A Sensible IMF Economist

Who knew.

Yes, this piece in the Atlantic by Simon Johnson is one of the first discussions of the IMF that I've ever seen that actually addresses the true root of a lot of third world economic disasters. Hint: it ain't poor people:

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.

In Russia, for instance, the private sector is now in serious trouble because, over the past five years or so, it borrowed at least $490 billion from global banks and investors on the assumption that the country’s energy sector could support a permanent increase in consumption throughout the economy. As Russia’s oligarchs spent this capital, acquiring other companies and embarking on ambitious investment plans that generated jobs, their importance to the political elite increased. Growing political support meant better access to lucrative contracts, tax breaks, and subsidies. And foreign investors could not have been more pleased; all other things being equal, they prefer to lend money to people who have the implicit backing of their national governments, even if that backing gives off the faint whiff of corruption.

But inevitably, emerging-market oligarchs get carried away; they waste money and build massive business empires on a mountain of debt. Local banks, sometimes pressured by the government, become too willing to extend credit to the elite and to those who depend on them. Overborrowing always ends badly, whether for an individual, a company, or a country. Sooner or later, credit conditions become tighter and no one will lend you money on anything close to affordable terms.

The downward spiral that follows is remarkably steep. Enormous companies teeter on the brink of default, and the local banks that have lent to them collapse. Yesterday’s “public-private partnerships” are relabeled “crony capitalism.” With credit unavailable, economic paralysis ensues, and conditions just get worse and worse. The government is forced to draw down its foreign-currency reserves to pay for imports, service debt, and cover private losses. But these reserves will eventually run out. If the country cannot right itself before that happens, it will default on its sovereign debt and become an economic pariah. The government, in its race to stop the bleeding, will typically need to wipe out some of the national champions—now hemorrhaging cash—and usually restructure a banking system that’s gone badly out of balance. It will, in other words, need to squeeze at least some of its oligarchs.

Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or—here’s a classic Kremlin bailout technique—the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large.

Eventually, as the oligarchs in Putin’s Russia now realize, some within the elite have to lose out before recovery can begin. It’s a game of musical chairs: there just aren’t enough currency reserves to take care of everyone, and the government cannot afford to take over private-sector debt completely.

Bolding is mine. Wow. I'm so used to reading 90's-style technocratic arguments by IMF officials about the size of the welfare state—-inevitably accompanied by relentless drives to privatize everything in sight--that it's almost jarring to have one say "uh, no, the problem is crony capitalism".

Now, naturally Simon isn't just talking about third world countries, or dday wouldn't have linked to it. It makes the point that America is declining, or has declined, to a similar state. Sure, America's elites are beholden to the financial sector instead of the agricultural barons of South America or the manufacturing titans of East Asia, but the principle is the same. You make it as easy as possible for these guys to make money by sweeping regulation aside, and give them the assurance that no matter how wild their betting is, they'll be covered by the national treasury if things go south.

What's different, in Simon's mind, is how this power was gathered. It wasn't violence:

Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.

And how could they not? As Simon said, the DC economic elite were all tied to the New York markets in a kind of NY-DC axis. They went to the same schools, shared the same social groups, and often worked both as economic managers and business profiteers. Simon related one meeting where "the chair casually proclaimed, to the room’s general approval, that the best preparation for becoming a central-bank governor was to work first as an investment banker."

That's like saying that the president of Argentina should be an agribusiness executive. Well, except that those guys at least produce something. No wonder "a whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true."

But how to solve the problem? The banks need to have their behavior changed (they won't do it themselves, or they already would have), but the economy needs their services. They have too much power, far too much power, but letting them die might not be an option. Simon's solution: temporary nationalization and a Ma Bell breakup:

To break this cycle, the government must force the banks to acknowledge the scale of their problems. As the IMF understands (and as the U.S. government itself has insisted to multiple emerging-market countries in the past), the most direct way to do this is nationalization. Instead, Treasury is trying to negotiate bailouts bank by bank, and behaving as if the banks hold all the cards—contorting the terms of each deal to minimize government ownership while forswearing government influence over bank strategy or operations. Under these conditions, cleaning up bank balance sheets is impossible.

Nationalization would not imply permanent state ownership. The IMF’s advice would be, essentially: scale up the standard Federal Deposit Insurance Corporation process. An FDIC “intervention” is basically a government-managed bankruptcy procedure for banks. It would allow the government to wipe out bank shareholders, replace failed management, clean up the balance sheets, and then sell the banks back to the private sector. The main advantage is immediate recognition of the problem so that it can be solved before it grows worse.

The government needs to inspect the balance sheets and identify the banks that cannot survive a severe recession. These banks should face a choice: write down your assets to their true value and raise private capital within 30 days, or be taken over by the government. The government would write down the toxic assets of banks taken into receivership—recognizing reality—and transfer those assets to a separate government entity, which would attempt to salvage whatever value is possible for the taxpayer (as the Resolution Trust Corporation did after the savings-and-loan debacle of the 1980s). The rump banks—cleansed and able to lend safely, and hence trusted again by other lenders and investors—could then be sold off.

Cleaning up the megabanks will be complex. And it will be expensive for the taxpayer; according to the latest IMF numbers, the cleanup of the banking system would probably cost close to $1.5trillion (or 10percent of our GDP) in the long term. But only decisive government action—exposing the full extent of the financial rot and restoring some set of banks to publicly verifiable health—can cure the financial sector as a whole.

This may seem like strong medicine. But in fact, while necessary, it is insufficient. The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.

Oversize institutions disproportionately influence public policy; the major banks we have today draw much of their power from being too big to fail. Nationalization and re-privatization would not change that; while the replacement of the bank executives who got us into this crisis would be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would change only the names of the oligarchs.

Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.

This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual institutions in a sector that is essential to the economy as a whole. Of course, some people will complain about the “efficiency costs” of a more fragmented banking system, and these costs are real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes. Anything that is too big to fail is too big to exist.

To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths, we also need to overhaul our antitrust legislation. Laws put in place more than 100years ago to combat industrial monopolies were not designed to address the problem we now face. The problem in the financial sector today is not that a given firm might have enough market share to influence prices; it is that one firm or a small set of interconnected firms, by failing, can bring down the economy. The Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy Roosevelt’s trust-busting.

Caps on executive compensation, while redolent of populism, might help restore the political balance of power and deter the emergence of a new oligarchy. Wall Street’s main attraction—to the people who work there and to the government officials who were only too happy to bask in its reflected glory—has been the astounding amount of money that could be made. Limiting that money would reduce the allure of the financial sector and make it more like any other industry.

Still, outright pay caps are clumsy, especially in the long run. And most money is now made in largely unregulated private hedge funds and private-equity firms, so lowering pay would be complicated. Regulation and taxation should be part of the solution. Over time, though, the largest part may involve more transparency and competition, which would bring financial-industry fees down. To those who say this would drive financial activities to other countries, we can now safely say: fine.

And here's the problem. The public could give a shit about these guys. Honestly, a Democrat wouldn't lose a single potential vote by ratcheting up the FDIC process and cracking apart the big banks. But are the voters their real constituency? Sure, breaking them apart would reduce their political power, but the choice to do that is a political choice. So I'm not optimistic. But I'll close with one last quote:

Emerging-market countries have only a precarious hold on wealth, and are weaklings globally. When they get into trouble, they quite literally run out of money—or at least out of foreign currency, without which they cannot survive. They must make difficult decisions; ultimately, aggressive action is baked into the cake. But the U.S., of course, is the world’s most powerful nation, rich beyond measure, and blessed with the exorbitant privilege of paying its foreign debts in its own currency, which it can print. As a result, it could very well stumble along for years—as Japan did during its lost decade—never summoning the courage to do what it needs to do, and never really recovering. A clean break with the past—involving the takeover and cleanup of major banks—hardly looks like a sure thing right now. Certainly no one at the IMF can force it.

The only people who can force anything in DC may be the financiers themselves. So, yes, there will be force involved. But it will probably not be what we want, or what we need.

I feel a Cross of Gold analogy coming on.

OIL SHALE IS NOT ALTERNATIVE ENERGY!

I know everybody's calling this Republican "budget" ridiculously goofy. It is.

But THIS one is just a howler:

Americans realize that the future of energy is in alternative and renewable sources. In order to promote the development of renewable and alternative energy, Republicans support promoting the leasing of federal lands which contain alternative energy such as oil shale. The Interior Department should provide lease sales of oil shale in an environmentally-sound manner, rather than hinder leasing plans. Republicans also supportenabling federal agencies to take the lead in spurring a market byusing fuels derived from oil shale, tar sands, and coal.

Bolding mine; see title.

Okay, let's leave aside the health care folderol about dying Britons and the massive handout to the wealthy and the lack of actual, erm, budgeting aside. How delusional do you have be to call oil shale an "alternative energy?"

It's not "alternative?" It's oil! Just dirtier and more expensive! Just go ask the Albertans!

Incredible.

Dyson: Not As Advertised

I'll grant that this piece about Freeman Dyson and his anti-climate change positions is a nice little bio. But I was expecting something that would actually, y'know, show why he thinks the scientific consensus is wrong, and there was precious little of that. It's just a whole lot of "he's smart, he thinks climate change isn't an issue", without addressing the problem of the thousands of other smart people who have done a lot of smart work on the subject who are quite sure that the climatological equivalent of gravity exists.

Sorry, but I'm not going to be impressed by a writer that is willing to let people say things like "I never claim to be an expert on climate. I think it’s more a matter of judgment than knowledge" without applying the same standard to, say, aeronautical engineers. About all it does show is that too many journalists still have a crippling aversion to treating science as anything but religion in lab coats.

(Well, and that Freeman Dyson probably wouldn't get along with David Attenborough, considering his airy dismissal of the dangers faced by polar bears.)

Edit: Link added. I'll also add a link to the Media Matters response, where they point out that, far from being a science writer, the guy who penned the piece is a sports and music writer. Which might explain why a piece on science seemed so curiously lacking in, well, science.

First George Will and now this. Are the media's Powers That Be that worried about people taking climate change seriously, or just that thirsty for a fake controversy now that their favored political battles have become so one-sided?

A Nice Bit of Good News (For a Change)

There's a good piece in Fast Company that I missed about how good NPR has become:

Yes, it's true: In one of the great under-told media success stories of the past decade, NPR has emerged not as the bespectacled schoolmarm of our imagination but as a massive news machine poised for what Dick Meyer, editorial director for digital media, half-jokingly calls "world domination." NPR's listenership has nearly doubled since 1999, even as newspaper circulation dropped off a cliff. Its programming now reaches 26.4 million listeners weekly -- far more than USA Today's 2.3 million daily circ or Fox News' 2.8 million prime-time audience. When newspapers were closing bureaus, NPR was opening them, and now runs 38 around the world, better than CNN. It has 860 member stations -- "boots on the ground in every town" that no newspaper or TV network can claim. It has moved boldly into new media as well: 14 million monthly podcast downloads, 8 million Web visitors, NPR Mobile, an open platform, a social network, even crowdsourcing. And although the nonprofit has been hit by the downturn like everyone else, its multiple revenue streams look far healthier long term than the ad-driven model of commercial media. (In 2003, Joan Kroc, widow of McDonald's founder Ray, gave a $200 million endowment to NPR, the largest gift ever to an American cultural institution. She must have gotten one hell of a tote bag.)

In the past few months, a fresh crop of new executives and editors have arrived at NPR from the storm-tossed commercial media world. Meyer came from CBS; Kinsey Wilson landed from USA Today as general manager for digital media; and in January, Vivian Schiller joined from NYTimes.com as the new CEO. Their mission -- seizing even greater audience share -- is more aggressive than most for-profit operations' in this age of retrenchment. But with that ambition comes great responsibility. "Part of our desire to bring more NPR to more people is that, with the evisceration of commercial journalism, there's a dire need for it," Meyer says. "Major mainstream stories are increasingly going uncovered. And I think it might be the nonprofit journalism world that meets that huge market need, which is also a basic need of a democratic society and an information-based economy."

It's the big question about journalism: if commercial journalism is withering on the vine, and quality reportage is an important public good, than why not treat it like a public good? The BBC is wildly successful as an international source of news, and so is state-funded Al Jazeera in Qatar. NPR would make sense as an American alternative, especially when the humble podcast is becoming more and more important as a source of news and opinion in our post-radio world.

And some of the shows are must listen:

Combine the personal touch with the patience to do serious explanatory journalism, and you get one of NPR's major editorial triumphs of the past year: "The Giant Pool of Money," an hour-long episode of This American Life about the financial crisis first broadcast in May 2008. The show was the first-ever coproduction between NPR and TAL (Ira Glass & Co. are produced by WBEZ in Chicago and Public Radio International, an independent production company). NPR business reporter Adam Davidson and TAL producer Alex Blumberg coaxed global economists into breaking down terms such as derivatives, tranches, short selling, and credit swaps. They used vivid narrative and humor to bring these stultifying concepts to life. You hear from guys like Glen Pizzolorusso, who spent his days approving "liar loans" and his nights at Marquee with Christina Aguilera. Throughout, Blumberg and Davidson's frank dismay at the chicanery comes through.

To hear Davidson tell it, the economic crisis demands public-radio-style journalism. "I don't think this is a good story for newspapers, to be honest with you. Because it's an emotional story, it's a shocking story. We're used to all the people who formed the architecture of our economic infrastructure having the voice of God -- like Alan Greenspan. They're the experts and they understand the world and they're going to explain it. And business journalists had that tone too. We're now in a world where anybody who tells you they know exactly what's going on, you can just dismiss them as a liar."

To continue to get that kind of programming out to as many consumers as possible, everyone from Schiller on down sees technology as the key. "We have to skate where the puck is going," she says (in what may be the first use of a hockey metaphor by an NPR CEO). Certainly "The Giant Pool of Money" demonstrated how easily a strong NPR show can be repurposed as multiple digital streams. It has been downloaded as a podcast more than half a million times and spawned a thrice-weekly NPR podcast and blog, Planet Money, which are getting 1 million downloads and 400,000 page views a month, respectively. But NPR's digital efforts are much broader. It was the first mainstream-media organization to enter podcasting and often has several programs in the iTunes top 10. An open platform introduced last year allows listeners to mix their own podcasts and otherwise play around with NPR content -- one fan built an NPR iPhone app. And NPR is putting all of its editorial employees -- every editor, producer, and reporter -- through multimedia training, with support from the Knight Foundation. Traffic on NPR.org grew 78% from 2007 to 2008.

I'd highly recommend that show, by the way. This American Life's various pieces on the bubble and its sources aren't perfect—their economists spend a lot of their time trying to blame credit-card debt for the debacle of CDS/CDO trading—but by-and-large they're excellent. Certainly they're some of the most easily understood and most approachable examinations of the situation I've experienced.

And as for the local scene:

[S]omeday soon we may be looking at a world where public radio emerges as the main local-news source in many communities coast to coast. In Minneapolis, where the Star-Tribune is in bankruptcy, for example, the population may be about to get a lot less of columnist Chip Scoggins on the Vikings and a lot more of Garrison Keillor musing about Powdermilk Biscuits. It's worth asking what might be lost in the transition. NPR's audience may be surprisingly balanced among liberals, conservatives, and moderates, but it's overwhelmingly college-educated and affluent. "I think people like to listen to us because at the end of the day it makes them feel a little smarter," says Weiss. So will NPR have to bone up on the wildcat offense, or will the rest of America learn to love WTO coverage from Singapore?

This might be the most important role of NPR going forward. National news is in trouble; local news faces extinction. ANY source of local news is likely to become vital in short order, and if NPR can fill that (unprofitable) gap, then everybody's better off. Well, except maybe sportswriters.

It's a good piece; give it a read. And go catch Giant Pool of Money. It really was amazing.

Taibbi: We're Royally F***ked

So he says in The Big Takeover, laying out exactly how the CDS/CDO clusterfuck started, who was responsible, and (most importantly) why the bailout is going to create more problems than it solves.

(The key takeaway is that bailing out these big banks—while leaving the smaller ones alone to either fail or get absorbed by the big ones—not only rewards the worst actors in this situation, but creates the very giant institutions that are the problem in the first place. You shouldn't reward AIG for being "too big to fail". But that's exactly what Paulsonian thinking (Taibbi's term) is all about: you reward your buddies who are members of the financial and economic elite, and let the rest of us proles go hang.

And, unfortunately, because of the way the Fed is run and the lack of real oversight, there's nothing the rest of us can do about it. Goody.

Richard Cohen, You're Part of the Problem

Easy defenses of media blowhards, from other media blowhards, aren't going to curry much favor, Dick. Especially when those defenses consist of "if these guys knew it was all a lie, why did they put their money into it?"

Sure, most people would think "um, maybe it's like a Ponzi scheme, that they hope to get out before it all falls apart, or maybe they just think that it WOULD fall apart". Others would think "hmm, what if somebody was predicting something like this would happen?" And they'd look, and they'd find them.

(Though not at the Washington Post.)

But not columnists like Richard Cohen. See, they know these guys. They trust these guys. They're part of the same tribe, the same Village, as digby puts it. Cohen, like the folks at CNBC, doesn't question anything that his buddies set in front of him, and will defend those buddies to the death, worthwhile or not.

After all, if Cohen were the type to take attacks fairly, then he would have not have written this:

Now we get back to Stewart. The gravamen of his charge is that the financial media, particularly CNBC and Cramer, knew all the time what was happening and was, in effect, shilling for the industry. "Listen, you knew what the bankers were doing, yet were touting it for months and months," he told Cramer in probably the most celebrated showdown since the Earps and Doc Holliday met the Clantons and others at the O.K. Corral.

At the very least, he would have bothered to mention that the blatantly manipulative games that Stewart was highlighting. The "you knew" bit was in reference to a video that Cramer produced openly advocating market price manipulation, not credit default swaps or collateralized debt obligations. People understand manipulation perfectly well. That's why it's illegal, and Cramer admitted it was illegal, but advocated it anyway.

Funny how Richard Cohen didn't even touch that little factoid, huh? But of course he didn't. He's too busy defending his own friends, and his own positions, from a public who is sick of their incompetent economic elites and their media apologists.

Cramer on Stewart

Just go watch it. No, really. It's beyond summary.

The Daily Show With Jon StewartM - Th 11p / 10c

Intro - Brawl Street: Get Ready to Buy Low! And Sell Die

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

Cramer just rolled with it as best he could. He didn't contradict. He couldn't: John hauled out a series of 2006 clips of Cramer advocating lying, cheating, and manipulation to the bounds of the law and beyond. Cramer's at the point where he needs to protect his career and reputation, never mind his sense of well-being and honor.

The thing that people probably won't get, though, is that John really isn't interested in Cramer. I wouldn't say he's interested in CNBC. He's interested in the press, and how the press serves more as a dissemination medium for the powerful than anything else. This is exactly what The Daily Show is about, and has always BEEN about, but people often forget it in their rush to turn it into a left/right Republican/Democrat thing.

Jon disliked and possibly hated Bush, yes, but his beef has always been more with the media, and that's why his most scathing critiques have always been aimed at them. Cramer shouldn't overestimate his importance. He's just the latest, and there will be others.

(And, just incidentally, this is why there needs to be both a Colbert Report AND a Daily Show. Sometimes you need to put the satire away and come straight out.)

What the Hell, Barry?

Did your people really just try to classify a copyright trade agreement as "national security secrets"?

The U.S. government has denied a freedom of information act request for several Anti-Counterfeiting Trade Agreement documents, invoking a clause that says that the documents are protected as national security secrets. The provision applies in cases where there could be "damage to the national security and the original classification authority is able to identify or describe the damage." The content of the documents has been reported here and here.

I could maybe see the U.K. slapping a D-Notice on something like this—-though good luck getting anybody to pay attention to it--but there are quite literally no grounds for this here. ACTA is a power grab by the powerful, little else, and I'd gotten the impression that that's what Dems were supposed to be against these days.

(Though, admittedly, the Dems have ever been in the IP makers' pockets. Side effect of the whole hollywood thing.)

Anyway, free the damned things up, Barry, or give us a DAMNED good reason for why you aren't.

My Take on the Freeman Thing

I'm not a big fan of Daniel Drezner, apologist as he is for the sort of winger conventional wisdom that dropped America in the soup in 2003, but I do agree with one of his commentators on this:

Vetting used to be about making sure someone was qualified, did not have a criminal background, and had no existing conflicts of interests. Now, it is whether or not you share the opinion of the major power brokers in DC. In this case, it was running afoul of the AIPAC crew. But it could just as easily holding the wrong position on medicine, transportation, etc.

What follows is some wingnut nonsense about the DoE, but the basic idea is sound. The fact that Freeman was lobbied to death because he said that the settlements were maybe sorta kinda a problem isn't as bad as Brzezinski getting froze out because he has ties to Jummy Carter(better known as History's Greatest Monster) but it's definitely a sign that the problems dealing with middle eastern issues have outlived the Bush/Cheney cabal.

Though it may not be that simple. Stephen Walt (yeah, THAT Stephen Walt) believes that this shows that the Dems are "wimps" and that his polemics are true. He points to a "chilling effect":

the worst aspect of the Freeman affair is the likelihood of a chilling effect on discourse in Washington, at precisely the time when we badly need a more open and wide-ranging discussion of our Middle East policy. As I noted earlier, this was one of the main reasons why the lobby went after Freeman so vehemently; in an era where more and more people are questioning Israel's behavior and questioning the merits of unconditional U.S. support, its hardline defenders felt they simply had to reinforce the de facto ban on honest discourse inside the Beltway. After forty-plus years of occupation, two wars in Lebanon, and the latest pummeling of Gaza, (not to mention Ehud Olmert's own comparison of Israel with South Africa), defenders of the "special relationship" can't win on facts and logic anymore. So they have to rely on raw political muscle and the silencing or marginalization of those with whom they disagree. In the short term, Freeman's fate is intended to send the message that if you want to move up in Washington, you had better make damn sure that nobody even suspects you might be an independent thinker on these issues.

I know I return to this point a lot, but there are good reasons to use pseudonyms, and this is one of them. Not necessarily this issue, but there are no small number of them where you either engage in RightThink or are unwelcome. Look at Walt.

(I note, without comment, that the anti-pseudonym and litigious Whatzisname is one of those who would applaud this move.)

Glenn Greenwald isn't happy either, and makes a good point about anonymity; that people with power can and do organize behind the scenes, while keeping their public hands clean. AIPAC (according to Greenwald and others) played this game: they coordinated the critical response, but didn't come out in public against Freeman's appointment, because they knew that their public involvement would actually strengthen his case. I'd say there's a difference, though, between pseudonymous or anonymous commentary and behind-the-scenes elite organization; one is available to the people, but the other is the province of the powerful.

(And there's also the issue of the press granting selective anonymity to sources, which is a different and yet somewhat more intractable problem. "High-level officials" are a much bigger problem that Greek-named bloggers, folks.)

That said, the fact that there WAS a debate over this does, in Greenwald's mind, indiciate that the situation is changing somewhat. I agree. Like Walt and Mearsheimer, any "victory" only reinforces the perception of unchecked power that they're trying to fight, and this particular issue isn't going away anytime soon, especially with Israel's new leaders being a problematic bunch at best.

I'll give the last word to Josh Marshall:

The whole effort strikes me as little more than a thuggish effort to keep the already too-constricted terms of debate over the Middle East and Israel/Palestine locked down and largely one-sided. James Fallows argues here for the need for contrarian thinkers in general, of which Freeman is certainly one. Joe Klein reviews the issue here, arguing that it's not the time to be enforcing groupthink on Israel or other critical policy issues. And Andrew Sullivan has been doing great blogging on this topic in general and in this timeline in particular, which shows the whole storm being whipped up by neoconservatives upset over Freeman's positions on Israel. Finally, 17 former Ambassadors -- including Thomas Pickering -- have now come forward to support the appointmentand defend Freeman's worthiness for the position if not agree with all his views.

These other posts are each worth reading because they're good and go into more detail than I am. And I could go into a deeper discussion of foreign policy questions involved. But the gist is that campaigns like this are ugly and should be resisted. Not just on general principles, but because the country needs more diversity of viewpoints on this issue right now.

True enough. But I suspect, Josh, that that's what they're worried about.

Manufacturing Confession

So here's digby:

Brainwashing. False confessions. Show Trials. Of course. That's the main purpose of torture. Indeed, it's the only thing it's capable of. That's been the case going all the way back to the Inquisition. So the purpose of torture is to use the power of the authority to force people to make false confessions --- and, more importantly, use those false confessions in kabuki procedings which many people know are show trials but which are powerless to challenge due to their superficial legality. The sheer power of that is awe-inspiring to the victims and the torturers alike.

The Bush administration's simplistic approach to national security was to show that they were the biggest, meanest bastards on the planet. Part of that is to create the impression that there is no rhyme or reason for our violence other than a demonstration that we have the power to do it. The inexplicability of it is the point. And to that end, all those creepy rituals with the prisoners in the orange jumpsuits and the goggles on their knees were designed to show that the United States was engaged in a form of bureaucratic, systematic sadism. Which it clearly was.

Interrogations for the purpose of gaining intelligence were never the point. The point was to create terror. And there's a word for that.

Wondering what that's all about? Simply this:

The point of the CIA torturing people like, say, Mohammed Bunyam was never to extract information. It was to coerce confessions.

Here's Valtin:

The worst part of Mohamed's captivity, by his own account, is the five months he spent at the "dark prison" the CIA ran at an undisclosed location near Kabul, Afghanistan...

...And what was all this torture for? According to Mr. Mohamed, it was during his stay at the Dark Prison that U.S. interrogators went beyond inducing confessions. They wanted him to finger other individuals, and use him to testify in the military commissions trials they were planning. Later, when Mohamed arrived in Guantanamo in September 2004, interrogators got worried Binyam would testify he only "confessed" or gave information because he was tortured, and tried to conduct "clean" interrogations, so they could say the testimony was uncoerced. They demanded he give his confession "freely". After Obama was elected president and announced Guantanamo would close, Mohamed says his treatment became more brutal.

I'll just interject here and say that I imagine this is because the interrogators were terrified that the party was over. Valtin isn't so sure, and believes that Obama will leave all this in place. I hope he's wrong. That would be odious.

The full article on this is at the Daily Mail. It paints a picture of a Central Intelligence Agency run absolutely amok, turned into a full-scale inquisitorial and intimidation machine. Whether it was due to overzealous career men or Cheney's horrific influence is debatable, though for the sake of the institution I hope it's the latter. Either way, this has nothing to do with the CIA's mandate, and needs to end. This isn't HUMINT, it isn't sources and methods, it isn't intelligence. It's horror. And, to the extent that the country ever was one built on a set of ideals, it's profoundly unAmerican.

Derivatives Skip Bankruptcy Courts

Now this is something I hadn't paid attention to. There was a provision of the 2005 bankruptcy bill—odious pile of lobbyist-authored faeces that it is—that helped cause the current situation.

TPM reader GG explains:

Respectfully, you guys are totally misunderstanding something crucial in the AIG bailout: Derivatives claims are not stayed in bankruptcy. (Yet another brilliant innovation from the 2005 bankruptcy reform legislation.)

If AIG were to go down, derivatives counterparties would be able to seize cash/collateral while other creditors and claimants would have to stand by and wait. Depending on how aggressive the insurance regulators in the hundreds of jurisdictions AIG operates have been, the subsidiaries might or might not have enough cash to stay afloat. If policyholders at AIG and other insurance companies started to cancel/cash in policies, there would definitely not be enough cash to pay them. Insurers would be forced to liquidate portfolios of equities and bonds into a collapsing market.

In other words, I don't think the fear was so much about the counterparties as about the smoking heap of rubble they would leave in their wake.

Additionally, naming AIG's counterparties without knowing/naming those counterparties' counterparties and clients would be at best useless, and very likely dangerous. Let's say Geithner acknowledges that Big French Bank is a significant AIG counterparty. (Likely, but I have no direct knowledge.) BFB then issues a statement confirming this, but stating it was structuring deals for its clients, who bear all the risk on the deals, and who it can't name due to confidentiality clauses. Since everyone knows BFB specialized in setting up derivatives transactions for state-affiliated banks in Central and Eastern Europe, these already wobbly institutions start to face runs. In some cases this leads to actual riots in the streets, especially since the governments there don't have the reserves to help out. If you're Tim Geithner, do you risk it? Or do you grit your teeth and let a bunch of senators call you a scumbag for a few more hours?

So, everybody else gets to wait and see, in the case of a bank failing, whether they get ANYTHING because the derivatives players get first crack at the organization, even if it breaks the debtor organization into pieces? This is horrendous.It makes sense, mind you, since this whole thing is based around managing risk and they clearly didn't want horrible unpredictable innumerate judges getting involved in this game.

It's still horrendous, though. It shows why institutions are so unwilling to lend. Who wouldn't be? You don't know how bad their derivatives situation is, don't know whether they'll have any money to pay you back, and don't know if you'll get a thin dime after the derivative traders get through with them!

And the fact that this might be an international security issue? That scenario in the fourth paragraph sounded frighteningly real, and the prospect of Geithner being responsible for the well-being of the European (and African, and Asian, and...) banking system is pretty terrifying itself. He's not a guy that inspires a lot of confidence and, well, hope. But now we know why AIG can't fail.

Then again, if it's in the public interest to have something exist, and the private sector can't run it, the solution seems, well, pretty obvious. Doesn't it?

"Collossus of Propaganda"

Sorry, Bill, but I'm really not feeling it. It's not anywhere near as good as The Mighty Wurlitzer:

Seem reminiscent of anything? Yep. Bill's projecting again, as conservatives so often do. Their own little archipelago has been (well, HAD been) a unified machine propelled by a few money men for decades, so it makes sense that they'd assume that the left works the same way. That obsession with Soros is a good example; they KNOW that Scaife bankrolls half of their movement, and so are constantly searching for a Scaife of the left.

(That Soros is Jewish just makes it that much more ironic and appropriate; the people who are always complaining about anti-semitism on the left are falling into classically anti-semitic paranoiac fantasies about eeeevil jewish bankers.)

As for Media Matters being a "smear machine?" Well, he'd know. But what's really neat about Media Matters is how incredibly frightened the right is of them. They're used to milquetoast progressives sitting opposite them in debate, so when they get someone who's knowledgeable and uncompromising, they don't know what to do. Media matters is mellow compared to its counterparts on the right; but because the strident opposition is on the 'wrong side', we end up with "smear machine".

I'm Sorry, Rush

Okay, honestly, this is just trolling. Sure, Grade-A trolling, but definitely trolling.




...





...




...yeah, I love it too.

A Bit of a Reminder:

This is what happens when you give Republicans the presidency:

Weeks after the September 11 attacks, President George W. Bush’s Justice Department issued a sweeping legal opinion declaring that American military forces operating on U.S. soil did not have to obey the Constitution’s limits on search and seizure of individuals and their property, documents released Monday show.

In addition, Bush’s top lawyers argued that First Amendment rights “may also be subordinated to the overriding need to wage war successfully,” said the October 2001 memo drafted by two former attorneys in the Office of Legal Counsel, John Yoo and Robert Delahunty.

The memo’s conclusions remained the official but unannounced policy of the U.S. government for nearly seven years – until October 2008, when a new head of the Office of Legal Counsel, Steven Bradbury, renounced much of the 2001 opinion, again without notice to the public.

The memo and others surfaced as President Barack Obama’s administration demonstrated his stated commitment to transparency by revealing some of the most closely guarded legal secrets of his predecessor. The documents – long sought by critics of Bush’s expansive view of executive power – show that some of those legal claims proved to be too edgy even for the Bush administration, at least by the time it prepared to leave office.

In 2001, Yoo and Delahunty argued that the Fourth Amendment protections against search-and-seizure didn’t apply to domestic military operations, as long as they were designed to deter and prevent further terrorist attacks.

“We believe that the Constitution, properly interpreted, allows the President as Commander in Chief, and the forces under his control, to use military force against foreign enemies who operate on American soil, free from the constraints of the Fourth Amendment,” the pair wrote.

Seven years later, another lawyer, Bradbury, rejected that out of hand.

The 2001 opinion “states several propositions that are either incorrect or highly questionable,” Bradbury wrote in another newly-released memo. He labeled as “erroneous” Yoo’s conclusion that the Fourth Amendment does not apply to domestic military activity. He called the opinion’s assertions about war and the First Amendment “overbroad and general” and “not authoritative.”

The American Civil Liberties Union, which filed a lawsuit to seek release of some of the opinions, said the claims about the authority of the armed forces were particularly disturbing.

“That memo takes the position essentially that the Constitution doesn’t constrain the military inside the U.S. It’s a memo that sees war as a blank check for the president,” an ACLU lawyer, Jameel Jaffer, said. “That memo provides a great argument for the transparency we’d been calling for because I don’t think if that memo had been released when it was written it could have survived public scrutiny but the result of it not being released was that the Bush administration was able to build an entire national security strategy on top of it.”

Remember this when you think about the last 8 years. You actually didn't have a right to freedom of speech. You didn't even have protection from illegal search and seizure.

The Constitution is, apparently, no match for a conservative with pet lawyers and a war to fight.

Steele Cracked First

I think we all knew that Michael Steele would go "crawling on his belly" (as digby put it) to kiss Rush Limbaugh's, ahem, ring.

Politico:

Republican National Committee Chairman Michael Steele says he has reached out to Rush Limbaugh to tell him he meant no offense when he referred to the popular conservative radio host as an “entertainer” whose show can be “incendiary.”

“My intent was not to go after Rush – I have enormous respect for Rush Limbaugh,” Steele said in a telephone interview. “I was maybe a little bit inarticulate. … There was no attempt on my part to diminish his voice or his leadership.”

Steele, mind you, only really said that he was the leader of the party, and that Rush was an entertainer whose comments were unhelpful and incendiary. Rush, on the other hand, called Steele everything but a little traitor bitch, and that's only because you can't really swear on a podium.

And Steele goes crying to him.

Yep. Rush "I call black victims 'hos'" Limbaugh is the leader of the Republicans and guiding light to the Conservative movement. They're clearly just trying to hold their seats from primary challengers. Outside of that, they're boned, as there's no way that the Dems won't be able to shove his nonsense down their throats in competitive districts and states.

Anyway, what the hell happened to the Republican party of a few years ago? There's no way someone like Steele would have been dumb enough to publicly apologize to a figure who's challenging his rule unless he'd already set it up as a mutual apology through back channels. He gets nothing out of this: he looks even weaker, which is devastating for an American politician and more so for a Republican, and only improves Limbaugh's position. And he can't afford to improve Limbaugh's position, because the man doesn't give a shit about his party or his country! The hateful, borderline-treasonous toad would watch both burn, as long as his ratings stay up!

Sure, I've got nothing against weak Republicans. As far as I'm concerned, they could collapse and another party spring up and the country would be better for it. But in the meantime, Congress has shit to do, and they aren't going to get it done as long as Limbaugh's at the helm.

Rushpublicans

So Michael Steele has been whining about the fact that it's Rush's party now?

Truth hurts. Sorry, bud, but the party that you lead has little chance of winning over Dems or independents at this point. The Republicans that are left are the ones who are in rock-solid seats, and those guys are going to be very, very worried about primary challengers. Those primary challengers know it, too, and that faction is going to work very, very hard to press the advantage.

Sure, it'll alienate the rest of the country, but what does THAT matter?