Kevin Drum

Kevin's Camera Gallery

| Sun Jun. 19, 2011 6:22 PM EDT

In the camera thread last night I mentioned that one of these days I'd take pictures of the entire Drum family camera collection, from 1935 onward. Well, why not now? However, since most of you aren't interested in this kind of thing, I've put it below the fold.

Advertise on

Quote of the Day: Manufacturing Misinformation

| Sun Jun. 19, 2011 11:46 AM EDT

From Jon Stewart, responding to Chris Wallace's (undoubtedly accurate) observation that Fox News viewers are pretty happy with Fox News:

New Camera Blogging

| Sun Jun. 19, 2011 12:49 AM EDT

So I went out and bought a new camera today. Because — um, because I heard that the economy needed stimulating, and as a patriotic American I figured I should do my part. Besides, ever since cameras became electronic gadgets, their useful lives are officially measured in months, not years. And catblogging deserves only the very best, no?

So here you go. A nice, soothing picture of some kind of plant at sunset. The vibration reduction really works well, doesn't it?

Obama, Libya, and the OLC

| Sat Jun. 18, 2011 12:51 PM EDT

Charlie Savage reports in the New York Times that the White House decided earlier this year to overrule official Department of Justice advice on whether the War Powers Act applies to Libya:

President Obama rejected the views of top lawyers at the Pentagon and the Justice Department when he decided that he had the legal authority to continue American military participation in the air war in Libya without Congressional authorization, according to officials familiar with internal administration deliberations.

Jeh C. Johnson, the Pentagon general counsel, and Caroline D. Krass, the acting head of the Justice Department’s Office of Legal Counsel, had told the White House that they believed that the United States military’s activities in the NATO-led air war amounted to “hostilities.” Under the War Powers Resolution, that would have required Mr. Obama to terminate or scale back the mission after May 20.

So how often do presidents overrule the OLC? John Elwood:

As the article also notes, it is “extraordinarily rare” for that to happen. When Senator Whitehouse asked me after a hearing in 2008 for an example, the only one that came to mind was from the Roosevelt Administration. (There must be others, but I’m still drawing a blank.) If press accounts are correct, together with the D.C. voting rights bill, we now have two recent examples.

Hmmm. I think we should make that three recent examples. George Bush's overrule of the OLC on the legality of the NSA eavesdropping program wasn't that long ago, after all. As I recall, we liberals got pretty hot under the collar over that. Just as we got pretty hot under the collar over the obvious politicization of the OLC when it approved the use of torture against detainees at Guantanamo.

The DC voting bill example doesn't bother me much. It was all done out in the open, there was plenty of opportunity to discuss its constitutionality, and everyone knew it would have gone to the Supreme Court if it had passed. The OLC's opinion just wasn't that decisive. But unilateral executive actions done against OLC advice are entirely different. There's no public debate, there's no need to round up votes, and the Supreme Court quite likely will never have a chance to get involved. And they're especially different when the president overrules the OLC based on a reading of the law that's as transparently absurd as Obama's claim that our operation in Libya isn't important enough to count as "hostilities."

Look: either we believe that the OLC should be both independent and authoritative or we don't. In the past, I think most liberals — including Barack Obama — believed both. It's disgraceful that apparently he no longer does.

Nonfiction Favorites

| Sat Jun. 18, 2011 12:15 PM EDT

Inspired by the Guardian's list of the 100 best nonfiction books of all time, the New York Times asked a bunch of its staff writers to pick their five favorites. There was a four-way tie for first place, and the reason for the tie is more interesting than the names of the books themselves:

Of the 33 lists submitted, each of those books appeared three times. (Yes, I know that is a completely unscientific basis for deeming them our picks as the best of all time, but what did I say about rigor?)

That's sort of remarkable. Out of 33 lists, not a single book was mentioned by more than three people. And unless I missed something, only four books out of a total of 167 (two staffers imperiously listed six books instead of five) were written before the 20th century. What's interesting is that this is such a dramatic demonstration of how atomized we are these days: we all read wildly different things, and even within a group of fairly similar people there's not a whole lot of crossover. Not only are there no classics that we've all read and treasured, but even among modern books there's precious little that we all have in common.

But this is a hard exercise. I'll make it easier by listing my ten favorite nonfiction books, but honestly, if you asked me again next week it would probably be a different list. (With the exception of #1, which would show up every time.) That said, here's this week's list:

  1. The Power Broker, by Robert Caro
  2. The Jungle, by Upton Sinclair
    [Embarrassing update: this is, of course, a work of fiction. I sort of forgot that.]
  3. Fear and Loathing: on the Campaign Trail '72, by Hunter S. Thompson
  4. Guns, Germs, and Steel, by Jared Diamond
  5. Before the Storm, by Rick Perlstein
  6. Postwar, by Tony Judt
  7. Against the Gods, by Peter Bernstein
  8. Plagues and Peoples, by William McNeill
  9. In Search of Schrödinger's Cat, by John Gribbin
  10. How the Mind Works, by Steven Pinker

So many books left out! Even though I did the more traditional list of ten. Sigh.

Quote of the Day: Obama's Plan to Ruin Medicare

| Sat Jun. 18, 2011 10:58 AM EDT

From Michele Bachmann, explaining President Obama's plan to kill off Medicare:

I think very likely what the president intends is that Medicare will go broke and ultimately that answer will be Obamacare for senior citizens.

Well, that would certainly explain why Obama pushed so hard for a healthcare reform bill that, according to Medicare's actuaries, had the following effect: "The financial status of the HI trust fund is substantially improved by the lower expenditures and additional tax revenues instituted by the affordable Care Act. These changes are estimated to postpone the exhaustion of HI trust fund assets from 2017 under the prior law to 2029 under current law."

The fiend!

Advertise on

Jon Huntsman's Iron Self Discipline

| Fri Jun. 17, 2011 4:07 PM EDT

Jon Chait notes today that Jon Huntsman admitted in 2009 that the Republican Party had become too extreme for someone like him to ever win its presidential nomination:

It's not like the GOP has moved to the center since then, either. So why is he running now? Almost certainly, Huntsman is hoping to raise his name recognition, run a credible campaign, and then, if and when a prospective Obama reelection prompts the party to move to the center, set himself up as an acceptable candidate for 2016.

I happen to agree with Jon: Huntsman almost certainly knows that he can't win this year and that Obama is likely to be reelected anyway. But I'll also say this: if it's really true that Huntsman is just positioning himself for 2016, it displays an almost stunning level of ambition and discipline. Running for president is a long, soul-destroying, almost mind-bogglingly grueling exercise, and that's true even if you're independently wealthy and only running a semi-campaign. After all, you still have to do all the events, speak to all the groups, grovel for money to show you're serious, pander to the interest groups, travel ten thousand miles a month, deal with the press, etc.

Now, it's one thing to do that if you think you might actually win the presidency. But doing it just to set yourself up for a possible win four years down the road? That's some serious dedication. Huntsman must have a level of determination and self-control that makes Thomas Edison look like an indolent street urchin.

Friday Cat Blogging - 17 June 2011

| Fri Jun. 17, 2011 2:12 PM EDT

No theme today, just a pair o' cats. On the left, Inkblot is trying to look like he's the king of the jungle. You decide if he's succeeded. On the right, Domino is entranced with that greatest of all cat toys, the paper bag. She had quite a good time during that photo shoot. (And yes, before you ask, she got her head caught in the bag's handle once. Luckily her human servant was around to extract her. The bag then exited the room when the human did.)

UPDATE: From comments, the presidential campaign finally gets kicked off for real: "Inkblot/Domino for 2012! One pretends to be king of the jungle and the other can't get out of a paper bag. Perfect credentials for a P/VP ticket."

How Bad Are Credit Default Swaps?

| Fri Jun. 17, 2011 2:00 PM EDT

Why is the European Central Bank dead set against even a "voluntary" restructuring of Greek debt that would force private investors to take a bit of a haircut on their holdings of Greek bonds? Matt Steinglass thinks their motivations are pretty much what they say they are:

The ECB doesn't believe it's possible to make private holders of Greek debt "share the pain" without precipitating a Greek default. They think if you pressure banks to roll over Greek debt, that debt will become untradeable, which is the same as "worthless"; the ratings agencies will deem the failure to pay at maturity to be a technical default, which may trigger credit default swaps; the Greek banking system will become insolvent, meaning nobody in Greece will have any money anymore; recapitalising those Greek banks will have to be done by governments that actually have money, ie the northern European ones; and ultimately the costs will all fall on the northern European taxpayer anyway. Meanwhile northern Europe's pension funds will be hit by the credit panic, which again will hurt the average citizen. The ECB folks sincerely think there's no way around having taxpayers pick up the bill for saving Greece and the euro.

I would really like to see a more detailed explanation of this. The basic idea here is that credit default swaps are (duh) triggered by a default: when you buy CDS on, say, a Greek bond, you're paying for protection against default. If the issuer of the bond defaults, then you're made whole by whoever you bought the CDS insurance from.

So far, so simple. It's often a little unclear exactly what triggers payment of a CDS, but it's perfectly plausible that even a modest restructuring, whether voluntary or not, would count as an "event" that would trigger lots of CDS contracts. But then what? What are the figures here? Just how much CDS is there on Greek debt? How much would be triggered by default? Who are the main sellers of CDS on Greek bonds? How big would the effect be if they had to pay off bondholders?

I'm curious about this for two reasons. First, I want to know if the ECB really has a good case. Would Greek default trigger a massive wave of renewed insolvency all over Europe as CDS sellers are forced to pay off on their insurance? Second, I want to know if this is yet another reason we should be wary of CDS. One of the big knocks against CDS has been that although it's theoretically a perfectly fine idea, in practice it can act as a huge multiplier, turning a bad default that hurts thousands of people into a catastrophic, systemic payout that hurts millions. In this case, it would turn tens of billions of dollars of Greek default (bad) into hundreds of billions of dollars of rolling CDS payouts (really, really bad).

But is this really the case? If this is what the ECB thinks, I'd like to see the detailed research to back it up. And if they're right, I think it's one more nail in the coffin of credit default swaps in general. If they really do magnify risk this way, it's time to do away with them. If you buy Greek bonds — or anyone else's bonds — maybe it's time to start doing due diligence again instead of just buying CDS and calling it a day.

UPDATE: Felix Salmon has a few numbers here that suggest CDS exposure is fairly small. However, his numbers also suggest that direct exposure to Greek default is fairly small, and in any case, not a problem for the banking industry. So this is still a bit of a mystery.

Fannie, Freddie, and Wall Street

| Fri Jun. 17, 2011 12:23 PM EDT

David Brooks has a scathing column about Fannie Mae today, based largely on Reckless Endangerment, a new book by Gretchen Morgenson and Joshua Rosner. A few excerpts:

Fannie Mae co-opted relevant activist groups, handing out money to Acorn, the Congressional Black Caucus, the Congressional Hispanic Caucus....Fannie ginned up Astroturf lobbying campaigns....Fannie lavished campaign contributions on members of Congress....Fannie executives ginned up academic studies. They created a foundation that spent tens of millions in advertising. They spent enormous amounts of time and money capturing the regulators who were supposed to police them.

Morgenson and Rosner write with barely suppressed rage, as if great crimes are being committed. But there are no crimes. This is how Washington works. Only two of the characters in this tale come off as egregiously immoral. Johnson made $100 million while supposedly helping the poor. Representative Barney Frank, whose partner at the time worked for Fannie, was arrogantly dismissive when anybody raised doubts about the stability of the whole arrangement.

I think this is basically right, and Fannie deserves most of the grief that it's gotten. But it doesn't deserve the paragraph that follows:

Of course, it all came undone. Underneath, Fannie was a cancer that helped spread risky behavior and low standards across the housing industry. We all know what happened next.

It's absolutely legitimate to be mad as hell at what Fannie did. It's not legitimate, though, to pretend that Fannie was really a motivating force behind the financial crash. The evidence is pretty clear on this point: although Fannie (and Freddie Mac) expanded their share of the mortgage securitization market dramatically in the 80s and 90s, their market share plummeted just as dramatically at exactly the time when the housing bubble really started to take off in 2002. It was mostly the private sector that drove the declining standards in home loans during the bubble, with Fannie and Freddie playing catchup only years later after they had lost a big chunk of market share. That was a bad move on their part, and by coming in late they ended up saddling themselves with the very worst quality loans from the 2005-06 era. These collapsed almost entirely, requiring a massive taxpayer bailout.

This is important. Fannie and Freddie screwed up badly during the tail end of the housing bubble, and they certainly played a general role in promoting home ownership for many years before that — a role that was pretty enthusiastically endorsed by everyone else in Washington too, both Democrat and Republican. They shouldn't be let off the hook for that. But did they drive the housing bubble? No. Wall Street is desperate for confirmation that they weren't really to blame for the collapse in underwriting standards and the securitization mania that followed in the early aughts, but they shouldn't be allowed to get away with this no matter how many conservative think tanks are in the bag for them. Whether you love government agencies or hate them, the evidence is clear: The bubble-induced financial collapse of 2008 was mostly the fault of the private sector, which went almost literally insane with its financial engineering and tacit endorsement of mortgage fraud from 2000 through 2006. Like it or not, 'twas Wall Street that killed the beast.

UPDATE: Jonathan Bernstein: "David Brooks today singles out Barney Frank. The same Barney Frank whose Democrats were the minority party in the House from 1995 through 2006. Hey, for all I know Frank was incredibly evil during those years (I haven’t read the book Brooks is working from), but it just couldn’t have mattered very much, at least in the twelve years leading up to the crisis."

Dean Baker: "There's a small problem in this story. The worst junk mortgages that inflated the housing bubble to extraordinary levels were not bought and securitized by Fannie and Freddie, they were securitized by Citigroup, Merrill Lynch, Goldman Sachs, Lehman and the other private investment banks. These investment banks gobbled up the worst subprime and Alt-A garbage that sleaze operations like Ameriquest and Countrywide pushed on homebuyers."