Dov Seidman on Charlie Rose on Bloomberb in Manila 10:00 pm November 23, 2011. His book "How."
First 1/2 was with David Brooks. Awesome.
Showing posts with label David Brooks. Show all posts
Showing posts with label David Brooks. Show all posts
Wednesday, November 23, 2011
Wednesday, June 9, 2010
Oh David Brooks!
(c) 2010 F. Bruce Abel
Read about The Big Shaggy and David's defense of the liberal education. One of his best.
Natural Gas Guru: Op-Ed Columnist - History for Dollars - NYTimes.com
Read about The Big Shaggy and David's defense of the liberal education. One of his best.
Natural Gas Guru: Op-Ed Columnist - History for Dollars - NYTimes.com
Friday, June 4, 2010
Op-Ed Columnist - Race to Sanity - NYTimes.com
(c) 2010 F. Bruce Abel
Brooks loves Obama. Oh how far we've come.
Op-Ed Columnist - Race to Sanity - NYTimes.com: "But occasionally a politician comes along with a more measured vision of a limited but energetic government. Recently, for example, I read a speech by a politician who gave examples of both when government had failed (the old welfare system) and when it had succeeded (the railroad legislation under Lincoln, the bank reforms under F.D.R. and the highway system under Eisenhower). “Our government shouldn’t try to guarantee results,” this politician said, “but it should guarantee a shot at opportunity for every American who’s willing to work hard.”"
Brooks loves Obama. Oh how far we've come.
Op-Ed Columnist - Race to Sanity - NYTimes.com: "But occasionally a politician comes along with a more measured vision of a limited but energetic government. Recently, for example, I read a speech by a politician who gave examples of both when government had failed (the old welfare system) and when it had succeeded (the railroad legislation under Lincoln, the bank reforms under F.D.R. and the highway system under Eisenhower). “Our government shouldn’t try to guarantee results,” this politician said, “but it should guarantee a shot at opportunity for every American who’s willing to work hard.”"
Tuesday, June 1, 2010
Op-Ed Columnist - The Oil Plume - NYTimes.com
(c) 2010 F. Bruce Abel
Wasn't Brooks an early proponent of complete deregulation?
Now read this:
Op-Ed Columnist - The Oil Plume - NYTimes.com: "Everybody is comparing the oil spill to Hurricane Katrina, but the real parallel could be the Iranian hostage crisis. In the late 1970s, the hostage crisis became a symbol of America’s inability to take decisive action in the face of pervasive problems. In the same way, the uncontrolled oil plume could become the objective correlative of the country’s inability to govern itself."
Wasn't Brooks an early proponent of complete deregulation?
Now read this:
Op-Ed Columnist - The Oil Plume - NYTimes.com: "Everybody is comparing the oil spill to Hurricane Katrina, but the real parallel could be the Iranian hostage crisis. In the late 1970s, the hostage crisis became a symbol of America’s inability to take decisive action in the face of pervasive problems. In the same way, the uncontrolled oil plume could become the objective correlative of the country’s inability to govern itself."
Thursday, April 1, 2010
David Brooks
(c) 2010 F. Bruce Abel
From David Brooks's piece in the NYT:
"If the relationship between money and well-being is complicated, the correspondence between personal relationships and happiness is not. The daily activities most associated with happiness are sex, socializing after work and having dinner with others. The daily activity most injurious to happiness is commuting. According to one study, joining a group that meets even just once a month produces the same happiness gain as doubling your income. According to another, being married produces a psychic gain equivalent to more than $100,000 a year."
Friday, March 19, 2010
David Brooks Today -- And For All Time
To try to maintain his readership Brooks "balances" in a way that I despise. But can he write! Can he conceptualize! "Communitarian," for heaven's sake. But it's so right on.
http://www.nytimes.com/2010/03/19/opinion/19brooks.html
Op-Ed ColumnistThe Broken Society
comments
(273)
By DAVID BROOKS
Published: March 18, 2010
The United States is becoming a broken society. The public has contempt for the political class. Public debt is piling up at an astonishing and unrelenting pace. Middle-class wages have lagged. Unemployment will remain high. It will take years to fully recover from the financial crisis.
Read All Comments (273) »
This confluence of crises has produced a surge in vehement libertarianism. People are disgusted with Washington. The Tea Party movement rallies against big government, big business and the ruling class in general. Even beyond their ranks, there is a corrosive cynicism about public action.
But there is another way to respond to these problems that is more communitarian and less libertarian. This alternative has been explored most fully by the British writer Phillip Blond.
He grew up in working-class Liverpool. “I lived in the city when it was being eviscerated,” he told The New Statesman. “It was a beautiful city, one of the few in Britain to have a genuinely indigenous culture. And that whole way of life was destroyed.” Industry died. Political power was centralized in London.
Blond argues that over the past generation we have witnessed two revolutions, both of which liberated the individual and decimated local associations. First, there was a revolution from the left: a cultural revolution that displaced traditional manners and mores; a legal revolution that emphasized individual rights instead of responsibilities; a welfare revolution in which social workers displaced mutual aid societies and self-organized associations.
Then there was the market revolution from the right. In the age of deregulation, giant chains like Wal-Mart decimated local shop owners. Global financial markets took over small banks, so that the local knowledge of a town banker was replaced by a manic herd of traders thousands of miles away. Unions withered.
The two revolutions talked the language of individual freedom, but they perversely ended up creating greater centralization. They created an atomized, segmented society and then the state had to come in and attempt to repair the damage.
The free-market revolution didn’t create the pluralistic decentralized economy. It created a centralized financial monoculture, which requires a gigantic government to audit its activities. The effort to liberate individuals from repressive social constraints didn’t produce a flowering of freedom; it weakened families, increased out-of-wedlock births and turned neighbors into strangers. In Britain, you get a country with rising crime, and, as a result, four million security cameras.
In a much-discussed essay in Prospect magazine in February 2009, Blond wrote, “Look at the society we have become: We are a bi-polar nation, a bureaucratic, centralised state that presides dysfunctionally over an increasingly fragmented, disempowered and isolated citizenry.” In a separate essay, he added, “The welfare state and the market state are now two defunct and mutually supporting failures.”
The task today, he argued in a recent speech, is to revive the sector that the two revolutions have mutually decimated: “The project of radical transformative conservatism is nothing less than the restoration and creation of human association, and the elevation of society and the people who form it to their proper central and sovereign station.”
Economically, Blond lays out three big areas of reform: remoralize the market, relocalize the economy and recapitalize the poor. This would mean passing zoning legislation to give small shopkeepers a shot against the retail giants, reducing barriers to entry for new businesses, revitalizing local banks, encouraging employee share ownership, setting up local capital funds so community associations could invest in local enterprises, rewarding savings, cutting regulations that socialize risk and privatize profit, and reducing the subsidies that flow from big government and big business.
To create a civil state, Blond would reduce the power of senior government officials and widen the discretion of front-line civil servants, the people actually working in neighborhoods. He would decentralize power, giving more budget authority to the smallest units of government. He would funnel more services through charities. He would increase investments in infrastructure, so that more places could be vibrant economic hubs. He would rebuild the “village college” so that universities would be more intertwined with the towns around them.
Essentially, Blond would take a political culture that has been oriented around individual choice and replace it with one oriented around relationships and associations. His ideas have made a big splash in Britain over the past year. His think tank, ResPublica, is influential with the Conservative Party. His book, “Red Tory,” is coming out soon. He’s on a small U.S. speaking tour, appearing at Georgetown’s Tocqueville Forum Friday and at Villanova on Monday.
Britain is always going to be more hospitable to communitarian politics than the more libertarian U.S. But people are social creatures here, too. American society has been atomized by the twin revolutions here, too. This country, too, needs a fresh political wind. America, too, is suffering a devastating crisis of authority. The only way to restore trust is from the local community on up.
http://www.nytimes.com/2010/03/19/opinion/19brooks.html
Op-Ed ColumnistThe Broken Society
comments
(273)
By DAVID BROOKS
Published: March 18, 2010
The United States is becoming a broken society. The public has contempt for the political class. Public debt is piling up at an astonishing and unrelenting pace. Middle-class wages have lagged. Unemployment will remain high. It will take years to fully recover from the financial crisis.
Read All Comments (273) »
This confluence of crises has produced a surge in vehement libertarianism. People are disgusted with Washington. The Tea Party movement rallies against big government, big business and the ruling class in general. Even beyond their ranks, there is a corrosive cynicism about public action.
But there is another way to respond to these problems that is more communitarian and less libertarian. This alternative has been explored most fully by the British writer Phillip Blond.
He grew up in working-class Liverpool. “I lived in the city when it was being eviscerated,” he told The New Statesman. “It was a beautiful city, one of the few in Britain to have a genuinely indigenous culture. And that whole way of life was destroyed.” Industry died. Political power was centralized in London.
Blond argues that over the past generation we have witnessed two revolutions, both of which liberated the individual and decimated local associations. First, there was a revolution from the left: a cultural revolution that displaced traditional manners and mores; a legal revolution that emphasized individual rights instead of responsibilities; a welfare revolution in which social workers displaced mutual aid societies and self-organized associations.
Then there was the market revolution from the right. In the age of deregulation, giant chains like Wal-Mart decimated local shop owners. Global financial markets took over small banks, so that the local knowledge of a town banker was replaced by a manic herd of traders thousands of miles away. Unions withered.
The two revolutions talked the language of individual freedom, but they perversely ended up creating greater centralization. They created an atomized, segmented society and then the state had to come in and attempt to repair the damage.
The free-market revolution didn’t create the pluralistic decentralized economy. It created a centralized financial monoculture, which requires a gigantic government to audit its activities. The effort to liberate individuals from repressive social constraints didn’t produce a flowering of freedom; it weakened families, increased out-of-wedlock births and turned neighbors into strangers. In Britain, you get a country with rising crime, and, as a result, four million security cameras.
In a much-discussed essay in Prospect magazine in February 2009, Blond wrote, “Look at the society we have become: We are a bi-polar nation, a bureaucratic, centralised state that presides dysfunctionally over an increasingly fragmented, disempowered and isolated citizenry.” In a separate essay, he added, “The welfare state and the market state are now two defunct and mutually supporting failures.”
The task today, he argued in a recent speech, is to revive the sector that the two revolutions have mutually decimated: “The project of radical transformative conservatism is nothing less than the restoration and creation of human association, and the elevation of society and the people who form it to their proper central and sovereign station.”
Economically, Blond lays out three big areas of reform: remoralize the market, relocalize the economy and recapitalize the poor. This would mean passing zoning legislation to give small shopkeepers a shot against the retail giants, reducing barriers to entry for new businesses, revitalizing local banks, encouraging employee share ownership, setting up local capital funds so community associations could invest in local enterprises, rewarding savings, cutting regulations that socialize risk and privatize profit, and reducing the subsidies that flow from big government and big business.
To create a civil state, Blond would reduce the power of senior government officials and widen the discretion of front-line civil servants, the people actually working in neighborhoods. He would decentralize power, giving more budget authority to the smallest units of government. He would funnel more services through charities. He would increase investments in infrastructure, so that more places could be vibrant economic hubs. He would rebuild the “village college” so that universities would be more intertwined with the towns around them.
Essentially, Blond would take a political culture that has been oriented around individual choice and replace it with one oriented around relationships and associations. His ideas have made a big splash in Britain over the past year. His think tank, ResPublica, is influential with the Conservative Party. His book, “Red Tory,” is coming out soon. He’s on a small U.S. speaking tour, appearing at Georgetown’s Tocqueville Forum Friday and at Villanova on Monday.
Britain is always going to be more hospitable to communitarian politics than the more libertarian U.S. But people are social creatures here, too. American society has been atomized by the twin revolutions here, too. This country, too, needs a fresh political wind. America, too, is suffering a devastating crisis of authority. The only way to restore trust is from the local community on up.
Friday, July 31, 2009
Brooks -- Ah Brooks!
Op-Ed Columnist
Wise Muddling Through
comments (40)
By DAVID BROOKS
Published: July 30, 2009
Everybody wants to be a striding titan. Almost all alpha-leaders want to be the brilliant visionary in a time of crisis—the one who sees the situation clearly, makes the bold plans and delivers the faithful to the other side.
Post a Comment »
Read All Comments (40) »
It almost never works out that way. The historian Henry Adams concluded that “in all great emergencies ... everyone was more or less wrong.” Abraham Lincoln didn’t feel like a heroic leader: “I claim not to have controlled events, but confess plainly that events have controlled me.” In real crises, the successful leaders are usually the ones who cope best with ignorance and error.
David Wessel’s about-to-be-released book, “In Fed We Trust,” gives a revealing blow-by-blow account of the recent financial crisis and illustrates this point.
It is a tale replete with error. In theory, Ben Bernanke, Henry Paulson and Tim Geithner were as well prepared as anyone for this sort of event. Bernanke had spent his life studying the Great Depression; Paulson had led the world’s most prestigious investment bank; Geithner had been involved in financial rescues in Asia and beyond.
Moreover, all of them were expecting some kind of crisis. They knew there had been a dangerous surge of debt.
And yet as the panic unfolded in 2007 and 2008, they continually underestimated its scope and implications. In July 2007, Bernanke estimated global losses from the subprime mortgages and other loans of $50 billion to $100 billion. The losses turned out to be in the neighborhood of $4 trillion. In October of 2007, Bernanke said the banking system was healthy and doubted that the housing woes would destabilize it. He was wrong.
Their decision not to bail out Lehman Brothers was based on a complete misreading of the economic psychology. Paulson was sick of doing bailouts. He seems to have had some sort of intuitive moral sense that it was time for some bank to pay for its mistakes. Bernanke and Geithner went along, and none of them anticipated the meltdown that followed.
But this is not a story of failure. It’s a story of effective muddling through. Bernanke & Co. never really got control of events. But they did avert disaster and committed only a few big blunders. In the real world, that counts as a job well done.
Bernanke’s first achievement was social, not intellectual. Wessel describes one long meeting and one tough decision after another. Rarely have so few endured so many conference calls for the sake of so many. And yet through all the talk, the fear and the rotten choices, Bernanke seems to have cultivated a feeling of comradeship and harmony within the group. He kept the conversation going.
Something unexpected would happen. At one point A.I.G. claimed that it needed a $4 billion cash infusion. Within days it drew in $38 billion instead. Bernanke, Geithner, Paulson and others would just keep talking it through. They developed a feel for the crisis, and for the sort of traditions they would have to smash to address it.
Second, Bernanke avoided the grand gesture. Occasionally, Paulson would make a bold policy pronouncement. The idea was to lay down some sort of principle so the markets would understand the new rules and feel more secure. But then events would change and he’d have to reverse course. He’d end up producing more uncertainty, not less.
Bernanke and Geithner favored a process of constant and gradual adjustment. They were navigating in a violent sea, shifting their weight this way and that to stay upright another day. They tried to solve one problem at a time and worry about the unintended consequences later. Their method didn’t produce a set of clear principles. Their lack of a grand plan or an exit strategy worried some. But their method matched the chaos of the situation.
Finally, there was the size of the response team. It wasn’t too big. There weren’t giant agencies going at each other. The White House and the Congress were barely involved. But it wasn’t too small — just a lone genius and a few loyalists. Instead, the same little platoon of about a dozen people shows up again and again in Wessel’s account—a manageable community of decision makers with no single person dominating the proceedings.
This recession is happening at a time when many wonder if the political system is capable of addressing the nation’s problems. The presidency has become a gargantuan enterprise in which media-star leaders are surrounded by a permanent campaign apparatus. The Congress is both riven by ideology and dominated by parochial concerns.
The Federal Reserve is not the most democratic institution, but under Bernanke et al, it seems to have done a good enough job. Self-effacement did not lead to timidity. Good people were mobilized and were able to talk frankly about the many things they did not understand.
Sign in to RecommendNext Article in Opinion (2 of 26) » A version of this article appeared in print on July 31, 2009, on page A23 of the New York edition.
comments (40)
Wise Muddling Through
comments (40)
By DAVID BROOKS
Published: July 30, 2009
Everybody wants to be a striding titan. Almost all alpha-leaders want to be the brilliant visionary in a time of crisis—the one who sees the situation clearly, makes the bold plans and delivers the faithful to the other side.
Post a Comment »
Read All Comments (40) »
It almost never works out that way. The historian Henry Adams concluded that “in all great emergencies ... everyone was more or less wrong.” Abraham Lincoln didn’t feel like a heroic leader: “I claim not to have controlled events, but confess plainly that events have controlled me.” In real crises, the successful leaders are usually the ones who cope best with ignorance and error.
David Wessel’s about-to-be-released book, “In Fed We Trust,” gives a revealing blow-by-blow account of the recent financial crisis and illustrates this point.
It is a tale replete with error. In theory, Ben Bernanke, Henry Paulson and Tim Geithner were as well prepared as anyone for this sort of event. Bernanke had spent his life studying the Great Depression; Paulson had led the world’s most prestigious investment bank; Geithner had been involved in financial rescues in Asia and beyond.
Moreover, all of them were expecting some kind of crisis. They knew there had been a dangerous surge of debt.
And yet as the panic unfolded in 2007 and 2008, they continually underestimated its scope and implications. In July 2007, Bernanke estimated global losses from the subprime mortgages and other loans of $50 billion to $100 billion. The losses turned out to be in the neighborhood of $4 trillion. In October of 2007, Bernanke said the banking system was healthy and doubted that the housing woes would destabilize it. He was wrong.
Their decision not to bail out Lehman Brothers was based on a complete misreading of the economic psychology. Paulson was sick of doing bailouts. He seems to have had some sort of intuitive moral sense that it was time for some bank to pay for its mistakes. Bernanke and Geithner went along, and none of them anticipated the meltdown that followed.
But this is not a story of failure. It’s a story of effective muddling through. Bernanke & Co. never really got control of events. But they did avert disaster and committed only a few big blunders. In the real world, that counts as a job well done.
Bernanke’s first achievement was social, not intellectual. Wessel describes one long meeting and one tough decision after another. Rarely have so few endured so many conference calls for the sake of so many. And yet through all the talk, the fear and the rotten choices, Bernanke seems to have cultivated a feeling of comradeship and harmony within the group. He kept the conversation going.
Something unexpected would happen. At one point A.I.G. claimed that it needed a $4 billion cash infusion. Within days it drew in $38 billion instead. Bernanke, Geithner, Paulson and others would just keep talking it through. They developed a feel for the crisis, and for the sort of traditions they would have to smash to address it.
Second, Bernanke avoided the grand gesture. Occasionally, Paulson would make a bold policy pronouncement. The idea was to lay down some sort of principle so the markets would understand the new rules and feel more secure. But then events would change and he’d have to reverse course. He’d end up producing more uncertainty, not less.
Bernanke and Geithner favored a process of constant and gradual adjustment. They were navigating in a violent sea, shifting their weight this way and that to stay upright another day. They tried to solve one problem at a time and worry about the unintended consequences later. Their method didn’t produce a set of clear principles. Their lack of a grand plan or an exit strategy worried some. But their method matched the chaos of the situation.
Finally, there was the size of the response team. It wasn’t too big. There weren’t giant agencies going at each other. The White House and the Congress were barely involved. But it wasn’t too small — just a lone genius and a few loyalists. Instead, the same little platoon of about a dozen people shows up again and again in Wessel’s account—a manageable community of decision makers with no single person dominating the proceedings.
This recession is happening at a time when many wonder if the political system is capable of addressing the nation’s problems. The presidency has become a gargantuan enterprise in which media-star leaders are surrounded by a permanent campaign apparatus. The Congress is both riven by ideology and dominated by parochial concerns.
The Federal Reserve is not the most democratic institution, but under Bernanke et al, it seems to have done a good enough job. Self-effacement did not lead to timidity. Good people were mobilized and were able to talk frankly about the many things they did not understand.
Sign in to RecommendNext Article in Opinion (2 of 26) » A version of this article appeared in print on July 31, 2009, on page A23 of the New York edition.
comments (40)
Tuesday, July 28, 2009
Brooks -- Always Good, Sometimes Great --This One's Great
Very, very interesting hypothetical question. Aren't we acting this way now?
http://www.nytimes.com/2009/07/28/opinion/28brooks.html?_r=1
Tuesday, June 16, 2009
Tuesday, June 9, 2009
Brooks is So Good it Hurts
He can be nuanced to a fault.
Herein he discusses Justice Sotomayor in a multi-faceted way:
http://www.nytimes.com/2009/06/09/opinion/09brooks.html?_r=1
What I find disconcerting is that he now accepts as OK that the vast majority of discrimination cases should be dismissed. (And that is Sotomayor's record as well.) This concept has never been verbalized outside the inner sanctums of the plaintiffs' bar.
Herein he discusses Justice Sotomayor in a multi-faceted way:
http://www.nytimes.com/2009/06/09/opinion/09brooks.html?_r=1
What I find disconcerting is that he now accepts as OK that the vast majority of discrimination cases should be dismissed. (And that is Sotomayor's record as well.) This concept has never been verbalized outside the inner sanctums of the plaintiffs' bar.
Tuesday, June 2, 2009
How Does David Brooks Know So Much About Everything?
This time its the economics and culture of GM. And his predictions are not hopeful.
http://www.nytimes.com/2009/06/02/opinion/02brooks.html
http://www.nytimes.com/2009/06/02/opinion/02brooks.html
Tuesday, May 5, 2009
Brooks -- He's Taken the Long Road Home
To those of us who follow David Brooks closely, how far he has come toward total disgust of his Republican Party:
http://www.nytimes.com/2009/05/05/opinion/05brooks.html
http://www.nytimes.com/2009/05/05/opinion/05brooks.html
Wednesday, April 29, 2009
Brooks -- Do Not Go After Cheney, Bush
Remember who the Taliban are, not just who we are:
http://www.nytimes.com/2009/04/29/opinion/29friedman.html?_r=1
I totally agree with Brooks here in this well-drafter argument.
http://www.nytimes.com/2009/04/29/opinion/29friedman.html?_r=1
I totally agree with Brooks here in this well-drafter argument.
Monday, April 27, 2009
Krugman -- Money for Nothing
This is a Must Read. Is "it" over and the bankers have won? Krugman hopes not. I hope not. Because they have produced nothing of value except pain.
It occurs to me that May 4th is a key day. Through trading (turned into a "hold") I own 500 Citigroup, and 200 Regions Financial. But still I want there to be some "solution" to the banking problem and some real understanding of what really happened.
The "quants" did this, broadly speaking.
As readers of this blog know, I believe the heads of the banks had no idea what the quants were doing. (I'm not sure "quants" is the right all-inclusive category here, as it also takes "traders" to do the deed.) So, using Brooks's terms, the heads of the banks were "stupid," not "greedy." (If one must choose a dominating term above all.)
Op-Ed Columnist
Money for Nothing
By PAUL KRUGMAN
Published: April 26, 2009
On July 15, 2007, The New York Times published an article with the headline “The Richest of the Rich, Proud of a New Gilded Age.” The most prominently featured of the “new titans” was Sanford Weill, the former chairman of Citigroup, who insisted that he and his peers in the financial sector had earned their immense wealth through their contributions to society.
Soon after that article was printed, the financial edifice Mr. Weill took credit for helping to build collapsed, inflicting immense collateral damage in the process. Even if we manage to avoid a repeat of the Great Depression, the world economy will take years to recover from this crisis.
All of which explains why we should be disturbed by an article in Sunday’s Times reporting that pay at investment banks, after dipping last year, is soaring again — right back up to 2007 levels.
Why is this disturbing? Let me count the ways.
First, there’s no longer any reason to believe that the wizards of Wall Street actually contribute anything positive to society, let alone enough to justify those humongous paychecks.
Remember that the gilded Wall Street of 2007 was a fairly new phenomenon. From the 1930s until around 1980 banking was a staid, rather boring business that paid no better, on average, than other industries, yet kept the economy’s wheels turning.
So why did some bankers suddenly begin making vast fortunes? It was, we were told, a reward for their creativity — for financial innovation. At this point, however, it’s hard to think of any major recent financial innovations that actually aided society, as opposed to being new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes.
Consider a recent speech by Ben Bernanke, the Federal Reserve chairman, in which he tried to defend financial innovation. His examples of “good” financial innovations were (1) credit cards — not exactly a new idea; (2) overdraft protection; and (3) subprime mortgages. (I am not making this up.) These were the things for which bankers got paid the big bucks?
Still, you might argue that we have a free-market economy, and it’s up to the private sector to decide how much its employees are worth. But this brings me to my second point: Wall Street is no longer, in any real sense, part of the private sector. It’s a ward of the state, every bit as dependent on government aid as recipients of Temporary Assistance for Needy Families, a k a “welfare.”
I’m not just talking about the [1] $600 billion or so already committed under the TARP. There are also the [2] huge credit lines extended by the Federal Reserve; [3] large-scale lending by Federal Home Loan Banks; the [4] taxpayer-financed payoffs of A.I.G. contracts; the [5] vast expansion of F.D.I.C. guarantees; and, [6] more broadly, the implicit backing provided to every financial firm considered too big, or too strategic, to fail.
One can argue that it’s necessary to rescue Wall Street to protect the economy as a whole — and in fact I agree. But given all that taxpayer money on the line, financial firms should be acting like public utilities, not returning to the practices and paychecks of 2007.
Furthermore, paying vast sums to wheeler-dealers isn’t just outrageous; it’s dangerous. Why, after all, did bankers take such huge risks? Because success — or even the temporary appearance of success — offered such gigantic rewards: even executives who blew up their companies could and did walk away with hundreds of millions. Now we’re seeing similar rewards offered to people who can play their risky games with federal backing.
So what’s going on here? Why are paychecks heading for the stratosphere again? Claims that firms have to pay these salaries to retain their best people aren’t plausible: with employment in the financial sector plunging, where are those people going to go?
No, the real reason financial firms are paying big again is simply because they can. They’re making money again (although not as much as they claim), and why not? After all, they can borrow cheaply, thanks to all those federal guarantees, and lend at much higher rates. So it’s eat, drink and be merry, for tomorrow you may be regulated.
Or maybe not. There’s a palpable sense in the financial press that the storm has passed: stocks are up, the economy’s nose-dive may be leveling off, and the Obama administration will probably let the bankers off with nothing more than a few stern speeches. Rightly or wrongly, the bankers seem to believe that a return to business as usual is just around the corner.
We can only hope that our leaders prove them wrong, and carry through with real reform. In 2008, overpaid bankers taking big risks with other people’s money brought the world economy to its knees. The last thing we need is to give them a chance to do it all over again.
It occurs to me that May 4th is a key day. Through trading (turned into a "hold") I own 500 Citigroup, and 200 Regions Financial. But still I want there to be some "solution" to the banking problem and some real understanding of what really happened.
The "quants" did this, broadly speaking.
As readers of this blog know, I believe the heads of the banks had no idea what the quants were doing. (I'm not sure "quants" is the right all-inclusive category here, as it also takes "traders" to do the deed.) So, using Brooks's terms, the heads of the banks were "stupid," not "greedy." (If one must choose a dominating term above all.)
Op-Ed Columnist
Money for Nothing
By PAUL KRUGMAN
Published: April 26, 2009
On July 15, 2007, The New York Times published an article with the headline “The Richest of the Rich, Proud of a New Gilded Age.” The most prominently featured of the “new titans” was Sanford Weill, the former chairman of Citigroup, who insisted that he and his peers in the financial sector had earned their immense wealth through their contributions to society.
Soon after that article was printed, the financial edifice Mr. Weill took credit for helping to build collapsed, inflicting immense collateral damage in the process. Even if we manage to avoid a repeat of the Great Depression, the world economy will take years to recover from this crisis.
All of which explains why we should be disturbed by an article in Sunday’s Times reporting that pay at investment banks, after dipping last year, is soaring again — right back up to 2007 levels.
Why is this disturbing? Let me count the ways.
First, there’s no longer any reason to believe that the wizards of Wall Street actually contribute anything positive to society, let alone enough to justify those humongous paychecks.
Remember that the gilded Wall Street of 2007 was a fairly new phenomenon. From the 1930s until around 1980 banking was a staid, rather boring business that paid no better, on average, than other industries, yet kept the economy’s wheels turning.
So why did some bankers suddenly begin making vast fortunes? It was, we were told, a reward for their creativity — for financial innovation. At this point, however, it’s hard to think of any major recent financial innovations that actually aided society, as opposed to being new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes.
Consider a recent speech by Ben Bernanke, the Federal Reserve chairman, in which he tried to defend financial innovation. His examples of “good” financial innovations were (1) credit cards — not exactly a new idea; (2) overdraft protection; and (3) subprime mortgages. (I am not making this up.) These were the things for which bankers got paid the big bucks?
Still, you might argue that we have a free-market economy, and it’s up to the private sector to decide how much its employees are worth. But this brings me to my second point: Wall Street is no longer, in any real sense, part of the private sector. It’s a ward of the state, every bit as dependent on government aid as recipients of Temporary Assistance for Needy Families, a k a “welfare.”
I’m not just talking about the [1] $600 billion or so already committed under the TARP. There are also the [2] huge credit lines extended by the Federal Reserve; [3] large-scale lending by Federal Home Loan Banks; the [4] taxpayer-financed payoffs of A.I.G. contracts; the [5] vast expansion of F.D.I.C. guarantees; and, [6] more broadly, the implicit backing provided to every financial firm considered too big, or too strategic, to fail.
One can argue that it’s necessary to rescue Wall Street to protect the economy as a whole — and in fact I agree. But given all that taxpayer money on the line, financial firms should be acting like public utilities, not returning to the practices and paychecks of 2007.
Furthermore, paying vast sums to wheeler-dealers isn’t just outrageous; it’s dangerous. Why, after all, did bankers take such huge risks? Because success — or even the temporary appearance of success — offered such gigantic rewards: even executives who blew up their companies could and did walk away with hundreds of millions. Now we’re seeing similar rewards offered to people who can play their risky games with federal backing.
So what’s going on here? Why are paychecks heading for the stratosphere again? Claims that firms have to pay these salaries to retain their best people aren’t plausible: with employment in the financial sector plunging, where are those people going to go?
No, the real reason financial firms are paying big again is simply because they can. They’re making money again (although not as much as they claim), and why not? After all, they can borrow cheaply, thanks to all those federal guarantees, and lend at much higher rates. So it’s eat, drink and be merry, for tomorrow you may be regulated.
Or maybe not. There’s a palpable sense in the financial press that the storm has passed: stocks are up, the economy’s nose-dive may be leveling off, and the Obama administration will probably let the bankers off with nothing more than a few stern speeches. Rightly or wrongly, the bankers seem to believe that a return to business as usual is just around the corner.
We can only hope that our leaders prove them wrong, and carry through with real reform. In 2008, overpaid bankers taking big risks with other people’s money brought the world economy to its knees. The last thing we need is to give them a chance to do it all over again.
Sunday, April 26, 2009
Opacity, David Brooks and Simon Johnson -- Were Bankers Greedy or Stupid? Stupid.
I may have posted this before, but I cannot readily find it. Simon Johnson was on Bill Moyers Friday night and referred to this David Brooks article which discussed Johnson's suggested view of Wall Street. I feel that Brooks has it more right. And I think he now agrees: Bankers did not
understand what they were doing. Instruments were too complex. Things were in fact opaque and they were sold as mathematically transparent.
We see this over and over, and I can think of Procter & Gamble vs. Bankers Trust, some 20 years ago; and Enron, perhaps.
No one in the room wants to be the one to say "I don't understand."
This applies to Simon Johnson too, to some extent!
Op-Ed Columnist
Greed and Stupidity
comments (383)
By DAVID BROOKS
Published: April 2, 2009
What happened to the global economy? We seemed to be chugging along, enjoying moderate business cycles and unprecedented global growth. All of a sudden, all hell broke loose.
Read All Comments (383) »
There are many theories about what happened, but two general narratives seem to be gaining prominence, which we will call the greed narrative and the stupidity narrative. The two overlap, but they lead to different ways of thinking about where we go from here.
The best single encapsulation of the greed narrative is an essay called “The Quiet Coup,” by Simon Johnson in The Atlantic (available online now).
Johnson begins with a trend. Between 1973 and 1985, the U.S. financial sector accounted for about 16 percent of domestic corporate profits. In the 1990s, it ranged from 21 percent to 30 percent. This decade, it soared to 41 percent.
In other words, Wall Street got huge. As it got huge, its prestige grew. Its compensation packages grew. Its political power grew as well. Wall Street and Washington merged as a flow of investment bankers went down to the White House and the Treasury Department.
The result was a string of legislation designed to further enhance the freedom and power of finance. Regulations separating commercial and investment banking were repealed. There were major increases in the amount of leverage allowed to investment banks.
The U.S. economy got finance-heavy and finance-mad, and finally collapsed. When it did, the elites did what all elites do. They took care of their own: “Money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves,” Johnson writes.
In short, he argues, the U.S. financial crisis is a bigger version of the crises that have afflicted emerging-market nations for decades. An oligarchy takes control of the nation. The oligarchs get carried away and build an empire on mountains of debt. The whole thing comes crashing down. Johnson’s remedy is clear. Smash the oligarchy. Nationalize the banks. Sell them off in medium-size pieces. Revise antitrust laws so they can’t get back together. Find ways to limit executive compensation. Permanently reduce the size and power of Wall Street.
The second and, to me, more persuasive theory revolves around ignorance and uncertainty. The primary problem is not the greed of a giant oligarchy. It’s that overconfident bankers didn’t know what they were doing. They thought they had these sophisticated tools to reduce risk. But when big events — like the rise of China — fundamentally altered the world economy, their tools were worse than useless.
Many writers have described elements of this intellectual hubris. Amar Bhidé has described the fallacy of diversification. Bankers thought that if they bundled slices of many assets into giant packages then they didn’t have to perform due diligence on each one. In Wired, Felix Salmon described the false lure of the Gaussian copula function, the formula that gave finance whizzes the illusion that they could accurately calculate risks. Benoit Mandelbrot and Nassim Taleb have explained why extreme events are much more likely to disrupt financial markets than most bankers understood.
To me, the most interesting factor is the way instant communications lead to unconscious conformity. You’d think that with thousands of ideas flowing at light speed around the world, you’d get a diversity of viewpoints and expectations that would balance one another out. Instead, global communications seem to have led people in the financial subculture to adopt homogenous viewpoints. They made the same one-way bets at the same time.
Jerry Z. Muller wrote an indispensable version of the stupidity narrative in an essay called “Our Epistemological Depression” in The American magazine. What’s new about this crisis, he writes, is the central role of “opacity and pseudo-objectivity.” Banks got too big to manage. Instruments got too complex to understand. Too many people were good at math but ignorant of history.
The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.
Both schools agree on one thing, however. Both believe that banks are too big. Both narratives suggest we should return to the day when banks were focused institutions — when savings banks, insurance companies, brokerages and investment banks lived separate lives.
We can agree on that reform. Still, one has to choose a guiding theory. To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand.
understand what they were doing. Instruments were too complex. Things were in fact opaque and they were sold as mathematically transparent.
We see this over and over, and I can think of Procter & Gamble vs. Bankers Trust, some 20 years ago; and Enron, perhaps.
No one in the room wants to be the one to say "I don't understand."
This applies to Simon Johnson too, to some extent!
Op-Ed Columnist
Greed and Stupidity
comments (383)
By DAVID BROOKS
Published: April 2, 2009
What happened to the global economy? We seemed to be chugging along, enjoying moderate business cycles and unprecedented global growth. All of a sudden, all hell broke loose.
Read All Comments (383) »
There are many theories about what happened, but two general narratives seem to be gaining prominence, which we will call the greed narrative and the stupidity narrative. The two overlap, but they lead to different ways of thinking about where we go from here.
The best single encapsulation of the greed narrative is an essay called “The Quiet Coup,” by Simon Johnson in The Atlantic (available online now).
Johnson begins with a trend. Between 1973 and 1985, the U.S. financial sector accounted for about 16 percent of domestic corporate profits. In the 1990s, it ranged from 21 percent to 30 percent. This decade, it soared to 41 percent.
In other words, Wall Street got huge. As it got huge, its prestige grew. Its compensation packages grew. Its political power grew as well. Wall Street and Washington merged as a flow of investment bankers went down to the White House and the Treasury Department.
The result was a string of legislation designed to further enhance the freedom and power of finance. Regulations separating commercial and investment banking were repealed. There were major increases in the amount of leverage allowed to investment banks.
The U.S. economy got finance-heavy and finance-mad, and finally collapsed. When it did, the elites did what all elites do. They took care of their own: “Money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves,” Johnson writes.
In short, he argues, the U.S. financial crisis is a bigger version of the crises that have afflicted emerging-market nations for decades. An oligarchy takes control of the nation. The oligarchs get carried away and build an empire on mountains of debt. The whole thing comes crashing down. Johnson’s remedy is clear. Smash the oligarchy. Nationalize the banks. Sell them off in medium-size pieces. Revise antitrust laws so they can’t get back together. Find ways to limit executive compensation. Permanently reduce the size and power of Wall Street.
The second and, to me, more persuasive theory revolves around ignorance and uncertainty. The primary problem is not the greed of a giant oligarchy. It’s that overconfident bankers didn’t know what they were doing. They thought they had these sophisticated tools to reduce risk. But when big events — like the rise of China — fundamentally altered the world economy, their tools were worse than useless.
Many writers have described elements of this intellectual hubris. Amar Bhidé has described the fallacy of diversification. Bankers thought that if they bundled slices of many assets into giant packages then they didn’t have to perform due diligence on each one. In Wired, Felix Salmon described the false lure of the Gaussian copula function, the formula that gave finance whizzes the illusion that they could accurately calculate risks. Benoit Mandelbrot and Nassim Taleb have explained why extreme events are much more likely to disrupt financial markets than most bankers understood.
To me, the most interesting factor is the way instant communications lead to unconscious conformity. You’d think that with thousands of ideas flowing at light speed around the world, you’d get a diversity of viewpoints and expectations that would balance one another out. Instead, global communications seem to have led people in the financial subculture to adopt homogenous viewpoints. They made the same one-way bets at the same time.
Jerry Z. Muller wrote an indispensable version of the stupidity narrative in an essay called “Our Epistemological Depression” in The American magazine. What’s new about this crisis, he writes, is the central role of “opacity and pseudo-objectivity.” Banks got too big to manage. Instruments got too complex to understand. Too many people were good at math but ignorant of history.
The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what’s left of functioning markets.
Both schools agree on one thing, however. Both believe that banks are too big. Both narratives suggest we should return to the day when banks were focused institutions — when savings banks, insurance companies, brokerages and investment banks lived separate lives.
We can agree on that reform. Still, one has to choose a guiding theory. To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand.
Tuesday, April 21, 2009
Saturday, April 18, 2009
Friday, April 3, 2009
Krugman -- China's Dollar Trap
(c) 2009 F. Bruce Abel
Remember April 2, 2009. The events of yesterday are unique and world-changing.
They are:
Remember April 2, 2009. The events of yesterday are unique and world-changing.
They are:
change in mark-to-market accounting rule;
attendant rise in the S&P 500 (or "Dow" if you wish to follow that) with the assurance that the market is now no lon-ger a "Bear" market;
Geithner and Obama wow the world and actually accomplish things at the G-20;
Cramer said the unthinkable -- we now are out of "the de-pression." The depression, what??? Nobody ever said that we were in one. But,
as Cramer says, when you have a 60% decline in steel orders that's a depression. (I think I heard him right.)
The following Krugman article highlights the "China Dollar Trap," which may or not relate to the events of yesterday, but the article is worth a study:
http://www.nytimes.com/2009/04/03/opinion/03krugman.htmlBy the way did you notice that the tone of the advance the last couple of days was much more even across the S&P 500? Not just the banks. That indicates that the mutual funds are jumping back into the water.
For a brilliant analysis and compendium on the two theories of how we got where we are, see David Brooks today:
http://www.nytimes.com/2009/04/03/opinion/03brooks.html
I am of the Simon Johnson "Greed" Camp, and the Wall Street Stupidity Camp.
The greed narrative leads to the conclusion that government should
aggressively restructure the financial sector. The stupidity narrative is
suspicious of that sort of radicalism. We’d just be trading the hubris of
Wall Street for the hubris of Washington. The stupidity narrative suggests
we should preserve the essential market structures, but make them more
transparent, straightforward and
comprehensible. Instead of rushing off to
nationalize the banks, we should
nurture and recapitalize what’s left of
functioning markets.
Tuesday, March 31, 2009
Brooks -- Car Dealer in Chief
http://www.nytimes.com/2009/03/31/opinion/31brooks.html?_r=1&adxnnl=1&adxnnlx=1238497362-d4O7sfzhhvOP6l3sYnq1iw
But this one says Obama and the Auto Task Force did the right thing.
http://www.nytimes.com/2009/03/31/opinion/31tue1.html
But this one says Obama and the Auto Task Force did the right thing.
http://www.nytimes.com/2009/03/31/opinion/31tue1.html
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