Kevin Drum

Quote of the Day - 11.21.08

| Fri Nov. 21, 2008 12:15 PM PST

QUOTE OF THE DAY....From Felix Salmon, on the possibility of Citigroup merging with Goldman Sachs:

"Nothing's unthinkable in this market, not even the idea that you can tie two rocks together and hope that they float."

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National Security Musings

| Fri Nov. 21, 2008 10:57 AM PST

NATIONAL SECURITY MUSINGS....I don't have a lot of independent comment on this, but here's a bit of miscellaneous rumormongering on the national security front. First, Joe Klein:

Lots of news from Obamaland on the national security front in the past 24 hours — Hillary Clinton "on track" to become Secretary of State, retired General Jim Jones said to become National Security Adviser (while Republican realist Brent Scowcroft has been advising Obama on National Security)...and some strong flutterings that Obama wants to retain Robert Gates as Secretary of Defense as first reported here last summer, which seems especially credible because no other name has been floated as a potential SecDef.

If true, this is an extremely strong, and wise, national security team. It would reflect a powerful desire on Obama's part to return to the tradition of bipartisan foreign policy, with politics stopping at the water's edge. And it would reflect a growing centrist consensus in the foreign policy/national security spectrum that includes most members of the Bush 41 and Clinton teams — in favor of the primacy of diplomacy over militarism, ready to begin talks with those the Bush Administration considered pariahs (the Taliban, Syria, Iran), but not averse to the use of force — against Al Qaeda, in particular — when necessary.

Hmmm. Here's Andrew Sullivan on John Brennan:

Marc reports the Republican, former chief-of-staff for George Tenet (who authorized war crimes as CIA head), admirer of Dick Cheney, CEO of the company one of whose contract employees improperly accessed Obama's and McCain's passports, and defender of renditions and "enhanced interrogations" is still Obama's front-runner pick to head the CIA. No, I'm not making this up.....Why is such a man even considered for the post under Obama? This man cannot end the taint of Bush-Cheney. He was Bush-Cheney.

From across the pond, Alex Massie considers Obama's views more broadly and concludes that we're not likely to see any dramatic change:

Viewed from outside the United States, the foreign policy "debate" in Washington is a curiously curtailed affair. It concentrates on means, not ends and this rather tends to obscure the fact that, on many and perhaps even most issues, there's less between the parties than might be thought.

....When you get down to the bottom of it, Obama hasn't yet given much indication that he either wants to, let alone will, break from the broad thrust of the Washington foreign policy consensus. That being so, why should hawks on either side of the aisle have anything to fear from him? Means matter, of course, but so do ends.

I'm not yet in the mood to make any thundering pronouncements on any of this stuff. None of these people have actually been announced yet, for one thing, and the rumor mill might be wrong. And even if these do turn out to be Obama's picks, they aren't the whole team. And anyway, Obama never pretended to be some kind of Noam Chomsky acolyte. He's a mainstream liberal American president.

Still — and keep in mind that I'm speaking as someone who's only modestly left of center on foreign affairs — this is a disturbingly hawkish team taken as a whole, isn't it? I get the whole "water's edge" thing, as well as Obama's desire to bring back some kind of consensus in the national security arena, but it would be nice to see at least one or two really serious progressives getting some high profile national security positions that have the president's ear, wouldn't it? I mean, that is why most of us voted for him, right?

The Gnomes of Zurich

| Fri Nov. 21, 2008 10:12 AM PST

THE GNOMES OF ZURICH....John Quiggin thinks Switzerland is about to go bankrupt. Just thought I'd mention it.

Trouble in River Citi

| Fri Nov. 21, 2008 9:27 AM PST

TROUBLE IN RIVER CITI....Back in the hazy days of early 2008, Countrywide failed. But hey — they were hugely exposed to subprime mortgages, so that was hardly a surprise. Don't read too much into it. Then Bear Stearns failed. But they were the weakest of the investment banks and had unusual derivative exposures. The others were probably OK. Then Fannie and Freddie failed. But they were GSAs. And Lehman Brothers went under. But Richard Fuld had really screwed the pooch, and the federal bailout plan would keep the other investment banks OK. But then Merrill got eaten, and Morgan and Goldman turned themselves into bank holding companies. No more investment banks. But at least the big money center banks were basically OK, right?

So tell me: now that Citigroup seems to be on the brink of failure, what are we supposed to think? Is anyone safe? Is Brad DeLong right, and full-scale Swedish style nationalization is the only real option still open to us? Does Congress really want to go into recess without passing some kind of major stimulus package before January 20? Really?

MacBook Update

| Fri Nov. 21, 2008 9:00 AM PST

MACBOOK UPDATE....Thanks to everyone who suggested resetting the SMC controller in my MacBook. It didn't work, but it did cause the white LED on the front of the notebook to start pulsing again, which made me think it was working for a while and allowed me to go to bed happy. When I woke up this morning, though, the battery was still dead after a night of charging and the message on the menu bar was actually more ominous than before. Sigh. Off to the Genius Bar, I guess.

But I'm curious about something. An awful lot of people in yesterday's thread seemed to think that I had committed some kind of technological malpractice by letting the battery discharge completely. Mind you, this wasn't deliberate on my part. I just closed the lid one day (August 29, I think, after using the MacBook to blog about Sarah Palin during a power failure) and then didn't happen to use it for the next two or three months. But frankly, even if I'd known I wasn't going to use it I wouldn't have done anything special. I would have just figured that the battery would discharge completely and I'd have to charge it before I used it next. No big deal.

But that's not so? If you let your battery discharge completely, the entire machine dies and refuses to charge the battery again? Why? Just to teach me a lesson? Or what? I don't understand why completely discharging a battery should have such dire effects. I thirst for knowledge, as always, so can anyone enlighten me?

Sadr's Slump

| Fri Nov. 21, 2008 8:51 AM PST

SADR'S SLUMP....The latest from Baghdad:

More than 10,000 supporters of the radical anti-American Shiite cleric Moktada al-Sadr gathered in Baghdad's Firdos Square on Friday to protest the Iraqi government plan to sign a security agreement which would maintain American troops in the country for up to three years. With powerful symbolism, demonstrators hanged an effigy of President Bush from the plinth that once supported the statue of Saddam Hussein that was toppled after Baghdad fell to U.S. troops on April 9, 2003.

Hmmm. Am I the only one who thinks 10,000 is a pretty puny turnout for one of Sadr's protests? Didn't he used to brag about turning out crowds of nearly a million? Symbolism is nice, but a few hundred thousand marchers would have been a much more impressive show.

Based on this, I predict that the SOFA will pass parliament shortly. You heard it here first.

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Car Tax Update

| Thu Nov. 20, 2008 7:49 PM PST

CAR TAX UPDATE....I see that the California legislature is thinking of taking my advice and raising the vehicle license fee back to the same rate (2% of assessed value) that we had for most of our history:

The plan creates a potential political quandary for Gov. Arnold Schwarzenegger. The last governor to triple the vehicle license fee was his predecessor, Gray Davis, and it played a large role in his recall. In his first act in office, Schwarzenegger cut the fee back down to its current rate.

Yeah, that's a quandary all right. Poor Arnold.

Apple Woes

| Thu Nov. 20, 2008 7:22 PM PST

APPLE WOES....So remember how you guys were all over me for years about how bad PCs sucked and how I should get a Mac to solve all my problems etc. etc.? And so I finally got one a few months ago, and it worked fine. (Not really any better than a PC, to be honest, but it was fine.) Remember all that?

Well, guess what? I haven't used my MacBook for a couple of months, but I pulled it out the other day and discovered that Macs don't hibernate in order to extend battery life. They just go into standby mode when you close the lid, and then hibernate right before the battery goes completely dead. So of course my battery was completely dead. No big deal, though: I just plugged in the charger and went away for a few hours.

And nothing happened. The notebook no longer recognizes the battery and declines to charge it even a tiny bit. Reinstalled the battery, but that didn't do any good. So now what? Take it into an Apple store and find out what's wrong, I guess. What a pain. Why can't Apple make decent hardware, anyway?

Blog Bleg

| Thu Nov. 20, 2008 1:36 PM PST

BLOG BLEG....I need more blogs to read. Who do you recommend? All subject areas and political affiliations welcome as long as they have interesting things to say. Leave your top picks in comments.

More CDS Chatter

| Thu Nov. 20, 2008 12:33 PM PST

MORE CDS CHATTER....Megan McArdle, who has been skeptical of the role of credit default swaps in the financial meltdown, publishes an email today from a reader that, I think, gets it about right:

As someone with a front-row seat to this crisis, let me say that there are people who trade CDS and do not understand crucial details of contract terms and bond seniority....Moreover, street-side participants in CDS have realized that they are counterparties to obligations they often don't understand, and this has certainly played a role in both a) their unwillingness to extend credit and b) their inability to get credit from lenders who are uncertain of what their CDS obligations mean. THAT is why Buffett called them "financial weapons of mass destruction" — not because they START a war, but because they have immense capacity to radically ESCALATE it.

....[After the fall of Lehman Brothers] everyone started worrying about collateral, and then discovered that they were not able to properly worry about collateral, since they did not fully understand derivative collateral requirements. All they knew is that they were facing something big and scary, and so — once again collectively and naively — we all stopped lending just to be safe.

This is, roughly speaking, my understanding of what happened too. The CDS market is a highly useful one, but it's too opaque; it's too hard to truly know what your CDS counterparty risk really is; and collateral requirements can amplify a downward spiral and cause bank failures that otherwise wouldn't have happened. There are regulatory answers for all these things, and although they probably wouldn't eliminate problems in the future (nothing can do that, I imagine), they might reduce them considerably.

On another note, Megan has apparently cast her vote for "CDSs" as the plural of CDS. I'd opt for "CDSes" myself, but I'm open to anything that's an actual, rather than an implied, plural. Perhaps this will start a trend.