• Quote of the Day


    From Alex Knapp, who says that being imprisoned for a crime you didn’t commit isn’t the worst injustice you can suffer after all:

    Now I’ve learned that there is something worse that can happen. You can be accused of a crime you didn’t commit, then have the government that imprisoned you acknowledge that yes, you are innocent — but they’re going to keep you in prison anyway.

    He’s talking about the 17 Uighurs who continue to be held at Guantanamo Bay despite the fact that they were clearly brought there in error and have never conspired against the United States in any way.  The Obama administration acknowledges this, but continues to argue in court that it has no obligation to release them anyway.  Not exactly a profile in courage.

  • Mighty Suburbia


    As a replacement for race-based affirmative action, Texas started a program ten years ago that guaranteed admission to the University of Texas to the top ten percent of all high school classes.  As a result, more kids from rural and inner city schools were admitted to UT Austin, the system’s flagship campus.  Hooray!  But not everyone was thrilled by this:

    For six years [] an odd coalition of lawmakers from the inner cities and rural towns had beaten back efforts to weaken the program….That coalition finally cracked this year under pressure from suburban factions in the Legislature and after heavy lobbying by university officials, who vowed to recruit minorities aggressively.

    ….Senator Rodney Ellis, a Houston Democrat, [] fought the change….The bill, Mr. Ellis said, was a victory for suburban students.

    “The very people who make the most noise about this are the parents of kids who have had all the advantages in life,” he said. “They are the same people who don’t give a tinker’s damn about the people in the quote other schools unquote.”

    But Senator Florence Shapiro, a Republican from Plano who sponsored the legislation in the Senate, said students from good suburban high schools had a legitimate complaint. Only class rank is taken into account, not extracurricular activities or other talents. Many students have been attending colleges out of state.

    “The pressure for this bill,” Ms. Shapiro said, “really comes from the suburban counties where the youngsters do really well and many times are in the top 13 percent and cannot go to the university. They really go all over the country when they don’t have opportunity here.”

    Never underestimate the power of suburban parents.  They never give up and they never surrender.

    (Via Matt Yglesias.)

  • Extreme Charter


    The LA Times has an interesting read today about the American Indian Public Charter schools in Oakland, which are some of the highest performing schools in the state of California:

    Not many schools in California recruit teachers with language like this: “We are looking for hard working people who believe in free market capitalism. . . . Multicultural specialists, ultra liberal zealots and college-tainted oppression liberators need not apply.”

    ….The Academic Performance Index, the central measuring tool for California schools, rates schools on a scale from zero to 1,000, based on standardized test scores. The state target is an API of 800….The oldest of the American Indian schools, the middle school known simply as American Indian Public Charter School, has an API of 967. Its two siblings — American Indian Public Charter School II (also a middle school) and American Indian Public High School — are not far behind.

    ….On Tuesday, American Indian’s high school will graduate its first senior class. All 18 students plan to attend college in the fall, 10 at various UC campuses, one at MIT and one at Cornell.

    ….The school could not provide its students’ elementary school test scores, so it is hard to say if they were [already above average when they were admitted]. Roberts did provide three years of middle school scores for all students who entered American Indian in 2004 (with names removed for privacy), showing their progress in math and English from sixth to eighth grade. Of the 51 students who entered American Indian’s middle school that year, only six scored lower than “proficient” in both math and English at the end of sixth grade.

    In a nutshell, this story explains pretty well why I like charter schools — and also why I doubt they’re any kind of educational panacea.  Lefty-baiting aside, AIPC is a super-strict, teach-to-the-test, no goofing off kind of place that apparently gets good results.  So I say: fine.  If there are some parents who want their kids to go to schools like this, let ’em.

    At the same time, AIPC is tiny: 51 students in middle school and 18 in its first graduating class.  It plainly attracts only parents and children who are academically motivated in the first place.  It requires middle school teachers to teach every subject and keeps them on a grueling pace, which means lots of turnover.  Cheerleaders to the contrary (“They really should be the model for public education in the state of California,” says Debra England of the Koret Foundation), the odds that the AIPC formula is scalable to an entire school district is nil.

    It makes sense to try out different kinds of schools for different kinds of kids and different kinds of neighborhoods.  With a few obvious caveats, I’m all for it.  But let’s not pretend that any particular one of these charters is necessarily the model for everyone else on the basis of 18 cherry-picked graduates.  It ain’t so.

  • Chart of the Day


    As I’ve mentioned before, one of the big problems with reaching peak oil isn’t just that oil prices will go up, but that they’re likely to spike up and down fairly violently.  In 2006, for example, demand for oil pretty much bumped up against the total available supply, which meant that even a small amount of additional demand was enough to send oil prices spiraling up past $150 in little more than a year.  The ensuing recession reduced demand by only a modest amount, but that was enough to cause oil prices to plummet to under $50 in the same timespan.  And this isn’t just a demand-side problem: a small glitch in supply could easily have caused the same kinds of violent price spikes.

    As a general rule, the world can handle high oil prices.  In fact, to the extent that high prices get us off our butts and looking for cleaner, more sustainable sources of energy, high oil prices are a good thing.  But what the world economy can’t handle is constant, huge gyrations in oil prices: nearly all of our recessions since 1973 have been jump started by a sudden spike in oil prices.

    So what happens next?  Via Ryan Avent, Paul Kedrosky points us to this projection from McKinsey, which shows that demand will once again bump up against supply very shortly: probably within a couple of years, but almost certainly within four years at the outside.  And when that happens, prices will once again rise unpredictably.  A strike in Venezuela could cause oil prices to double in less than a month.  A rumor of new supergiant field or a small recession could cause a subsequent collapse.  Price changes of 100% in short periods will become common.

    You can probably already figure out where this post is going, can’t you?  Wild spikes in oil prices are very bad news for the global economy, and the only way to avoid them is to permanently reduce global demand for oil so that we once again have enough spare pumping capacity to keep prices relatively steady — high and rising, perhaps, but at least rising fairly predictably.  That means we need higher mileage cars (global warming isn’t the only reason for stronger CAFE standards), electrification of transportation, better conservation and efficiency measures, and more investment in solar, wind, and biofuels.  And all this needs to be done fairly quickly if we want to avoid an economy permanently at the mercy of OPEC oil.  Even 2013 isn’t that far away.

  • Quote of the Day


    From Michael O’Hare, professor of public policy at UC Berkeley:

    So, for the record: I am not the Zodiac killer, had absolutely nothing to do with those (or any other) murders. As far as I know, I wasn’t even in California when any of them happened.

    I had lunch with Mike once.  He didn’t seem like a serial killer.  But then, they never do, do they?

  • The Battle for the Soul of Conservatism


    The nomination of Sonia Sotomayor to the Supreme Court raises a question: Who will win the battle for the conservative soul?  In the red corner, we have the insane wingnuts:

    Newt Gingrich: “White man racist nominee would be forced to withdraw. Latina woman racist should also withdraw.”  Rush Limbaugh: “How can a party get behind such a candidate? That’s what would be asked if somebody were foolish enough to nominate David Duke or pick somebody even less offensive.” Tom Tancredo: “She’s a member! She’s a member of La Raza!” Matthew J. Franck: “Is she still, and how much of La Raza’s politics does she make her own?” Michael Goldfarb: “Does anyone dispute that Sotomayor has been the recipient of preferential treatment for most of her life?”  Bill Bennett: “Did she get into Princeton on affirmative action, one wonders.” G. Gordon Liddy: “Let’s hope that the key conferences aren’t when she’s menstruating or something, or just before she’s going to menstruate.”

    And in the other red corner, we have an improbable band of rebels trying to urge conservatives to act like grownups:

    Peggy Noonan: “Newt Gingrich twitters that Judge Sotomayor is a racist. Does anyone believe that? He should rest his dancing thumbs, stop trying to position himself as the choice and voice of the base in 2012, and think.” Jon Cornyn: “This is not the kind of tone that any of us want to set when it comes to performing our constitutional responsibilities of advise and consent.” Julian Sanchez: “What we’re seeing here [] is people clinging to the belief that Sotomayor has to be some mediocrity who struck the ethnic jackpot, that whatever benefit she got from affirmative action must be vastly more significant than her own qualities, that she’s got to be a harpy boiling with hatred for whitey, however overwhelming the evidence against all these propositions is.  This is really profoundly ugly.” Michael Steele: “I know that a lot of folks want to do the knee jerk you know let’s start slammin’ and rammin’, but I think we really need to take a step back from this.” Charles Krauthammer: “What should a principled conservative do?….Nothing ad hominem. The argument should be elevated, respectful and entirely about judicial philosophy.”

    Who will win?  I guess we won’t know until Sarah Palin weighs in, will we?

  • Friday Cat Blogging – 29 May 2009


    I don’t know how well it shows up in the photo, but when they write the definition of “smug” in the next edition of Webster’s, they’re going to use this picture of Inkblot.  He was so pleased with himself he could hardly stand it.  On the right, we have an action shot of Domino darting out from behind the quilts to protect the house from an invasion of cat toys.

    And here’s our latest experiment in feline pyschology.  Last weekend Marian brought home a blue blanket and tossed it down in the entryway.  Inkblot made an immediate beeline for it and claimed it as his new favorite thing.  The next day we put the blanket up on the couch.  He wouldn’t go near it.  We put it on the carpet.  Ditto.  We put it on the carpet right next to the sofa, and he not only wouldn’t go near it, he actually circled way around it as if it were going to bite him.  So then, out of curiosity, I picked it up and put it back on the hardwood floor in the entryway.  He made an immediate beeline for it and curled right up.  Now what the hell is going on with that?

  • Yet More on Tough Talk


    Hillary Clinton says the Israeli settlements in the West Bank need to stop.  No outposts, no “natural growth,” no nothing.  But even if that’s the line coming from the Obama administration, surely Bibi Netanyahu can count on congressional pressure to show Obama who’s really boss?  Right?

    According to many observers in Washington and Israel, the Israeli prime minister, looking for loopholes and hidden agreements that have often existed in the past with Washington, has been flummoxed by an unusually united line that has come not just from Obama White House and the secretary of state, but also from pro-Israel congressmen and women who have come through Israel for meetings with him over Memorial Day recess. To Netanyahu’s dismay, Obama doesn’t appear to have a hidden policy. It is what he said it was.

    ….Whereas in the past Israeli leaders have sometimes eased pressure from Washington on the settlements issue by going to members of Congress, this time, observers in Washington and Israel say, key pro-Israel allies in Congress have been largely reinforcing the Obama team’s message to Netanyahu. What changed? “Members of Congress have more willing to follow the leadership of the administration … because [they] believe it is in our national security interest to move toward ending the conflict and that it is not a zero sum for Israel,” the former senior Clinton administration official said.

    That’s Laura Rozen over at Foreign Policy. Congress has always been a key part of Israel’s ability to fight off pressure from American presidents.  If that’s changing, it’s a big deal.

  • The White Man’s Burden


    Michelle Cottle is a racist, sexist hatemonger:

    Not to state the obvious, but an upper-middle class white guy reared in the suburbs is shaped by his experiences, carries certain assumptions, and views the world through a particular prism as much as a working-glass Puerto Rican gal from Queens, or, for that matter, the half-black son of a single mom raised in Hawaii. The person belonging to the cultural/ethnic/religious/gender/racial demographic that has traditionally dominated a field (and thus whose perspective has long been the default) may not have given as much thought to his prism as a member of a non-dominant group. But that does not make his prism a neutral one. It simply allows him to more freely indulge his delusions of pure rationality and objectivity.

    This is ridiculous.  It’s just a coincidence that opposition to affirmative action comes almost exclusively from white men.  Nothing to do with background at all.  Right, Rush?

  • Risk


    Economist Gary Gorton has written a 20,000 word paper on the subject of “informationally-insensitive debt” — i.e., ultra-safe investments like federally insured bank deposits.  Ezra Klein boils this down to a thousand words.  I boldly push the boundaries even further:

    The morons who inhabit Wall Street thought they had removed all risk from inherently risky investments.  They were wrong.

    There!  Twenty words.  That’s a compression ratio even greater than Ezra’s.  Felix Salmon comments:

    Gorton’s solution to this problem is to involve the government in all manner of regulation — and insurance — of the securitization market, thereby making [asset back commerical paper] behave much like federally-insured bank deposits. I don’t like this solution at all, since it would send the contingent liabilities of the government into the stratosphere, and more importantly would ratify the demand for informationally-insensitive assets by creating trillions of dollars of new ones.

    In my view of the crisis, it’s precisely the demand for informationally-insensitive assets which is the problem. And we need to get individuals, companies, and institutional investors out of the mindset that they can do an elegant little two-step around the inescapable fact that anybody with money to invest perforce must take a certain amount of risk. If you have a world where people are all looking for risk-free assets, you end up shunting all that risk into the tails. And the way to reduce tail risk is to get everybody to accept a small amount of risk on an everyday basis. We don’t need more informationally-insensitive assets, we need less of them.

    I agree.  There’s a common view that investors in the period up until 2006 were practically drunk on risk, pricing it nearly at zero — but now, after the crash, they’ve become more risk averse than your grandmother.  They’re almost completely unwilling to accept any risk at any price.

    I think this view is fundamentally wrong.  What really happened is that in the early part of the decade investors became convinced that they could avoid risk entirely via financial engineering.  They were, in fact, immensely risk averse, but this wasn’t obvious because they were buying up every security in sight.  The post-crash flight to quality, it turns out, wasn’t really a flight at all.  Modern investors have been afraid of risk all along.

    So Felix is right.  The last thing we need is for the government to perpetuate the delusion that financial markets are risk free.  For small retail bank depositors, that’s fine.  For the big boys it’s not.  They need to relearn the art of genuinely analyzing risk and taking it on knowingly, rather than pretending they can hedge it away under all circumstances.  After all, accurate analysis of risk is essential to the efficient allocation of capital, and efficient allocation of capital is one of the keys to economic growth.  It’s time for Wall Street to get back to basics.

  • Quote of the Day


    From Will Wilkinson, who’d like to see a libertarian nominated to the Supreme Court but knows perfectly well that Barack Obama is a liberal who will nominate liberals to the Supreme Court:

    So I was hoping for a relatively centrist liberal who sees some merit in libertarian arguments, especially about the protection of economic rights. As far as I can tell, there is nothing especially worrying about Sotomayor. She’s obviously super-qualified. And from what I’ve read, she seems like a highly competent, fairly moderate liberal who sticks pretty close to the law (which nobody really likes when they don’t like the law!) and is perfectly willing to side with Republican-appointed judges when that seems to her the right thing to do. What are people going batshit crazy over? I don’t get it. And I really don’t get why many Republicans have taken this opportunity to reinforce the already widespread impression that they are morally odious morons. God, I hate politics.

    I feel your pain, Will.  The craziness is coming so thick and fast that I can’t even keep up with it.  It makes my brain hurt.

  • Europe and Guantanamo


    Getting European countries to accept resettlement of Guantanamo prisoners was always going to be a hard sell, but the Washington Post reports that it’s recently gotten even harder:

    Rising opposition in the U.S. Congress to allowing Guantanamo prisoners on American soil has not gone over well in Europe. Officials from countries that previously indicated they were willing to accept inmates now say it may be politically impossible for them to do so if the United States does not reciprocate.

    “If the U.S. refuses to take these people, why should we?” said Thomas Silberhorn, a member of the German Parliament from Bavaria, where the White House wants to relocate nine Chinese Uighur prisoners. “If all 50 states in America say, ‘Sorry, we can’t take them,’ this is not very convincing.”

    ….More trouble emerged when Washington stipulated that the Uighurs would be barred from traveling to the United States.

    “If the U.S. says they should come here, but they cannot travel to the U.S., we would have to ask why not?” said a German Interior Ministry official, speaking on the condition of anonymity because of the sensitivity of the negotiations. “Does that mean they are dangerous?”

    Good question!  When the time came to actually accept Guantanamo detainees, European countries were always bound to run into more trouble with domestic politics than they anticipated.  But with the American talk radio contingent making it virtually impossible for the U.S. to accept even a small number of the safest detainees ourselves, it’s now inevitable that Europeans are going to back off.  You’d have to be politically suicidal to resettle prisoners that the United States has all but tattooed “terrorist.”

    So now what happens to them? Stay tuned.

  • Regulating Derivatives


    The Wall Street Journal reports that big banks aren’t happy with the Obama administration’s plans to make trading of credit derivatives more transparent by putting them on a public exchange:

    Wall Street banks with large derivative-trading businesses have been outwardly supportive of greater regulatory oversight of the $684 trillion market. But behind the scenes, there has been hand-wringing over the details of certain proposals and discussions about how the industry can help shape the rules.

    Potentially billions of dollars in revenue is at stake. An effort earlier this decade to improve transparency in the corporate-bond market ended up cutting bank fees by more than $1 billion in a year, according to some studies.

    ….For credit-default swaps, information about intraday trades and prices has long been controlled by a handful of large banks that handle most trades and earn bigger profits from every transaction they facilitate if prices aren’t easily accessible.

    For example, credit-default swaps tied to bonds of companies such as General Electric Capital and Goldman Sachs typically have a pricing gap of 0.1 percentage point between the bid and offer price. That translates into a $40,000 margin for every $10 million in debt insured for five years. Greater price transparency could narrow that gap, lowering costs for buyers and sellers but reducing fees for banks.

    That’s a sad story, isn’t it?  When you make trades public, suddenly banks find that they can’t rob their clients blind anymore.  Break out your violins, boys and girls.

  • Paying for College – Part 2


    A few days ago I linked to a Robert Reich post in which he suggested that the skyrocketing cost of student loans was forcing too many grads to take high-paying private sector jobs instead of lower-paying but more socially beneficial positions.  As a solution, he recommended limiting loan repayments to 10% of income for ten years, and I sort of agreed.

    Well, that hasn’t happened yet, but this morning Mike Kruger of the House Committee on Education and Labor emailed to tell me about some of the provisions of the recently passed College Cost Reduction and Access Act:

    The biggest thing is the Income-Based Repayment Program that will cap a monthly payments based on income.

    Under the income-based repayment program, such borrowers will never have to spend more than 15% of their discretionary income — an amount based on federal poverty guidelines — on student loan payments. Those whose income falls below 150% of the poverty level won’t be required to make any payments.

    Here’s how it could work: Suppose a student has the average $22,000 in student loans, and gets a job making $25,000/year. Assuming the loans have a fixed interest rate of 5.6%, the monthly payment under the income-based repayment program would be $110, vs. $240 under a standard 10-year repayment plan. Obviously, when the student’s income rises in the future, so will the payments.

    For some students, the reduced payments won’t cover the interest on their loans. For those with subsidized Stafford loans — which are provided to students who demonstrate economic hardship — the government will pay the interest for the first three years of the program.

    For unsubsidized loans, the interest will be added to the balance, so a student could come out of the program with a larger loan balance. However, any amount owed after 25 years of qualifying payments will be forgiven. This is significant, because in the past, it was nearly impossible for borrowers to get out from under their student loan debts.

    Now, this isn’t what Reich was proposing.  You still have to pay back the full amount of the loan eventually (or make payments for 25 years, whichever comes first) regardless of your income.  But it’s sort of a nudge in the right direction, so I thought I’d pass it along.

  • Nice Try, Terry


    From the Washington Post:

    Consumer activist Ralph Nader accused Terry McAuliffe Thursday of orchestrating an effort to remove him from the presidential ballot in 2004 when McAuliffe was chairman of the Democratic National Committee.

    Nader said that McAuliffe offered him an unspecified amount of money to campaign in 31 states if Nader would agree to pull his campaign in 19 battleground states.

    I sort of hope this is true.  I’ve never been a big McAuliffe fan before, but this would certainly raise my opinion of him.

  • More Tough Talk


    It would be nice to see an English-language translation of the entire interview, but M.J. Rosenberg has some fairly eye-popping tough talk on Israel from former ambassador Martin Indyk over at TPMCafe.  It’s worth checking out.

  • Spending and Taxes in California


    Are California’s budget woes due to skyrocketing spending?  Michael Hiltzik says this is a myth:

    Analyzing the 2008-09 budget bill last year, the legislative analyst determined that since 1998-99, spending in the general fund and state special funds — the latter comes from special levies like gasoline and tobacco taxes — had risen to $128.8 billion from $72.6 billion, or 77%.

    During this time frame, which embraced two booms (dot-com and housing) and two busts (ditto), the state’s population grew about 30% to about 38 million, and inflation charged ahead by 50%. The budget’s growth, the legislative analyst found, exceeded these factors by only an average of 0.2% a year.

    There’s a lot of truth to this, but I think it goes too far.  For starters, Hiltzik uses a special measure of inflation, not the usual CPI-U, and he doesn’t include spending from bond measures.  The chart on the right, using budget data from the Department of Finance, shows per-capita spending including bond measures, adjusted for inflation using the standard CPI figures from the BLS.  There are two things that jump out at you.  First, even using a standard measure of inflation, Hiltzik is right: per capita spending in the decade between 1999 and 2009 has barely budged.  It’s up about 6%.

    At the same time, if you compare it to 1997 it’s up 23%.  California went on a spending spree during the dotcom boom and we never returned to our old levels even after the bust.  What’s more, spending in the years between 1999 and 2009 was up even more.  In the decade between 1997 and 2007, per capita spending increased an impressive 39%.  We’ve tightened our belt considerably in the past couple of years, but that’s against the background of some pretty sizeable increases in the intervening years.

    California has multiple problems.  Prop 13 reduced our tax base permanently and made it all but impossible to adjust other taxes to make up for it.  Citizens have approved bond measure after bond measure in the seeming belief that because they don’t raise taxes, they also don’t cost any money.  The governor and the legislature have relied on way too much smoke and mirrors.  But spending has also gone up.  There’s just no way to understand the whole picture without acknowledging that.

    UPDATE: California’s population actually grew about 15% between 1998 and 2008, not 30%.  However, that was just an arithmetic error on Hiltzik’s part.  The overall budget growth result that he quoted from the LAO is correct.

    (I used population figures from the Census Department in my calculations.  So the per capita spending numbers in the chart should be correct.)

  • Economic Fascism


    The latest firestorm in the conservosphere concerns Chrysler’s shutdown of a quarter of its dealer network.  Capitalism at work, you say?  More like crony capitalism, my friends:

    Is the Obama administration punishing Chrysler dealers for their politics? A preliminary analysis by Doug Ross suggests that could be the case.

    ….[Ross] started with the list of Chrysler and Dodge dealerships which will be closed as a result of the government-mandated Chrysler bankruptcy plan. Then he marked those dealers whose names appeared more than once in the list. Next, he checked which ones contributed to political campaigns. Every one of them had donated almost exclusively to Republican candidates. Ross found only one dealer on the closing list who had contributed to the Obama campaign, a $200 donor in Waco, Texas.

    ….Shades of the Nixon enemies list, we first saw signs that Obama wasn’t above playing hardball with his political opponents during the active campaign.

    Nate Silver puts his high-powered statistical brain to work on his puzzler and concludes….wait for it….that there’s no there there.  “It turns out,” he says, “that all car dealers are, in fact, overwhelmingly more likely to donate to Republicans than to Democrats — not just those who are having their doors closed.”  Big surprise.

    So that’s that.  But I want to defend Doug Ross and the RedState folks who publicized this anyway.  I’m serious.  Sure, it turned out that nothing was going on, but you know what?  If George Bush’s administration had gone down this road, I’d want someone to watch them like a hawk too.  The crackpotty writing may be a source of amusement, and I have no doubt that these guys are, as usual, going to embarrass themselves in an Ahab-like quest to prove that Obama really did force Chrysler to target Republican donors — with the lapdog mainstream media covering up for him because, you know, that’s what they do.  But even so, I say dig away.  Even blind squirrels find nuts occasionally, and if the government is going to be running car companies, then this is exactly the kind of thing people should be watching out for.  That’s what opposition parties are for.

    As Bob Somerby reminds us frequently, the real damage to Bill Clinton didn’t come from the crackpots and their conspiracy theories.  It came from the mainstream media eagerly picking up on these theories even when there was nothing there.  As long as modern-day Jeff Gerths hold their fire unless there’s some real smoke, we’ll be OK.

  • The Fed’s Legacy


    Ezra Klein writes about the federal response to the banking crisis:

    Recently, I asked an administration official which government program we’d remember as making the most difference in averting catastrophe. Where will the history books place the credit?

    “It’ll be the Federal Reserve,” he replied. “It’ll be their decision to increase the size of their balance sheet from whatever it was before the crisis to whatever it is now.” The Fed’s decisions, of course, have attracted relatively less press coverage, both because the Federal Reserve doesn’t speak to the press as often as the Treasury Department and because new Federal Reserve policies don’t spark tiffs with the Congress, or the Republican Party, or outside economists. As such, the Fed is a bit harder for reporters to write about. But there’s some evidence that it will be Ben Bernanke, rather than Tim Geithner, who our children — at least our nerdier children, the ones who study the recession of 2009 — will read about.

    I don’t think there’s any question that this is right.  Both TARP and the stimulus bill were important, but the trillions of dollars in alphabet soup programs from the Fed have dwarfed them both.  Their relative obscurity in the mainstream media, however, probably has less to do with the Fed’s low profile or lack of political fireworks and more to do with the fact that these programs are just really, really hard to describe in understandable terms.  It’s not impossible to explain the impact of term lending facilities or guarantees of the commercial paper market, but it’s a helluva lot harder than explaining a bank bailout or a hundred billion dollars in infrastructure spending.

    Regarding Bernanke, though, it’s well to remember Richard Posner’s pithy summing up of his performance: “He is like a general who having been defeated in battle because of his errors manages the retreat of his army competently.”  I’m still not sure that even the retreat was managed all that competently — there might well be additional financial shoes to drop over the next year — but even if it turns out that the worst is behind us, both of these sides of Bernanke’s crisis management are part of his legacy.  It’s still not clear what the history books are going to say about Bernanke and his Fed.

  • Tough Talk on Settlements


    I missed this yesterday:

    Rebuffing Israel on a key Mideast negotiating issue, Secretary of State Hillary Rodham Clinton said Wednesday that the Obama administration wants a complete halt in the growth of Jewish settlements in Palestinian territory, with no exceptions.

    ….The administration has communicated its position “very clearly, not only to the Israelis, but to the Palestinians and others, and we intend to press that point,” Clinton said in an appearance at the State Department with Egyptian Foreign Minister Ahmed Aboul Gheit.

    I don’t have a lot to say about this, aside from the fact that it’s impressively tough rhetoric coming from an American administration.  I wonder if they can stick to it?