TARP, baby!

A mostly political Weblog.
Oct. 1 2008 10:09 PM

TARP, Baby!

Explaining Paulson's plan better than Paulson.

(Continued from Page 8)

Friday, July 18, 2008

So when Obama opposes the surge it's potential "chaos" and "disaster,"  according to John McCain. But when Chuck Hagel opposes the surge it's an "informed decision"? "I respect his views," says McCain. ... GetDrunk asks: "Will McCain 'respect' Obama's views once Obama has 'studied the issue'?" ... Maybe Obama was relying on Hagel's deep knowledge! Does that make it better? ... If an "informed decision" leads to chaos and disaster, what does that say about the value of the process by which U.S. Senators go about becoming "informed"?... P.S: You'd think McCain could just say, "I think Sen. Hagel is wrong"? What is it about Hagel that has the power to fog not just his own mind but the minds of others? Does he tell great dirty stories? Is he so gloomy that his friends worry that dissing him will send him over the edge? ... 5:10 P.M. link

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Thursday, July 17, 2008

If I see one more hip twentysomething man reading a book of high-class poetry (Rilke, Larkin) I'm going to report a trend (or, rather, check to see if the Trend has been Declared already). ... Update: I suspect these people are somehow mixed up in this. ... 2:52 A.M.

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"Security First"--McCain's One-Step Two-Step: Ramesh Ponnuru admits that John McCain has given "mixed signals" as to whether he intends to a) secure the borders through an enforcement bill, wait until the borders are secure, and only then try to pass a second bill to legalize illegal immigrants or to b) try to pass one big "comprehensive" bill that includes both enforcement and a provision that automatically triggers legalization once certain statutory conditions are met.  It's a crucial issue, since the statutory conditions are likely to be easy to meet--e.g., four pro-legalization border state governors certifying that "security" has been achieved, a "trigger" McCain has suggested in the past--and there will be tremendous pressure to either declare them satisfied or water them down.

Even admitting McCain's flailing, semi-confused contradiction--sorry, strategic ambiguity--is a concession some McCain supporters won' t make.  But think about it: President McCain takes office in 2009, along with a heavily Democratic Congress. A commitment to legalization is one of the few things McCain will have in common with those Democrats. What's he going to do--pass a tough "enforcement" bill his first year, despite opposition from Dem leaders, then wait a year or two, and then try to pass a second mostly-amnesty bill either in a mid-term election year or in the second half of what is likely to be his single term in office? Or will he try to pass both parts quickly, while he's still popular, in one big bill with whatever "triggers" are needed? Answer: He'll do (b). I can't believe Ponnuru thinks otherwise. ... 2:46 A.M. link

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When I tell  my liberal friends that "card check" is one of the big issues in the 2008 campaign, they tend to roll their eyes. But when I tell my conservative friends that "card check" is one of the big issues in 2008 ... they roll their eyes too. Apparently the words "card check" are not enough, in themselves, to convey the fundamental shift in industrial organization that might result if workers could trigger unionization under the Wagner Act without a normal secret-ballot election.

Mike Murphy's initial  anti-card check ads, using actor Vincent Curatola who played Johnny Sack in The Sopranos (and who also appeared in the Clintons'  parody), attempted to bring the issue down from the eye-roll level. They seemed effective to me, but I'm pre-convinced. Murphy's new follow-up ads-- example here--will be a test of whether support of card check can actually be used against individual candidates. I'm less convinced of that. ... P.S.: The target of this particular ad is Al Franken. It's hard for me to believe that Franken, who's always struck me as a sensible yuppie neolib type underneath, actually cares that much about card check (whatever his  Web site says). ... 1:40 A.M. link

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Wednesday, July 16, 2008

The Chandra Story Is Back: Fred Barnes said the most discouraging words in the English language are "first of a series." But the Chandra Levy case actually deserves a 12-part series, and I'm eager to read WaPo's effort. (I admit I may wait until it's all published and I can peek at the conclusion). Here's a complicated mystery, with a real victim and all sorts of sociological and political lessons, that never got the coverage it deserved after self-righteous media scolds who mainly work for MSM organizations that are now going broke used it to symbolize the allegedly trivial, tabloidy coverage before 9/11! ... Maybe I'll even  "skip" it. ...  Bonus: Now Howie Kurtz can try to boost his CNN ratings with a tabloidy show re-denouncing tabloidy coverag e of the Levy case!   ... 4:34 P.M. link

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Can't Get Enough Fannie Mae: V-helpful op-ed by Lawrence Kudlow

a) makes it clear that Fannie's involvment in the subprime market comes not from repackaging subprime loans as securities but from buying those securities after they'd been repackaged by others (which still helped fuel the subprime lending crisis, pace Krugman):

The main mission of Fannie and Freddie is to provide liquidity into the mortgage markets by purchasing loans made by local lenders and repackaging them into bond-market security pools that are sold to investors with the U.S. government's stamp of approval. You might call this the good-cop function.

But then there's the bad-cop function: Fannie and Freddie purchased some of these mortgage pools for their own portfolios, essentially setting up a high-risk internal hedge fund. It was the sinking credit quality of this hedge fund that drove last week's shareholder run. Think sub-prime mortgages and other shaky and exotic loans.

b) suggests, startlingly, that the government has agreed to back only Fannie's "good cop" function, not the bad-cop securities purchases that are the source of Fannie's financial troubles;

c) hints that left and right are converging on the desirability of de-privatizing Fannie and Freddie, at least temporarily. When even an AEI expert calls for talking profit-making shareholder owned organizations and "making them tightly controlled government agencies," maybe they should be made tightly controlled government agencies! Letting Jim Johnson politico types build profit-making empires with taxpayer-supported credit is just too risky. (For how Johnson operated, see this 2006 WaPo piece  [via NewsAlert].)

P.S.: When toting up the costs and benefits of Fannie Mae, shouldn't Slate's Daniel Gross have taken into account the cost of dragging down the whole economy in a subprime crisis which Fannie and Freddy helped fuel maybe not as a primary but as an important secondary factor? Just asking!  .... I smell Kool Aid! ... 2:58 P.M. link

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Tuesday, July 15, 2008

Chart of the Day: What happened to the number of people on public assistance in New York City after the 1996 welfare reform. ... 2:52 A.M.

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Both these candidates are for the same thing: a path to citizenship--that doesn't reward people who come in illegally--but McCain did change his emphasis ...

Liasson is being very careful not to overemphasize or underemphasize the difference between the candidates. She doesn't exhibit any tilt toward Obama or toward McCain. It's all exquisitely fair--except that she almost unconsciously embeds a bit of ludicrous BS that is common to both candidates: the idea that their legalization plans wouldn't "reward people who come in illegally."

Of course they would. When you hear the candidates talk about sending illegals to the "back of the line,"  remember that there are two lines: 1) An initial, typically very long line in which foreigners patiently wait years, sometimes decades, to get green cards or other documents that enable them to live and work here legally, and 2) a shorter second line of people who have green cards and want to become citizens. Neither Obama nor McCain would send illegals to the back of the first line--that would, in many cases, be tantamount to deporting them. On the contrary, the illegals who are already here get to pay a not-huge fine and skip Queue #1 entirely. They may go to the back of Queue #2, but that's a queue they can wait out while working legally in the richest country on Earth--a reward the poor suckers who obeyed the law and are still lining up outside U.S. consulates abroad don't get. ...

Just because both candidates say something doesn't mean it's not crap! ... 2:33 A.M.  link

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kf seems to have reappeared on Josh Marshall's Talking Points Memo blogroll after a mysterious absence. Thanks! ...  12:34 A.M.

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Monday, July 14, 2008

Asymptotically approa ching ... damage control: Calculated Risk has what seems like a judicious assessment of Krugman's Fannie Mae column.

Fannie and Freddie had about as much to with the "explosion of high-risk lending" as they could get away with. We are all fortunate that they couldn't get away with all that much of it. ... [snip]

But they didn't like losing their market share, and they pushed the envelope on credit quality as far as they could inside the constraints of their charter: they got into "near prime" programs (Fannie's "Expanded Approval," Freddie's "A Minus") that, at the bottom tier, were hard to distinguish from regular old "subprime" except--again--that they were overwhelmingly fixed-rate "non-toxic" loan structures. ...

Furthermore, both GSEs [Government Sponsored Enterprises--e.g. Fannie Mae and Freddie Mac] were major culprits in the growth of the mega-lenders. Over the years they were struggling so hard to maintain market share, they were allowing themselves to experience huge concentration risks. As they catered more and more to their "major partners"--Countrywide, Wells Fargo, WaMu, the usual suspects--they helped sustain and worsen the "aggregator" model in which smaller lenders sold loans not to the GSEs but to CFC or WFC, who then sold the loans to the GSEs. ...

I think we can give Fannie and Freddie their due share of responsibility for the mess we're in, while acknowledging that they were nowhere near the biggest culprits in the recent credit bubble. [E.A.]

In a post-column mop up operation, Krugman cites Calculated Risk's analysis and glibly says, "That's not really in contradiction to what I said  ..." Really? What Krugman said was:

Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago ....

My turn: But didn't I say that "Fannie Mae was a huge buyer of subprime mortgages"? I did. How does this jibe with Calculated Risk's assertion that Fannie Mae and Freddie Mac pushed the envelope but that the envelope still constrained them at least somewhat?  I don't know the answer ... at least not yet... but at least part of it seems   to be  that Fannie Mae mainly purchased subprime mortgage securities--i.e. mortgages that had been aggregated and repackaged as bonds--but that it didn't buy actual subrime mortgages directly. In theory buying the bonds backed by lousy mortgages might have been safer than buying the mortgages, although this 2007 Fortune article seems to argue that the protection was largely illusory, and that through the bond purchases

over the past five years [Fannie Mae] became exposed to mortgages that were made to people with poor credit - subprime mortgages.

Is there any doubt that by purchasing bonds backed by subprime mortgages Fannie Mae helped enable the "explosion of high-risk lending"? I wouldn't think so. Indeed, expanding subprime lending seems to have been the goal.  But then why doesn't Calculated Risk emphasize that aspect of Fannie's culpability? If anyone wants to explain this to me, I'll repackage it and sell it to my readers. ...

Answers! a) Yes, the explanation seems to be that Fannie Mae bought securities backed by subprime loans, not the loans themselves; b) Even Tantu says  these securities purchases were "supposed to be about supplying some 'needed' capital to the subprime market." If you're providing "needed" capital aren't you thereby enabling the "explosion of high risk lending," as Conn Carroll charges? Doesn't that leave Krugman--"Fannie and Freddie had nothing to do with the explosion"--looking like he's drunk some kind of Fannie Mae Kool Aid?  ...[Thanks to readers R and S11:57 P.M. link

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Curious passage in Paul Krugman's half-defense of Fannie Mae today:

But here's the thing: Fannie and Freddie had nothing to do with the explosion of high-risk lending a few years ago, an explosion that dwarfed the S.& L. fiasco. In fact, Fannie and Freddie, after growing rapidly in the 1990s, largely faded from the scene during the height of the housing bubble.

Partly that's because regulators, responding to accounting scandals at the companies, placed temporary restraints on both Fannie and Freddie that curtailed their lending just as housing prices were really taking off. Also, they didn't do any subprime lending, because they can't.

Huh? Does Krugman not know that Fannie Mae was a huge buyer of subprime mortgages, including mortgages from Angelo Mozilo's Countrywide? David Smith's eerily prescient AHI blog noted  that Fannie Mae and Freddie Mac reportedly bought $35 billion in subprimes in the first quarter of 2007 alone.

What you need to know here is that the right — the WSJ editorial page, Heritage, etc. — hates, hates, hates Fannie and Freddie. Why? Because they don't want quasi-public entities competing with Angelo Mozilo.

"Huh?" again. Conn Carroll responds:

The problem is that Fannie was Countrywide's No. 1 enabler. ... When he was CEO of Fannie, former Barack Obama campaign adviser Jim Johnson worked personally with Mozilo to streamline the two companies' business relationship.

Could Mozilo have done his subprime thing without Johnson and Fannie Mae as a backup to purchase his junky mortgages?

P.S.: Krugman suggests Fannie's problem is that it wasn't a true government agency, but rather a hybrid public/private partnership that privatized profits and socialized losses.

Liberals like Fannie the way it was for the first 30 years — a purely public enterprise.

Good point--according to Smith Fannie seems to have been using all sorts of tricks to turn profits using its implicit government credit guarantee.But if Fannie had been a pure government enterprise, would it really have refrained from supporting Mozilo-style subprime lending? I'm not so sure. Providing "affordable housing" was a policy crusade of Johnson, among others, and a popular goal on Capitol Hill (where Mozilo had done so much to ensure that his "friends" would be receptive to his particular method of pursuing affordability).

P.P.S.: Krugman also writes, boldly:

You could say that the Fannie-Freddie experience shows that regulation works.

You could say that--unless you read the remainder of Krugman's column, which notes the inadequate capital requirements imposed on Fannie-Freddie because 

the companies' management bought off the political process, systematically hiring influential figures from both parties.

P.P.P.S.: Is this risk of corruption any less with a) "purely public enterprise" than with b) a public-private hybrid like Fannie Mae or c) a purely private enterprise (like, say, the Blackstone Group)? Interesting question. I would think well-connected liberal operatives like Johnson would be capable of at least perverting a regulatory regime even if they headed a 100% federal, civil-servicized Fannie Mae. (Most "regulation" is in category (c) of course, where the risk of corruption seems somehow undiminished by the triumphant "Fannie-Freddie experience.") ...

Update: See semi-clarifying semi-correction. ...  2:00 P.M.

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Didn't subprime poster villain Angelo Mozilo do Barack Obama a big favor by compromising Obama's initial VP vetter, Jim Johnson, with favorable loans, causing Johnson to step down from his position? How bad would today's headlines be for Obama if Fannie Mae fatcat Johnson was still heading up his vice-presidential search effort? ... 10:45 P.M.

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A reader emails:

People seem to think it's somehow a stroke of political genius that Sen. Obama is taking Sen. Hagel with him on his trip to Iraq.  But why doesn't this highlight Obama's lack of judgment on the surge, by bringing along the man who considered it a catastrophically bad idea?

Actually, Hagel called the surge  "the most dangerous foreign policy blunder in this country since Vietnam." ... Is Obama cannily trying to demonstrate why Hagel would be a horrifying VP pick? Is he trying to deflect attention from his own poor surge judgment ("the surge has not worked") by bringing along as a lightning rod someone whose judgment was even worse than his? ... Imagine how embarrassing it would be if Obama went with an antiwar Republican like Gen. Zinni, who supported the surge, with what now looks like contrarian wisdom. ... 1:40 A.M.

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Saturday, July 12, 2008

BMW 3 series needs a Seven Level DeBangling, gets minor tweaks. Now slightly less ugly. ... 12:41 P.M.

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William Bradley on why Schmidt might be a good fit: He helped Schwarzenegger move to the center in 2006. A beat sweetener, but that doesn't make it wrong! ... 12:28 A.M.

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Friday, July 11, 2008

I must admit, I don't quite understand why Obama appears to have lost ground in two of three  recent polls. ... My working theory was roughly this:

Moving to a more responsible position on Iraq: Valuable.

Having Jesse Jackson say he wants to cut your nuts out: Priceless

Maybe the Newsweek poll is off (always a good bet). Maybe Obama's rapid-fire--and, therefore, seemingly calculated--pivots on a series of issues really have hurt his image, as Halperin suggests. Maybe there will be a delayed Jackson bounce. ... Or maybe Obama needed to respond to Jackson more forcefully, given that Jackson implicitly, but rather graphically, raised the "wuss" meme. ... 4:40 P.M. link

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Thursday, July 10, 2008

According to Rasmussen, voters reject Obama's Scarsdale Bien Pensant Dinner Party Lecture about bilingulalism by, oh, 83% to 13%. ... See also Gateway, Clegg, and Maguire. ... Maguire makes the seemingly obvious point about having a common language: that it allows America to welcome and integrate immigrants from all over the world, whose native tongues may be Vietnamese, Chinese, or Polish, etc. ... Clegg:

If a fat, rich American goes to Paris and can't speak French, that's too bad but it is no tragedy. When a child growing up in America, or anyone who wants to live here and get ahead, doesn't learn English, that IS a tragedy.

7/11 Update: Does Obama really want to make this a two-day story? ...  4:06 P.M.  link

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McCain makes what, in other circumstances, might be a candidacy-crippling Social Security gaffe,** but few except Josh Marshall notice. ... I don't know if this means that the new Schmidt regime is already floundering or that it's working brilliantly. ...

**--A Category II Kinsley Gaffe, to be precise, in that it accurately reflects what the candidate really thinks. ... 3:45 P.M. link

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Reader D.L. emails:

Jackson may be right.  Let us assume for argument's sake that Obama is condescending and arrogant etc.  I am black but I am not so sure that really matters.  All I can say is close your eyes and look at the damned statistics.  We in the black community need to face up to the fact that we are the primary cause of our own demise. That may only be partly true but, by golly, it is better than thinking it is someone else's fault. One of these days white people are going to wake and realize that they do not have to respond to black guilt anymore.  Strom Thurmond, Jesse Helms and their ilk are dying and we need to start looking inward. What Obama says might only be partly true but in this case I will take it to heart. Arrogant, condescending, who cares?  We need to start hitting the books (yea, learning to speak Spanish is not a bad place to start), taking responsibility for our children (I am aware that welfare is not a "black" problem, but I guarantee you that the majority of white people think it is which, in some respects, makes it our problem). Maybe we need to hear more of that, not less.

Fair enough. But Steven Waldman helpfully links to a Father's Day talk in which Obama gets this point across without any downtalking  that I can discern. Effective! The biggest problem with Obama's occasional "I'm a big success and I'm telling you losers what to do" tone, in other words, may be that's it's not effective. My guess is it's likely to eventually produce a non-trivial, intense anti-Obama movement within the black community that will partially undermine the message D.L. wants delivered. ... P.S.: Of course, Obama's effectively non-condescending Father's Day talk my be what really annoys Rev. Jackson, as Waldman, Jack White, Eric Easter and Kathleen Parker have all suggested. ... See also Daniel Finkelstein, who employs a Shelby Steele-ish template, but whose argument dovetails with Easter's description of blacks worrying that whites want Obama to bring "a change in the racial dynamic." I know I do! ... 2:57 P.M. link

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Didn't Jesse Jackson Sr. have a point? There is something condescending, or arrogant, in Obama's lecture to a town hall meeting  in Georgia:

"You are probably not that good a rapper. Maybe you are the next Lil' Wayne, but probably not, in which case you need to stay in school," Obama, D-Ill., told a cheering crowd, brought to a standing ovation at a town hall meeting in Powder Springs, Georgia.

The presumptive Democratic nominee was speaking about high school drop out rates and the need for people to be committed to working hard in school so they can get a job after school.

Obama said he knows some young men think they can't find a job unless they are a really good basketball player.

"Which most of you brothas are not," Obama, who played basketball in high school, a sport he continues to play to this day, said jokingly. "I know you think you are, but you're not. You are over-rated in your own mind. You will not play in the NBA." [E.A.]

Isn't there a better way to phrase it that doesn't set up Obama as a commanding know-it-all--something along the lines of, "I urge you all to stay in school. I've seen what happened to friends of mine. I know what would have happened to me. The odds against people who drop out of high school are not good." (Something along the lines of this, in fact.) ...  P.S.: If you were a conscientious African-American parent who carefully rationed your kids' TV time, how would you feel if Obama came to town and told you, "So turn off the TV set, put the video game away." ... Even Bill Cosby is less condescending, I think. He's just a pissed off old geezer comin' right at ya. He doesn't claim to venerate Lil' Wayne  and then put down kids who aspire to live the life Lil' Wayne boasts about. ...

P.P.S.: Obama's lecture to parents about how "you need to make sure your child can speak Spanish"? Also condescending! Especially since, as Abe Greenwald points out, Obama doesn't speak Spanish.*** ... He's insultingly missing the point about the need for a common language, of course. If we want a common language, and the common language of Americans is English, then learning Spanish, however beneficial, is not going to achieve that goal. It's perfectly reasonable for native English speakers to worry if enough new immigrants whose ethnic leaders demand bilingual education will learn English. They probably will, but Obama's saying it's wrong to even worry about it. ... [via Corner] ... And then there's the whole embarrassed-by-boorish-Americans-who-don't-know-French riff. A provien vote-getter! ...  P.P.P.S.: He also seems really tired! ...

P.P.P.P.S.: Is the lecturing style one that wears well in a President? I think the answer is so obviously "no" that it's never been tried. Mayhill Fowler tried to warn us. [I had a snide comparison to Jimmy Carter's "malaise" speech here, but that was unfair to Jimmy Carter. The "malaise" speech  was an exercise in self-loathing--and if it insulted voters it insulted them by attributing to them the same flaws and failures Carter attributed to himself.] ...

***: From a Jorge Ramos interview with Obama--"Obama studied Spanish in high school and for two years in college. "My Spanish used to be OK," he said. Now, however, he has all but forgotten it." ... 12:44 A.M. link

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Tuesday, July 8, 2008

Even kf is not this paranoid. ... 2:35 P.M.

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From WaPo's bio of new Post executive editor Marcus Brauchli:

He is married to Los Angeles Times reporter Maggie Farley, who is the paper's U.N. bureau chief.

The Los Angeles Times has a U.N. bureau chief? More layoffs please! ... [Thks. to alert reader E.]  2:27 P.M.

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