Kevin Drum

Life on the Street

| Wed Oct. 13, 2010 11:05 AM EDT

And now for some contradictory news about Wall Street earnings:

With the country's major banks due Wednesday to start reporting third-quarter earnings, a new pessimism is taking hold on Wall Street based on the growing belief that the economy will remain weak for some time, limiting the industry's ability to make money....Wall Street analysts who follow their own industry have recently slashed earnings estimates for a number of big players. Several firms have quietly fired staff, and many more layoffs are expected by early next year. There are even predictions of a severe drop in Wall Street's notoriously generous compensation.

"We're going to see a larger increase in unemployment in the financial services than anyone had expected," said Steven Eckhaus, a lawyer who advises banks on employment matters.

So are Wall Street traders breaking out the champagne buckets (yesterday's news) or preparing to sell their backup vacation homes (today's news)? Hard to say. But this report does suggest one reason that it's going to be hard to tell if financial reform is working. I've suggested before that overall industry profitability is a key metric to watch because a safer industry is inherently a less profitable industry. However, the opposite isn't mathematically equivalent: a less profitable industry might be a safer industry but it might not be. It might be less profitable just because the economy is sucking.

So: if industry profits stay high, that's definitely a bad sign. But if industry profits fall, it's an ambiguous sign. Wait and see.

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Drowning in Ethanol

| Wed Oct. 13, 2010 12:53 AM EDT

Somebody just shoot me now:

The Environmental Protection Agency is expected to announce Wednesday that it has approved motor fuel with higher blends of ethanol for use in newer vehicles....The agency will grant a waiver to existing rules to allow the use of E15 — made with 15 percent ethanol and 85 percent gasoline — in cars made in model year 2007 or more recently.

....Big agriculture companies and ethanol distilleries have been pressing for an increase in the limit on ethanol in motor fuel because the nation's overall ethanol production is approaching 10 percent of motor fuel use, a point commonly known as the "blend wall" by people in the industry.

Just what we need. More land-use destroying, corn price increasing, environmentally idiotic ethanol. All taxpayer-subsidized, of course. I guess the Iowa caucuses must be coming up any year now.

How They Win

| Tue Oct. 12, 2010 4:27 PM EDT

Via Jon Chait, a new study shows that the good looking guys really do get all the hot chicks votes. Three researchers did a study to find out if attractive political candidates were more likely to win elections, and in order to eliminate a source of bias they asked Americans and Indians to rate the attractiveness of candidates for Mexican and Brazilian offices:

Despite cultural, ethnic, and racial differences, Americans and Indians agree about which candidates are superficially appealing (correlations ranging from .70 to .87).  Moreover, these superficial judgments appear to have a profound influence on Mexican and Brazilian voters, as the American and Indian judgments predict actual election returns with surprising accuracy. These effects, the results also suggest, may depend on the rules of the electoral game, with institutions exacerbating or mitigating the effects of appearance.

Since, unlike Chait, I'm a serious blogger, I won't illustrate this post with a picture of George W. Bush in his flyboy days. Instead you get a chart. And it's really pretty remarkable. The study included ratings of 47 pairs of candidates, and as you can see the more attractive candidates had a better chance of winning (black dashed line). But that's not all! In an effort to add some value to this study, I drew red lines at the one-third marks, and the results are truly astounding. In the middle, things are kind of a crapshoot. But when one candidate has a strong appearance advantage over the other, the results are almost foregone. All of the eight ugly candidates lost and six out of seven of the dreamboats won.

I don't know if similar results hold for women, but if it does maybe Republicans would be wise to nominate Sarah Palin after all.

Quote of the Day: Congress and its Discontents

| Tue Oct. 12, 2010 2:34 PM EDT

In an interview with Ezra Klein, car czar Steve Rattner tells us what he thinks about America's lawmakers:

EK: Tell me about dealing with the Congress.

SR: When you actually deal with them to try and get something done? It's impossible. It is so divisive, so parochial and so petty. If you look at the auto rescue, the only time Congress really got involved was over the dealers. Here we are, laying off thousands of workers and restructuring these companies, and the only thing that animated Congress was the dealers. In terms of the body as a whole, they were just obstructionists.

I think that if we didn't have TARP, the whole economy could have imploded before Congress figured out what to do. They hated TARP because it gave the Treasury a $700 billion check, but it wouldn't have worked any other way. I think every president gets tagged negatively by the American public for things that really, they should be tagging Congress for. Everyone talks on the morning talk shows about the president's approval rating, it's 45 or 44 or 46, and Congress is 22. People should be focused on Congress. It's really important. It's not on top of the Hill by coincidence. It's not Article I of the Constitution by coincidence.

I recommend we replace them all with a randomly selected bunch of sixth graders. They might not get any more done, but at least they'd be better behaved.

California's Medical Marijuana Maze

| Tue Oct. 12, 2010 12:21 PM EDT

Josh Harkinson tests out California's Byzantine medical marijuana bureaucracy:

Soon enough, I found Price-Less Evaluations, "the most trusted medical marijuana evaluation center in San Francisco"....The receptionist led me back into a hallway, where I saw a stooped, white-haired man in a rumpled pullover — the doctor. "Come on in," he mumbled. I stepped into an office and sat down at the edge of his desk. "So, can cannabis help you in some ways?" he asked, pen poised over a recommendation form. "I think so, yeah," I replied, trying to sound confident.

"So how does it help you?" he asked as the ink dried. "Well," I offered, "I have periodic pain from typing a lot, and in my lower back, and it could help me with that." He smiled. "Good. It's signed right there." The entire conversation had taken less than 90 seconds.

On my way out, I paid the $70 evaluation fee in cash and forked over another $20 for a wallet-sized "patient identification card" — carte blanche to buy pot from one of California's 1,000 medical marijuana dispensaries.

Apparently the time it took to google this up was the most arduous part of the whole experience.

UPDATE: Just in case anyone didn't get it, "Byzantine bureaucracy" was just a little joke.

Meaningless Polls, Part 897

| Tue Oct. 12, 2010 11:59 AM EDT

From the latest Bloomberg poll:

The Republican “Pledge to America” is viewed as a good idea by 48 percent of likely voters, compared with 39 percent who term it a bad idea.

Are they seriously trying to tell us that 87% of likely voters have heard of the Pledge to America? Please. Here's the actual question:

All this poll tells you is that if you vaguely ask people if they're in favor of cutting taxes and reducing some government spending, about half will vaguely say they are as long as nothing is cut that actually affects them. It's hard to think of a more meaningless poll question.

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Liberal Branding Revisited

| Tue Oct. 12, 2010 11:31 AM EDT

Bob Somerby thinks that liberal branding isn't as hard as some of us think:

For ourselves, we think it’s very easy: The people, not the powerful! You have to explain where things go from there, of course.

Yep. You have to explain where things go from there. But that's the whole problem, isn't it?

Dumb and Dumber

| Tue Oct. 12, 2010 11:00 AM EDT

And now, from the annals of political cluelessness:

In a potential sign of Democratic unease with the White House midterm political strategy, some of President Obama's allies have begun to question his sustained attack on the U.S. Chamber of Commerce, which has long claimed bipartisanship but is being increasingly identified as a GOP ally.

....Democrats expressing reservations have worked on behalf of moderate candidates with business backing. They recalled past attacks on former President Clinton and Vice President Al Gore for receiving foreign money and warned that White House charges now could lead to GOP reprisals, particularly if Republicans gain control of the House.

"The White House may reap the whirlwind," said one top Democratic staffer. "What are we going to do next year if a Republican Congress is making baseless claims about President Obama? We'll want the media to hold them accountable to the facts and the evidence."

Maybe you think the president's attacks on the Chamber of Commerce are over the top. Fine. Maybe you think it's making life hard for some centrist Dems. Fine. But worrying about "reprisals"? Worrying that it will leave Dems helpless if Republicans start making "baseless claims about President Obama"? WTF? What planet do some of these guys come from? Are they still under the impression that Republicans might not make baseless claims about Obama if he plays nice? Or that the press is going to hold them accountable if they do?

Holy cats. Maybe they really do deserve to lose.

A Chicken in Every Pot

| Tue Oct. 12, 2010 10:10 AM EDT

More evidence that the recession is over!

Pay on Wall Street is on pace to break a record high for a second consecutive year, according to a study conducted by The Wall Street Journal.

About three dozen of the top publicly held securities and investment-services firms — which include banks, investment banks, hedge funds, money-management firms and securities exchanges — are set to pay $144 billion in compensation and benefits this year, a 4% increase from the $139 billion paid out in 2009.

There's some speculation in the article that Wall Street pay might "level out" as profits flatten in response to financial reform, but if that happens "analysts and experts expect that Wall Street will lay off employees in order to keep bonus pools high." So it's all good.

The GOP's Shadow Banking System

| Tue Oct. 12, 2010 12:10 AM EDT

The recent hubbub over the Chamber of Commerce taking money from foreign sources may be a little overblown, but at least it's serving to shine a spotlight on an issue that really is important: the growing tidal wave of anonymous cash that funds American elections. The New York Times reports:

The American Future Fund, organized under a tax code provision that lets donors remain anonymous, is one of dozens of groups awash in money from hidden sources and spending it at an unprecedented rate, largely on behalf of Republicans. The breadth and impact of these privately financed groups have made them, and the mystery of their backers, a campaign issue in their own right.

....The surge of anonymous money is the latest development in corporate America’s efforts to influence the agenda in Washington, following rules enacted several years ago banning large, unregulated gifts to political parties....Now, as new laws and a major Supreme Court decision have removed barriers to corporate giving, Republican operatives have embraced the use of nonprofit issue groups that can keep donors’ identities secret.

....The U.S. Chamber of Commerce, which does not identify its corporate members, spent $10 million over the last week on advertisements, mostly against Democrats, records show. The chamber will most likely meet its fund-raising goal of $75 million, more than double what it spent on the 2008 campaign, Republican operatives say.

Democrats tried to bring this tsunami of interest group spending into the light by passing the DISCLOSE Act earlier this year, but the results were unsurprising. It got a grand total of two Republican votes in the House and zero Republican votes in the Senate, and ended up being filibustered to death. Corporate special interests prefer to work in the shadows, and the GOP is happy to oblige their preferences.

The bulk of the Times story is about the American Future Fund, which, upon investigation, turns out to have been started by a wealthy ethanol producer. This is probably pretty typical. A lot of the donors to these anonymous funds are probably just the usual rich folks who have given money to Republican campaigns in the past ("reliable Republican contributors who helped elect George W. Bush and support Swift Boat Veterans for Truth" in the Times' words), but quite a few others are newbies with an agenda who don't want their customers or anyone else to know that they're taking partisan stands:

When [Karl] Rove and Ed Gillespie, the former Republican chairman, began their efforts last spring, they first helped set up a group called American Crossroads under a tax-code provision that requires the disclosure of donors. It took in several seven-figure contributions from high-profile donors, including Trevor Rees-Jones, president and chief executive of Chief Oil and Gas, and Robert Rowling, chief executive of TRT Holdings.

Then in June, Mr. Rove and Mr. Gillespie helped organize Crossroads GPS under the provision that allows donors to give anonymously. A Republican operative who speaks frequently with Mr. Rove said the public donations, revealed over the summer, were used as “a way to energize others to give large amounts anonymously.”

The operative added, “It has worked like a charm.”

I'll bet it did. The vast sums of money spent by corporate interests on American elections is bad enough, but vast sums of secret money is far worse. This is not a healthy develpment in a supposedly open democracy.