publius

The Republican “Budget”

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by hilzoy I've been trying to figure out what to say about the House Republicans' new "budget". I think it's pretty neat that they decided to use those cute bubbles instead of numbers. Maybe next week they'll present their budget using interpretive dance or little animated jelly beans. I also like the way they say … Read more

Hoovervilles

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by hilzoy From the NYT: "As the operations manager of a outreach center for the homeless here, Paul Stack is used to seeing people down on their luck. What he had never seen before was people living in tents and lean-tos on the railroad lot across from the center. "They just popped up about 18 … Read more

Press Conference: Minor Notes

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by hilzoy I saw Obama's press conference, and I thought it was quite good, in a sober, unremarkable way. I just wanted to note two minor points that struck me  First, everyone who asked a question had the chance to ask a follow-up. I don't have the heart to go back and look at Bush's … Read more

Shameful

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by hilzoy Via TPM, a Wall Street Journal article that says, basically, that at first the Obama administration did not particularly seek out Wall Street's advice: "In late January, as Treasury Secretary Geithner prepared his proposal for handling the banking crisis, administration officials avoiding seeking input from Wall Street. "Those people are tainted," said one aide at … Read more

The Geithner Plan, Part 2

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by hilzoy In my last post I argued that the auctions Sec. Geithner is (by all accounts) about to propose as part of his plan to solve the problems with the banking industry might not work at all; that if they did work, they would do so by giving buyers an incentive to overpay, with both … Read more

The Geithner Plan: Take 1

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by hilzoy Some negative reactions to the Geithner plan: Krugman, more Krugman, Calculated Risk, Yves Smith, James K. Galbraith, Henry Blodget, Noam Scheiber. Brad DeLong, on the other hand, likes it, and whether you agree with him or not, he's made the strongest case I can think of for it, and it's absolutely worth reading, … Read more

Hey Paul Krugman!

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by hilzoy Somehow, this YouTube just seemed appropriate today: (via Calculated Risk, who also notes Dr. Krugman's answer to a similar question.)  Open thread. *** Update: I don't have any idea whether any of you share my interest in utterly weird music — music that makes you think: someone actually went to some trouble to … Read more

HR 1586

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by hilzoy Even though I am furious at the people who brought down AIG, along with all the other Masters of the Universe, I do not support the House bill that passed yesterday — the one that would tax bonuses at 90%. For starters, it's badly targeted. On the one hand, it leaves out the … Read more

Mark Haines Doesn’t Get It

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by hilzoy

If anyone on Wall Street is wondering: what is this "it" that we are supposed to "get"? Is it just that people are angry? Could I be one of those people who don't "get it"? If so, how would I know?, s/he could do worse than consider this YouTube of CNBC's Mark Haines interviewing Rep. Brad Sherman (D-CA) (via TPM). It's a pretty good diagnostic tool. 

This is what "not getting it" looks like. At about 50 seconds in, Haines says: "You and people who share your opinions seem to feel that, you know, let's hold salaries on Wall Street to $100,000. Do you have any idea what Wall Street would look like if you did that?" If your immediate reaction is: that's telling him, Mark Haines!, then you don't get it. 

A couple of years ago, it would have been hyperbole to suggest that we would all be better off if the senior executives at all our major financial firms were people picked entirely at random out of the phone book. Now, it's arguably true. People picked at random would, admittedly, be likely not to have been to business school. They might not know a lot about futures or derivatives or put options. But so what? At least they might have been more likely to know that they were clueless, and a few of them might have had the common sense to ask questions like: will housing prices really go up indefinitely?

In any case, what's the worst they could have done? Bankrupted their companies with ludicrously risky gambles that fell apart once markets went south? Destroyed trillions of dollars in value? Brought the world financial system to the brink of collapse? Left taxpayers across the globe on the hook for trillions of dollars? Bankrupted entire countries?

Oh, right. 

"Getting it" means understanding that the entire story that some people on Wall Street have told themselves about why they got such obscene levels of compensation is false. As a group, they were not uniquely talented. They did not make a lot more money for their company than they earned, at least not in the long run. Their salaries were not fair compensation for the value they produced. It would not have been worse if they had been replaced by people chosen at random. 

Look at the YouTube clip again. Mark Haines seems astonished and baffled by Rep. Sherman's comments. He acts as though he's dealing with some ignorant Yahoo who just doesn't see that when people on Wall Street and people on Main Street disagree, Wall Street is obviously right. That's why he takes "What do people on Main Street know about running a financial system?" to be such a killer response to Sherman.

A few years ago, it would have been a killer response. Normally, it makes sense to think that people on Wall Street know more about running a financial system than people chosen at random, just as it makes sense to think that a successful director knows more about making movies than I do. When people reach positions of prominence in a given field, it makes sense to think that their opinions about the field they work in are entitled to some deference*. It takes a lot to completely forfeit any right to that deference. But the people in the financial services industries have managed to pull it off.

And that's what Mark Haines doesn't get.

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And Another Thing …

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by hilzoy In the piece by Steven Davidoff about the AIG contract that I cited in my last post, he also writes: “This was not a boilerplate contract. Rather, it was highly negotiated. And it was highly negotiated to pay retention fees at high levels without regard to performance. This is obviously shocking. But it makes me … Read more

The AIG Contract

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by hilzoy The contract guaranteeing employees of AIG's Financial Products their retention bonuses has been published. Since I am not a lawyer, and my impression is that contract law is not for the faint of heart, I haven't read it all the way through. Steven Davidoff at Dealbook has, however, and he teaches corporate law. … Read more

Good News

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by hilzoy Today brought some very good news for members and veterans of the armed forces. First, Stop Loss — whereby a service member's term of service can be extended whether she likes it or not — will be ended: "The Department of Defense announced today a comprehensive plan to eliminate the current use of … Read more

Do You Feel Lucky, AIG? Well, Do You?

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by hilzoy I don't think that the Wall Street types have any idea at all how angry people are at them. We were angry before, but the business about the AIG bonuses — which is fairly small potatoes in the grand scheme of things — just sums things up perfectly.  If I were an investment banker making … Read more

AIG: The Commentary

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by hilzoy Something about the AIG story is bringing out strange reactions. Chuck Grassley: "In a comment aired this afternoon on WMT, an Iowa radio station, Grassley (R-Iowa) said: "The first thing that would make me feel a little bit better towards them if they'd follow the Japanese model and come before the American people and … Read more

Animal Stories

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by hilzoy Recently, we've learned that chimpanzees stockpile weapons in anticipation of future attacks. We've discovered that they not only use tools, but modify them to make them better. But macaques teaching their infants to floss? "Female monkeys in Thailand have been observed showing their young how to floss their teeth –using human hair. Researchers … Read more

And Another Thing …

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by hilzoy To Edward Liddy: The next time you write to the representative of the janitors, teachers, police officers, and home health aides who now own 80% of your company and are being asked to continue to finance the lifestyles of the people who took it down, try for a different tone. Here, for instance: "I would … Read more

Bonuses At AIG

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by hilzoy From the WSJ: "American International Group Inc. will pay $450 million in bonuses to employees in its financial products unit. That division was at the heart of AIG's collapse last fall, which compelled the U.S. government to provide $173.3 billion in aid to keep it running. Chief Executive Edward Liddy told Treasury Secretary … Read more

All That Chas

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by publius I haven’t been able to weigh in on Chas Freeman (or much of anything lately) because of work, but it was a pretty sorry spectacle. There is, however, one silver lining. By being so hysterical, the anti-Freeman camp implicitly acknowledged the weakness of – and lack of self-confidence in – their arguments. Generally … Read more

Broadband Grants — A Worry

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by publius On Tuesday, the Commerce Department held an introductory public meeting about the new broadband grants.  The different agencies with responsibility were on hand asking for public comments – the FCC, NTIA, and RUS (Rural Utilities Service).  So here’s mine – don’t let the broadband grants become a wasteful subsidy for national wireless carriers. … Read more

Next Up: Action Figures?

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by hilzoy From a review of Fault Line, a new thriller by Barry Eisler: "Some books have an opening line that catches your attention. A few rare one have openers that grab you, shake you a bit, and compel you to keep turning pages until the last. Such is the case with Barry Eisler's first … Read more

Stem Cell Orders for Dummies (Like Me)

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by publius In reading up on Obama’s stem cell decision, I got confused about what exactly it does.  This line, in particular, confused me (from the WSJ): The new policy won't affect federal laws that prevent the use of federal money to destroy human embryos. So while it will substantially broaden research opportunities on established … Read more

And Another Thing …

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by hilzoy One other thing bothered me about the story I wrote about in my last post, about parents who forget their kids in the car. It opens with a description of a courtroom scene: "The defendant was an immense man, well over 300 pounds, but in the gravity of his sorrow and shame he … Read more

Kids In The Back Seat

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by hilzoy The Washington Post has a story about people who accidentally leave their kids in the car, where they die from the heat. I often say that things are worth reading, but this one is more than usually so: for the detail, the understanding, the neurological explanation for how this could happen even to … Read more

A Question

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by publius Before I descend into a snarky rant, I thought I should seek some guidance from the masses about this (from the WSJ): U.S. Secretary of State Hillary Clinton criticized plans to demolish 88 Palestinian homes in Jerusalem that Israel says were built without permits. Days before Mrs. Clinton arrived on a visit to … Read more

Be Like Reagan And Thatcher! Soak The Rich!

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by hilzoy Possibly because of my immersion in posts about going Galt, I've read altogether too many blog posts and newspaper columns about the horrid, wealth-destroying, class-warfare-waging, socialist nightmare that is Barack Obama's tax policy. So I thought it might be a good idea to get a few basic facts on the table. Obama is … Read more

Your Moment Of WTF??

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by hilzoy From the normally sane Will Wilkinson (h/t): "Obama and his devotees are Bizarro World Randian romantics in the grip of an adolescent faith in the generative powers of the state." Savor that sentence. Cherish it. Roll it around on your tongue. It has to be the one and only time anyone will ever … Read more

Please Go Galt!

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by hilzoy The unemployment numbers are dreadful. But for once, there's a glimmer of hope on the horizon: conservatives are going Galt. "While they take to the streets politically, untold numbers of America's wealth producers are going on strike financially. Dr. Helen Smith, a Tennessee forensic psychologist and political blogger, dubbed the phenomenon "Going Galt" … Read more

Don’t Give Away Carbon Permits

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by hilzoy Via Kevin Drum, bad news from Sen. Jeff Bingaman:  "Sen. Jeff Bingaman, a New Mexico Democrat who chairs the energy panel, said earlier that any climate bill that passes the Senate is unlikely to adhere to the administration's plan that the government auction all the permits to emit greenhouse gases because such a … Read more

Renewable Energy Standards

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by hilzoy A renewable energy standard is a requirement that utilities get a certain percentage of their power from renewable energy. It's a market-based system: utilities that exceeded the requirement would get credits that they could sell to other utilities who weren't doing as well, enabling us to meet the standard in the most cost-effective … Read more

Senate: Stop It.

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by hilzoy Via TPM, Bloomberg: "President Barack Obama's economic advisers are increasingly concerned about the U.S. Senate's delay in confirming the nominations of Austan Goolsbee and Cecilia Rouse to the White House Council of Economic Advisers. Without Senate confirmation, the two economists are barred from advising the president as the administration tackles the worst financial crisis … Read more