Oh Please Let Haley Barbour Run For President

The Washington Post this morning ranked the most influential voices in the GOP right now. Of course, Dick Cheney is way up there. But buried in the rankings is more chatter about the influence of Mississippi governor and former tobacco lobbyist Haley Barbour, who may be mulling a presidential run in 2012. Barbour has been making all the right trips around the country; on June 24, he'll pop in for his second recent visit to New Hampshire. And, he's term-limited so Barbour will be in the job market come 2011.

The Post posits that Barbour will ultimately decide that trying to run against a reformer as a former uber-lobbyist probably is a lost cause, but I'm still rooting for him to run. What could be more fun that a bubba like Barbour facing off with Obama on the stump, where he could brag about his record of say, dumping thousands of poor pregnant women off Medicaid and other such feats? As campaign fodder goes, Barbour has at least as much color to offer as Mitt Romney, one of the presumed front-runners, though he might be hard pressed to compete with the dog-on-top-of-the-car vacation stories and all that Mormon stuff. Still, Barbour's entry into the race would liven things up in the press pool considerably.

Will Derivatives Ruin Cap-and-Trade?

Rachel Morris has on online piece today suggesting that the same Wall Street rocket scientists who destroyed the global economy via derivatives trading may be getting ready to do the same thing with carbon permits from a cap-and-trade system.  After all, if they can slice and dice subprime mortgages, why can't they do the same for packages of carbon permits?

I've got a few problems with this, though.  First, there's this:

Cap and trade would create what Commodity Futures Trading commissioner Bart Chilton anticipates as a $2 trillion market, "the biggest of any [commodities] derivatives product in the next five years."

I'm not entirely sure what this means, but my best guess is that Chilton is forecasting a market with a notional value of $400 billion per year.  This is not as large as it sounds.  The notional value of the CDS market in 2007, for example, was over $50 trillion.  Chilton's estimate for the carbon market is less than 1% that size.  Likewise, the underlying value of the actual carbon permits is likely to be on the order of $50-100 billion a year, which is less than 1% of the underlying value of, say, the U.S. stock market.  Even if Wall Street went nuts with this stuff, it couldn't do too much damage.

Then there's this:

In addition to trading the allowances and offsets themselves, participants in carbon markets can also deal in their derivatives — such as futures contracts to deliver a certain number of allowances at an agreed price and time.

This is true, but carbon permits are essentially commodities, and the kinds of derivatives traded on commodity exchanges are generally forwards, futures, and options.  But while these may be derivatives, they're mostly not the rocket science kind.  They've been around forever, they're well understood, and they weren't responsible for any of the problems that caused our current meltdown.

Beyond that, these kinds of derivatives can actually be pretty helpful.  They're generally used for two purposes: (a) managing volatility and (b) speculation.  The first is an unalloyed good thing, since one of the main complaints about a cap-and-trade system is that it doesn't provide investors with a fixed carbon price they can plan around.  Futures contracts help with that.  And speculation, though it often gets a bad rap (sometimes deservedly), can be helpful too if it provides a price signal today for possible permit scarcity tomorrow.  Driving up the price sooner rather than later can actually motivate higher levels of investment in green technology.  (The downside: if Congress bollixes the law and speculators decide that there are going to be loads of permits in the future, they'll drive the price down.  But if Congress screws up that badly, the whole system isn't going to work worth a damn anyway.)

Finally, there's this:

Perhaps the biggest uncertainty hinges on how offset derivatives—such as a contract to buy offset credits at a future date for a determined price — will be monitored. This too would be left to the White House task force to figure out. It will be a tough task because the quality of offset projects is notoriously difficult to verify. Sen. Jeff Bingaman (D-N.M.) has described them as "fraught with opportunity for game playing, which will be fully exploited, I'm sure."

Offsets are a big problem, but their problems have nothing to do with derivatives.  They're a problem because it's really, really hard to insure that an offset (say, planting a million acres of trees in Brazil in order to make up for emitting a million tons of carbon) is real, that it's something that wouldn't have been done anyway, and that it's effectively monitored to make sure it's permanent.  Those are genuinely big issues, but they're issues that are inherent in the whole concept of offsets.  Making derivatives out of them doesn't change things much.

With all that said, the piece is worth a read.  I have my doubts that derivatives are really that big a problem in the carbon market, and in any case I'd just as soon see them regulated by the same mechanisms we come up with to regulate all the other derivative markets, rather than being treated as a one-off special.  Still, it's worth knowing about this stuff, and worth taking some time to address in the Waxman-Markey markup process.  For example, Bart Stupak's provisions for making sure carbon derivatives are exchange traded, which Rachel mentions in her article, are well worth trying to protect through the end of the legislative process.  After all, if Wall Street objects, it almost has to be a good thing, doesn't it?

The Supreme Court just ruled, 5-4, that a West Virginia judge who was the beneficiary of over $3 million in campaign spending by an energy company executive probably should have recused himself from ruling on an almost-$30 million case involving that same energy company. In his dissent (PDF), Chief Justice John Roberts asserts that it is "far from clear that [the over $3 million in campaign] expenditures affected the outcome of this election." Really? I could see using the word "determined" in this context (the judge did win by 7 percentage points). But to argue that over $3 million spent on a state judicial election had zero effect on the outcome beggars belief.

New York Times Fail

Last week, Mother Jones alum and current Talking Points Memo news editor Justin Elliott nagged and embarrassed the New York Times into running an editors' note explaining how badly it messed up a front-page story on alleged "recidivism" of Guantanamo Bay detainees. But this weekend, the Times was at it again, totally blowing yet another torture-related front-pager. Once again, the Times has obtained exclusive information about a politically controversial issue, and once again, the Times has simply regurgitated right-wing spin on what it obtained. (Sound familiar?)

This time around, the Times has obtained three emails (PDF) sent by Jim Comey, a Deputy Attorney General in the Bush administration, in April and May 2005. Any fair reading of these emails suggests that Justice Department lawyers faced enormous amounts of pressure from the White House to rule that the torture techniques the administration was already using were legal. Read the emails and see for yourself.

The Times seems to think that the news in the emails was that some right-wing Bush administration officials who were once thought not to have approved torture may have actually approved torture. Shocking, I know. It's almost as if the story was leaked to the Times by someone who wanted to promote the Bush-Cheney line on torture: "we were assured it was all legal." But the White House, of course, had all all the power, and pushed for exactly the opinions it wanted.

Comey even predicted in his emails that the officials who were demanding the legal backing at the time would later claim they had just innocently followed freely-given legal advice. "I told him the people who were applying pressure now would not be there when the shit hit the fan. Rather they would simply say they had only asked for an opinion," Comey wrote in the April 28 email. That's exactly what happened. But the Times left that comment for the bottom of its story, and spun the lead and the headline so much as to make it seem like they were writing about a different set of emails entirely. I guess I shouldn't be surprised at this behavior from a newspaper that won't call torture torture, but it's still disappointing. Marcy Wheeler, Glenn Greenwald, and Andrew Sullivan have more.

Chart of the Day

Nate Silver informs us today that although there aren't very many women in Congress, the women we do have are more likely to come from male-dominated congressional districts.  The effect is most pronounced in strongly Democratic districts (blue line), but it's there in Republican and neutral districts too.

Why?  Who knows.  It seems unlikely that a fairly small difference in male:female population ratio would actually be noticeable by the residents of a district, but Nate says the effect is pretty robust.  In other words, it's probably not a fluke.  So what's the answer?  Some underlying variable that drives both things?  Are women less likely to vote for a woman than men are?  (Maybe some kind of analysis of exit poll results would help here.)  Leave your guesses suggestions for further research in comments.

We Are All 17 Year Olds Now

This was all over the tubes yesterday, but it's so entertainingly crazy that I feel like I have to pass it along.  It's Sen. Chuck Grassley's Twitter feed, and Grassley really seems to have fully channeled the junior high school spirit of the whole thing.  First he's annoyed at an anodyne Obama call to "deliver" on healthcare because Obama is, like, obviously a slacker since he took some of the weekend off for sightseeing.  Then, a few minutes later, he's annoyed all over again.  Finally, this morning he feels compelled to toss a random barb at Al Gore.

Very strange.  Is Grassley off his meds or something?  Or did someone hijack his Twitter account?  That was actually my first thought, but his office hasn't denied the tweets so I guess they're really his.  Thus does Twitter make fools of us all.  Enjoy.

Obama's New CEO Pay Restrictions

The Obama administration is planning to increase its oversight of CEO pay. A top Treasury Department official, Kenneth Feinberg, will be charged with monitoring executive compensation at companies that have been bailed out more than once. Feinberg will have to approve any changes in compensation at those firms. The administration is also drafting broader principles that will apply to all banks and be enforced—or not enforced—by federal regulators. The New York Times explains:

The set of broad pay principles being drafted by the Treasury Department would authorize regulators to tell a bank to alter its compensation arrangements if it is found to encourage too much risk-taking. It is not clear how the government will define too much risk.

According to the two government officials, the new principles will not include bonus restrictions, although they will encourage banks to set compensation in a way that avoids rewarding risk-taking through short-term bonus awards. They will apply to a broad swath of financial companies, even the United States operations of foreign banks, as well as private companies like hedge funds and private equity firms.

It's great that the administration finally seems to be taking the executive pay issue seriously. But back in 2007, then-Senator Barack Obama championed a weaker executive compensation reform that now seems to have gone by the wayside. It was called "say on pay," and would have allowed stockowners a non-binding vote to express their displeasure with a company's pay packages. As Mother Jones reported in March, a top Geithner aide, Mark Patterson, was one of the financial industry lobbyists fighting Obama's "say on pay" legislation. Patterson and his Wall Street bosses won that battle, and Obama's reform never became law. Now Patterson is Geithner's chief of staff. This time around, though, it seems like Patterson's former Wall Street bosses are the ones who aren't getting much of a say on pay.

Anti-Affirmative Action Hypocrisy

In an interview with The New Yorker, William Bowen—Princeton's president circa Sonia Sotomayor's freshman year there—articulates the argument for considering race in college admissions:

The way many Americans learn about civil rights—the way I learned about Rosa Parks in second grade—very much focuses on color blindness. The idea of racial justice often coexists uneasily with that basic narrative. In a recent Supreme Court decision striking down affirmative-action programs for some school districts, John Roberts reflected the opinion of many conservatives when he wrote, “The way to stop discrimination on the basis of race is to stop discriminating on the basis of race.” What’s your response to that?

[...]

One of the good outcomes of the O’Connor decision [in the Michigan v. Long affirmative action case]  was the rejection of quotas and just giving points because you were black or whatever. The University of Michigan was told that, at the undergraduate level, you can’t do that. That’s wrong. I agree! That is wrong because it fails to capture what the whole portfolio of the person looks like.

In short, your racial and ethnic background can shape who a student is and will become during and after college; paying no mind to it—or simply giving out a point for being Latino—ultimately patronizes that ethnic experience, whether white, black, Latino or Asian.

That idea gets lost, or overlooked, when people talk about color blindness—thinking of Rosa Parks as just another person. Color blindness, then, seems to overtake the affirmative action debate for many: Any mind paid to race is an anathema to racial justice. Scores of minority students at the nation's most selective colleges know exactly how that manifests itself—the complete shedding of racial blindness by some white students who see a minority student's race as their overriding factor for admission.

Just after I arrived for my freshman year at my alma mater, Northwestern, a Latina friend of mine overheard her white roommate on the phone lamenting to a friend that her roommate and her friends—about five of us—only "got in because they're Latino." The girl I had been dating the summer before school put it just as bluntly when I told her the school had given me a good chunk of financial aid: "That's because you're Mexican."

I remember making a point not to mention my racial background on my application, but the comments were belittling and condescending nonetheless. What makes them even more hurtful is that they are delivered wrapped in a thin film of ignorance about what affirmative action means: Considering a person's racial makeup to better understand who she is and could become, and how her experiences could contribute to a more dynamic student body. That group will always, and must, include white students.

But the argument against it, made most recently by talkers like Pat Buchanan in the debate over Sonia Sotomayor's nomination to the Supreme Court, pushes aside that definition of affirmative action. I did not indicate my own race on my college applications because I was all too aware of the idea that affirmative action means I would receive a point for my race. That's how so many Americans see it. It then becomes so easy to exploit when a president nominates someone with Sonia Sotomayor's racial background to the Supreme Court: She must have gotten to where she is because of her race.

Such words only show intellectual laze, because they are such an easy weapon to wield in a debate where. They create a convenient weapon, too, because it allows people to almost completely dismiss a person strictly on the basis her race and without paying mind to her body of work. That is the inherent hypocrisy in such arguments: After calling for color-blindness and focus on merits, those dismissing minorities like Sotomayor as "affirmative action" nominees eschew the former and overlook the latter.

Remember when conservatives tried to blame the subprime mortgage crisis on poor people and minorities? According to the conservatives' narrative, a 1977 law called the Community Reinvestment Act caused all of our problems by encouraging the extension of credit to poor people and minorities. The problem with that argument was that the vast majority of subprime loans were made by institutions that were not subject to the CRA, and studies have shown that the act has actually increased the amount of responsible lending to poor families. Even the Federal Reserve has posted research explaining that the CRA argument is bogus.

So why, then, do we keep hearing about poor people and minorities defaulting on subprime loans? Because, as it turns out, subprime lenders didn't need any encouragement to make predatory loans to people they thought they could easily exploit. The New York Times reports:

As she describes it, Beth Jacobson and her fellow loan officers at Wells Fargo Bank “rode the stagecoach from hell” for a decade, systematically singling out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages... Wells Fargo, Ms. Jacobson said in an interview, saw the black community as fertile ground for subprime mortgages, as working-class blacks were hungry to be a part of the nation’s home-owning mania. Loan officers, she said, pushed customers who could have qualified for prime loans into subprime mortgages. Another loan officer stated in an affidavit filed last week that employees had referred to blacks as "mud people" and to subprime lending as "ghetto loans."

Gays in the Military

Here's some good, if unsurprising, news: support for allowing gays to serve openly in the military is up considerably since 2004.  For the past few decades public opinion on all kinds of gay issues has trended more tolerant by about 1% per year, and Gallup's latest poll confirms this: in the past five years support for allowing gays and lesbians to serve has increased from 63% to 69%.

Perhaps surprisingly, the biggest shift comes from conservatives, who have become more supportive by 12 percentage points, moving from 46% in favor to 58% in favor.  Regular churchgoers and the young have also made bigger-than-average jumps.

There's a rule of thumb that says social policies are resistant to change until they garner two-thirds support from the public.  Allowing gays to serve openly in the military has now officially passed that point.  That means it's safe to keep your campaign promise and act, Mr. President.