Hometown audiences can be harsh--especially when they are disappointed. After the Alaska Troopergate report was released and declared that Governor Sarah Palin had abused her office, Palin maintained that she had been exonerated. Not so fast, says the Anchorage Daily News. Here's how the newspaper responded to Palin's claim:

Sarah Palin's reaction to the Legislature's Troopergate report is an embarrassment to Alaskans and the nation.
She claims the report "vindicates" her. She said that the investigation found "no unlawful or unethical activity on my part."
Her response is either astoundingly ignorant or downright Orwellian.
Page 8, Finding Number One of the report says: "I find that Governor Sarah Palin abused her power by violating Alaska Statute 39.52.110(a) of the Alaska Executive Branch Ethics Act."
In plain English, she did something "unlawful." She broke the state ethics law.
....If she had actually read it, she couldn't claim "vindication" with a straight face.
....Palin's response is the kind of political "big lie" that George Orwell warned against. War is peace. Black is white. Up is down.
....You asked us to hold you accountable, Gov. Palin. Did you mean it?
Bottom line: Gov. Palin, read the report. It says you violated the ethics law.

It's hard to accuse the Anchorage Daily News of being part of the Eastern establishment liberal media conspiracy that is supposedly out to destroy Palin. So how will the McCain-Palin spinners spin this one?


The world's most infamous (translation: successful) black market arms dealer was arrested last March in Thailand, taken down by an international sting operation spearheaded by the U.S. Drug Enforcement Administration. Since then, Russian Viktor Bout has been held in a Bangkok prison, awaiting extradition to the United States, where he will face terrorism charges. The trial, if it ever takes place, is likely to be somewhat thorny for the U.S. government, which contracted with Bout-controlled firms to transfer weapons and supplies into Baghdad in the months immediately following the 2003 invasion of Iraq. But let's forget about that for now... Bout's attorney is pulling out all the stops in his effort to prevent his client's extradition. The latest tactic? Remind the world of what the Americans have been doing to prisoners held on terrorism charges—namely, locking them up and throwing away the key. Thai lawyer Chamroen Panompakakom today pointed a Bangkok courtroom's attention to the case of Hambali, an Indonesian Al Qaeda leader also captured in a Thailand. In 2003, he disappeared into Guantanamo and has yet to stand trial. There's little doubt of Bout's guilt. He was caught red-handed in the act of selling surface-to-air missiles to what he believed to be members of the Colombian FARC. But if he manages to evade the U.S. legal system, it could well be the latest perversion of law to result from Guantanamo: Bout avoids his day in court, while Guantanamo's inmates would love nothing more than to have theirs. Oh, the irony....

THE COMING CONSERVATIVE BACKLASH....In today's column, David Brooks is already predicting a conservative backlash against upcoming liberal overreach. Sheesh. Can we please have our liberal overreach first? I'm looking forward to it.

Personally, though, I'm skeptical. I hope I'm just being my usual pessimistic self, but I'm skeptical anyway. Take this from Ezra Klein, for example, about the new Paulson bailout plan:

The liberals were right. Not the Democrats. The liberals. They were right that deregulation had gone too far....They were right that government intervention on a massive scale was needed to stabilize the capitalist system. They were so right, in fact, that Hank Paulson and George W. Bush couldn't hold the line, and will now sign into law the most profoundly socialist measure this country has seen since the 1930s.

Maybe. And this is basically what prompts Brooks to predict a social democratic renaissance hellscape, which will eventually degenerate into....something....and then produce an inevitable backlash.

But, really, is this bailout the most profoundly socialist measure this country has seen since the 1930s? In a technical sense, maybe it is (though conservatives would probably argue the case for Medicare), but I have my doubts that it's a harbinger of social revolution. The government isn't nationalizing banks, after all. They're taking what amounts to roughly 20% nonvoting stakes. And my guess is that in a couple of years, when the markets have settled down, they'll sell those stakes off and everything will return to normal. Hopefully it will be a more tightly regulated normal, but it won't necessarily have an enormous impact beyond the financial sector.

I hope I'm wrong about this. I'd like to see the social democratic renaissance that Brooks is so itchy about. But although I know that comparisons to Japan and Sweden aren't really fair since both countries are already pretty socially democratic compared to ours, it's still the case that massive bank failures in those countries in the early 90s didn't fundamentally change their characters. I have my doubts that it will happen here, either, unless Barack Obama turns out to be a far more dynamic leader than I expect him to be. I sure hope he proves my skepticism wrong, and if he does I'm perfectly willing to accept the conservative backlash in 2024 that goes along with it. We could get a lot done in the meantime.

Robot Cars

ROBOT CARS....Matt Yglesias, riffing off a Tim Lee piece, says that self-driving cars could free up lots of parking spaces. Which is true, I guess, but seems sort of like saying that cold fusion would be great because it would allow us to build smaller cooling towers. If we ever do build a genuinely self-driving car, it means we're only a stone's throw away from nearly human-level artificial intelligence. More efficient parking will be the least of our worries at that point.

On Friday, the House Oversight and Government Reform Committee announced that a hearing scheduled for Thursday, October 16 on the role of hedge funds in the current financial crisis would be postponed until after the election. The committee, chaired by Henry Waxman (D-Calif.), says the postponement is to "accommodate the schedules of witnesses." Fine. But several of the hedge fund execs asked to testify at the hearing are big Dem donors who the party might not want to embarrass before the election. And by big Dem donors, I mean BIG Dem donors. Here are the numbers for the 2008 election cycle (excluding 527 contributions):

  • John A. Paulson, President, Paulson & Co., Inc: $86,974, $43,400 of that to Democrats
  • George Soros, Chairman, Soros Fund Management, LLC : $111,190, $110,150 of that to Democrats
  • Philip A. Falcone, Senior Managing Director, Harbinger Capital Partners: $0
  • James Simons, President, Renaissance Technologies, LLC: $117,050, $105,050 of it to Democrats (only $2,000 to Republicans—the rest went to a PAC.
  • Kenneth C. Griffin, Chief Executive Officer and President, Citadel Investment Group: $70,100, $60,750 of it to Democrats

That's $385,314 worth of 2008 election cycle donations from five witnesses (one of whom didn't give anything). $319,350 of it, or 82.9 percent, went to Democrats.

TROOPERGATE II: THE RECKONING....After earlier promising to cooperate fully with the Alaska legislature's probe of Troopergate (because she had "nothing to hide," natch), Sarah Palin pulled a 180 after her vice presidential nomination and denounced the probe as an obvious partisan witch hunt. Instead, she wanted the state personnel board to investigate. So how's that working out? Michael Isikoff reports:

Some Democrats ridiculed the move, noting that the personnel board answered to Palin. But the board ended up hiring an aggressive Anchorage trial lawyer, Timothy Petumenos, as an independent counsel. McCain aides were chagrined to discover that Petumenos was a Democrat who had contributed to Palin's 2006 opponent for governor, Tony Knowles. Palin is now scheduled to be questioned next week, and the counsel's report could be released soon after. "We took a gamble when we went to the personnel board," said a McCain aide who asked not to be identified discussing strategy. While the McCain camp still insists Palin "has nothing to hide," it acknowledges a critical finding by Petumenos would be even harder to dismiss.

I'm sure Scooter Libby sympathizes. I'll bet he didn't expect Patrick Fitzgerald to conduct a real investigation either. Stay tuned.

Your Salary in 2016

YOUR SALARY IN 2016....Due to the vagaries of print magazine lead times, my swan song at the Washington Monthly is only now hitting newsstands across the globe. It's part of a package called "The Stakes," and the question put to me and a bunch of my fellow contributing editors (that's the title you get when you're a Monthly alum) was how things would change over the next eight years depending on who wins the election. The subjects include China, the courts, healthcare, broadband infrastructure, and all the other wonkiness that the Monthly is famous for. And me? No mushy predictions here, my friends. My focus was on economic fundamentals, and at the end of my piece my conclusion was blunt:

Democrats really are better for the economy than Republicans, and it really does seem to be related to differences in their economic programs. Given that, then, I'll make this prediction: If Barack Obama is elected president, the economy over the next eight years will be better than if John McCain is elected. In fact, I'll go further and put some hard numbers to that prediction. Here they are:

Click the link to get firm dollar figure forecasts for 2016 for both McCain and Obama. Plus an explanation of where they came from. Email it to all your Republican friends!

And if you want to read all the other essays, you can find them here. Enjoy.

The New Paulson Plan

THE NEW PAULSON PLAN....Yesterday I had a couple of questions about the Treasury's plan to recapitalize America's banks. One question was, which banks would get help? Big ones? Little ones? The answer, it turns out, is all of them:

One central plank of these new efforts is a plan for the Treasury to take approximately $250 billion in equity stakes in potentially thousands of banks, according to people familiar with the matter....Treasury will buy $25 billion in preferred stock in Bank of America, J.P Morgan and Citigroup; between $20 billion and $25 billion in Wells Fargo; $10 billion in Goldman and Morgan Stanley; and between $2 billion and $3 billion in Bank of New York Mellon and State Street.

Second question: did the banks themselves pressure Paulson into doing this? Apparently not:

Not all of the banks involved are happy with the move, but agreed under pressure from the government.

The justification for forcing all the big banks to participate is that if only a few banks got help, then they'd be instantly stigmatized as failures and no one would do business with them. So it's better to force everyone to recapitalize, thus keeping everyone's relative solvency a secret.

I get the reasoning, but I wonder if it really makes sense? After all, isn't part of the point of this exercise to figure out which banks are really worth saving and which ones aren't? And should we really be wasting money on banks that don't need help? As part of the plan the Fed is also guaranteeing new debt, and it seems as if that, combined with sufficiently large capital injections, would make the rescued banks pretty sound. Plus there's this:

While the Treasury wants to put money into banks, its main goal is to attract private capital. To make sure private investors aren't scared away, the Treasury is expected to structure its investment on terms favorable to the banks and will inject capital in exchange for preferred shares or warrants, these people said, a move that is designed to not hurt existing shareholders.

If they're forcing good banks to take government cash, this is actually reasonable. And if we do it for some banks, I guess we have to do it for all of them. But that means we're also in the business of rescuing shareholders of bad banks. Why?

I dunno. I guess I'll wait for the experts to weigh in and set me straight. The whole thing sounds a little squirrelly, though. I can't help but think that aiming the money more tightly at bad banks and driving harder bargains in the process would have been a better idea.

UPDATE: Brad DeLong is thrilled with the plan. Hilzoy has some concerns.

450px-Medved_mzoo.jpg Think Wall Street's rollercoaster ride is scary? Imagine if stocks were species. That's what the future looks like in a warming world: a monster bear market robbing the world of its real riches.

A new review published in Science addresses the question of whether the tropical forests and coral reefs of the tropics will have the most to lose as a result of global warming. Some say no: that tropical organisms will do well because their ranges will expand into temperate areas. Others says yes: because there's little or no wilderness left in the temperate zone for them to move into.

Now a review of published papers finds that for plants and insects on a mountain slope in Costa Rica, a 3.2-degree C increase in temperature threatens 53 percent of lowland species with extinction, while 51 percent face range-shift gaps—meaning they have nowhere else to go.

Another reviewed study follows historical range changes for small mammals during 100 years of climate change in Yosemite National Park. These data show that species' ranges are likely to contract dangerously as warming pushes life farther and farther up mountain slopes. . . Bottom line: biodiversity is Earth's credit line. Without it, there's absolutely no way to fund the future. Time to reassess our fatally flawed economics .

Julia Whitty is Mother Jones' environmental correspondent, lecturer, and 2008 winner of the Kiriyama Prize and the John Burroughs Medal Award.

Regulation Followup

REGULATION FOLLOWUP....British prime minister Gordon Brown, everyone's hero of the financial moment, talks about reform:

"Sometimes it does take a crisis for people to agree that what is obvious and should have been done years ago can no longer be postponed," the British prime minister, Gordon Brown, said in London in a speech calling for the adoption of a new Bretton Woods-style agreement among major countries. "We must now create the right new financial architecture for the global age."

I mentioned a few days ago that I'd been noodling about this, and I certainly think there's value in talking about specifics: imposing transaction fees on financial trades, tightening up mortgage rules, requiring that credit default swaps be traded on an open exchange, and so forth. But the big picture always seems to come back to two things:

  • Task central banks with paying more attention to asset bubbles. Alan Greenspan famously thought we should just let bubbles inflate away and then deal with the aftermath as best we can, but events of the past decade really don't make that seem like such a great idea anymore. What's more, this piece of the puzzle probably doesn't even require drastic regulation. It's not a matter of trying to get rid of bubbles completely, after all, but of trying to keep them just a wee bit more under control. If we had managed to restrain the housing bubble by even 20% or so, for example, that might very well have made the difference between tough times and global crisis. At the very least, central banks should refrain from throwing fuel on the fire, and should try to persuade government actors to do the same. Combine that with some modest monetary brakes when bubbles are plainly out of control, and we could avoid a lot of future trouble.

  • Regulate leverage everywhere, not just in the formal banking sector. This is probably even more important. If the subprime bubble had been our only problem, it probably would have meant systemwide losses of half a trillion dollars or so. Maybe a trillion. That's nothing to sneeze at, and all by itself it would very likely have led to a few big bank failures, some big losses in the stock market, and a nasty recession. But that's merely a disaster. It was the additional leverage from derivative trading based on the underlying loans that turned a disaster into a global meltdown.

    Figuring out how to fix this is a gargantuan task that's several light years above my pay grade. Simple financial leverage is straightforward enough, but effective leverage hidden in complex debt instruments, often off balance sheet, makes this a regulatory nightmare. Realistically, I suppose it probably needs to be some kind of extension of Basel II with more scope and more bite, but one way or another, after years of talking about the dangers of stratospheric leverage but taking very little actual action to rein it in, something has to be done. If we're looking for work for all the rocket scientists who have been let go from their Wall Street jobs recently, this might not be a bad place to start.

So who should be our go-to guys on this subject? It seems like liberals were caught sort of flat-footed by the Paulson bailout plan, which made it difficult (though, in the end, not impossible) to quickly sell Congress on a different strategy. This time around, when the conversation starts, it would be nice to have some coherent strategies already on the table from people we trust. Any suggestions?