Dear US Mint: Pump Your Brakes

The US Mint is completely out of control. Most recent illustration: the release of four (4!) new pennies commemorating the 200th anniversary of Abraham Lincoln's birth. The first, shown at the right, is already in production. Here are details:

The first coin, nicknamed the "Kentucky Penny," features an image of one-room log cabin where Lincoln was born on Feb. 12, 1809, near Hodgenville, Ky....
The second design, the "Indiana Penny," features an image of a young Lincoln taking a break from his work as an Indiana rail splitter. It will find its way into pockets and change purses starting May 14.

The "Illinois Penny," marking Lincoln's work as a state legislator, will start dropping into tip jars Aug. 13.

And the fourth penny, with an image of the unfinished U.S. Capitol dome, makes its debut Nov. 12. The unfinished dome symbolizes the nation torn apart by the Civil War and Lincoln's resolve to bring it back together.

And just in case that wasn't enough, the Mint is also producing 500,000 commemorative Lincoln silver dollars. This is officially Minters Gone Wild. Tourists visiting America already have to deal with the fact that our quarters have over fifty different images on the back, many of which are obscure references to local tourist attractions. (Some don't even exist any more!) There are two different versions of Jefferson on our nickles, there are dollar and half-dollar coins you've never heard of, and starting in 2010 the US Mint is going to start featuring national parks on our quarters. Did you know that there are $10 coins featuring famous first wives?

Enough! The pictures on the back of our coins ought to mean something. I know this is a bizarre place to make a stand for tradition, but we're now printing coins with middling Presidents Harrison, Tyler, Polk, and Taylor on them. At this point, the national Mint is like a frantic crack addict, looking desperately for a new fix that it knows it will enjoy less than the last. Consider this an intervention, Mint. Go check yourself into rehab before we find you sprawled out in a gutter surrounded by dimes with pictures of Grover Cleveland's private commode on the back.

Update: This post was originally titled "Dear US Mint: Pump Your Breaks," because I am an idiot.

Should We Be Critical of the Geithner About-Face?

A lot of early morning chatter on the internets is focusing on this WaPo story, which suggests that Treasury Secretary Tim Geithner's rollout of the Wall Street bailout version 2.0 was "hobbled" by a last minute change of plans. "According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers," the article says. "They needed an alternative and found it in a previously considered initiative to pair private investments and public loans to try to buy the risky assets and take them off the books of banks."

This news isn't being received kindly. TPM's top headline: "How Geithner's Bailout Rollout Flopped." Mike Tomasky echoes the Post and says that Geithner's effort was "hobbled." Conservative blog Red State is calling the situation a "picture of dysfunction."

And yet, why? I agree that Geithner should have ignored his arbitrary deadline in order to put more meat on the bones of his plan. I agree that it is ridiculous that the administration gave Geithner no staff to work with. But shouldn't we applaud the fact that Geithner did not stubbornly stick to a plan that he could see was not working, despite the fact that he had spent weeks working on it? Wasn't it characteristic of the Bush Administration to never admit mistakes and to obstinately stick with policies that were obvious failures? Doesn't that explain years 2003-2006 of the Iraq War and Donald Rumsfeld's tenure as Secretary of Defense?

Geithner saw that he had a flawed plan. Instead of saying, "It's too late to change course" or "We put too much work in to switch things now," he scrapped what he had and went with something better. I say we give him credit for that.

538's Nate Silver Predicts the Oscars

If you thought you had post-election letdown syndrome, with the endless hours of TV punditry and blog pontification that once filled your days and nights suddenly evaporating, imagine what Nate Silver feels like. His labor-intensive web site, fivethirtyeight.com, rocketed to prominence last year as the most reliable and thorough electoral predictor around, but after the election, what does he have to post about? Well, it turns out his geeky brilliance can be used to predict other things as well, including the lame old Oscars, heading to your TV this Sunday. Silver fed the history of Oscar winners into his supercomputer for New York magazine, and the results included both the obvious and the somewhat surprising.

Insolvency

INSOLVENCY....Is the U.S. banking system insolvent?  John Hempton provides five different definitions of insolvency and suggests that the answer isn't as clear as we might like:

Now when a blogger or an analyst tells you a bank or the system is insolvent then ask them what definition of insolvency they are using and test them against that definition. Then test them against others — and work out — in the context given — whether the institution is solvent against the definition appropriate for the circumstances. People who do not think clearly as to definition of insolvent are being sloppy — and that includes most the bloggers I most admire including Paul Krugman. The context in which the banking system is insolvent is that (a) it is illiquid because people don’t trust it and (b) it can’t get enough liquidity because it has to sell assets into a market in which they are trading considerably below their “yield to maturity or GAAP price” and if you sell it at that price you reveal “mark-to-market” insolvency as per Roubini. However provided the banking system could remain liquid it is unlikely it will actually be insolvent though individual banks might be. [I should note that this is a US conclusion. The UK banks started much more thinly capitalised and I think they are insolvent.]

This is what the stakes are in the (so far incompetent) government policy as to how the banking crisis is to be dealt with. What is a marginal solvency crisis (and that is all it is on a yield to maturity basis) is being turned into the mother-of-all-liquidity-and-solvency crises. Sure the banks bought in on themselves by telling so many lies in the good times (so they are never believed now). But now the problem is beyond their ability to control.

Anyway wholesale nationalisation is not the right policy per-se. It will the inevitable result of following the wrong policies. The right policies will involve selective nationalisation — what I have described in other posts as “nationalisation after due process”.

The whole post is a long one, and hinges largely on a combination of regulatory forebearance issues and questions of whether toxic assets in the banking system are valued at fire sale prices or their most likely long-term yield.  I don't know if I agree with the whole thing or not, but I do agree that some kind of consistent and transparent test for solvency is needed to replace the ad hoc mess we've had up until now — and Hempton proposes one at the very end of the post.  The whole thing is educational and worth a read.

Filibuster Reax

FILIBUSTER REAX....Guess what?  It turns out that the blogosphere is chock full of pie-in-the-sky alternatives for doing away with the filibuster.  I've even got one myself.  But let's round up the others first.  Here's Matt Yglesias:

Pass a measure in the 111th congress saying that there will be no filibustering starting with the 113th congress. That would avoid the sense that the reform was a mere power grab.

I like this idea a lot. Unfortunately, my understanding of the rules suggests it's impossible. The only way to do away with the filibuster is via an arcane challenge to a point of order that would be sustained by the vice president while presiding over the Senate.  So it either happens or it doesn't.  There's no way for the 111th congress to pass a resolution that's binding on the 113th.

Hilzoy offers a couple of other alternatives.  She notes that modern filibusters are tepid affairs, but there's a reason for that: old-school filibusters are actually more tiring for the majority than for the filibustering minority.  Everybody got tired of that starting in the early 60s, and the reforms that were put in place eventually degenerated into today's routine requirement for 60 votes to pass virtually all legislation in the Senate.  What to do?

The Senate might make cloture votes require 60% of the votes of those who are present and voting, for instance. That would mean that the side that was mounting a filibuster would have to keep all its members around for the duration. Alternately, the Senate might adopt a rule that said that during filibusters, if a quorum was not present, the Senator who was speaking could decide to go on speaking or to allow a vote on cloture, to be decided by a majority of those present and voting. If s/he decided to go on speaking, s/he could do so, but no other Senate business could be conducted until the next business day. If s/he opted for the cloture vote, it would take place.

Maybe, though once again it's not clear how this could happen since I think it takes a two-thirds vote to change Senate rules.  Stuck again.

But as long as we're chattering about impossible things, here's my idea: a court case challenging the constitutionality of the filibuster.  Basically this would take the form of an originalist argument that the framers always intended for bills to be passed by majority votes in both Houses.  This wasn't spelled out specifically in Article 1, but that's only because it was such a deeply held assumption that nobody even thought it necessary to put it in writing.  Majority rule was quite plainly the default requirement, and in cases where a supermajority was required it was spelled out specifically.

In practice, of course, there's no chance that the Supreme Court would insert itself so deeply into the internal workings of the legislative branch, especially in the case of a custom that's been around for nearly two centuries.  So there's only one alternative left.  Steve Benen explains:

Perhaps there can be some kind of limit on the number of filibusters (kind of like NFL coaches having a limit on how many times they can challenge a referee's call on the field).

James Joyner is enthusiastic too ("Perhaps if they successfully challenge two bills, they get a third!").  Count me in as well. If it's pie-in-the-sky we're going to talk about, what better model do we have than professional sports?  The NFL might have a bad habit of changing its rules about as often as most of us change our shirts, but at least they manage to crown a champion every year.  Compared to Congress, that's not bad.

Sphere of Influence

SPHERE OF INFLUENCE....In the LA Times, Megan Stack reports that Russia is playing both parts in a good-cop-bad-cop routine directed at the United States:

In recent days, Russian officials have rushed forward to offer logistical help to NATO troops in Afghanistan — at the same time dipping into a dwindling budget to offer impoverished Kyrgyzstan more than $2 billion in an apparent payoff for ejecting a U.S. military base crucial to the war against the Taliban.

In fact, Russia is tugged between two strong, conflicting impulses. It distrusts U.S. motives, especially when it comes to America's penetration of former Soviet states. But Moscow's sense of invulnerability appears shaken by falling oil prices and the precarious economy. Many analysts believe the Kremlin is looking for an opening to make nice with the West. Nearby Afghanistan, where instability also spells danger for Russia, presents a handy opening.

And so Russian officials offer help with one hand, lash out with the other.

....The message from Moscow these days appears to be that the United States should not expect to cut deals with the Kremlin-backed governments of Central Asia. If Obama wants something from the region, he'll have to ask Moscow.

The key question seems to be: how scared is Putin of Islamic extremism near Russia's border?  And how badly do we want Russian help?  Stay tuned.

Treasury Bubble Watch

TREASURY BUBBLE WATCH....Is the appetite for treasury bonds with minuscule yields finally waning?  The Wall Street Journal reports:

Time and again the U.S. Treasurys market has escaped the correction many believe is inevitable for a market that is so buoyant, it could be mistaken for a bubble. This week, it may not be so fortunate.

Prices of government bonds started to fall Friday, ahead of the vote by the House of Representatives that approved the $789.5 billion stimulus package. This decline could be the beginning of the capitulation the market has been bracing for since the administration of President Barack Obama took over, with promises of a recession-era boom in government spending.

Personally, I wouldn't read too much into this.  But it's something worth keeping an eye on.  The treasury bubble is going to pop eventually.

What Obama Did

WHAT OBAMA DID....Our obsessive modern media environment — talk radio, 24/7 cable news, constant blog chatter, etc. — turns every molehill into Mt. Everest.  Every bill is a cliffhanger.  Every amendment is a fight for the future of the party.  Every procedural vote is a referendum on the president and his entire program.

Except, you know, it's not.  The fantastic amount of sturm und drang from all sides to the contrary, here's what happened with the stimulus bill.  (1) Obama recommended a $775 billion package.  (2) The House futzed around with it a bit.  (3) The Senate futzed around a little more.  (4) The final confererence report ended up within a few percent of what Obama asked for in the first place: Slightly less spending, but more front-loaded; about the same amount of tax cuts; and the addition of a tweak to the AMT, which would have happened anyway later in the year.  Some of the net changes were good (more rail, more energy spending) and some were bad (housing subsidies, state aid cuts), but in the grand scheme of things this is pretty small potatoes.  Mark Kleiman notes that now that the sound and fury have died away, the media has finally figured out what happened:

Espo's [AP] story carries no hint of the earlier widely-repeated nonsense about how the failure of Republicans to vote for the bill even after it had been somewhat tailored to meet their original objections constitutes a defeat for Obama's post-partisan ambitions. It seems far more likely to constitute an act of collective political self-immolation. The stimulus bill and Obama are both quite popular, and the Republicans just the opposite. The public doesn't seem to have had nearly as much trouble as, for example, the editorial page of the Washington Post in figuring out which side is extending the hand of friendship and which side is biting it.

I would have thought that, by now, smart observers of the political scene would have developed some hesitancy about claiming that the Obama machine has blundered. Apparently not yet. But Ron Brownstein puts his finger on what seems to me the key fact about Obama as a politician: "flexible about tactics and unwavering in his goals."

And, I would add, patient. Obama is a low-discount-rate player in a very high-discount-rate town. And he understands what the pundits don't: this is a repeat-play game. His summary of the stimulus bill: "not 100 percent of what we would want ... but a very good start on moving things forward."

Obama has obviously had a few stumbles during his first month in office, but aside from losing Tom Daschle none of it was serious.  (The Commerce Department?  Please.  Sure, it's a little embarrassing to lose two candidates in a row, but in the end, nobody cares a whit.)  On the plus side, his team is in place, he's passed both a healthcare bill and an anti-discrimination bill, and he's now got the single largest stimulus bill in the history of the country sitting on his desk waiting for his signature.  And he still has 205 weeks left to go in his first term.  Were you really expecting very much more from the first three?

GOP Lemming Watch

GOP LEMMING WATCH....You think DC Republicans are nuts?  Come to California for the real thing.  We're in a $41 billion hole, and after weeks of grinding negotiations Gov. Schwarzenegger and Democratic leaders finally agreed on a package that contained $15 billion in spending cuts, $15 billion in temporary tax increases, and $11 billion in new borrowing.  So what happened?

Nothing.  The package needs a grand total of three (3) GOP votes in the state Senate, and it turns out there are only two.  All the others are still dead set on allowing California to run off a cliff rather than vote for any tax increases whatsoever no matter what the circumstances.  (Sen. Tony Strickland, R-Moorpark: The package, if passed would be remembered as "the Valentine's massacre on California taxpayers.")  In the Assembly, my representative, Chuck DeVore, tried to lead a revolt against the sellout Republican leadership, failed, and then promptly resigned his position as minority whip.  (Brian Leubitz at Calitics: "In the Byzantine world of Yacht Party politics this of course is good news for his chances of winning the party's nomination to get pummeled by Barbara Boxer in 2010.")  The Assembly then went into lockdown overnight.  (John Myers via Twitter: "A lockdown really is a lockdown. Assembly sergeants are at all exits of the chambers.")  The Senate pulled an all-nighter too, but by dawn the third GOP vote was still nowhere to be found.  Senate Dems even slashed some spending for children's healthcare, a project always near and dear to moderate Republicans, but it wasn't enough to get Sen. Dave Cox on board.  So they're still a vote shy.

Anyway, no big point to make here except that Republicans in California are certifiably insane.  Unfortunately, they're also pretty much invulnerable.  Over the past decade their ranks have dwindled to about a third of the legislature, but thanks to the cozy gerrymandering deals of the recent past they represent districts that are far more likely to punish them for compromise than for constructive engagement.  And since California requires a two-thirds majority to pass a budget, they can stamp their feet, hold their breath, give rousing speeches to their neanderthal constituencies, and run the state off a cliff just for giggles.  Aren't you glad you don't live here?

Geithner's Plan

GEITHNER'S PLAN....Treasury Secretary Tim Geithner was pummeled last week for offering up a vague and unsatisfactory plan for dealing with the U.S. banking crisis.  But he had better luck with his fellow economic mandarins at yesterday's G7 meeting:

Going into the meeting, Canadian Finance Minister James M. Flaherty called the U.S. financial rescue "less than clear," echoing comments made by financial chiefs in France and Germany. Afterward, many of the officials appeared reassured, saying that Geithner provided clear answers to their questions.

Several officials said Geithner was particularly helpful in explaining how the various elements of the administration's initiatives tie together as well as how he plans to combine public funds with private resources to get more bang out of every rescue dollar the governments spends.

That's great! So how about if he provides the American public with the same clear answers he offered to foreign central bankers? Apparently that's not going to happen:

Withholding critical details was a conscious choice by Geithner and his team, the official said in an interview. They wanted to avoid the mistakes of the Bush administration, which announced proposals before fully debating them and then quickly abandoned them when it realized they would not work.

Geithner and his staff also wanted to coordinate their proposals with lawmakers, the private sector and their counterparts overseas. This need for coordination is more than just rhetoric, officials said. If the United States develops a method to examine the books of banks and evaluate the real worth of their assets, it would likely affect financial firms around the world.

So let me get this straight.  The story we're asked to believe is that Geithner deliberately mumbled his way through Tuesday's press conference, but then, four days later, working from "a few pages of notes that he had quickly scribbled in a small notebook," provided a brilliant explanation of his plan that satisfied the most sophisticated economic audience on the planet?  What's wrong with this picture?