Kevin Drum

Are Canadian Banks the Answer?

| Wed Apr. 29, 2009 6:27 PM EDT

David Leonhardt's interview with President Obama includes a fair amount of conversation about the economy, including a question about whether big banks need to be split up:

THE PRESIDENT: You know, I’ve looked at the evidence so far that indicates that other countries that have not seen some of the problems in their financial markets that we have nevertheless don’t separate between investment banks and commercial banks, for example. They have a “supermarket” model that they’ve got strong regulation of.

Like Canada?

THE PRESIDENT: Canada being a good example....So — that doesn’t mean that, for example, an insurance company like A.I.G. grafting a hedge fund on top of it is something that is optimal....And in that sense I think you can make an argument that there may be a breaking point in which functions are so different that you don’t want a single company doing everything.

But when it comes to something like investment banking versus commercial banking, the experience in a country like Canada would indicate that good, strong regulation that focuses less on the legal form of the institution and more on the functions that they’re carrying out is probably the right approach to take.

I'm sort of waffly on the whole question of limiting bank size, but this isn't an especially persuasive answer.  The experience of Canada is, I suppose, an existence proof that big banks can be regulated effectively, but when Obama says "other countries" he sure seems to be suggesting more than just Canada.  And frankly, I think he'd run out of examples pretty quickly.  After all, big banks Europe are in pretty bad shape.  Ditto for big banks in Japan following their property crash.  And big banks in Russia.  And big banks in Asia following their 1997 meltdown.

In some sense, I guess this comes down to a belt and suspenders issue.  I suspect Obama is basically right: regulating leverage is more crucial than regulating bank size.  A big bank with reasonable gearing is pretty safe.  But if you really want to be safe, you'll have a fallback: not only will you regulate leverage, but you'll limit bank size and complexity as well, so that even if a bank manages to evade the leverage rules it still can't do too much damage.  It can only do that if it manages to evade two separate sets of rules.

More to the point, though, I wish Leonhardt hadn't let Obama off the hook by feeding him the Canada example.  I would have have been curious to hear what Obama had to say without prompting.  Does he really think the banking system in the rest of the world is doing well because it's better regulated than ours?  I'm not sure the evidence supports that.

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Hundred Days Summary

| Wed Apr. 29, 2009 2:09 PM EDT

According to CBS News White House correspondent Mark Knoller — who's apparently an obsessive record keeper — in his first hundred days Barack Obama has held 16 news conferences, given 115 speeches, held one cabinet meeting, signed 12 bills, visited the capitol 8 times, gone on 3 overseas trips, visited Camp David 4 times, flown on Air Force One 34 times, issued 17 proclamations, gone on one golf outing, and attended at least 10 sporting events.  More here.

Swine Flu

| Wed Apr. 29, 2009 12:46 PM EDT

Ezra Klein passes along the news that Israel's ultra-orthodox deputy health minister has some taxonomic concerns about our flu epidemic:

Yakov Litzman said the reference to pigs is offensive to both religions and "we should call this Mexican flu and not swine flu," he told a news conference at a hospital in central Israel.

Both Judaism and Islam consider pigs unclean and forbid the eating of pork products.

I don't get it.  Even taking this craziness on its own terms, what's the problem?  Pigs are unclean, flu is unclean, it makes perfect sense that a bad thing like a flu pandemic would come from a bad thing like herds of swine.  What's the deal here?

UPDATE: There's also this from Dr. Sanne Magnan, Minnesota's health commissioner: “We’re trying to get away from the term ‘swine flu,’” Magnan said at a press conference today....A possible reason for the name change: The “swine flu” label has the nation’s pork industry squealing, as hog prices plummet in apparent worry over public misperceptions that pork is unsafe to eat.

Yeesh.  But at least the motivation is pretty obvious here.

CNN and Jim DeMint

| Wed Apr. 29, 2009 12:42 PM EDT

This is annoying.  Here is CNN's Political Ticker today describing an interview with South Carolina senator Jim DeMint:

DeMint says he isn't worried. He denied that the GOP has become a southern party, attributing Republican losses in the northeast to some northern voters who have left the region and moved south hoping to avoid labor unions and "forced unionization."

I was all ready to bring the snark to the idea that people were moving south to avoid being press ganged into unions, but first I wanted to look up the actual transcript.  Here it is:

SANCHEZ: Why does it seem like the Republican Party is only going to the South, the Southern states, and the Democratic Party is starting to stay in the Northeast and then maybe branching out into some of the other areas, like Pennsylvania, where Arlen Specter is leaving?  I mean, does that worry?

DEMINT: Well, it's not just politically. People are moving from the northeast and from the northern part of the country to the south for a lot of reasons. And I think you see heavy unionization and forced unionization in Pennsylvania and Michigan, these other states. And obviously they're very much for the Democrat big-government approach. But we see that falling apart with American auto companies. We see it falling apart all across the country.

Come on.  DeMint may not be doing himself any favors with this kind of head-in-the-sand stuff, and in any case it's not really true that there's any serious regional migration between north and south.  Still, he didn't say people were moving south because of unionization.  He said people were doing it "for a lot of reasons" and then, responding to Sanchez's question about why Dems were branching out into Pennsylvania, suggested that places like Pennsylvania and Michigan are friendly to the "Democrat big-government approach" because of their high unionization.  And he believes in his heart of hearts that this is falling apart and conservatism will prevail.  This is probably wrong too, but it's not nearly as risible as the notion that factory workers are fleeing south to avoid closed shops.  CNN's own summary got it wrong.  DeMint is a troglodyte, but this is fairly ordinary political blather, not the high-octane idiocy they made it out to be.

Torture and Civilization

| Wed Apr. 29, 2009 11:49 AM EDT

Christopher Orr weighs in with a utilitarian argument about why torture is bad:

When a group of combatants are badly outnumbered, or surrounded, or otherwise very, very unlikely to win a conflict, they have a considerable incentive to surrender — but only if they believe they will subsequently be treated with mercy. That is why individuals, and nations, surrender. The humane treatment of surrendered captives, therefore, is a crucial — arguably the crucial — understanding between adversaries if their conflict is to end in any way other than with the wholesale slaughter of the losers.

If arguments like this persuade anyone, I'm all for them.  Any port in a storm.  But ultimately these exercises in logic chopping never work.  Is torture OK against an enemy that refuses to give up?  Is torture OK in a non-combat setting?  Is torture OK if you somehow convince yourself that it will save the lives of your enemy in the long run by ending the war sooner?  In the end, you can always chop the logic a little bit finer if you're minded to.  It just doesn't work.

I don't have either the vocabulary or the literary sensibility to explain with any eloquence why I oppose torture, so I usually stay out of conversations like this.  Besides, they depress the hell out of me.  But for the record, it goes something like this.

I don't care about the Geneva Conventions or U.S. law.  I don't care about the difference between torture and "harsh treatment."  I don't care about the difference between uniformed combatants and terrorists.  I don't care whether it "works."  I oppose torture regardless of the current state of the law; I oppose even moderate abuse of helpless detainees; I oppose abuse of criminal suspects and religious heretics as much as I oppose it during wartime; and I oppose it even if it produces useful information.

The whole point of civilization is as much moral advancement as it is physical and technological advancement.  But that moral progress comes slowly and very, very tenuously.  In the United States alone, it took centuries to decide that slavery was evil, that children shouldn't be allowed to work 12-hour days on power looms, and that police shouldn't be allowed to beat confessions out of suspects.

On other things there's no consensus yet.  Like it or not, we still make war, and so does the rest of the world.  But at least until recently, there was a consensus that torture is wrong.  Full stop.  It was the practice of tyrants and barbarians.  But like all moral progress, the consensus on torture is tenuous, and the only way to hold on to it — the only way to expand it — is by insisting absolutely and without exception that we not allow ourselves to backslide.  Human nature being what it is — savage, vengeful, and tribal — the temptations are just too great.  Small exceptions will inevitably grow into big ones, big ones into routine ones, and the progress of centuries is undone in an eyeblink.

Somebody else could explain this better than me.  But the consensus against torture is one of our civilization's few unqualified moral advances, and it's a consensus won only after centuries of horror and brutality.  We just can't lose it.

AmEx Woes

| Wed Apr. 29, 2009 10:49 AM EDT

Apparently some American Express customers are being told they have to send in copies of their tax returns if they want to keep their credit cards.  Gotta be a scam, right?  No one in their right mind would do that.

Nope.  It's for real.  AmEx must be in a world of hurt these days.

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Kathleen Sebelius

| Wed Apr. 29, 2009 10:16 AM EDT

Matt Yglesias ruminates on the meaning of yesterday's vote to (finally) confirm a Secretary of Health and Human Services:

It seems to me that if you can only get 65 votes for what should be an uncontroversial HHS appointment, then the odds of a broad bipartisan coalition for big picture health care reform are not so good.

....The prevailing spirit within the GOP is clearly that Obama is a very bad president and so they should vote “no” on his initiatives. Which is fine. But it means that if Obama wants to deliver on his campaign pledges, he needs to use every legal means at his disposal to just pass things over the objections of the minority that opposes him.

I had sort of the same thought yesterday.  I mean, I understand the political/fundraising motivations for voting no on Sebelius as a sop to the pro-life contingent in the GOP, but everyone knew there was no way it would ever make a difference.  It's not as if Obama would have turned around and nominated a pro-lifer to HHS, after all.  It's ridiculous.  But nearly the entire Republican caucus voted against her anyway, which means that their desire to work with Obama even at the most basic level of allowing a president to choose his own cabinet is less important than their desire to prove their absolute fealty to the conservative base.

Not a good sign — although I suppose there's an alternate reading that's less dire: if you know that Sebelius is going to be confirmed anyway, voting no is something of a freebie.  So maybe this doesn't really mean too much after all.  On balance, though, I think I'm with Matt.

Economic Update

| Wed Apr. 29, 2009 9:56 AM EDT

So how's the economy doing?  Let's take a look!

New York Times: U.S. GDP shrank by 6.1% in the first quarter, far worse than the "consensus" prediction of 4.7%.

Bloomberg: A full third of the country's biggest banks need additional capital, according to leaked preliminary results of the Treasury's stress tests.

RGE Monitor: According to a government report leaked to Sueddeutsche Zeitung, bad assets in the German banking system total slightly over a trillion dollars.  Over half of bad assets worldwide are in the European banking system, which has done much less to recognize them than we have in the U.S.

Wall Street Journal: Business fixed investment in the U.S. was down a whopping 37.8% last quarter.

Want some good news to go with that?  Sorry!  Apparently personal consumption was up 2.2%, which is probably a mixed blessing, and home prices were down 18% compared to last year, but didn't quite fall at a record rate.  That's the best I can do.  Ed Yardeni tries to do better, but one of the green shoots on his list of reasons to feel optimistic is the fact that Portfolio magazine has shut down.  Put me down as unconvinced.

Green Shoots

| Tue Apr. 28, 2009 4:21 PM EDT

Tapped glosses an EPI report on green jobs:

Most notable is its pronouncement that a "green" investment is one of the most stimulative forms of government spending, providing a 1.6:1 return-to-investment ratio. This is greater than generic infrastructure investment (1.59), temporary tax cuts (1.03), and corporate tax cuts (0.3)....Now for the less-than-rosy projection: men would be disproportionately advantaged by this spending, accounting for 75 percent of the total employment gains.

Actually, that's not as bad as it sounds — at least in the short run.  As CAP's Heather Boushey points out, men have absorbed 75% of all job losses during the current recession, so a stimulus program that targets them disproportionately makes some sense.  After all, it's either that or let them stay home grinding their teeth and taking cues from Fox News about who to blame for all this.  And we don't want that, do we?

Overall, EPI's model projects that $100 billion in green investments would generate 750,000 jobs and raise wages of non-college educated workers by about half a percent per year.  Plus it would help prevent us from turning the planet into a cinder.  So that would be another bonus.  The whole paper is here.

Specter and EFCA

| Tue Apr. 28, 2009 3:39 PM EDT

A few weeks ago Arlen Specter announced that he would oppose the Employee Free Choice Act (aka "card check"), labor's top legislative priority.  But now that he's a Democrat, what will he do?  Jon Chait speculates:

Specter says he’ll still oppose EFCA, but I have trouble seeing him really maintain that stance. He has to make it through a Democratic primary now. That’s very hard to do in Pennsylvania when the AFL-CIO is out for your blood.

Specter’s most likely play is to stay formally opposed to EFCA, but support a compromise along the lines of what some moderate Democrats might favor. He certainly can’t risk being the decisive anti-EFCA vote. Democrats in the Senate may be offering him institutional support in the primary, but primaries tend to be low-turnout operations, and Specter is going to have to work his way into the favor of the partisan Democratic base.

I think that's probably right.  Specter won't completely flip-flop, but there was some wiggle room in his statement announcing opposition to EFCA.  Even without changing his position on secret ballots, then, I could see him working with a few conservative Dems and moderate Republicans to construct a compromise bill that pretty effectively boosts his labor bona fides.  After all, the current version of EFCA is almost certainly dead in the water (and was likely dead before Specter announced his oppostion), so gaining support for even a watered down version would allow him to position himself as the guy who rescued EFCA and got half a loaf where there was nothing previously.

It might not work, of course, but it's probably worth a try for him.  I wouldn't be surprised to see him give it a go.