Bank Regulation Heats Up

Some possibly disturbing news from the Wall Street Journal:

The Obama administration is backing away from seeking a major reduction in the number of agencies overseeing financial markets, people familiar with the matter say, suggesting that the current alphabet-soup of regulators will remain mostly intact.

....The administration, for example, is unlikely to call for merging the Commodity Futures Trading Commission and the Securities and Exchange Commission, an idea it had considered, these people say. It also isn't expected to call for the Federal Reserve, Federal Deposit Insurance Corp. or the Office of the Comptroller of the Currency to cede their primary authority to supervise banks, they say....Officials worry that trying to start from scratch could ignite messy turf battles that might slow or even derail the entire process.

I'm not necessarily dedicated to the idea that a single bank regulator is an absolute necessity, but it sure seems as though a root-and-branch reform — which is a necessity — is going to require a considerable amount of consolidation.  If the Obama administration is backing off from this already, it's a bad sign.

I'm not always in favor of these box drawing exercises.  I'm still not convinced, for example, that creating a Director of National Intelligence was a great idea.  But bank regulation in the U.S. really is archaic, and it really is counterproductive to have so many regulatory bodies that banks can choose from.  Having two or three with clearly defined mandates to supervise well-defined sectors — or possibly well-defined spheres of activity throughout the entire industry — is probably OK.  Having a few different agencies around to disagree with each other is a good thing.  But half a dozen with fuzzy responsibilities?  That better not stay on the table for long.

Why Would Anyone Buy A Volt?

Perhaps it really is time to just let GM die. Today's Washington Post story on the next generation Toyota Prius explains how Japanese automakers are putting their money into better hybrids, giving the Prius a bigger trunk, more power and even better mileage at 50 mpg. By contrast, GM is banking its future--and billions of taxpayer dollars--on the Chevy Volt. If the Volt is GM's future, we're in big trouble.

The new electric car, due out next year, will only be able to go 40 miles--40 miles!--without recharging, meaning a Volt wouldn't get me from my house to Bagel City and back on a Saturday morning. To get around this problem, the Volt has a back-up gas tank that will stretch the car's usefulness another 400 miles at 50 mpg. In an age of 100-plus mile commutes, lots of people would presumably drive primarily on the gas tank (after all, the only charging station they're likely to find is one in their own garage). Meanwhile, the savings achieved are relatively small. The Volt needs 80 cents worth of electricity to go the same distance as a Prius with $1.50 worth of gas in the tank. But here's the rub: At $40,000, the Volt costs almost twice as much as a Prius, a difference that all but obliterates any savings at the pump. Does the Obama administration really, truly believe that GM can transform itself with this car?

Last week, House liberals got together to try to block Joe Lieberman and Lindsey Graham's bill that would have allowed the administration to unilaterally override the Freedom of Information Act when it wanted to withhold photos of detainee abuse. The liberals won this battle. Jane Hamsher reported Monday afternoon that the photo suppression legislation, which President Barack Obama supported, will not make it into the final war supplemental.

Glenn Greenwald has an excellent post on what this all means, but the bottom line is that you can be sure that Lieberman and Graham will try to bring this up again. This time around, House liberals got lucky because Republicans opposed the addition of IMF funding to the war supplemental, ensuring that liberal votes would actually matter. If Lieberman and Graham can find a bill to attach the photo suppression amendment to that Republicans and non-liberal Democrats will support, it'll stand a better chance of passing, because liberal votes won't matter.

Restraint

David Brooks on Sonia Sotomayor:

She is quite liberal. But there’s little evidence that she is motivated by racialist thinking or an activist attitude.

....When you read her opinions, race and gender are invisible. I’m obviously not qualified to judge the legal quality of her opinions. But when you read the documents merely as examples of persuasive writing, you find that they are almost entirely impersonal and deracinated.

....To my eye, they are the products of a clear and honest if unimaginative mind. She sticks close to precedent and the details of a case. There’s no personal flavor (in the boring parts one wishes there were). There’s no evidence of a grand ideological style or even much intellectual ambition. If you had to pick a word to describe them, it would be “restraint.”

Is anyone listening?

More on Democracy

Michael Rubin agrees with me that George Bush didn't do a bang-up job on the democracy promotion front, but thinks this shouldn't be a partisan fight:

I do agree a bit with Drum, albeit without the snark, when he says, "George Bush's main achievement in this arena wasn't to promote democracy, it was to completely cement Arab cynicism about America's obvious lack of concern for democracy." The difference between me and Drum appears to be that I don’t think partisan animus toward a previous president should excuse the abandonment of transformative diplomacy. Give Bush credit: He broke with the past and made democratization central to the debate. Cynicism toward democratization existed long before Bush was president when, in the context of the Cold War and after, Washington proved itself willing to coddle dictatorships. It is infuriating, however, that the gap between the rhetoric and reality of the Bush administration grew so large, and that in his second turn, Bush was willing to accept such backsliding in Lebanon, Egypt, and elsewhere.

I don't know enough about the literature on democracy promotion to say an awful lot about this, but I don't agree that Bush "broke with the past and made democratization central to the debate."  Rather, I think Bush and his team of old school anticommunists merely revived the Cold War context Rubin talks about, where democracy was less a real goal than it was a rhetorical cudgel to use against countries we didn't like.  In the postwar era, that mostly meant working to overthrow left-wing dictatorships while leaving the right-wing variety alone (famously given an intellectual foundation by Jeanne Kirkpatrick in "Dictatorships and Double Standards").  In the Bush era, this transitioned with barely a pause into working to overthrow Middle East dictatorships we didn't like while giving a pass to the ones that supported us.

That just doesn't seem transformative to me.  It never has.  In fact, Bush always struck me as less serious about democracy than his predecessors.  To him it was a nice slogan — every American politician is in favor of democracy, after all — but anyone who's serious about democracy knows that it's not the kind of thing you can get overnight.  It depends critically on education, on institutions, on culture, on overcoming corruption, on property rights, on the rule of law, and a dozen other things.  None of these were things that Bush ever seemed to have the patience to bother dealing with.

Obama, conversely, seems to have a better handle on this, both temperamentally and intellectually.  The result might be less bombastic and emotionally satisfying, but it's a more effective way of actually accomplishing something.  Less transformative rhetorically, perhaps, but if he follows through it's likely to be much more genuinely transformative in practice.

I'm still being partisan here, but I'm not sure that can be helped.  The approaches of Bush and Obama aren't just personal, after all, but reflect different world views.  The Bill Kristol wing of the conservative movement believes pretty strongly in a big bang approach to democratization, something that I just don't see any future in.  The Obama wing of liberalism, conversely, seems to see democracy promotion as small ball: lots of hard slogging, lots of public diplomacy, and lots of minor initiatives that fly under the radar and don't produce dramatic moments to rally around.

Unfortunately, that approach seems to elicit little but scorn from conservatives.  Like Rubin, I'd like this whole arena to be less partisan, but I'm not sure that's possible.  At least, not judging from the first few months of the Obama administration, anyway.  It's too bad.

Bad Behavior Update

Ed Whelan has apologized to Publius.  Good for him.

Quote of the Day

From George Will, demonstrating that he's about nine months behind the curve on state-of-the-art Obama crackpottery:

"I," said the president, who is inordinately fond of the first-person singular pronoun, "want to disabuse people of this notion that somehow we enjoy meddling in the private sector."

Jesus.  This would be an embarrassingly fatuous thing for a supposedly serious columnist to write even if it were true.  But a bare minimum of fact checking shows that it's not.  It's really, really, really not.

The Next Wave of Mortgage Profiteering

If there’s a lesson to be learned from the housing meltdown, it’s likely this: Where there’s a buck to be made, odds are there’s a scam being played.

At the peak of the housing bubble, it was mortgage companies like Countrywide, Wells Fargo, and Ameriquest, among many others, that used predatory lending practices and encouraged falsifiying homeowner information to sell now-toxic sub-prime mortgages. Today, as homeowners struggle to save their homes and search for any kind of lifeline to do so, a new brand of mortgage-industry profiteering is spreading: foreclosure rescue rip-offs.

Obama and Congress

After quoting a Montesquieu line about corrupt legislatures foreshadowing the end of liberty, Matt Yglesias says:

I do think you can see an inkling of what Montesquieu is talking about in the fact that there’s a persistent impulse in the contemporary United States to say that if something is really important, we need to basically cut congress out of the loop. This probably happened first with the steady decline of congress’ war powers. But you also saw it in the way that the Treasury/Fed response to the financial crisis was shaped by an overwhelming desire to avoid the need to go back to congress, by the way that proposals for improving the operations of MedPAC all involve trying to circumvent congress, etc. Tellingly, the judgment that congress can’t handle these issues is a judgment largely shared by congress.

Congress is a schizophrenic body: imperiously protective of its prerogatives some of the time, but, as Matt says, surprisingly eager to avoid responsibility and simply punt to the executive or the courts at other times.  So on the one hand you get blue-ribbon panels, base-closing commissions, the CBO, and statutory language left deliberately vague so that the hard details are left to agency rulemakers and appellate judges, while on the other hand you get temper tantrums about flying on Air Force One, seemingly endless jurisdictional fights, and committee barons rewriting entire legislative programs out of personal pique.  Barack Obama seems to understand this tension better than most, and so far has shown a quite subtle sense of when he can use executive power to lead Congress and when he needs to step back and let the Capitol Hill grandees do their thing.  Here's Matt Bai on how Obama does it:

After winning the office with the same kind of outsider appeal as his predecessors, he has quietly but methodically assembled the most Congress-centric administration in modern history. Obama’s White House is run by Rahm Emanuel, a former House leader who was generally considered to be on a fast track to the speakership before he resigned to become chief of staff, and it is teeming with aides plucked from the senior ranks of both chambers. Obama seems to think that the dysfunction in Washington isn’t only about the heightened enmity between the parties; it’s also about the longstanding mistrust between the two branches of government that stare each other down from twin peaks on either end of Pennsylvania Avenue.

....During a recent conversation in his expansive West Wing office, Emanuel explained that he was well aware, as he and his fellow transition aides set out to fill the various roles in Obama’s White House last fall, that many of the aides they hired had pivotal friendships on the Hill that Obama could exploit. “That was a strategy,” Emanuel said. “We didn’t kind of parallel-park into it. We had a deep bench of people with a lot of relationships that run into both the House and Senate extensively. And so we wanted to use that to our maximum advantage.”

Read the rest to learn about Emanuel's remarkably calculated "tracking system" for doling out little favors to members of Congress — something that's probably a good idea, but also one that perhaps he should have kept to himself.  Ditto for the "spontaneous" drop-bys in the West Wing.  Successful executives should always cultivate at least a little bit of an aura of mystery, shouldn't they?

Healthcare Reboot

I've been sort of quiet on the healthcare front lately.  This is because the news for the past few months has been mainly about committee wrangling, and that's so technical and inside-baseball-ish that even I have a hard time staying interested in it.

But things are starting to heat back up, and one of the key issues that's surfaced has been whether the final bill will include a "public option" of some kind.  I'll have more to say about that in the future, but for now you might want to check out Ezra Klein's quickie primer on the various flavors of public option currently on offer.  It's a good way of getting up to speed on this.