The World's Dumbest Deliberative Body

Midway through the second period of our global economic collapse, how's the home team doing?  Conventional wisdom says the Wall Street crowd is whiny and petulant.  President Obama is well-meaning but maybe a little too cautious. Europe is too disorganized and too eager to shift the blame instead of taking action.

And then....there's the Congress of the United States.  Michelle Bachmann, taking a page out of the Bircher playbook circa 1963, wants to make sure the Chinese don't foist a one-world currency on us while we're down.  Don Manzullo is so relentlessly clueless that even the normally imperturbable Ben Bernanke can't pretend to understand him.  And LA Times columnist Michael Hiltzik is watching television:

On C-SPAN I found the perfect thing: The House Financial Services Committee was grilling Treasury Secretary Timothy F. Geithner and Federal Reserve Chairman Ben S. Bernanke about the AIG rescue.

Rep. Jeb Hensarling (R-Texas) grumbled about "socialized medicine," as though he had wandered into the wrong committee room. Rep. Maxine Waters (D-Los Angeles) obsessed about the "small group of Wall Street types who are making decisions," especially Goldman Sachs & Co., which she described in terms James Bond uses to describe SPECTRE.

Their colleagues, meanwhile, emitted what the writer David Foster Wallace might have described as "recombinant strings of dead cliches" about undeserved bonus payments, U.S. taxpayer money paying off foreign banks and the mushrooming of that new American art form, the bailout.

They showed, in sum, that they have no understanding of the roots or remedies for the financial crisis, and — more to the point — no great desire to understand. They left me convinced that if we are to have a productive investigation of the financial meltdown, it must be taken away from posturing lawmakers.

Hiltzik's solution is a fantasy lineup of investigators to shove Congress out of the way and figure out what really happened.  A friend who works on Wall Street ended an email cautiously supportive of Geithner's toxic waste plan with this: "One last thought — could we possibly send Congress into recessuntil this is all over? They are killing us...."  My solution is — what?  I don't have one.  Enjoy the show, folks.

Who's Afraid of The Big, Bad Zit?

Residents of Nottinghamshire in the UK, apparently tormented by a scourge of young ruffians, have come up with a new addition to the cottage industry of anti-teenager technology. (See my earlier post about a New Zealand shopping mall's use of Barry Manilow's music to disperse unwanted teenage loiterers.) In this case, members of the Layton Burroughs Residents' Association have installed pink lights in three locations, which amplify the ugliness of pimples--a practice meant to embarrass teenagers and drive them away in search of softer, more sympathetic light.

From the BBC:
Tony Gelsthorpe, chairman of the Layton Burroughs Residents' Association, said the lights were important for the residents.
"We've had problems with underage drinking, drug dealing, anti-social behaviour and general intimidation.
"I was a little bit dubious about the pink lights at first but it's done the trick. We've got to think of our residents and we've got to live here at the end of the day.

Rihanna Gets a Gun

Two of them actually. Tattoos. Click here to see them. Wonder what that means?

I hope she's staying silent just because she refuses to play the game and not because she's either ashamed or...who knows what's she's feeling.

But guns....? I hope it's a warning to any other man who ever puts his hands on her. But only Rihanna knows for sure. Maybe she meant it for people like me who won't get out of her business. Regardless, I'm impressed by her silence. I hope I'm right. I hope she's all right.

BTW, I spoke with some high school girls this weekend and yup, they blame Rihanna. Not for "making" him hit her but for taking him back. If she really has. They also introduced me to this.

 Ah youth. 

Regulation Redux

Slowly but surely, the Obama administration is rolling out its vision for reformed financial regulation:

Treasury Secretary Timothy Geithner will call Thursday for changes in how the government oversees risk-taking in financial markets, pushing for tougher rules on how big companies manage their finances as well as tighter controls on some hedge funds and money-market mutual funds.

....The new rules will likely require financial institutions to hold more capital as a buffer against losses and will bolster risk-management standards. All told, the proposals would mean significant expansions of power for the Treasury, Federal Reserve and other regulators.

This is all well and good, though I'm still a little hazy on what underlying principles are guiding all this stuff.  That aside, though, I wonder how much good this will do all by itself.  After all, the problem during the housing bubble wasn't a lack of regulatory authority, it was a lack of regulatory will.  The Fed could have insisted on stiffer mortgage lending standards, but it didn't.  Alan Greenspan could have pushed for higher interest rates to slow down the rate of credit expansion, but he didn't.  Congress and the president could have raised taxes and run budget surpluses, but they didn't. The SEC could have tightened capital adequacy standards for investment banks, but instead it loosened them.

A more sensible set of financial regulations is long overdue.  But the bigger problem is ensuring that regulations actually get used, even when it means slowing down an economic expansion and spoiling everyone's fun midway through the party.  I'm not quite sure how to deal with that — I'm not quite sure it's even possible to deal with that — but it's something we should be addressing if we're even halfway serious about this stuff.

Getting to Yes

I was browsing through The Corner today and came across David Freddoso lauding the House Republicans' new housing plan.  You will be non-shocked to learn that it consists of a bunch of new tax breaks, including — naturally — elimination of the capital gains tax on investment property.  Yawn.

But wait!  It turns out that the House GOP's plan has inspired some surprising comity between right and left: they both hate it.  Jerry Taylor gives the conservative rationale for opposing the plan:

I know that there is plenty of political capital to be gained by providing handouts to middle-class homeowners and little political capital in removing the same. But a political party that ostensibly stands for free markets and limited government should not be in the business of underwriting or subsidizing private investments in anything unless we can find some plausible market failure in need of correction (and perhaps not even then).

Matt Yglesias provides the lefty view of why this plan sucks:

Preferential subsidies for investment in housing lead people to, on average, consume more housing and less stuff-that-isn’t-housing than they otherwise would. In other words, bigger houses instead of fancier clothes. This, in turn, has a substantial negative impact on the economy. Larger houses cost more to heat and cool, and larger houses lead to longer commutes. We shouldn’t stop people from buying big houses if that’s what they want to do, but it’s quite harmful to be specifically encouraging them to invest their resources in this way quite independently from the financial crisis. Reduce the tax-side subsidies to homeownership and we’d have somewhat faster economic growth, somewhat more public revenue, and a somewhat cleaner environment.

So: get rid of housing subsidies and we'd have both a freer market and bigger government.  It's a win-win!  Except for anyone who actually voted for it, of course.  But at least we get this bonus factoidish wonkery from Taylor:

For what it is worth, Switzerland is the only major country I am aware of that does not implicitly or explicitly subsidize housing in any substantial manner. Home ownership rates are somewhere around 35% as a consequence. But no one thinks of Switzerland as poor or deprived somehow because it does not receive the positive externalities allegedly associated with private home ownership.

I suppose not.  Still, it didn't stop the Swiss from buying our crappy mortgage-backed securities, did it?

Come see Rachel Maddow (in SF)--ticket giveaway

Genius host Rachel Maddow is graciously doing a fundraiser for Mother Jones in San Francisco this Saturday; we thought that as a thank you to all of MoJoBlog readerdom, we'd give away a pair of tickets to one of you. Let us know in the comments if you're interested--we'll pick one commenter at random by Thursday night. Make sure to register so we have a way to contact you. See you there!

UPDATE: And the winner is... commenter No. 2, reyonthehill! We'll email you about how to get a hold of your tickets. (I'm trying to figure out how to embed a picture of the random.org result, but can't seem to get it to work. Sorry!)

The Repeal of Glass-Steagall

Jason Zengerle points us to this allegedly prescient quote from 1999 in the New York Times:

"I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010," said Senator Byron L. Dorgan, Democrat of North Dakota. "I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness."

I understand the outcry over passage of the Commodity Futures Modernization Act, which happened a year later in 2000.  Aside from opening the infamous "Enron loophole," it also prevented the regulation of credit default swaps, something that might have come in handy over the past few years.

But despite a strong preconceived distaste for any legislation sponsored by Phil Gramm, I'm still a little mystified over the impact that repeal of Glass-Steagall is supposed to have had on our current financial meltdown.  Standalone investment banks have suffered every bit as much as the big conglomerates — maybe even more — and it's not clear that combining commercial and investment banking under one roof had any effect one way or the other on the housing and credit bubble that drove the collapse.  AIG would have gotten into the CDS business with or without Glass-Steagall, and crappy lending standards were the order of the day at Countrywide and IndyMac just as much as they were at Citigroup and Bank of America.

On a broad note, I suppose you can argue that repeal of Glass-Steagall encouraged the growth of ever more too-big-to-fail financial institutions, and there might be something to that.  On the other hand, I don't think Travelers Insurance has contributed anything to Citi's troubles, so it's not clear that crude size is really the culprit here.  There are big banks all over the world, not just here in the post-Glass-Steagall United States.

Maybe someone would like to take a crack at making the case for the malign role played by repeal of Glass-Steagall.  Even better, how about the case for reinstating it?  I'd certainly be interested in hearing it.

Just How Bad Will It Get?

Via Brad DeLong, Menzie Chinn compares the CBO's February and March projections of economic disaster and notes that they've become considerably more disastrous in only a month:

Notice that the no-stimulus counterfactual output gap and unemployment rates are noticeably worse now than only a month ago (see this post). For 2010, the February counterfactual was -6.3% of GDP, now around -10%; the February counterfactual for 2010 was 8.7% unemployment, now it's nearly 11% (I'm eyeballing the current counterfactuals off of Figures 2-1 and 2-2)....My guess is that that "massive" stimulus is going to look a lot less "massive" given the severity and duration of this recession.

A month ago CBO estimated that unemployment would hit 8.7% in the absence of a stimulus package.  Now they think it would have been around 10.5%.  With the stimulus, they think it will top out at a little over 9%.

Healthcare Reform, Insurance Industry Style

Over at the Wonk Room, Igor Volsky notes that AHIP, a healthcare insurance trade group, has finally announced its position on healthcare reform:

Specifically, by enacting an effective, enforceable requirement that all Americans assume responsibility to obtain and maintain health insurance, we believe that we could guarantee issue coverage with no pre-existing condition exclusions and phase out the practice of varying premiums based on health status in the individual market. While we support transitioning to a reformed system in which health-status-based rating is no longer used, rating flexibility based on age, geography, family size, and benefit design is needed to maintain affordability.

Volsky is pretty unimpressed, but I guess I feel slightly more generous toward this proposal than he does.  If AHIP is serious, this represents a philosophical concession that's worth having.  Unfortunately, the devil is in the details.

AHIP says that in return for making insurance mandatory, the industry is willing to guarantee coverage to everyone, regardless of health status.  But check out that last sentence, which is a loophole big enough to drive an EMT ambulance through.

I'll grant them family size as a reasonable criteria for premium flexibility.  Obviously a big family should be charged more than a single person.  But age?  Health issues rise rapidly with advancing years, so it would be fairly easy to avoid the worst risks by simply making premiums rise dramatically after age 50.  Geography?  Everyone knows that poor people tend to have the worst health, and obviously they cluster in low-income areas.  Benefit design?  Every health insurance company understands where the costs are in the system.  If plans with decent coverage of expensive chronic conditions like diabetes are priced out of reach, then nobody will buy them even if, technically, the premium isn't based on health status.

Now, some of this is simply fodder for regulation.  Maybe you can set minimum standards for plan benefits, or limits on how fast premiums can increase with age. But as Volsky points out, AHIP's position today isn't really very different from its position in 1992, which it abandoned at the first sign of political opportunity.  Liberals, including me, have a fond hope that the political scene is different today than it was in 1992, which might keep AHIP from bolting, but recent events suggest that Republicans are pretty likely to adopt the same "Just Say No" strategy this year that they did during the Clinton administration.  It's possible that the political scene hasn't changed as much as we think.

Bottom line: AHIP's statement is better than no statement.  It's progress of a sort, especially if they're serious about it and willing to accept reasonable regulations on how it gets implemented.  We'll see.

Abortions Up in Tough Times?

Apparently that's the case, that people are finding kids too spendy right now. The National Network for Abortion Funds, which helps women in need pay for abortions, says that calls to their helpline have quadrupled in recent months. The AP/Google.com puts it this way:
For many Americans, the recession is affecting their most intimate decisions about sex and family planning. Doctors and clinics are reporting that many women are choosing abortions and men are having vasectomies because they cannot afford a child.
First, this is a siren call for prevention, which legislators, and the courts, are hearing. That you have to resort to an abortion when you could be given access to available, affordable, birth control, is a lousy choice to have to make.

Second, how much do abortions cost anyway? Since many states restrict coverage [pdf] of the procedure by insurers, and since the Hyde amendment still prohibits federal funds (such as Medicaid) from covering most abortions, women often have to pay out-of-pocket. First trimester abortions cost in the neighborhood of $300-$500, second trimester ones can run upwards of $5000. And since the price for an abortion goes up pretty much each week once you get into the second trimester the issue of access takes on renewed significance. Waiting periods, parental notification, restrictions that send women across borders, these all take an emotional toll, and a financial one. I wonder if the recession could also be having an opposite effect, women wanting to have the procedure but not doing so because money is tight.