The AIG bailout (now up to about $182 billion) is the perfect case of what should never have happened. AIG was essentially two companies under one roof: a giant boring insurance company that was quite solvent and a giant speculative hedge fund that lost hundreds of billions. The two should never have been allowed to coexist (we regulate insurance companies to make sure they don't blow all the premiums they're paid on stupid gambles) and once AIG became insolvent it was not necessary to bail out the hedge fund operation to keep the insurer going.

Being the biggest insurance company in the world, AIG collapsing would likely have caused a mass panic and set off a bad chain of events. The collapse of the hedge fund which made giant bets with other hedge funds and financial entities wouldn't have done so. It would have screwed over the fund's counterparties (a "counterparty" in this instance being who the hedge fund was making bets with), but it wouldn't have caused a massive chain reaction.

A lot of this is due to the kind of bets AIG's hedge fund was making. In many instances, it was taking relatively small amounts of money on the chance that very very large CDOs (collateralized debt obligations, the massive bundles of mortgages that set of the entire debt crisis) would stop paying off. In some cases this was billed as "insuring" the CDOs, but they were pretty much straight up bets since the people buying the "insurance" weren't the owners of those CDOs, they were just betting on them failing (kind of like taking out fire insurance on someone else's property then cheering for the arsonists). Being willing to take these giant bets with a huge downside was mostly due to the way the hedge fund people were compensated. If they made a risky bet that was calculated to make money over an extended period of time (like taking huge bets on the health of poorly understood CDOs), the hedge fund people got paid for the entire estimated profit right away. They didn't have to wait until the deal had run its course. They didn't even have to wait until the deal had made any money at all. They got paid right away. This obviously created a massive conflict of interest, giving the hedge fund guys incentive to make any deal they could "estimate" would make money regardless of the risk.

When the CDOs started going under and AIG suddenly didn't have the money to pay off their bets; the Federal government didn't need to step in and start shoveling money into the furnace. The could have forced AIG into chapter 11, fired all the management, then spun off the giant insurance company we'd decided was essential to the global economy. The insolvent hedge fund could then have been wound down. There would not have been enough money to pay off all the bets AIG had lost, but so what? It's not the taxpayers' responsibility to bail out every company that makes bad bets and goes under. And, as stated, in many cases the counterparties had only paid out relatively small amounts of money getting some truly sick odds on their bets (up to 100:1). However, between the money they did have, the bets they'd made that didn't actually lose, and any money they could've clawed back from what was paid to hedge fund guys based on phantom profits; there likely would have been enough to pay back the money the counterparties had put up to make those bets. The counterparties wouldn't have been happy, but that's what happens when you make giants bets with a company that'll never be able to pay them off if they lose.

So, in the end, no one would have been out of pocket any money and the incompetents running AIG would have been out on the streets. Instead, we spent billions bailing out not the insurance side (which was not insolvent) but the hedge fund side which never should have been bailed out.

Just finished reading Bailout Nation, with New Post-Crisis Update: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy and it made me feel ill. Sure, the author overstated a few things to make his point. But even the raw numbers are pretty brutal, and I learned a few things I hadn't known. Draws a pretty bleak picture of how deregulation, lack of oversight, distorted reward structures, and historically low interest rates combined to melt the entire financial system. His emphasis in on the Fed and how normally sedate banks and insurance companies went wild with speculative greed.

I liked Michael Lewis'  The Big Short: Inside the Doomsday Machine a lot better for an inside look at how the mess got started and how it played out. For obvious reasons, the guys who made a killing betting against the real estate market could be candid with Lewis in a way the guys who lost billions of their investors' money never will be.

Found this Glenn Greenwald article from a couple years ago about the root of the Tea Party anger and how it was misdirected towards minorities instead of the truly rich and powerful rigging the system. He ties it into the anger misdirected towards Clinton by Gingrich's Contract with America crowd.

Just as was true for the 1994 crime bill, the right-wing fury over health care reform is motivated by the fear that middle-class Americans will have their money taken away by Obama while — all together now, euphemistically — “having someone else benefit.”  And this “someone else” are, as always, the poor minorities and other undeserving deadbeats who, in right-wing lore, somehow (despite their sorry state) exert immensely powerful influence over the U.S. Government and are thus the beneficiaries of endless, undeserved largesse:  people too lazy to work, illegal immigrants, those living below the poverty line.....

 .....The premise of these citizen protests is not wrong:  Washington politicians are in thrall to special interests and are, in essence, corruptly stealing the country’s economic security in order to provide increasing benefits to a small and undeserving minority.  But the “minority” here isn’t what Fox News means by that term, but is the tiny sliver of corporate power which literally writes our laws and, in every case, ends up benefiting.

Just ran across this. McCain sucking up to a dictator.

Watching Republicans on TV the last two days talking about Libya and Iraq has been downright embarrassing. They've gone into 24/7 election mode and refuse to say anything good about the US under Obama. Not only are they clearly hoping the economy doesn't recover until after the election, they just as clearly are upset when the US scores any foreign policy victories. Wouldn't be surprised to find out some of them secretly wish Osama bin Laden were still alive.

McCain congratulated the French and British yesterday on victory in Libya without mentioning the American contribution, then churlishly claimed that the war would have been over much sooner if Obama had done things differently. Today, Romney was talking about our orderly and planned well in advance withdrawal from Iraq as if it were the panicked evacuation of the last personnel from the embassy roof a la Saigon.

Need I point out the obvious. Libya is an example of using our power in a limited but very effective way to help people free themselves. Iraq is an example of using overwhelming force to create a total mess. The Republicans find it quite inconvenient that they were in charge of the amazingly expensive mess while someone they dislike was in charge of the inexpensive success.


This is Mitt's quote on Iraq:

President Obama’s astonishing failure to secure an orderly transition in Iraq has unnecessarily put at risk the victories that were won through the blood and sacrifice of thousands of American men and women. The unavoidable question is whether this decision is the result of a naked political calculation or simply sheer ineptitude in negotiations with the Iraqi government. The American people deserve to hear the recommendations that were made by our military commanders in Iraq.

Koch bros

If you want background on the most powerful men in American politics whom you've likely heard of, you should read this New Yorker article on the Koch brothers, billionaire right-wingers who fund an entire web on organizations, media fronts, and other assorted attempts to move American politics as far to the right as possible.

the Kochs vastly outdid ExxonMobil in giving money to organizations fighting legislation related to climate change, underwriting a huge network of foundations, think tanks, and political front groups. Indeed, the brothers have funded opposition campaigns against so many Obama Administration policies—from health-care reform to the economic-stimulus program—that, in political circles, their ideological network is known as the Kochtopus.

Oddly, as I was typing this; Rachel Maddow (who I would totally hit on if she were straight, as I just love smart tomboyish chicks) started talking about the Kock brothers somehow going after one of her producers by name.
Here's the video (but it's not very exciting, TBH)

Apparently, it is now illegal to take cash for used goods in Louisiana.

It's a law that was passed during this year's busy legislative session.....
.....[House bill 195] states those who buy or sell second hand goods are prohibited from using cash. State representative Rickey Hardy co-authored the bill. Hardy says, "they give a check or a cashiers money order, or electronic one of those three mechanisms is used.".....
.....Besides non-profit resellers like Goodwill, and garage sales, the language of the bill encompasses stores like the Pioneer Trading Post and flea markets.

 So much for limited government. I guess you can get right wingers to go along with almost anything as long as it's in the name of "law and order" (in this case, keeping people from selling stolen goods). Obviously, this bill was so poorly written that it'll likely be repealed (can't take cash at yard sales, brilliant). But the urge to control more and more of our lives is genuine. If something can't be monitored by the government, best not to allow it to take place at all.

Just look at our famously successful War on Drugs (so successful that no one can get drugs anywhere in the US). All we've had to do is spend hundreds of billions of dollars, lock up millions of people, sacrifice our 4th & 5th Amendment rights, enrich murderous gangsters at home and despots around the world; and we've made drugs slightly harder to get hold of. Terrific. I can't wait to see what's next on the agenda.

Word out of Tripoli is that Gadhafi is dead. To me, Libya is an almost perfect example of how American military power should be used. There was a popular uprising against a brutal dictator, which was being violently suppressed. We and our allies provided support for the rebels, including airpower; but never committed ground troops. The dictator eventually gets defeated, mostly due to opposition by his own people. Post-war Libya will be rebuilt by Libyans for the benefit of Libyans. That's the way to do things. Hard to do anything but pat Obama on the back on foreign policy.

I really don't understand the hostility to alternative energy on the part of the right wing. OK, I understand hostility on the part of those in the oil or coal industries as pure short-sighted self interest. That's pretty standard. What I don't understand is the hostility emanating from right wing bloggers, talking heads, or even commenters on message boards. It's as if anything the damn hippies like absolutely must be opposed regardless of what it is.

If we really want "energy independence", is it better to hope unicorns discover a massive overlooked source of oil deep in the American heartland, or to come up with alternatives to the oil we now import from dictatorships in the Middle East? Is it better to burn through our limited fossil fuels as fast as we possibly can, or to adopt methods to stretch how long they last.

The easiest is solar energy. By far our biggest demand for electricity is during the day. It's when we run A/C the most. It's when our factories are running. It's when our offices, schools, and stores are open. We have to build an overcapacity of electrical plants just to deal with the big spikes in demand we experience in the day. Luckily enough, that's also when the sun is shining. We have tens of millions of single family homes with empty roofs, just waiting for electrical panels. We have entire office and industrial parks with rooftops just as empty. Filling these rooftops with generating capacity would drastically reduce the demand for electricity and suffer almost no transmission loss. Fossil fuels combine for 2/3 of our electrical generation, and as demand increases they account for almost all the new generating capacity that comes online.

The Freakonomics site has a post that manages to completely miss the point. It disparages rooftop solar in places like San Francisco because there are sunnier parts of the state; treating it as an either/or proposition as if putting rooftop solar in San Francisco meant it couldn't go in Bakersfield or Fresno. It also completely ignores the energy lost in transmission which is saved by generating it where it's consumed and indulges in some hippie-punching by speculating that San Franciscans only want solar panels to make themselves look good.

The article goes on to praise San Diego for having just over 2000 residential solar installations. In a city of over 1.3 million people which gets only 42 rainy days a year, 2000 roofs with solar is a friggin joke. San Diego is absolutely perfect for solar and should have it on almost every roof. We should be putting rooftop solar pretty much everywhere practical, especially in places that never have snow and to which power transmission is lossy and can't be easily expanded.

Charles Pierce on David Brooks

It's Tuesday, and David Brooks is happy — nay, ecstatic — that all of you out there are using your encroaching poverty to rediscover your moral compass. He calls it — and I am not kidding here — The Great Restoration, and he's awfully proud of each and every one of you peasants.....

.....to Brooks, "Quietly but decisively, Americans are trying to restore the moral norms that undergird our economic system."
Jesus H. Christ in a fking Volvo, no, it doesn't. It means people are broke. People are broke because the end product of 30 years of economic theorizing and political action that you supported has resulted in a shattered middle-class. People are broke because the Wall Street casino that your politics created and celebrated and enabled finally broke the entire country and took the rest of us down with it.

Bloomberg's Editorial Board
writes on the same basic idea as my "tax to cause the least pain" concept, but is also worried about people getting pissed off and just wanting to "punish" Wall Street.

We support Obama’s stance that people who earn more than $200,000 (or $250,000 for a couple) ought to contribute more to the public weal. Critics call this “class warfare,” but it needn’t be. The intention isn’t to punish the rich, nor to suggest that people with high incomes are bad. The intention is to raise the money necessary to finance the amount of government we want, and to do so as fairly as possible. Those who have been luckiest in the lottery of life -- whether by talent or trust fund -- have also, in recent years, been luckiest in rates of taxation

Goldman Sachs must really, really be sweating its public image, as I just ran across a full page they ran in "Popular Science" touting their role in building a big arena in Louisville. I can't imagine that the readership has a big crossover with investment banking customers, so I'm guessing they're just trying to tell the world: "See, we sometimes actually help get funding for stuff you like. We're not just blood-sucking vampires."

I Liked Ike

Where has the Republican Party of Eisenhower, of Ford, even of Nixon gone?

There is space for a political party that is in favor of a small yet efficient government that intrudes into the market and personal lives only when necessary, strong cost-effective defense, low taxes that cause the least pain and market distortion, and balanced budgets except in emergencies. We just don't have one of those parties.

Small, efficient governments don't spend hundreds of billions in corporate welfare. Cost-effective defense doesn't waste billions on unneeded big-ticket items nor does it get involved in military adventurism overseas. A sound government would raise enough money to pay for its operations, not borrow hundreds of billions to avoid raising taxes while shifting as much of the tax burden as possible onto the backs of those who can least afford it.

I really think that a lean government that only operates where it is really needed could be an electoral winner, mainly through keeping tax rates really low without borrowing our kids into the grave. So it depresses me to see the party that pays lip service to low taxes and small government make corporate welfare its biggest priority.

Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union. It is time to pause in our career to review our principles, and if possible revive that devoted patriotism and spirit of compromise which distinguished the sages of the Revolution and the fathers of our Union.

- Andrew Jackson, Veto of the Second Bank of the United States, 1832.

Goodbye to All That: Reflections of a GOP Operative Who Left the Cult

Both parties are rotten - how could they not be, given the complete infestation of the political system by corporate money on a scale that now requires a presidential candidate to raise upwards of a billion dollars to be competitive in the general election? Both parties are captives to corporate loot. The main reason the Democrats' health care bill will be a budget buster once it fully phases in is the Democrats' rank capitulation to corporate interests - no single-payer system, in order to mollify the insurers; and no negotiation of drug prices, a craven surrender to Big Pharma.

But both parties are not rotten in quite the same way. The Democrats have their share of machine politicians, careerists, corporate bagmen, egomaniacs and kooks. Nothing, however, quite matches the modern GOP.

Causing the Least Pain

I've noticed that opponents of the so-called "Buffett Rule" (that millionaires shouldn't pay lower tax rates than the less well off) throw out phrases like "class warfare" and "jealousy" as if the point were just to punish rich people for the hell of it.

The fact is, government operations need to be paid for. Doing this requires taxes and taxes on anyone cause at least some pain. So we should try to find  the source of taxes that cause the least pain and the least distortion of the market. Charging millionaires like Warren Buffett the same tax rates that others pay as a way to narrow the budget deficit seems about as painless as we can get.

The same holds true for Inheritance Taxes. Sure, it would be nice to inherit millions without paying any taxes, but it would be nice for a janitor to pay less tax on his paycheck too. Which do you think causes more pain, inheritance taxes on estates over $1 million or income taxes + state taxes + payroll taxes on the average pay stub?

I've read articles that explain away the lower taxes Buffett pays based on the fact that payroll taxes have a cap and capital gains are taxed at a lower rate as if this were just the way things are and there's nothing we can do about it. Those tax rates weren't set by edict from the Flying Spaghetti Monster. They were set by political decisions and can be changed by political decisions. Payroll taxes skyrocketed under Reagan as a way to disguise the size of the deficits he was running and no President since has done a thing to lower them; even as upper income tax rates, inheritance taxes, and capital gains taxes have been slashed or entirely eliminated.

The tax burden has been trending in the direction of most pain, as taxes on those who can least afford it (mainly payroll and sales taxes) have gone up while taxes on those who aren't struggling have gone down. If we need to do something about the deficits (and we do), then I'm simply asking that we go in the other direction and look at taxes that cause the least pain.

"There is always an easy solution to every human problem--neat,
plausible, and wrong."  

H.L Mencken

"9-9-9" 

Herman Cain

Politics is not a game. It effects real people in very real ways. It decides what taxes we pay, if we go to war, and how your kids are educated. So I can't hope for someone batshit crazy like Bachmann to win the Republican nomination just because she'd be easier to beat. Whoever gets the nomination could easily end up the next President, and I'd prefer that not be someone batshit crazy. So definitely pulling for a moderate, preferably someone with enough spine to stand up to the wingnuts in his own party. Unfortunately, that's not the moderate we're stuck with. Romney is the only non-wingnut to gain any traction, so I guess he's the man. Not that he'd be a terrible President if he was working with a Democratic Congress (he wouldn't be); just that he's not the man to stand up to a Republican Congress and tell them to slow down.


This definitely appears to be the race Romney wants. He's the only moderate the press acknowledges (sorry, Huntsman) and there are 3 conservatives to split the far more numerous rightwing vote. He's just got to hope they don't coalesce around one candidate because if they do Romney is toast. His only path in a year dominated by wingnut anger is to win with a moderate plurality. He'll be helped by the press and Republican establishment, who are scared of a loose cannon and really don't give a damn about social issues.

Not going to dive into a complex explanation of where I've been. Just figure it's enough to say I saw a lot, did a lot, and had a hell of a lot of fun. Definitely should have kept writing, but I didn't. Always missed it, so now I'm back.

So, umm, how ya been?