Kevin Drum

Sunday Bonus Catblogging - 10.12.2008

| Sun Oct. 12, 2008 1:11 PM PDT

SUNDAY BONUS CATBLOGGING.... There's too much tension and stress this weekend over our ongoing financial tsunami. What's needed is some bonus catblogging to explain in layman's terms how we got into this mess.

In today's installment, Inkblot demonstrates graphically what happened to our banking system. Like the titans of our financial industry, last night he became convinced that the answer to all his problems was increased leverage. With enough leverage, along with some positive thinking, he was sure he could fit himself into the box lying on the floor. And he almost did it. Unfortunately, he eventually found himself forced to deleverage his position, at which point the box went kablooey and he needed to be bailed out. Sort of like our banks. Lesson learned?

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Quote of the Day - 10.12.08

| Sun Oct. 12, 2008 12:27 PM PDT

QUOTE OF THE DAY....From IMF chief Dominique Strauss-Kahn, commenting on the financial crisis:

"Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown."

If he means "largest" literally, he's talking about Citi, Chase, and BofA. I wonder if he's talking literally?

Also: why only U.S. and European banks? How are things going in Asia and Australia? How have they managed to avoid the contagion?

Security Agreement Update

| Sun Oct. 12, 2008 12:06 PM PDT

SECURITY AGREEMENT UPDATE....From Juan Cole:

Al-Hayat reports in Arabic that its sources in Baghdad say that the al-Maliki government will sign off on a security agreement with the Bush administration "within days." The report says that Grand Ayatollah Ali Sistani has assured the government that he will accept the agreement if it can pass parliament. Pundits are debating how likely the measure is to get through the Iraqi legislature, with some denying it has a chance and others saying it will sail through.

Cole suggests this might be an attempt at an "October surprise," but I don't really see that. It's been in the works for months, everyone knows it's been in the works for months, and even if it passes the Iraqi parliament it's hardly election-changing news anyway. I'm surprised it's taken as long as it has, but my guess is that the delay has been of a fairly mundane variety.

Tracking the Markets

| Sun Oct. 12, 2008 11:37 AM PDT

TRACKING THE MARKETS....Am I the only one who finds this chart that I adapted from today's LA Times a little puzzling? Yes, financial stocks are down a bit more than either big caps or small caps, but shouldn't they be down a lot more?

As usual, maybe I'm just missing something here. But if our banking system is systemically undercapitalized; if the global financial system is close to meltdown; and if the solution is likely to include massive share dilution from a federal government equity injection, shouldn't financial stocks be sucking really, really hard? Can someone enlighten me?

Troopergate Finale

| Sat Oct. 11, 2008 6:58 PM PDT

TROOPERGATE FINALE....I read most of the Branchflower report on Troopergate last night, but the MSM seemed to be doing a fine job of reporting the results all its own so I never got around to posting about it. The basic story, of course, revolves around Todd and Sarah Palin's crusade to get their ex-brother-in-law, Mike Wooten, fired from his job as a state trooper, and their efforts to get Alaska's Commissioner of Public Safety, Walt Monegan, to do the firing. Most of this story is pretty well known already. However, Time's Nathan Thornburgh points out the aspect of the report that struck me as the most remarkable:

The result is not a mortal wound to Palin....But the Branchflower report still makes for good reading, if only because it convincingly answers a question nobody had even thought to ask: Is the Palin administration shockingly amateurish? Yes, it is. Disturbingly so.

The 263 pages of the report show a co-ordinated application of pressure on Monegan so transparent and ham-handed that it was almost certain to end in public embarrassment for the governor.

....Monegan and his peers constantly warned these Palin disciples that the contact was inappropriate and probably unlawful. Still, the emails and calls continued — in at least one instance on recorded state trooper phone lines.

The state's head of personnel, Annette Kreitzer, called Monegan and had to be warned that personnel issues were confidential. The state's attorney general, Talis Colberg, called Monegan and had to be reminded that the call was putting both men in legal jeopardy, should Wooten decide to sue. The governor's chief of staff met with Monegan and had to be reminded by Monegan that, "This conversation is discoverable ... You don't want Wooten to own your house, do you?"

Monegan pointed out to a steady stream of people that (a) Wooten was protected by civil service and there was nothing more that could be done since he'd already gone through a formal disciplinary procedure, and (b) any conversation about Wooten was discoverable in court if Wooten ever got tired of being hounded and decided to file a civil suit. And yet the contacts kept coming and coming and coming — and coming and coming. And Branchflower documents them in painful detail. It's all quite remarkable.

In fact, here's the part that really puzzles me: what exactly did Todd and Sarah Palin hope to accomplish? Surely they knew perfectly well that Monegan was right: he couldn't have fired Wooten even if he wanted to. And they must also have known that even if Monegan were replaced, any replacement would quickly check into the situation and report back the same thing. Wooten had already been disciplined, and unless something new cropped up there was simply nothing that anyone could do to force him out of his job. In fact, the Palins' efforts probably made it nearly impossible even to reassign Wooten since it would so obviously have been politically motivated. It was a completely futile crusade they were on.

So what were they thinking? Or were they?

Banks

| Sat Oct. 11, 2008 11:20 AM PDT

BANKS....Justin Fox on the "shadow banking system":

And another thing: If you borrow short and lend long, you're effectively a bank. It's becoming ever less clear to me what justification there is for nonbank borrow-short-lend-long-institutions other than regulatory arbitrage.

Brad DeLong responds:

Not just "effectively" a bank. You are a bank. Not until the twentieth century did we have organizations that borrowed short and invested long that did not call themselves "banks." The emergence of non-bank banks has always been the result of attempts at regulatory arbitrage.

So what's the answer? What should our 21st century definition of "bank" be for regulatory purposes? Any entity that invests other people's money in any way? That can't be right, can it? Or can it?

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Dialing it Down

| Fri Oct. 10, 2008 6:14 PM PDT

DIALING IT DOWN....OK, credit where it's due. After watching his campaign events turn into increasingly ugly free-for-alls, John McCain has apparently decided that enough's enough. Ana Marie Cox reports on his latest rally in Minnesota:

But then something weird happens: He acknowledges the "energy" people have been showing at rallies, and how glad he is that people are excited. But, he says, "I respect Sen. Obama and his accomplishments." People booed at the mention of his name. McCain, visibly angry, stopped them: "I want EVERYONE to be respectful, and lets make sure we are."

The very next questioner tried to push back on this request, noting that he needed to "tell the American the TRUTH about Barack Obama" — a not very subtle way, I think, to ask John McCain to NOT tell the truth about Barack Obama. McCain told her there's a "difference between record and rhetoric, and I plan to talk about his record, respectfully... I don't mean that has to reduce your ferocity, I just mean it has to be respectful."

And then later, again, someone dangled a great big piece of low-hanging fruit in front of McCain: "I'm scared to bring up my child in a world where Barack Obama is president."

McCain replies, "Well, I don't want him to be president, either. I wouldn't be running if I did. But," and he pauses for emphasis, "you don't have to be scared to have him be President of the United States." A round of boos.

And he snaps back: "Well, obviously I think I'd be better. "

Of course, this is kind of the best of both world: Crazy base-world gets to bring up Ayers and whatever else, really, and he gets to say, "Be respectful." But I think he means it.

UPDATE: Indeed, he just snatched the microphone out the hands of a woman who began her question with, "I'm scared of Barack Obama... he's an Arab terrorist..."

"No, no ma'am," he interrupted. "He's a decent family man with whom I happen to have some disagreements."

Good for him. Now I wonder if he can get the same message out to Sarah Palin?

Friday Cat Blogging - 10 October 2008

| Fri Oct. 10, 2008 1:24 PM PDT

FRIDAY CATBLOGGING....I've still got a lot on my mind today, but I guess that's true for all of us, isn't it? So let's call it a week anyway and spend the rest of the day winding down and admiring our cats instead. They deserve it.

Today we have action shots. Sort of. On the left, what is Domino looking at? A bird? A plane? Superman? No: it was a bird after all. To be precise, a hummingbird flitting around the garden for her occasional amusement. On the right, you'll notice the extreme bushiness of Inkblot's tail. I'm not entirely sure what caused it, but circumstantial evidence suggests he took note of a neighborhood dog and came charging around the corner to run into the house. Thus the tail. He knows perfectly well that the back door is open, of course, but he'd rather have somebody open the front door for him instead.

We are currently suffering from a cat food liquidity crisis, and it's now time for resolute action to prevent it from turning into a cat food insolvency crisis and causing full blown feline panic. So I'm off to the store. Have a good weekend, everyone.

"William F. Buckley's Son Says He Is Pro-Obama."

| Fri Oct. 10, 2008 1:03 PM PDT

"WILLIAM F. BUCKLEY'S SON SAYS HE IS PRO-OBAMA"....Christopher Buckley explains why he's not writing his endorsement of Barack Obama in his usual column at the back of National Review, the magazine his father founded:

My colleague, the superb and very dishy Kathleen Parker, recently wrote in National Review Online a column stating what John Cleese as Basil Fawlty would call "the bleeding obvious": namely, that Sarah Palin is an embarrassment, and a dangerous one at that. She's not exactly alone. New York Times columnist David Brooks, who began his career at NR, just called Governor Palin "a cancer on the Republican Party."

As for Kathleen, she has to date received 12,000 (quite literally) foam-at-the-mouth hate-emails. One correspondent, if that's quite the right word, suggested that Kathleen's mother should have aborted her and tossed the fetus into a Dumpster. There's Socratic dialogue for you. Dear Pup once said to me sighfully after a right-winger who fancied himself a WFB protégé had said something transcendently and provocatively cretinous, "You know, I've spent my entire life time separating the Right from the kooks." Well, the dear man did his best. At any rate, I don't have the kidney at the moment for 12,000 emails saying how good it is he's no longer alive to see his Judas of a son endorse for the presidency a covert Muslim who pals around with the Weather Underground. So, you're reading it here first.

The modern GOP is the party of Newt Gingrich, Tom DeLay, Karl Rove, George Bush, Dick Cheney, John McCain, and Sarah Palin. It's not just off the rails. It doesn't even know where the rails are anymore.

"Off With His Head!"

| Fri Oct. 10, 2008 12:28 PM PDT

"OFF WITH HIS HEAD!"....Steve Benen describes the ugliness of the Republican Party's recent rallies and campaign events:

The McCain campaign has deliberately been whipping the angry, far-right Republican base into a frenzy. That includes increasing frequency of "Hussein" references, but it also includes looking the other way while campaign supporters exclaim "treason!," "terrorist!," and "kill him!" during official rallies.

On Wednesday, during a McCain harangue against Obama, one man could be heard yelling, "Off with his head!" On Thursday, Republicans erupted when an unhinged McCain supporter ranted about "socialists taking over our country." Instead of calming them down, McCain said the lunatic was "right."....Slate's John Dickerson described the participants' "bloodthirsty" tone.

The danger here is not mobs of violent Republicans marching through the streets. The danger is that John McCain is setting us up for a repeat of the 90s, an era that conservatives to this day have never been willing to come to grips with. If the looney-bin right decides to treat President Obama as not just an opposition leader, but as a virtual enemy of the state, as they did with Bill Clinton, it's going to be a very, very long eight years. Whatever grownups are left in conservative-land really need to step up to the plate soon before their movement goes even further off the rails than it already is.