Bad news this morning for Summum, the Utah religious group famous for its mummification practices. The Supreme Court, in a unanimous decision, rejected the group's arguments that the First Amendment required the city of Pleasant Grove to install a Summum monument displaying its "Seven Aphorisms" (Number 3: Vibration) in a public park. Summum had argued that because the city had accepted a Ten Commandments monument for the park, rejecting the Summum monument violated the group's free speech rights. A lower federal court had agreed with the Summum, but the justices in Washington were clearly swayed by arguments that a favorable ruling for Summum would open the door to a "parade of horrors" in public space everywhere.

The Summum clearly had a sympathetic case, especially to stalwart believers in the separation of church and state. But they weren't helped by the very real example of Reverend Fred Phelps, the infamous head of the Westboro Baptist Church in Kansas. Phelps, who runs, wants to erect a public monument in Casper, Wyoming depicting Matthew Shepard, the gay University of Wyoming student who was murdered in 1998. The caption would read, "Matthew Shepard entered Hell October 12, 1998, in defiance of God's warning 'thou shalt not lie with mankind as with womankind; it is abomination.'" If the Summum had prevailed, Phelps might have, too. Justice Samuel Alito wrote that picking and choosing monuments for a public park was not the same thing as deciding who can and can't speak in a public place, as Summum had argued. Alito said "the display of a permanent monument in a public park" requires a different analysis.

My home state of Utah no doubt breathed a sigh of relief at the news, as Summum has spent years tormenting city officials across the state with its proposed monuments, largely as an effort to get rid of the many Ten Commandments monuments in public parks. Today's decision finally puts an end to the campaign, which really is too bad. As a journalist, you always have to root for the story, and this one, where a group that mummifies pets goes up against elected officials who are mostly members of a faith that once practiced polygamy, is pretty good.

Coleman vs. Coleman

I haven't been following the Minnesota Senate recount very closely, but apparently Norm Coleman still has no intention of abandoning his Ahab-like quest to retain his seat even though he lost the election:

Republican Norm Coleman on Tuesday refused to rule out an appeal if a three-judge panel rules against his challenge in what he called “the race that never ends.”

....Coleman said his lawyers will wrap up their arguments by the end of the week, and he expected a ruling to come down in a “couple weeks.” If he loses, he would not say whether he would try to appeal a ruling with the state Supreme Court.

“I’m not ruling it in or ruling it out, let’s see what the court does and hopefully they’ll do the right thing,” Coleman said. He added: “This process already is Tolstoy-esque.”

Considering that Coleman is the guy primarily responsible for this Tolstoy-esque state of affairs, his complaint here is a little rich.  Still, as much as I'd like to blame him for this whole mess, I'm not entirely sure I can.  Speaking purely as a layman, what really appalls me about all this is how slowly the courts are moving.  Are the issues really so complex that things can't be expedited a wee bit?  Are Minnesotans really bound and determined to make Florida look like a model of efficiency and dispatch?  What's going on with these guys?

Obama and the Banks

I mentioned this briefly last night, but I want to highlight this short passage from Obama's speech again:

I intend to hold these banks fully accountable for the assistance they receive, and this time, they will have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer. This time, CEOs won't be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.

Still, this plan will require significant resources from the federal government — and yes, probably more than we've already set aside. But while the cost of action will be great, I can assure you that the cost of inaction will be far greater, for it could result in an economy that sputters along for not months or years, but perhaps a decade.

The first paragraph starts us off with some excellent populist banker bashing.  You can almost feel the pitchforks and torches in the air.  But it's just a carnival barker's trick designed to misdirect.  In the second paragraph, delivered so quickly you could be forgiven for missing it, we get the substance: "This plan will require significant resources from the federal government — and yes, probably more than we've already set aside."

Bottom line: we intend to keep shoveling money into America's big banks.  But we don't really intend to get anything for it.

Here's the best interpretation I can put on this.  Obama knows that he's very likely going to have to nationalize one or more banks over the next few months.  But he also knows that talking about it openly is disastrous.  Like it or not, it just is.  So the only way for it to work is to deny, deny, deny right up until the day you stop denying.  Then you make a clean sweep: you take over whichever banks you need to and give the rest a firm, credible clean bill of health.  And everyone can get on with business.

Maybe this is wishful thinking on my part.  But I hope this is what's going on.

Jindal's Jaw Jaw

Greg Veis on the political world's Mission Impossible:

Is there a more dangerous assignment for a rising party star to accept than a State of the Union rebuttal?....In all the heated discussions last summer about who Obama’s running mate should be, whenever Kathleen Sebelius’s name came up, people would talk about how impressive it is that she’s a strong Democratic voice in a conservative state and that she has true policy credentials--and then they’d say, But did you see her rebuttal? Similar deal with Tim Kaine, who was plagued by his dead fish performance in ’06. Gary Locke, Obama’s likely next pick for Commerce, gave such a bad speech six years ago that it’s a breathtaking act of charity that he’s been allowed to talk in public, in front of other people, with cameras around, again.

And it's not just rising stars who bomb at this assignment.  Remember Harry Reid and Nancy Pelosi in 2005?

This was why I didn't bother listening to Jindal's speech last night.  I figured he was doomed no matter what, so why bother.  But I've since watched it and — well, holy cow.  What a train wreck.  Aside from the bizarre decision to follow one of America's most sophisticated speechmakers with an address that sounded like it was meant for a class of third graders, it didn't even make sense.  It wasn't the government that restored New Orleans after Katrina?  Tell that to the taxpayers who forked over $200 billion.  We need to spend less during a massive recession?  You betcha.  Republicans stand for universal access to affordable healthcare coverage?  Huh?  Now is not the time to dismantle our defenses?  Who's proposing that?  And the usual lie about the stimulus bill funding a train from LA to Las Vegas got even more baroque in Jindal's telling, morphing into a mag lev train.  Is that supposed to make it sound even worse?  Or what?

Yeesh.  Even the Fox News bobbleheads couldn't stomach this stale repetition of Club for Growth talking points.  Who can blame them?

And as long as I'm picking on Jindal, who picked out his tie, anyway?  Was it supposed to kinda sorta match the stripes on the American flag next to him?  Or was it just a colorful candy cane?  Or what?

Out of Iraq

AP reports that Barack Obama has settled on a withdrawal schedule for Iraq:

President Barack Obama plans to remove all U.S. combat troops from Iraq by August 2010, administration officials said Tuesday, ending the war three months later than he had promised during his presidential campaign.

The withdrawal plan — an announcement could come as early as this week — calls for leaving a large contingent of troops behind, between 30,000 and 50,000 troops, to advise and train Iraqi security forces and to protect U.S. interests.

Reuters is slightly less positive about this, quoting an official saying only, "That's the way the wind's blowing."  And MSNBC's report adds a caveat from another official: "The 19-month withdrawal is based on assumptions — (on improved security) — and if those assumptions don’t hold up, all bets are off, and we'd have to adjust."

Still, put this together with Obama's flat statement in Tuesday's speech that "I will soon announce a way forward in Iraq that leaves Iraq to its people and responsibly ends this war," and it sounds like we're finally getting out.  Not completely out, but then, Obama never promised otherwise.  For better or worse, we'll probably be living with his "residual force" for quite a while.

The Gaussian Copula

I've been reading about Wall Street's fabulous Gaussian copula function for some time, but aside from a vague notion that it was a rocket science method of measuring risk, I've never had the slightest idea what it was actually all about.  In this month's Wired, Felix Salmon explains.  Basically, it's a clever way of figuring out whether the odds of two different bonds defaulting are correlated.  If they are, then bundling them together into a single security is risky since there's a good chance they'll both go into the toilet at the same time. If they aren't, bundling them together is fairly safe since even if one of them defaults, at least the other one is still safe.  Its inventor was a math guru named David X. Li:

In 2000, while working at JPMorgan Chase, Li published a paper in The Journal of Fixed Income titled "On Default Correlation: A Copula Function Approach." (In statistics, a copula is used to couple the behavior of two or more variables.) Using some relatively simple math — by Wall Street standards, anyway — Li came up with an ingenious way to model default correlation without even looking at historical default data. Instead, he used market data about the prices of instruments known as credit default swaps.

....When the price of a credit default swap goes up, that indicates that default risk has risen. Li's breakthrough was that instead of waiting to assemble enough historical data about actual defaults, which are rare in the real world, he used historical prices from the CDS market.....Li wrote a model that used price rather than real-world default data as a shortcut (making an implicit assumption that financial markets in general, and CDS markets in particular, can price default risk correctly).

Hmmm.  The implication here is that the fundamental problem with the Gaussian copula — which was the mathematical basis behind the proliferation of CDOs, CLOs, and all the other shiny new investment vehicles that imploded so spectacularly last year — is that it was based on the relatively brief historical record of credit default swaps.  I don't have any doubt that that's true, but a few paragraphs later the real villain turns out to be a familiar one:

"Everyone was pinning their hopes on house prices continuing to rise," says Kai Gilkes of the credit research firm CreditSights, who spent 10 years working at ratings agencies. "When they stopped rising, pretty much everyone was caught on the wrong side, because the sensitivity to house prices was huge. And there was just no getting around it. Why didn't rating agencies build in some cushion for this sensitivity to a house-price-depreciation scenario? Because if they had, they would have never rated a single mortgage-backed CDO."

There's just no getting around it: there might have been technical problems with the Gaussian copula function, but even if it had worked the way people thought it did it wouldn't have mattered.  The rating agencies and the sell-side BSDs were just using it as an excuse to pretend that house prices would rise forever anyway.  That was a far more fundamental problem than the statistical shortcomings of the formulae they used.

Still, it's an intriguing piece that's worth reading.  You can put it alongside Joe Nocera's piece last month on Value at Risk, yet another quant model developed at JPMorgan whose wide misuse contributed mightily to our current economic meltdown.  When common sense takes a holiday, it turns out, all the math in the world can't save you.

Obama's Speech

I don't know how meaningful this is, but listening to Barack Obama's speech tonight it struck me that there were only two places where he specifically asked Congress to send him legislation.  The first was a cap-and-trade plan to address global warming, and the second was the Hatch-Kennedy national service bill. On healthcare, by contrast, he merely said he would be bringing stakeholders together "to begin work on this issue next week."

Maybe that's significant, maybe it's not.  But I was at least a little surprised that his healthcare pitch wasn't a bit punchier.

A few miscellaneous observations.  Overall, it was a good, adult speech.  The beginning was like a punch in the gut to Republican fecklessness over the past eight years, but later on Obama somehow got plenty of bipartisan standing Os anyway, even in a few places where I wouldn't have expected it.  There was some fine populist demagoguery aimed at Wall Street ("This time, CEOs won't be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet"), but it was mainly just a cover for an admission that he planned to keep shoveling money into banks.  And he made it pretty clear that he would announce a withdrawal plan from Iraq within a few days.

That's all for now.  Consider this an open speech thread.

Bobby Jindal, the Republican governor of Louisiana, gave the GOP response to President Barack Obama's speech to Congress Tuesday night. I'll leave the analysis of how Jindal did to David Corn, but it's important to note that Jindal repeated two fairly common Republican lies about the stimulus package. Here's the relevant portion:

[The stimulus includes] $8 billion for high-speed rail projects, such as a magnetic levitation line from Las Vegas to Disneyland, and $140 million for something called "volcano monitoring".

The truth is that the stimulus bill does not allocate any high speed rail money for specific projects. In fact, any stimulus money for high speed rail would be allocated by Obama transportation secretary Ray Lahood—a Republican.

The 'volcano monitoring' part is almost as misleading. According to ProPublica, the relevant portion of the stimulus money is for "U.S. Geological Survey facilities and equipment, including stream gages, seismic and volcano monitoring systems and national map activities." It seems obvious that employing geologists, building facilities, buying equipment, and paying people to map the country all have a stimulative effect. But more importantly, why does Bobby Jindal think monitoring volcanoes is a bad thing for the government to be doing? There doesn't seem to be any immediate way for private enterprise to profit from monitoring volcanoes (maybe selling volcano insurance?), but there is obviously a huge public benefit from making sure volcanoes are monitored: warning people if a volcano is going to erupt. Isn't that obvious?

Apparently not to Bobby Jindal. But, of course, Bobby Jindal is the person who just tried to tell the nation that the problem with the government's response to Hurricane Katrina was that bureaucrats demanded that people have proof of insurance and registration. It wasn't.

(There's no money in the stimulus to save the San Francisco salt marsh mouse, either.)

UPDATE: You want a cool video on maglev trains? You got a cool video on maglev trains.

Hearst said today that it may sell, or totally shutter, San Francisco's main daily newspaper. The San Francisco Chronicle lost $50 million in 2008, and has been losing money consistently since 2001. If the paper cannot recoup losses "within weeks" via job cuts and other measures, Hearst officials said via a statement today, "...we will have no choice but to quickly seek a buyer for the Chronicle or, should a buyer not be found, to shut the newspaper down." According to Reuters, the Chronicle employs nearly 300 people on its news staff alone, and is the 12th largest daily in the nation.

So what does it mean for San Francisco to lose the Chronicle? For Bay Area folks, there are a number of newspapers that could possibly step up coverage to fill the gap, like the excellent San Jose Mercury News or the Oakland Tribune. Television news crews could conceivably lengthen their broadcasts. So far, all I've seen is that one of the of the city's smaller dailies, the San Francisco Examiner, is hiring. The Examiner also has only half the Chronicle's circulation, and is given away free instead of sold. While many San Franciscans have pooh-poohed the Chronicle for its heavy slant toward lightweight stories, surely the Examiner is not what they envisioned as a solution.

More disturbing than the Examiner taking over San Francisco is the idea that liberal, literate, San Francisco might not have a newspaper to call its own. Even Cleveland and La Crosse, Wisconsin, have their own papers. Granted, a Sunday morning in San Francisco will show you as many people reading the New York Times as the Sunday Chronicle, but still, the Chronicle has been there and there really isn't another paper in town of similar quality or distribution. As much as I'd like to think a major city can survive without a newspaper, I'm not super-excited to try the experiment personally. San Francisco has some of the nation's most tech-savvy citizens, but are they really ready to get their local news only from virtual sources? If the Chronicle gets shut down within weeks, as seems to be Hearst's intention, they may have no choice but to find out the hard way.

"Sources say." Rumors of a film version of cult-favorite TV show Arrested Development have been flying around like badly-imitated chickens for a while now, with everybody from Jeffrey Tambor to David Cross jumping on board. But young Michael Cera, now a big movie star, appeared to be the last holdout, and you couldn't make an Arrested Development movie without George Michael. But now, E Online has it on good authority that Cera has agreed to do the film. "Insiders" are saying production may even get going by the end of the year, with show creator Mitchell Hurwitz as writer/director. Finally, I'll be able to eat frozen bananas again without crying.