as Santelli calls for the streets to run green with the equity of the working class is an astonishing insight in the psychology of the crisis. These guys feel betrayed. America let them down!....They should lose their houses. Wall Street is tired of being ground under the thumb of the lower middle class. This country has coddled those losers long enough, and see where it's gotten us.

It's not fair to say that these folks only get upset when it's homeowners being bailed out.  After all, there's been plenty of righteous fury over the bank bailouts too.  But there's definitely a different sense to this: it's closer, more personal.  Wall Street being bailed out is one thing: it's infuriating, but in the end you just shrug your shoulders and figure this is the way the world works.  But homeowners?  Your neighbors?  The guy who installed fancy granite countertops and a new wet bar and then mocked you for carefully husbanding your money instead of living the good life?  He's going to get bailed out?  WTF?

This has always been the soft underbelly of bailing out homeowners.  It's a good idea both on broad economic grounds and on social justice grounds, but the fact is that there's no way to make it 100% fair.  There are going to be some people who get government help who don't deserve it.  And some of those people aren't going to be bankers a thousand miles away, they're going to be people you personally know and loathe.  And that's hard to take.

In the end, I think Santelli is channeling the reaction of a small minority.  Stabilizing the mortgage market and helping people in trouble is the right thing to do even if there's no way to get the focus laser perfect.  But watch out for the demagogues while you're doing it.

UPDATE: More here.

Is Obama's "Fiscal Responsibility Summit" a Sneak Attack?

| Fri Feb. 20, 2009 12:28 PM EST

Liberals are worried that next Monday's "fiscal responsibility summit," hosted by the Obama Administration, will be two things they don't like: (1) yet another sop to conservatives, and (2) the beginning of a rightward shift on entitlement reform. Will the Obama team embrace the center-right consensus that Social Security is in crisis and that the only way to fix it is to cut benefits?

Ezra Klein argues that the Obama folks understand that Social Security has little bearing on America's long-term financial solvency, and that they will use the summit to make the case that health care reform is the way to ease our entitlement problems.

That, basically, has been Orszag's project: Talk a lot about the health care crisis and longer-term problems in the budget and get people to stop talking about an illusory crisis in a made-up program called socialsecurityandmedicareandmedicaid. Because what Orszag and Krugman both realize is that Social Security's unfunded liabilities only look like the sort of problem you need to "fix" if you're mixing it in with Medicare's unfunded liabilities. If there's an "entitlements problem" that requires an "entitlements commission" then that will cut Social Security and Medicare and Medicaid. If there's no "entitlements problem" and instead a health reform problem and some small questions about a politically electric program, then what you get is health reform -- which is also a way to slow Medicaid and Medicare growth without resorting to cuts -- and an end to the fear-mongering on Social Security.

Let's hope the Obama team is this savvy. It would be pretty remarkable if they can channel the Social-Security-is-a-crisis! hysteria and turn it into even more energy behind the cause of universal health care.