Jamie Dimon, CEO of JPMorgan Chase, says that new capital adequacy rules are "anti-American":

The Basel III capital rules are designed to make the financial system safer by making banks build up risk-absorbent “core tier one” capital to at least 7 per cent of risk-weighted assets. The biggest, including JPMorgan, have to reach 9.5 per cent.

“I’m very close to thinking the United States shouldn’t be in Basel any more. I would not have agreed to rules that are blatantly anti-American,” he said. “Our regulators should go there and say: ‘If it’s not in the interests of the United States, we’re not doing it’.”

He objected to both the additional buffer of 2.5 per cent and the way capital is calculated. Mortgage-servicing rights, a US market feature which takes cashflow from homeowners paying mortgages, are strictly limited in counting towards tier one capital. Mr Dimon also criticised global liquidity rules, arguing that regulations that viewed covered bonds – a European market feature – as highly liquid but discounted government-backed mortgage-backed securities in the US were unfair and that other details hit investment banking activity core to US banks hardest.

Dimon is getting a lot of grief over this, and rightfully so. Still, I think the right lens to look at this isn't really Dimon-centric, tempting though that is. The truth is that all international financial negotiations, and Basel negotiations most famously, are always endlessly bogged down by parochial minutiae. Every country has a slightly different economy that depends on slightly different things. For example, here's a Wall Street Journal report on the Basel negotiations a year ago:

The French are demanding changes that would allow their three largest banks — Societe Generale SA, Credit Agricole SA and BNP Paribas SA — to continue owning insurance subsidiaries without facing steep penalties. The Germans and French want banks' minority investments in other institutions to count toward capital standards. The Japanese have raised concerns about no longer counting deferred tax assets as capital. U.S. officials want banks, such as Bank of America Corp. and J.P. Morgan Chase & Co., to continue to be allowed to count mortgage-securitization rights as capital.

This stuff goes on endlessly because every country has a banking sector that specializes in certain things and not in others, and a business sector that relies on financing in one form but not another. When the dust settles, every country usually loses out on a few of its sacred cows. In our case, it was treatment of mortgage-backed securities. German banks got their way on covered bonds but are still upset over treatment of silent participations. French banks that rode out the financial crisis without problems are unhappy about getting stuck with the same rules as banks that didn't. And of course, European banks in general are less well capitalized than American banks and are likely to have more problems with Basel's core capital standards than ours.

It's possible that the U.S., on net, didn't do as well as some other countries, but I doubt it. More likely, U.S. negotiators, for obvious reasons, wanted tough capital standards, wanted tough liquidity standards, wanted to rein in the use of mortgage-backed securities, and simply didn't consider any of them an America-vs.-the-world issue. But then again, neither does Jamie Dimon. He considers it a JPMorgan-vs.-other-banks kind of issue — as well he should. His newfound sense of financial patriotism should be taken with a large shaker of salt.

Here's a handy tool from the redoubtable Henry Waxman: a searchable database of Republican votes to dismantle environmental protections in the current session of Congress. Just in its first six months! And it doesn't even count the growing popularity of calls from GOP presidential candidates to simply eliminate the EPA lock, stock, and barrel. (Excuse me: the "job-killing EPA." Precise terminology is important here.)

Anyway, it's handy stuff if you want to know with precision just how deeply Republicans are committed to undermining the environment in the service of their corporate interests. You can search by agency, by topic, or by legislation. The full database is here. Have fun.

What's the smart play for Republicans regarding Obama's jobs package? I think it's pretty simple: stay calm, pass one or two items so that you don't look mindlessly obstructive on an issue that's important to voters, and call it a day. The effect this has on the economy won't be big enough to materially affect the election, so why not?

The big question, of course, is whether Republicans are still capable of playing smart politics these days. Matt Yglesias points us to a Politico story suggesting that many conservatives are already griping about passing even a few small parts of Obama's jobs bill:

"Obama is on the ropes; why do we appear ready to hand him a win?" said one senior House Republican aide who requested anonymity to discuss the matter freely. "I just don't want to co-own the economy by having to tout that we passed a jobs bill that won't work or at least won't do enough."

…"To assume that we're naturally for these things because we've been for them does not mean we will be for them if they cause debt, if they [have] tax increases and if they take money from the free-enterprise sector, which creates jobs," said Texas Rep. Pete Sessions, who heads up the House Republican campaign arm.

These two quotes encapsulate the problems facing the GOP: on the one hand, their all-but-complete addiction to mindless obstructionism as a legislative strategy these days, and on the other, a tea party wing that's fanatically contemptuous of any ideological deviation. These are very different things: One is a scorched-earth tactical approach to politics and the other is a scorched-earth political faction with no taste for ideological compromise. Either of them alone might be enough to keep the GOP from acting in its own best interests, and both of them together may present a barrier that's simply insurmountable. Their voices were fairly muted in the immediate aftermath of Obama's speech, but they'll gain strength and vitriol as actual legislation starts to become more concrete.

So the question is, can the GOP's political pros keep these parts of their electoral id reined in long enough to act in their own rational self-interest? Or have obstructionism and tea partyism simply become too deeply ingrained in their governing strategy and political coalition to be turned off even briefly when it makes sense? The debt ceiling battle was inconclusive on this front: Republicans did manage to find a compromise eventually, but the obstructionist/tea party sentiments in the party sure kept them from finding one for a very long time. With a little bit less at stake this time, and with the supercommittee sellout already on the books, there just might not be any taste for further restraint. We'll see.

I know this is hardly an original observation, but the other day I happened to watch a few old clips of politicians being interviewed (in this case, "old" = 30 years ago) and it reminded me — again — of just how mind-numbing their descendents are. This has become such a routine part of our daily lives that most of the time we barely even notice it, but honestly: everything, and I mean every last word, that comes out of politicians' mouths these days is predigested boilerplate. It's just an unending stream of stale, endlessly repeated, poll-approved talking points. Democrats and Republicans alike. Every single time. They simply never speak like normal people anymore.

I dunno. Maybe we're all like that now. Have I said anything original lately? Maybe not. But every few months I happen to notice this phenomenon again, and it seems freshly creepy every time. It's easy not to think about it, but when you do, even for a few seconds, it's pretty obvious that this just isn't natural. Politics has always been partly about acting, but even politicians are supposed to be human beings for at least part of their lives. Within living memory they were, but no longer. What the hell has gone wrong with us?

A few weeks ago, writing about the latest death spasms in the European banking system, I said: "The overnight market can dry up — well, overnight if a bank's solvency comes into question.... It might not happen in a week, but it's sure starting to look like it might happen in a month or two."

Well, we're now halfway through "a month or two." So how are things going? Paul Krugman surveys recent events and asks:

Did the euro just enter its death throes? OK, I know that sounds over the top, and I hope it is. But recent developments are really, really bad.

Yes indeed. Greece looks increasingly hopeless, and the rest of Europe appears increasingly in little mood to help. Just the opposite, maybe. So what to do? Barry Eichengreen says eurobonds and fiscal union are a great idea, but they'll take months or years to put in place. And Europe doesn't have months or years: "The most recent Greek rescue, put in place barely six weeks ago, is on the brink of collapse. The crisis of confidence has infected the eurozone’s big countries. The euro’s survival and, indeed, that of the European Union hang in the balance." Three things need to happen right away:

The first urgent task is for Europe to bulletproof its banks. Doubts about their stability are at the center of the storm. It is no coincidence that bank stocks were hit hardest in the recent financial crash.

....The second urgent task is to create breathing space for Greece. The Greek people are making an almost superhuman effort to stabilize their finances and restructure their economy. But the government continues to miss its fiscal targets, more because of the global slowdown than through any fault of its own.

....The third urgent task is to restart economic growth. Financial stability, throughout Europe, depends on it. Without growth, tax revenues will remain stagnant, and the capacity to service debts will continue to erode. Social stability, similarly, depends on it. Without growth, austerity will become intolerable.

I keep thinking that, when Greek default, cascading bank failures, or dissolution of the eurozone — or all three — appear truly imminent, European leaders will finally buckle down and do what needs to be done. But the last couple of weeks haven't done much for my confidence on this score. If anything, Europe seems to be drifting ever further toward lifeboat ethics. The bad kind, that is. The every-man-for-himself kind. And we finally seem to be genuinely close to a point of no return. Once the financial markets decide to attack — either a country or a banking system — they can't be bought off with half measures. It's either a full-scale, damn-the-torpedoes rescue or else it's catastrophe. And right now a full-scale rescue isn't looking very likely. Instead, "austerity" is the order of the day, which is sort of like thinking that maybe the steerage decks are really the best place to ride out the sinking of the Titanic.

But hey, that's just Europe, right? It's not going to affect us, is it? Why, just a few days ago, Ben Bernanke said that our financial exposure to European problems was "manageable." So there's nothing to worry about. But then again, this is the same guy who said in 2007 that "the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained." So maybe it's time to stock up on canned goods after all.

Is there a silver lining? No, there isn't. But if you insist on one, here it is: since this time the epicenter of the problems is Europe, it's possible that President Obama can convince the troglodytes in the Republican Party that any contagion that hits Wall Street is sort of like a foreign invasion. That seems like the only thing likely to get their blood flowing, so maybe we'll actually be able to respond. You never know.

The Great Southern California blackout was apparently caused by an electrical grid that collapsed after a single series capacitor was taken offline in Yuma, Arizona, causing a cascading series of failures:

The failure of a single piece of equipment in Yuma, Ariz., ignited a massive blackout that left more than 4 million people without power, baffling utility officials and highlighting the vulnerability of the U.S. electrical grid.

Authorities in Arizona said Friday that safeguards built into the system should have prevented the breakdown at a Yuma substation from cascading across southern Arizona and into California and northern Mexico. They didn't, and the resulting instability led to the sudden shutdown of the San Onofre nuclear power plant, cutting off power to a large swath of Southern California.

...."We're struggling," said Daniel Froetscher, vice president of energy delivery for APS, the largest electricity provider in Arizona. "We have to take a hard look at the system design and figure out exactly what happened....We don't know the underlying causes."

The proximate cause remains unknown, but I'm going to take a guess and say that the ultimate cause is an aging electrical grid that's increasingly unable to handle big loads and small failures. This problem is hardly unique to the United States (Europe has suffered half a dozen blackouts as big as Thursday's in the past decade), but that's no reason to be complacent about it. If only we could pony up lots of cheap money to do something about this. But from where? It would have to be, oh, I don't know, some kind of nationwide infrastructure bank or something, sponsored by some entity that can issue long-term bonds practically for free.

Just a pipe dream, I guess. Nothing like that exists. Luckily I have plenty of spare battery-operated lanterns around.

Gas-fired power plants produce about half as much CO2 as coal-fired plants. So that makes natural gas good for the environment. Shutting down coal-fired generators and replacing them with gas-fired plants would cut down on CO2 emissions and reduce global warming.

But wait. Precision matters here. When natural gas is burned, it produces half as much CO2 as coal. But what if some of the raw natural gas leaks into the atmosphere when it's extracted from the ground? Natural gas is methane — which is a much more potent greenhouse gas than CO2 — so in addition to the CO2 that gas creates when it's burned, we need to add in the effect of leakage. Depending on how much leaks out, the net contribution of gas to global warming could actually be higher than coal.

So how much does leak out? Joe Romm rounds up the estimates here, which range from about 2% to upwards of 7%. (See updates below.) That's a pretty wide range, and it turns out, a pretty important one. A new study from the National Center for Atmospheric Research (NCAR), which accounts for both leakage of raw methane as well as the CO2 it generates when it's burned, concludes that replacing coal plants with gas-fired plants probably won't have much effect on climate change. The chart on the right displays the grim news. In the best case, if leakage is 2.5%, global warming would be reduced 0.08°C by the end of the century. That's less then a tenth of a degree. If leakage is 5%, warming is reduced by only 0.03°C. Anything above that and the net effect is actually negative. But even the best case is barely even noticeable compared to current estimates of warming by 2100, which range from 3°C to 6°C.  

Bottom line: natural gas is certainly cleaner than coal when it comes to particulates, mercury, and other sources of air pollution. But on the global warming front, its impact is slight at best. Until and unless carbon capture technology becomes genuinely feasible, the reality is that if we want to get serious about climate change, we need to eventually wean ourselves off fossil fuels almost completely.

UPDATE: An atmospheric chemist at an environmental NGO emails to make a couple of opposing points. First, methane leakage is most likely at the low end of the range I quoted. The high-end 7% estimate is based on a paper so bad he calls it "deceitful." What's more, methane leakage is something that can be addressed pretty effectively if the EPA gets its act together.

Second, one of the reasons that the NCAR study shows a small effect of switching away from coal is because the benefit of the reduced CO2 is offset by reduced emissions of SO2, which currently slows global warming because it acts as a coolant. However, sulfate particulate matter is deadly to breathe, and it's going away regardless of whether or not we switch away from coal. It's already on its way out in the U.S. and Europe, and starting to go away in China too. So SO2 reductions shouldn't be counted as a cost of switching from coal to gas. If you do the modeling without that, the switch from coal to gas has a bigger effect.

His conclusion: "It's a complicated story. The gas industry has made a total mess of Pennsylvania (behaving like a marauding horde) and clean-burning gas won't save our backsides. But gas might be an important part of the way forward, and more to the point, bad science is bad science."

I can't referee this immediately, but it seemed important to at least make a note of this dissenting opinion. If I learn more, I'll let you know.

UPDATE 2: CFR's Michael Levi agrees that the NCAR study is "badly flawed." I think I accept that at this point. The benefits of converting from coal to gas may be lower than industry cheerleaders would have us believe, but it's probably more worthwhile than the NCAR study suggests.

Catblogging was a close call this week. But last night my sister told me that not only had I better get on the ball and take some pictures, but it had been a tough week and they'd better be good pictures. Well, I don't know about that. But for better or worse, this morning we have cats exercising their brain muscles. On the left, Inkblot is finishing up today's Sudoku and Kenken puzzles in the LA Times. He seems to have made pretty good progress. On the right, Domino is working on the crossword puzzle, but she doesn't seem to be doing as well. I guess she got distracted by the cartoons.

Hey, whatever happened to Glenn Beck? Didn't he hold a rally in Israel recently? How come I didn't hear anything about that? The answer comes from Glenn Beck himself: "I don't believe Fox was there," he said on his radio show.

Imagine that! No Fox, no coverage. Paul Waldman draws a broader conclusion:

What this illustrates is the continuing power of TV, not so much as a medium of persuasion but as a medium of status conferral....That's because even if they aren't actually watching it, being on television signals to those people that you're a member of the most elite club, and you can't be ignored. That's true despite the fact that cable audiences are tiny — Beck himself always reached many more people on the radio than he did on television, even when his TV show was at its apex. But now, no matter how many fans he retains, he isn't on TV so he might as well not exist.

If a tree falls in the forest and no one hears it, does it make a sound? Good question. Now try this one: If a ranting lunatic doesn't have a show on Fox, does anyone know he exists? Apparently not. For some reason, we have bestowed this power to define who matters and who doesn't on Roger Ailes and Fox News. Why?

The Fed has been pumping billions of dollars of reserves into the banking system over the past few years. This hasn't created any inflationary pressure yet, but monetary hawks worry that it will if the Fed waits too long to unwind its balance sheet. "You cannot afford to get behind the curve on reining in this extraordinary amount of liquidity because that will create an enormous inflation down the road," said Alan Greenspan a couple of years ago.

Karl Smith agrees that this is an issue that needs to be taken seriously. At the same time, it's also an issue that Ben Bernanke has the tools to address. "The Fed has complete power to slow the expansion of lending and hence the emergence of hyper-inflation," says Karl, "and it doesn’t have to remove its reserve injections to make it happen."

Click the link for the full explanation. It's a little long, but very friendly. Basically, the Fed's authority to pay interest on reserves is the hero of the story. But the bottom line is simple: hyperinflation just isn't something to worry about, no matter how many gold bugs tell you otherwise.