Dig Up the Martin Act

Let's see if NY AG Cuomo, of former Fannie and Freddie fame, can ride the populist "we need a boogey man!" sentiment long enough to get something to stick against BoA. He's starting with the 1921 Martin Act, along with a bunch of charged rhetoric about disclosure and irresponsibility that seems to generate more heat than light on how and why the 2007-8 Credit Crisis happened. Oh well, it's politics, after all.

Like, Whatever CBO

The Congressional Budget Office in March released revised estimates for the cost to tax payers of the 700 Billion Troubled Assets Relief Program (TARP), to 356 Billion from 189 Billion. This quiet piece of news from CBO doesn't even seem troubling to me anymore, desensitized as I am to seeing billions or trillions appended to estimates of new government programs these days.

There's a kind of perverse liberation one can get when a situation is so bad that there's no point worrying about it anymore. Oh, so it's really 356 Billion? Okay, thanks for letting me know. If it goes up again, no need to say anything. I'll assume it's really bad, and you can spare me the details, okay? Cool.

I can't really get my mind around these bills anyway; if I run up a hundred dollar tab at the Macaroni Grill, I can see that's a lot for a couple hours of dinner and wine. But 356 Billion? What does this mean? And what can any of us do about it anyway?

Snookered

We're getting snookered. This is bad. Who remembers the "Troubled Assets Relief Program" (TARP), 700 billion in spending approved just months ago? Well, that's not interesting anymore. Silence on TARP. Now another 800 billion from the latest American Recovery and Reinvestment Bill. This will work!

TARP was supposed to right the ship. That's how it was sold, to the sceptical public (remember?). And yet, no discussion anymore, nothing. And now a new bill presumably because we have a new administration (TARP was Bush, and therefore failed), and it's another 800 billion. What about TARP? Sold to us in the same way: huge spending necessary to avert disaster. Months later we can't even remember what happened to the money, or why it was approved.

In the meantime our debt grows to proportions never seen before, and our elected officials play these games with the public. Why not, the public has a short memory...

Capping Salaries is Capitalism

Conservatives may be squawking lately about Pres. Obama imposing executive salary caps at 500K a year when their firms have accepted bailout tax payer money, but it's a great incentive for the private sector to avoid the turn left towards socialism. It's not Adam Smith, but it's surely a pointer towards the market economy, not away from it.

Why? It's logical, that's why. If your firm has a business model that does not require bailouts, then by all means, pay your executives what the market will allow. Fat cats are the by-product of wide open, entrepreneurial, anyone-can-be-anything societies. Bill Gates. It makes sense. On the other hand, if you need government to operate, you should expect now to be governed. We can hardly accept businesses wanting subsidies for failure and free market principles for salaries. That's not capitalism.

And so, I applaud the salary caps. It's a nod towards capitalism.

The Donald

Donald Trump gets interviewed, pretty frequently, by cable news for sound bites on what's happening with the economy, business, banking, this kind of thing. You know, The Donald topics. Well I really do love these Donald moments. This is a guy who once ran for President, promoting himself to the country with memorabilia like "I've had a great time here" (what the heck does that mean? Is this what-happens-in-Vegas campaigning? Sounds like a Chicago politician, with perhaps less criminality and more just standard issue louche).

So he's back on cable news now, giving his wisdom on the auto bailout. The problem with The Donald is that he's so opulently wealthy, so New York Cosmo privileged, that he can't manage the relevant distinctions for us plebian viewers. When asked if he'd buy an American car, he responds that he's got several. In fact, he says, he just had one of his workers buy a Dodge Ram truck for him. He likes Cadillacs, too. Buick makes a good car, he assures us.

The interviewer, Greta Van Suster-whatever, asks if he buys foreign as well, and she should have known better, because (say it with me) of course he does! He buys them all. See, it's just about Donald Trump being really rich. But strangely I still like the guy. He embodies that rarified world of gaudy New York real estate tycoons. He's (weirdly) innocently just that. He tells us with a straight face that he helps the struggling economy by buying expensive things (he's got, strictly speaking, something of a point here.) No time for philanthropic B.S., The Donald's making deals. He just scored another gold statue for one of his homes. Beautiful. Great time to buy em'.

Final thought, The Donald was on I think MSNBC a while back, and was asked about buying real estate. I kid you not, he's on point with a story about how he just picked up a piece of real estate for pennies on the dollar. 112 million is all. It's a great time to buy, he concludes (as if we should all rush out and grab up some resorts in Miami for cheap). The interviewer is slightly exasperated at this point and reminds Mr. Trump that many Americans are struggling to buy a first home, or pay the mortage on an existing. Unfazed. The deals are out there, he says. And they are. If you're The Donald.

The Puzzling Economy

What is the relation between economic theory and prosperity? It damn perplexes me. But I'm no economist. Still, consider: many of us are convinced that FDR's Keynesian approach helped pull us out of the Great Depression (but NYT luminary Paul Krugman has argued, recently that FDR botched it by not doing enough). And many of us are convinced that Reagan's supply side changes helped usher in the prosperity of the late 80s and 90s. Two radically different policies. So I ask: what's the real connection between economic theory and prosperity? I suspect it is tied very closely to circumstances. Very complicated circumstances.

On the extremes, things get easier to figure out: really bad economic policy is highly correlated with really low levels of prosperity. But somewhere in the middle (say, with regulated markets, like in the U.S.), it's hard to figure out what worked before, and pray tell, what will work again. As Nassim Nicholas Taleb suggests in his eminently readable "The Black Swan, The Impact of the Highly Improbable", maybe our best strategy is just to have smart, open-minded people keep tinkering in hopes that the right recipe will emerge. Trial and error. And when something finally works, we'll take credit for it, ex post facto, as if it was just obvious that X was the way (someone-very-close-to-me tells me that these Latin phrases are distracting and pedantic, like this long parenthetical, Godelian remark).

Anyway, such is the nature of things. We need to keep up the illusion that we're on it. And when the next big innovation comes, the markets will free up, and prosperity will (again) be ours. And a politician will take all of the credit.

Sorry, Mr. Pickens, Loan Denied

One of the (many) unfortunate consequences of the Credit Crisis is its stalling effect on some very sensible alternative energy plans. The Pickens Plan, for one, which I support. The first phase of PP is wind energy; unfortunately Mr. Pickens, who wrote a book titled "The First Billion is the Hardest", now can't get financing for the project.

The New York Times reports also that Centrica, a British company, has halted expansion of its offshore wind farms project due to economic woes.

And with the price of crude plummeting, the sense of urgency for energy reform is all but gone. The OPEC yo-yo continues.

The New Bipartisans (or, sound and fury...)

Curious is the surface veneer of bipartisan agreement on the bailout. I've heard only dyed-in-the-wool small government conservatives fulminate about it, presumably on principled grounds, and our own (in the sense of, he's a human too...) Ralph Nader, presumably on principled grounds as well (in Naderland, nothing makes less sense, and reeks with the stench of immorality more, than bailing out Corporate America).

In between, suddenly there's consensus; disagreement only on details. What happened? Call me cynical, but this seems more a surface veneer over "boundless seas of confusion"*, than real agreement. The economy seems to have gotten so complex, and the stakes for failing to understand it so great, that it's pushed politicians together in positively bizarre bedfellow fashion. Economic 9/11? Maybe. Maybe also just strength in numbers (insert favorite Nietzsche quote here). They're banding together against the "beast"... the new global economy. But I'm not assuaged. A little dyspeptic. And apprehensive.

* I transmogrified this phrase from Bloom's "The Closing of the American Mind" written years ago, and on a different (but perhaps related?) subject. Full disclosure.

Joe Six Pack

McCain's recent downward trend in the polls is best summed up as follows: A lot of ordinary Americans have begun scratching their heads in earnest, thinking "Hey, wait a minute, I know Joe Six Pack, and he's not that damn smart! Isn't this economy stuff kinda complicated?" Aw shucks.

We can throw in as well the observation that we've had Joe Six Pack for two terms now, and for all his Southern charm and "shoot ya straight" politics, it's simply a fact that the economic miasma we've been ineluctably sucked into happened under his watch.

Fair or not, the Credit Crisis has shifted the debate from national defense to the domestic economy, and that tends to favor the Democrats, not the encumbents. It also tends to favor expertise, and a respect for, and sensitive appreciation of, the complexity in our global financial system and in the world all around us.