I was moderately in the favor of the bailout. If I had been a member of congress yesterday, I would have voted for the bailout. I think the problem is real, and quite serious, and it seemed to me unlikely that a better plan could have been wrought in Congress, given the nature of the administration, and the nature of the Republican opposition. My sense is that most of the Democrats who voted against the bill basically agree with me, but just balance the risks and benefits of the bailout somewhat differently, deciding that it was a bad enough bill that there was no real harm in waiting a bit and see if something better could be devised. I think that is a plausible position, but I think in the end is a case of the best being the enemy of the good.
But on the other hand, leaving the question of whether we stand on the precipice of a cataclysmic depression aside, there is something heartening about the spectacle of this back benchers' revolt, the rank and file of both parties thumbing their nose at their respective leadership, the president (note to Republicans: too bad you had to wait till there was 100 days to go to demonstrate your independence from the thieves and liars who comprised the Bush administration on a vote that mattered), and at Wall Street, the Chamber of Commerce, and the punditocracy. Paulson’s maladroitness in the past few weeks is only now being fully examined, especially whether the big mistake was letting Lehman Brothers go down, and some troubling and interesting questions about whether the AIG rescue was really just a way of pulling Goldman Sachs’s chestnuts from the fire. And his bailout plan was to present something that was at best marginally acceptable to both parties, and then attempt a “cram-down” as I believe the term is, by making “my way or the highway” type threats and getting all of Wall Street’s ancestral voices to prophesy doom.
What the vote showed is there a great reluctance among legislators, and the American people as a whole, to simply patch up the status quo, and give money to Wall Street so they can go on being Wall Street. Underlying the vote was a confused, but clear cry for fundamental change. The Republicans haven’t figured this out yet; but when they realize that more of the free market simply won’t be able to solve a problem created by the excesses of the free market, it will leave only the ideologues in the free market camp. And Democrats need to realize that this is a call for fundamental sweeping transformation. Populism has been, at least from the time of Richard Hofstadter (if not since the time of William McKinley) been excoriated for anti-Wall Street rants devoid of substance, but this is a caricature, as historians have demonstrated again and again, most recently in Charles Postel’s excellent study The Populist Vision. The core populist demand was for the democratization of the American economy, a goal as elusive in the early 21st century as it was in the late 19th century, and just as pertinent. The goal is not to run against Wall Street, but to try to run Wall Street, and to try to run Wall Street differently. It is a cause that Barack Obama ignores at his own peril.
It is a sad fact of economic and political life that sometimes eggs fall. And rather than paying a king’s ransom to call out all the horses and men to try put it back together again, energies would perhaps be better spent on figuring out why it fell it fell in the first place, and, to beat the analogy to death, try either putting the egg is a less exposed position, or try putting something less fragile than an egg on the top of the wall.
Tuesday, September 30, 2008
Monday, September 29, 2008
Time for Obama to Lead
If Barack Obama wants to be president of the United States, he has to start acting like a president. And that means offering a specific route out of our economic turmoil.
People are confused, frightened and looking for answers. McCain doesn't have them. Obama does, or at least he has the beginning of answers.
I'm not much on economic policy, which I am happy to leave to Peter. But I do know a political moment when I see one.
If Obama starts acting like a candidate who can lead us out of this mess, he will go to the White House. I don't like to think of the consequences if he doesn't.
People are confused, frightened and looking for answers. McCain doesn't have them. Obama does, or at least he has the beginning of answers.
I'm not much on economic policy, which I am happy to leave to Peter. But I do know a political moment when I see one.
If Obama starts acting like a candidate who can lead us out of this mess, he will go to the White House. I don't like to think of the consequences if he doesn't.
Requiem for a Tabloid Newsman
Steve Dunleavy's gradual retirement from the Post was noted kindly in today's Times. Pardon me, but I think Dunleavy and his boss, Rupert Murdoch, drove New York's newspaper scene over a cliff.
As Tim Arango's piece notes, Dunleavy's politics could sometimes "lead him astray." I think it was much worse than that.
Murdoch and Dunleavy rose at the Post in 1977, a pivotal year in the history of New York when the city's old New Deal liberalism was on its last legs. Murdoch and Dunleavy helped finish it off, replacing it with a nasty conservatism. The old politics of New Deal New York, best exemplified by the pre-Murdoch Post, supported an inclusive democracy that aimed to provide a decent standard of living for everyone.
Since 1977, the Post's populism has mostly been about exploiting anger and resentment, with little to say about the rising economic inequality in the city that undermines the homes of working people.
With its emphasis on right-wing populism, Arango's story might leave you thinking that there were no conservative columnists before Dunleavy. But what about Westbrook Pegler, William F. Buckley, and Dick Young? There have been plenty of conservatives in the New York City press since World War II, but only since the Seventies have they become the voices of conventional wisdom.
Dunleavy, the piece argues, "tweaked the political landscape of the city, proving that populism in New York City could come from the right and not just from the cadre of well-known left-leaning columnists of the time, men like Pete Hamill, Jimmy Breslin, Murray Kempton and Jack Newfield."
But Dunleavy's career wasn't entirely about bringing balance to a city of liberal journalism--as if balance in and of itself is always a good thing.
Dunleavy's ascent was about lowering standards. Compared to his peers of 1977, he lacks Hamill's knowledge of the city, Newfield's talent for muckraking, Kempton's humane intelligence, and Breslin's ability to write.
I hate to kick a guy when he's down, but since Dunleavy and the Post have been doing for it a long time, I will. Together, Steve Dunleavy and Rupert Murdoch debased New York City and its journalism.
As Tim Arango's piece notes, Dunleavy's politics could sometimes "lead him astray." I think it was much worse than that.
Murdoch and Dunleavy rose at the Post in 1977, a pivotal year in the history of New York when the city's old New Deal liberalism was on its last legs. Murdoch and Dunleavy helped finish it off, replacing it with a nasty conservatism. The old politics of New Deal New York, best exemplified by the pre-Murdoch Post, supported an inclusive democracy that aimed to provide a decent standard of living for everyone.
Since 1977, the Post's populism has mostly been about exploiting anger and resentment, with little to say about the rising economic inequality in the city that undermines the homes of working people.
With its emphasis on right-wing populism, Arango's story might leave you thinking that there were no conservative columnists before Dunleavy. But what about Westbrook Pegler, William F. Buckley, and Dick Young? There have been plenty of conservatives in the New York City press since World War II, but only since the Seventies have they become the voices of conventional wisdom.
Dunleavy, the piece argues, "tweaked the political landscape of the city, proving that populism in New York City could come from the right and not just from the cadre of well-known left-leaning columnists of the time, men like Pete Hamill, Jimmy Breslin, Murray Kempton and Jack Newfield."
But Dunleavy's career wasn't entirely about bringing balance to a city of liberal journalism--as if balance in and of itself is always a good thing.
Dunleavy's ascent was about lowering standards. Compared to his peers of 1977, he lacks Hamill's knowledge of the city, Newfield's talent for muckraking, Kempton's humane intelligence, and Breslin's ability to write.
I hate to kick a guy when he's down, but since Dunleavy and the Post have been doing for it a long time, I will. Together, Steve Dunleavy and Rupert Murdoch debased New York City and its journalism.
House to Wall Street: Drop Dead
The best headline that is making the rounds: “House to Wall Street: Drop Dead.” Our dysfunctional political system has done in our dysfunctional economic system, which only seems appropriate. What happens next? If Pelosi and Boehner can’t twist the appropriate number of arms hard enough in the next few days, I suspect the congress will let Paulson let things go ad hoc-ing along until after the elections. Of course, it is the Republican’s fault, and Boehner evidently let members vote their “conscience” (or their likely election consequences) with predictable results. But every political and economic player in this debacle have their own responsibility for its failure. Prophylaxis is always a tough sell, Bush is the greatest wolf-crier in American history, and our faux populists are comfortable offering faux solutions to very real problems. If 25% of the workforce is selling apples next Monday, critics right and left will say that reports of the economy’s death were exaggerated. It wasn’t a good bill, in many ways. Almost nothing for homeowners, enough loopholes in the executive compensation restrictions to drive a $10 mil salary through, and perhaps most importantly, very weak provisions for government take over of failed institutions. Perhaps, as many lefty bloggers have written, now is the time for the Dems to write a good bill, and force Bush to sign it, though I doubt they will do so.
Perhaps the problems was thinking of this as a “bailout” a sop to the status quo, rather than what was really needed, a first step in the transformation of our financial system. In any event, pious and pusillanimous appeals to bipartisanship evidently aren’t going to work; and appeals to self-interest, however disguised in the usual palaver, will appear as they are; small and self-interested. If there is any good to come from this, perhaps the country needs a continuation of this crisis for a few more weeks, with a few more dramatic bank failures, to really concentrate its attention, and create a real Rooseveltian moment. Now is the time for the Democrats to educate the people on what the problem is, and what sort of pain and burden will have to be borne, and how to fix it. For a country that has been wandering about in the deserts of free markets for forty years, the entrance into the next promised land has to be carefully planned. Barack Obama you have to explain to the American people what they need to do, as if you were already president. And Barack Obama, now is the time for you to come to the aid of your party, and now is the time for you to come to the aid of your country.
Perhaps the problems was thinking of this as a “bailout” a sop to the status quo, rather than what was really needed, a first step in the transformation of our financial system. In any event, pious and pusillanimous appeals to bipartisanship evidently aren’t going to work; and appeals to self-interest, however disguised in the usual palaver, will appear as they are; small and self-interested. If there is any good to come from this, perhaps the country needs a continuation of this crisis for a few more weeks, with a few more dramatic bank failures, to really concentrate its attention, and create a real Rooseveltian moment. Now is the time for the Democrats to educate the people on what the problem is, and what sort of pain and burden will have to be borne, and how to fix it. For a country that has been wandering about in the deserts of free markets for forty years, the entrance into the next promised land has to be carefully planned. Barack Obama you have to explain to the American people what they need to do, as if you were already president. And Barack Obama, now is the time for you to come to the aid of your party, and now is the time for you to come to the aid of your country.
Sunday, September 28, 2008
More on Glass-Stegall
There has a been a lot of talk recently about the Banking Act of 1933, commonly known as the Glass-Steagall Act, especially those provisions of the act that concerned the separation of commercial from investment banking, which is what most people have in mind when they use the term Glass-Stegall. I fear the significance of the act has been widely misunderstood in the press, and let me try to correct some of confusions, if I can be allowed a post which is more professorial than most of my efforts.
When the 1933 act went into effect, it was not making a new distinction, but trying to restore an old one. When modern American investment banking got underway in the late 19th century, it was almost entirely handled by private banks, that is, banks that were organized as partnerships, and not as corporations. (All commercial banks, by definition, are organized as corporations.) The reasons for this are complex, but it has to do with the excellent ties of private bankers to European capital like J.P. Morgan (to Britain) and and Kuhn, Loeb (to Germany) and the fact that membership on the NYSE was limited to partnerships. Starting in the early 20th century, there began to be some underwriting by commercial banks, and this became increasingly pronounced in the 1920s, when many of the bigger banks established security affiliates that underwrote corporate and government securities, but through 1933 the lion’s share of the underwriting remained the domain of private bankers. Glass –Steagall forced commercial banks out of underwriting, and private banks had a choice between continuing to have deposits or underwriting, and a few prominent private banks, notably J.P. Morgan, reorganized as commercial banks. But the whole point was to isolate what was thought to be the riskiest and most speculative part of the banking business, underwriting, from commercial banking.
Okay. The Glass Steagall wall worked for a while, and then became progressively eroded starting in the 1970s, and long before it vanished it was widely seen as the part of the problem. I have found myself re-reading in recent days a book by one of my old professors at NYU, Vincent Carosso’s Investment Banking in America, which appeared in 1970. Now of all the professors I had at NYU, he was probably the most conservative. (I ran into him at the opera on evening, after a performance of Kurt Weill’s masterpiece, “The Rise and Fall of the City of Mahagonny” with an great agit-propy libretto by Berthold Brech, and staged appropriately by the Met, with the chorus coming down the aisles waving protest banners. I loved it. I asked Vince what he thought and he said, shaking his head, without a hint of irony, “cultural bolshevism!”) Anyway re-reading his account of Glass-Steagall, I was surprised that how strongly he supported it, and argued that the securities affiliates of commercial banks had indeed engaged in risky behavior and imprudent speculations, and that though some of the critics of investment banking were half-baked and half-cocked, that’s what happens in a democracy, and the final act preserved the essential features of both investment and commercial banking. Twenty years later attacking his book had become a cottage industry among conservative free marketers, who argued that the Glass-Stegall distinction had become a dangerous anachronism, and that Carosso had gotten it wrong.
Rather than delve further into this controversy, what is perhaps most interesting is that by the 1990s it had indeeed became anachronistic, but not for the reason Glass-Steagall's conservative critics assumed; underwriting was no longer the bread and butter of investment banks, and they were happy to cede large portions of their underwriting business to commercial banks. Investment banks had become, more than anything else, institutions that traded heavily for their own account in anything that seemed like a plausible investment. The basic distinction between investment banks and commercial banks remained as it always had been—investment banks were less strictly regulated and far more speculative in their business ventures than commercial banks. And it is this, that in the end, has brought down so many banks on Wall Street in recent weeks.
We will not be able to revise the distinction between commercial and investment banks , and in some ways that isn’t the point. The whole point of Glass-Steagall was to control speculation and rampant speculative activities in the banking industry. And in a new environment, what some are calling the “new new deal” this is what we face again, to create a framework that allows for some market operations, curbs speculation, and keeps the lender of last resort from lending as promiscuously as it has done in recent weeks. The debate on how to really fix the financial system, beyond providing the largess of the American people to Wall Street has barely begun. And in this debate, the proper understanding of our economic history is essential.
When the 1933 act went into effect, it was not making a new distinction, but trying to restore an old one. When modern American investment banking got underway in the late 19th century, it was almost entirely handled by private banks, that is, banks that were organized as partnerships, and not as corporations. (All commercial banks, by definition, are organized as corporations.) The reasons for this are complex, but it has to do with the excellent ties of private bankers to European capital like J.P. Morgan (to Britain) and and Kuhn, Loeb (to Germany) and the fact that membership on the NYSE was limited to partnerships. Starting in the early 20th century, there began to be some underwriting by commercial banks, and this became increasingly pronounced in the 1920s, when many of the bigger banks established security affiliates that underwrote corporate and government securities, but through 1933 the lion’s share of the underwriting remained the domain of private bankers. Glass –Steagall forced commercial banks out of underwriting, and private banks had a choice between continuing to have deposits or underwriting, and a few prominent private banks, notably J.P. Morgan, reorganized as commercial banks. But the whole point was to isolate what was thought to be the riskiest and most speculative part of the banking business, underwriting, from commercial banking.
Okay. The Glass Steagall wall worked for a while, and then became progressively eroded starting in the 1970s, and long before it vanished it was widely seen as the part of the problem. I have found myself re-reading in recent days a book by one of my old professors at NYU, Vincent Carosso’s Investment Banking in America, which appeared in 1970. Now of all the professors I had at NYU, he was probably the most conservative. (I ran into him at the opera on evening, after a performance of Kurt Weill’s masterpiece, “The Rise and Fall of the City of Mahagonny” with an great agit-propy libretto by Berthold Brech, and staged appropriately by the Met, with the chorus coming down the aisles waving protest banners. I loved it. I asked Vince what he thought and he said, shaking his head, without a hint of irony, “cultural bolshevism!”) Anyway re-reading his account of Glass-Steagall, I was surprised that how strongly he supported it, and argued that the securities affiliates of commercial banks had indeed engaged in risky behavior and imprudent speculations, and that though some of the critics of investment banking were half-baked and half-cocked, that’s what happens in a democracy, and the final act preserved the essential features of both investment and commercial banking. Twenty years later attacking his book had become a cottage industry among conservative free marketers, who argued that the Glass-Stegall distinction had become a dangerous anachronism, and that Carosso had gotten it wrong.
Rather than delve further into this controversy, what is perhaps most interesting is that by the 1990s it had indeeed became anachronistic, but not for the reason Glass-Steagall's conservative critics assumed; underwriting was no longer the bread and butter of investment banks, and they were happy to cede large portions of their underwriting business to commercial banks. Investment banks had become, more than anything else, institutions that traded heavily for their own account in anything that seemed like a plausible investment. The basic distinction between investment banks and commercial banks remained as it always had been—investment banks were less strictly regulated and far more speculative in their business ventures than commercial banks. And it is this, that in the end, has brought down so many banks on Wall Street in recent weeks.
We will not be able to revise the distinction between commercial and investment banks , and in some ways that isn’t the point. The whole point of Glass-Steagall was to control speculation and rampant speculative activities in the banking industry. And in a new environment, what some are calling the “new new deal” this is what we face again, to create a framework that allows for some market operations, curbs speculation, and keeps the lender of last resort from lending as promiscuously as it has done in recent weeks. The debate on how to really fix the financial system, beyond providing the largess of the American people to Wall Street has barely begun. And in this debate, the proper understanding of our economic history is essential.
Ex-Mayor Endorses Obama
As befits a blog run by two historians, Greater New York likes to take the long view in its posts. Nevertheless, this blogger is embarrassed to admit that he missed an endorsement of Barack Obama by a former mayor of New York City that deserves some attention.
The endorsement of Obama by Ed Koch, reported by New York One, says something about Obama's ability to win over Democrats and independents. It also suggests how Sarah Palin could turn voters away from John McCain. In his statement on behalf of Obama, Koch said:
Koch, of course, has been wildly erratic in his endorsements. In 2004 he backed Bush, largely because he thought he would be better for the security of Israel.
Such logic helped turn my beloved Aunt Tessie, a New Deal Democrat, into a Republican. But a Koch endorsement of Obama could help the Democratic candidate with Jewish voters like my aunt. And in a tight race in Florida, every vote will count. Are you listening, Aunt Tessie?
The endorsement of Obama by Ed Koch, reported by New York One, says something about Obama's ability to win over Democrats and independents. It also suggests how Sarah Palin could turn voters away from John McCain. In his statement on behalf of Obama, Koch said:
I have concluded that the country is safer in the hands of Barack Obama, leader of the Democratic Party and protector of the philosophy of that party. Protecting and defending the U.S. means more than defending us from foreign attacks. It includes defending the public with respect to their civil rights, civil liberties and other needs, e.g., national health insurance, the right of abortion, the continuation of Social Security, gay rights, other rights of privacy, fair progressive taxation and a host of other needs and rights.
If the vice president were ever called on to lead the country, there is no question in my mind that the experience and demonstrated judgment of Joe Biden is superior to that of Sarah Palin. Sarah Palin is a plucky, exciting candidate, but when her record is examined, she fails miserably with respect to her views on the domestic issues that are so important to the people of the U.S., and to me. Frankly, it would scare me if she were to succeed John McCain in the presidency.
Koch, of course, has been wildly erratic in his endorsements. In 2004 he backed Bush, largely because he thought he would be better for the security of Israel.
Such logic helped turn my beloved Aunt Tessie, a New Deal Democrat, into a Republican. But a Koch endorsement of Obama could help the Democratic candidate with Jewish voters like my aunt. And in a tight race in Florida, every vote will count. Are you listening, Aunt Tessie?
Saturday, September 27, 2008
Short-Term Draw of Long-Term Victory?
The general verdict in the New York dailies is that last night's presidential debate was something of a draw, with Obama performing best on the economy and McCain winning an advantage on foreign policy. But the long-term impact of last night's contest depends largely on the evolution of our national economic crisis. If the economy is the main issue on Election Day, then Obama's superior performance on economic matters will give him an important advantage.
Obama's best moment on foreign policy came when he pointed out how utterly mistaken McCain was on the decision to go to war in Iraq. It is that large judgment, and not the tactical decision on the surge, that is the best measure of McCain's fitness to gauge the necessity for war. At the same time, I thought Obama's tough talk on Pakistan made him sound a little trigger happy in that part of the world. But in the end, there didn't seem to be that much difference between them on Pakistan: McCain implied that he'd stage military operations there as well but wouldn't talk about them much.
McCain tried to present himself as the candidate with a firmer grounding in American history, reaching all the way back to World War II, Eisenhower and Ronald Reagan to prop up his candidacy. Obama invoked his dad's enthusiasm for coming to the US to argue that our country was once a beacon to the world.
Yet despite such discussions of history, I don't recall anyone mentioning that Ole Miss, the setting of the debate, saw vicious rioting against James Meredith's effort to integrate the school in 1962. Two died in the riots. One of them was a jukebox repairman, a visitor to the campus out of curiosity, killed by a stray bullet. The other was Paul Guihard, a reporter for Agence France Presse. His body was found in a remote part of the campus with a bullet hole in the back of his head. In all likelihood, he was executed by people who didn't want journalists reporting on resistance to integration.
Equally forgotten in the debate was Senator McCain's involvement with the Keating Five scandal, which fed into the economic disaster of the savings and loan industry in the late 1980s and early 1990s. McCain was investigated but never charged with anything, but the aura of the episode still lingers for anyone who cares to look.
I don't expect future debates to discuss the events that took place at Ole Miss in 1962, but it will be interesting to see if Obama ever brings up McCain and the Keating Five.
Obama's best moment on foreign policy came when he pointed out how utterly mistaken McCain was on the decision to go to war in Iraq. It is that large judgment, and not the tactical decision on the surge, that is the best measure of McCain's fitness to gauge the necessity for war. At the same time, I thought Obama's tough talk on Pakistan made him sound a little trigger happy in that part of the world. But in the end, there didn't seem to be that much difference between them on Pakistan: McCain implied that he'd stage military operations there as well but wouldn't talk about them much.
McCain tried to present himself as the candidate with a firmer grounding in American history, reaching all the way back to World War II, Eisenhower and Ronald Reagan to prop up his candidacy. Obama invoked his dad's enthusiasm for coming to the US to argue that our country was once a beacon to the world.
Yet despite such discussions of history, I don't recall anyone mentioning that Ole Miss, the setting of the debate, saw vicious rioting against James Meredith's effort to integrate the school in 1962. Two died in the riots. One of them was a jukebox repairman, a visitor to the campus out of curiosity, killed by a stray bullet. The other was Paul Guihard, a reporter for Agence France Presse. His body was found in a remote part of the campus with a bullet hole in the back of his head. In all likelihood, he was executed by people who didn't want journalists reporting on resistance to integration.
Equally forgotten in the debate was Senator McCain's involvement with the Keating Five scandal, which fed into the economic disaster of the savings and loan industry in the late 1980s and early 1990s. McCain was investigated but never charged with anything, but the aura of the episode still lingers for anyone who cares to look.
I don't expect future debates to discuss the events that took place at Ole Miss in 1962, but it will be interesting to see if Obama ever brings up McCain and the Keating Five.
Thursday, September 25, 2008
Creative Destruction
In the days after 9/11, my mother wisely tried to put the disaster in perspective. In the past, she observed, people died in terrible epidemics and the survivors got on with life. So we have done in New York City since 9/11. Our resilience, the historian Max Page suggests in a fine new book, is grounded in the fact that people have been imagining New York's destruction for more than two centuries.
In The City's End: Two Centuries of Fantasies, Fears and Premonitions of New York's Destruction (Yale, 2008), Page surveys every manner of imaginary apocalypse in Gotham, from fires to floods to nuclear war. He looks at every form of imagery, from films to drawings to novels. Through it all, with many pages of arresting illustrations, he finds conclusions that are surprisingly heartening.
As you might expect, he finds that depictions of disaster in New York reflect both the transformations of New York and long-standing American preoccupations: mixed feelings about cities, mistrust of immigrants, and the apocalyptic dimension of American religious thought. Still, he discerns two recurring themes.
Page is wise enough to realize that the fears made real on 9/11 could make New York a more frightened and withdrawn place. They could also, he argues, make people more creative and public-spirited. We live delicately balanced between the two, but I'd bet on the latter. So does Page. "New York," he concludes, "will remain the way up for us all, the home of our ideals, and the place to which the world looks for ideas, for success, for art, and for a new start."
In The City's End: Two Centuries of Fantasies, Fears and Premonitions of New York's Destruction (Yale, 2008), Page surveys every manner of imaginary apocalypse in Gotham, from fires to floods to nuclear war. He looks at every form of imagery, from films to drawings to novels. Through it all, with many pages of arresting illustrations, he finds conclusions that are surprisingly heartening.
As you might expect, he finds that depictions of disaster in New York reflect both the transformations of New York and long-standing American preoccupations: mixed feelings about cities, mistrust of immigrants, and the apocalyptic dimension of American religious thought. Still, he discerns two recurring themes.
One is the dark, minor key of alarm and warning, lessons and political arguments, fear and premonition of real disaster. The other is the key of celebration and entertainment, homage and love for the city. These two registers mark the two ends of American ideological composition: a persistent embrace of progress and modernism, utopia and ascent, but also a suspicion of failure, and the harsh truth of the jeremiad. That culture has been built on imagining our greatest city's end.
Page is wise enough to realize that the fears made real on 9/11 could make New York a more frightened and withdrawn place. They could also, he argues, make people more creative and public-spirited. We live delicately balanced between the two, but I'd bet on the latter. So does Page. "New York," he concludes, "will remain the way up for us all, the home of our ideals, and the place to which the world looks for ideas, for success, for art, and for a new start."
Tuesday, September 23, 2008
The Last Hundred Days
The eight years of the Bush administration have been, if nothing else, full of events of significance and import. Who would have thought that the last hundred days might qualify as the most important period in his presidency? What is the opposite of a lame duck? A healthy duck? A super duck? Bush is going out the only way he knows how to, putting congress between a rock and a hard place, and squeezing out yet more authority for the presidency and the unified executive, with the Democrats once again faced with the challenge of being seen as either partisan spoilsports or dupes. Finally after many election cycles of talking about it, we finally have an October (okay, a late September) Surprise, and both presidential candidates are, well, surprised. Who would ever have thought that a fundamental crisis in capitalism could so help the capitalists? But that is perhaps the basic problem with this $700 billion bailout; when capitalism fails, and you cannot conceive of any alternative, the only thing you can do is help the capitalists.
And Bush ends his administration being compared to the president he is probably least like, FDR. So what New Deal analogy do you want to make? Shall I liken the toxic collateralized mortgage securities bailout to, the NRA? The RFC? The HOLC? The TVA? There really doesn’t seem to anything quite like the current bailout in Roosevelt’s armamentarium of social programs. Perhaps the AAA is the closest analogy, where the government intervened with a complex series of price supports to keep farmers down on the farm; but of course now instead of supporting dirt poor farmers, we are providing financial support to filthy rich bankers. The principle is the same, I suppose. And like the NRA, the worst of the New Deal programs, its basic purpose seems to be to “stabilize” the existing structure of American industry, with all of its inequalities and inequities. This seems fundamentally misconceived; the goal of the government should be to keep lending and credit available to all who need it; it should not be keep in place the bankers and the current banking system. The basic problem seems to be that, to coin a phrase, in for a penny, in for a pound. You can’t half takeover the banking system. Banking companies should be compelled to participate in the bailout, whether they want to or not, and there should be general limits on compensation. Nationalize the banking system. Look the whole point of capitalism is that you have to pay for your failures. Socialism is nature's way of saying that capitalism has failed and visa versa.)
Or alternatively, follow the advice of some conservatives who say the crisis talk is overblown, and let the market take its own course, with a much smaller intervention for some financial institutions that really need the help. I do think that the market can largely sort this out, and the $700 billion (and a renationalized Freddy and Fannie) should be used, like the TVA, in creating a government funding alternative to the banking system that is superior to the private system. And lets spend much more on creating limited equity cooperatives and superior public housing so families would not feel compelled to spend above their heads to purchase a home.
I am increasingly skeptical of whether this plan is needed, and whether the situation is really as dire as it is being painted by Paulson. Democrats need to stand their ground, and take their time. At an absolute minimum, the stance has to be, as Krugman says “no equity stake, no deal.” The ultimate lesson of the New Deal is, I think, that massive government intervention in the economy without a concomitant massive restructuring of the economy is doomed to failure. We need to take over the banks, in whole or in part. (Oh, and by the way, if John McCain doesn’t vote for the final package, neither should any Democrat.) What is at stake is not merely the future of the economy, but our future as a democracy.
And Bush ends his administration being compared to the president he is probably least like, FDR. So what New Deal analogy do you want to make? Shall I liken the toxic collateralized mortgage securities bailout to, the NRA? The RFC? The HOLC? The TVA? There really doesn’t seem to anything quite like the current bailout in Roosevelt’s armamentarium of social programs. Perhaps the AAA is the closest analogy, where the government intervened with a complex series of price supports to keep farmers down on the farm; but of course now instead of supporting dirt poor farmers, we are providing financial support to filthy rich bankers. The principle is the same, I suppose. And like the NRA, the worst of the New Deal programs, its basic purpose seems to be to “stabilize” the existing structure of American industry, with all of its inequalities and inequities. This seems fundamentally misconceived; the goal of the government should be to keep lending and credit available to all who need it; it should not be keep in place the bankers and the current banking system. The basic problem seems to be that, to coin a phrase, in for a penny, in for a pound. You can’t half takeover the banking system. Banking companies should be compelled to participate in the bailout, whether they want to or not, and there should be general limits on compensation. Nationalize the banking system. Look the whole point of capitalism is that you have to pay for your failures. Socialism is nature's way of saying that capitalism has failed and visa versa.)
Or alternatively, follow the advice of some conservatives who say the crisis talk is overblown, and let the market take its own course, with a much smaller intervention for some financial institutions that really need the help. I do think that the market can largely sort this out, and the $700 billion (and a renationalized Freddy and Fannie) should be used, like the TVA, in creating a government funding alternative to the banking system that is superior to the private system. And lets spend much more on creating limited equity cooperatives and superior public housing so families would not feel compelled to spend above their heads to purchase a home.
I am increasingly skeptical of whether this plan is needed, and whether the situation is really as dire as it is being painted by Paulson. Democrats need to stand their ground, and take their time. At an absolute minimum, the stance has to be, as Krugman says “no equity stake, no deal.” The ultimate lesson of the New Deal is, I think, that massive government intervention in the economy without a concomitant massive restructuring of the economy is doomed to failure. We need to take over the banks, in whole or in part. (Oh, and by the way, if John McCain doesn’t vote for the final package, neither should any Democrat.) What is at stake is not merely the future of the economy, but our future as a democracy.
Monday, September 22, 2008
Five Banks and a Ballpark
Let me take break from the long series of posts on the financial crisis—they will return—and take note of the other big event in New York City over the weekend; the last game ever to be played in Yankee Stadium (of course, before the start playing in the new Yankee Stadium next year.) Let me tell you a story. I was at a wedding in Atlanta a few weeks ago, and I was chatting with the grandfather of the bride, a sprightly 95, and still volunteering a few days a week at the hospital in which he has worked for about sixty years. I knew he was Yankee fan, because, in what was probably my only other conversation with him about 20 years ago, we were in a car, going somewhere (for Passover, I think.) We were on the Major Deegan, drove past the stadium, and we got talking. He grew up in the Bronx and he told me about scrounging up fifty cents, getting a seat in the bleachers, and wait and watch the Babe and Lou Gehrig blast out home runs.
Anyway, we got talking in Atlanta about the imminent destruction of Yankee Stadium, and he told me that he first saw the Yankees in 1922, at the Polo Grounds, that is, the year before Yankee Stadium opened, and that he has been a Yankee fan ever since, from the era of Ruth and Gehrig, through the DiMaggio and Mantle years, the downturn in the 1960s, and the times of Reggie, Donnie, and Derek, which have come to an end this year, with the Yankees out of Octovber baseball for the first time in fifteen years. Anyway, he told me, God willing, he will be around next April, still watching the Yankees. How many people out there, have lived through and remembered the entire 86-year life of Yankee Stadium? And I asked him if he remembered to talking to old time baseball fans in those years, and he said, sure, I remember people talking about the way baseball used to be played in the 1880s and 1890s. Cool.
What is the moral? The recklessness on Wall Street in recent years has often been praised as a bout of creative destruction; the strong surviving, the weak failing and falling, to have their carcasses picked over by the vultures and jackals. And I suppose part of this is inevitable. Certainly if you go back 86 years ago, very few of the current names of Wall Street were around then; Chase National and J.P Morgan, now J.PMorganChase is about as close as you get, and I suppose First National City Bank into Citicorp; other than that, very few names remain from the early 1920s. But if we learned anything over the past two weeks, creative destruction needs to be separated from overclever destruction, when the masters of the universe get overmastered. And the death of Yankee Stadium,the grandest of grand ball parks, which had it roots in the surging property values in the early 21st century, is certainly an example of a destruction that is too clever by half.
Anyway, we got talking in Atlanta about the imminent destruction of Yankee Stadium, and he told me that he first saw the Yankees in 1922, at the Polo Grounds, that is, the year before Yankee Stadium opened, and that he has been a Yankee fan ever since, from the era of Ruth and Gehrig, through the DiMaggio and Mantle years, the downturn in the 1960s, and the times of Reggie, Donnie, and Derek, which have come to an end this year, with the Yankees out of Octovber baseball for the first time in fifteen years. Anyway, he told me, God willing, he will be around next April, still watching the Yankees. How many people out there, have lived through and remembered the entire 86-year life of Yankee Stadium? And I asked him if he remembered to talking to old time baseball fans in those years, and he said, sure, I remember people talking about the way baseball used to be played in the 1880s and 1890s. Cool.
What is the moral? The recklessness on Wall Street in recent years has often been praised as a bout of creative destruction; the strong surviving, the weak failing and falling, to have their carcasses picked over by the vultures and jackals. And I suppose part of this is inevitable. Certainly if you go back 86 years ago, very few of the current names of Wall Street were around then; Chase National and J.P Morgan, now J.PMorganChase is about as close as you get, and I suppose First National City Bank into Citicorp; other than that, very few names remain from the early 1920s. But if we learned anything over the past two weeks, creative destruction needs to be separated from overclever destruction, when the masters of the universe get overmastered. And the death of Yankee Stadium,the grandest of grand ball parks, which had it roots in the surging property values in the early 21st century, is certainly an example of a destruction that is too clever by half.
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