The Pirates of Somalia: A Photo Essay

The Boston Globe has assembled a spectacular photo essay of the chaos afloat off the shores of Somalia, where pirates have stepped up attacks on commercial shipping in the last year. Enjoy it for yourself here.

You bail it out, you own it.

That's the problem that Barack Obama is encountering. The federal government on his watch has poured tens of billions of dollars into AIG. And then comes the news that the failed insurance giant has awarded its execs hundreds of millions of dollars in bonuses. Though these rewards were set up by contracts established before the feds showered AIG with taxpayer dollars, the Obama administration is in a position to get blasted for this. After all, it's hard for the Obama White House to defend shoring up AIG with $170 billion in money from the Federal Reserve while its executives are scoring big.

Assuming propping up AIG is good policy, Obama has to sell this rescue--and all the others--to the public, and that's not any easier if AIG execs are lining their own pockets at the same time. Treasury Secretary Timothy Geithner has tried to pressure AIG chief Edward Liddy on these bonuses, and Liddy has attempted to hold firm, claiming much of these bonuses are necessary for the firm to retain talent. (Obvious response: if this is what you call talent, perhaps it's time to hand AIG over to amateurs.)

So Obama has to attack AIG while aiding it. He took a stab at this on Monday morning. At a White House appearance, when he was supposed to be talking about his plans to bolster small businesses, he took the opportunity to poke at AIG:

[AIG] is a corporation that finds itself in financial distress due to recklessness and greed.

Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?

In the last six months, AIG has received substantial sums from the US Treasury. I’ve asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole....This isn’t just a matter of dollars and cents. It’s about our fundamental values.

All across the country, there are people who are working hard and meeting their responsibilities every day, without the benefit of government bailouts or multi-million dollar bonuses....All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. That is an ethic we must demand.

What this situation also underscores is the need for overall financial regulatory reform, so we don’t find ourselves in this position again, and for some form of resolution mechanism in dealing with troubled financial institutions, so we have greater authority to protect the American taxpayer and our financial system in cases such as this. We will work with Congress to that end.

Will this approach--slam AIG, help it survive, and push financial reregulation--work politically? It probably depends on how much feeling--and what sort of feeling--Obama puts into the slamming part. A little anger won't hurt. There may be building--or seething--outrage beyond the Beltway. Obama has to make sure he's not blind-sided by it. And those recipients of federal largess at AIG are not helping.

Quote of the Day - 03.16.09

From Fareed Zakaria, himself a Very Serious Person in good standing, breaking ranks with the Very Serious People who have a chokehold on American foreign policy:

The problem with American foreign policy goes beyond George Bush. It includes a Washington establishment that has gotten comfortable with the exercise of American hegemony and treats compromise as treason and negotiations as appeasement.

On a related note, I think this partly accounts for one of my pet peeves: the popularity of the "carrot and stick" metaphor that gets used so often when politicians and pundits talk about how we should deal with foreign powers.  Most national leaders are comfortable with the idea of negotiating with us based on competing interests, but I don't think there's a leader in the entire world who doesn't bristle at the idea of being bribed like a schoolboy into cooperation with the United States.  It's a fantastically counterproductive way of publicly describing foreign relations, but nobody on this side of the Atlantic even seems to notice how fundamentally demeaning and offensive it is, or how difficult it makes it for foreign leaders to avoid the charge that they're "caving in" if they come to terms with us.

A better description of the bargaining process is simple: we have things we want, they have things they want, maybe we can strike a deal.  That's the way adults negotiate.  It's time for the carrot and the stick to be buried for good.

Alcopops

Last year California decided to raise taxes on "alcopops," sweet alcoholic drinks that are largely designed to appeal to teenagers.  But guess what?  No new taxes have flowed into state coffers:

Beverage makers admit they aren't paying the new taxes. They say they don't have to because they have reformulated the drinks — more than 6,000 varieties — to transform them into simple beers by limiting the amount of distilled spirits they contain.

They won't explain how. The formulas, they say, are trade secrets. And beverage-industry officials and federal regulators say there are no tests to determine how much distilled spirits the drinks contain.

....Board member Bill Leonard, who voted against the initial tax hike, said that although he is curious about how the industry managed to change thousands of drink formulas in a year, "it is probably impossible for us to ever figure out whether the formula is what they say it is."

I have to admit that my first reaction when I read this story was to laugh.  I know, I know: that's totally inappropriate.  It's a serious issue.  Etc.  But the brazenness on display here is really something, isn't it?  If the alcopop business ever fizzles out, maybe industry executives can all find jobs at AIG instead.

AIG Reveals Creditors, Plans Bonuses

As Kevin Drum notes, "AIG" (really the mostly government-owned company's government-appointed executives) released the names of its largest counterparties on Sunday. So it looks like the Project on Government Oversight's Michael Smallberg was right on the money when he told me on Friday: "With members of Congress from both sides of the aisle asking for the list, they'll only be able to avoid these questions for a limited amount of time."

Now we know what many observers already suspected: not only were companies receiving billions from the insurance company in what's been dubbed a "backdoor bailout," but some of those banks weren't even US-based. The meat of the "backdoor bailout," Portfolio's Felix Salmon writes, is in Appendix B of AIG's list (PDF): the amounts of bad mortgage-backed securities AIG bought from its counterparties to cancel out the bad insurance contracts it had written for those very same mortgage-backed securities. France's Société Générale got $6.9 billion, Germany's Deutsche Bank got $2.8 billion, and Swiss UBS got $2.5 billion. Goldman Sachs, as POGO suspected, also did quite well: it got $6.8 billion. The benefit for AIG's counterparties here is twofold: they offloaded bad assets, which improves their financial situation, and were most likely compensated for those assets in excess of what were actually worth.

I know I'm late to this, but I'm a big fan of this Norm Eisen character. From a profile in last Friday's WaPo:

Eisen is the White House ethics adviser, the guardian of Obama's integrity, and he is called for consultation every time the new administration has a question regarding more than 1,000 pages of government ethics rules and regulations....

Eisen almost never leaves his office without a binder of ethics statutes and a badly mangled copy of "5 CFR," the code of federal regulations. It's a dense collection of complicated rules. One chapter on gift bans is followed by a long addendum of exceptions, which are then followed by their own exceptions. Gifts from lobbyists are not allowed, unless they're worth less than $20, and only then if they result from a spouse's business or employment.

After he accepted the ethics job, Eisen "got comfortable" with his copy of the 5 CFR -- meaning he tore off the cover, ripped out pages that did not apply to the White House and annotated sections he liked. He crossed out rules in pencil that he planned to change. No longer, he decided, could White House employees receive small gifts, honorary degrees or awards from lobbyists.

"No way," he said. "Some of these things are just scams."

Ultimately, it is Norm Eisen's work that has the power to separate Obama's administration from all the other administrations in recent history, including the Democratic ones. He is the Secretary for Ending Politics As Usual. And I wish him all the luck in the world.

Proud socialist Billy Wharton took to the pages of the Washington Post yesterday to argue that Barack Obama is not a socialist. Frankly, he'll thank everyone for dropping the phony comparison.

All this speculation over whether our current president is a socialist led me into the sea of business suits, BlackBerrys and self-promoters in the studio at Fox Business News. I quickly realized that the antagonistic anchor David Asman had little interest in exploring socialist ideas on bank nationalization. For Asman, nationalization was merely a code word for socialism. Using logic borrowed from the 1964 thriller "The Manchurian Candidate," he portrayed Obama as a secret socialist, so far undercover that not even he understood that his policies were de facto socialist. I was merely a cudgel to be wielded against the president -- a physical embodiment of guilt by association.

The funny thing is, of course, that socialists know that Barack Obama is not one of us. Not only is he not a socialist, he may in fact not even be a liberal. Socialists understand him more as a hedge-fund Democrat -- one of a generation of neoliberal politicians firmly committed to free-market policies.

Wharton points to Obama's refusal to nationalize the banks, his rejection of single-payer health care, and his unwillingness to withdraw all troops from Iraq and Afghanistan immediately. All are areas that represent deep divides between the president and America's socialist minority. Wharton continues, "The president has... been assigned the unenviable task of salvaging a capitalist system intent on devouring itself." Fundamentally reshaping that system is out of the question for Obama. Any political observer who has been watching Obama closely but still doesn't accept that either (1) doesn't understand the president, (2) doesn't understand socialism, or (3) understands both but is willing to disregard reality for the sake of a partisan talking point.

SXSW Dispatch: Email Is for Old People

Sheerly Avni is a film and culture writer guest-blogging for Mother Jones from Austin's South by Southwest Festival.

Part One: Email Is for Old People

In a fit of pathological optimism, I opted to register for both the Interactive and Film portions of SXSW. This is like deciding to "do" both Italy and France on a five-day trip to Europe: Vertigo-inducing and ill-advised, though possible if you forgo sleep. Forgoing sleep in Austin has been easy; my hotel walls, more than three blocks away from the musical epicenter, were booming in time to the bass beat until well past 2 a.m.

And now I also have insomnia. Because not until I started passing out my spiffy new business cards in the SXSW pressroom did I discover that, despite living in San Francisco, having an iPhone, knowing some html, and maintaining a regular Facebook account, what a pathetically ass-backwards, last century, late-adopting, buzzword-clueless Internet rube I really am.

And, dear reader, or rather, user, or rather content-abuser, I hope you're a rube too.

SXSW is all about the search for the new. New music, new filmmakers, and in tech, that new "killer app," which will change everyone's lives forever. The killer app of two years ago at SXSW was Twitter. The killer app of last year was also.... Twitter. And this year at SXSW, as I discovered while trading business cards with tech bloggers and entrepeneurs too polite to point it out (thanks, Grant!), not having a Twitter account printed on my card places me firmly on the dusty, musty side of ever-narrowing bandwidth between tomorrow and yesterday.

Email addresses are obsolete; give your Twitter handle instead? It took me a while to wrap my mind around the concept—long enough that by the time I'd built my new account, I'd found out that guess what, Twitter's out now, too.

Like I said, vertigo.

In my next dispatch: Two films which premiered this weekend about what happens when it's not your email address but your livelihood that's become obsolete.

AIG Fesses Up

So where has all that taxpayer cash that's been shoveled into AIG gone?  Today they revealed their largest counterparties, and the top 5 — drum roll, please — are:
  • Goldman Sachs: $12.9 billion
  • Bank of America + Merrill Lynch: $12.0 billion
  • Société Générale: $11.9 billion
  • Deutsche Bank: $11.8 billion
  • Barclays: $8.5 billion
So it looks like everyone was right: Goldman did have enormous exposure to AIG and foreign banks did get massive dollops of aid from the bailout.  No wonder Lloyd Blankfein and Christine Lagarde took such a keen personal interest in AIG's fortunes.

UPDATE: The AIG memo contains four appendices that list amounts paid out to various creditors.  I just added them up to get the numbers above, but Felix Salmon says that amounts to adding up apples and oranges.  The real action, he says, is solely in Appendix 2, which gives us a different top 5:
  • Société Générale: $6.9 billion
  • Goldman Sachs: $5.6 billion
  • Merrill Lynch: $3.1 billion
  • Deutsche Bank: $2.8 billion
  • UBS: $2.5 billion
There's more to it than this, though.  Read Felix for more details on why further transparency is still needed.

Professor Buffy, Ph.D: Vampire-Slaying in the Real World

Journalism is weird.

Check out this HuffPo article about medieval folks' belief in vampires:

An archaeological dig near Venice has unearthed the 16th-century remains of a woman with a brick stuck between her jaws— evidence, experts say, that she was believed to be a vampire. The unusual burial is thought to be the result of an ancient vampire-slaying ritual. It suggests the legend of the mythical bloodsucking creatures was tied to medieval ignorance of how diseases spread and what happens to bodies after death, experts said...The well-preserved skeleton was found in 2006 on the Lazzaretto Nuovo island, north of the lagoon city, amid other corpses buried in a mass grave during an epidemic of plague that hit Venice in 1576."

How weird that the desecrated skeleton blamed for the worst of society's ills was female. Not. But I digress.

Wouldn't you know that Friday, as I luxuriated in the New Yorker I innocently came upon this: "In The Blood: Why Do Vampires Still Thrill?"

Ok. I smell a conspiracy, which is about as unusual as me smelling coffee or my stupid cat's litter box. Or, like, oxygen.

I'm a humorless feminist and all, but given the planet's fascination with vampires, why are the victims female while the cultural vampire sex symbols are male?

People, if we're gonna do the time, can't we at least do the crime?