The Commentariat -- May 15, 2012

My column in the New York Tiimes eXaminer is on Paul Krugman's column on the JPMorgan Stanley kablooey. The NYTX front page is here. ...

... ** NEW. I have another column in today's New York Times eXaminer, this one on David Brooks' attempt to explain Obama's popularity. The NYTX front page is here.

President Obama will appear on the ABC TV show "The View" Tuesday morning. Barbara Walters provides some clips:

President Obama delivered the Barnard College commencement address Monday:

NEW. Katrina vanden Heuvel in the Washington Post: "Richard Fisher, the conservative president of the Dallas Federal Reserve Bank, has been raising alarms about the big banks for years. The top five banks now control 52 percent of the financial industry's assets; they had 17 percent in 1970.... Fisher argues 'Complacency, complicity, exuberance and greed' are in our DNA. These 'human traits and weaknesses result in market disruptions,' Fisher says, that are 'occasional and manageable.' ... Big banks backed by government turn these manageable episodes into catastrophes.' Fisher would force the big banks to reorganize and get much smaller. And he would require 'harsh and non-negotiable consequences' for any bank that ends in trouble and seeks government aid, including removal of its leaders, replacement of its board, voiding all compensation and bonus contracts and clawing back any bonus compensation for the two previous years."

Jessica Silver-Greenberg & Nelson Schwartz of the New York Times: "In the years leading up to JPMorgan Chase's $2 billion trading loss, risk managers and some senior investment bankers raised concerns that the bank was making increasingly large investments involving complex trades that were hard to understand. But even as the size of the bets climbed steadily, these former employees say, their concerns about the dangers were ignored or dismissed. An increased appetite for such trades had the approval of the upper echelons of the bank, including Jamie Dimon...." ...

"Regression to the Mean, JPMorgan Edition." James Kwak of Baseline Scenario: "The performance of anyone doing anything will exhibit regression to the mean.... If JPMorgan came through the financial crisis well, it was some combination of skill and luck. Remember, JPMorgan didn't have as big a portfolio of toxic assets as its competitors because it was late to the party; only in retrospect do we ascribe this good fortune to the supposed skill of Jamie Dimon. JPMorgan was never as good as people (both supporters and critics) made it out to be, so we shouldn't be so surprised that it just lost $2 billion (and counting)." ...

... John Schoen of NBC News: JP Morgan Chase's "spectacular multibillion-dollar losses, still being tallied weeks after a risky trading strategy began to unravel, have renewed concerns that the government may not be up to the task of reining in the nation's biggest banks." CW: No kidding.

** Ezra Klein: prominent attorney Emmet Bondurant "alongside Common Cause, where he serves on the board of directors, [is] suing to have the Supreme Court abolish" the filibuster. ...

... New York Times Editors: "We have supported eliminating the filibuster for judicial and executive nominees. Making other filibusters harder would be good for both parties. If [Harry] Reid [D-Nev.] remains majority leader in January, he should lead the reform."

Ed Pilkington of the Guardian: "The Columbia Human Rights Law Review ... has cleared its entire spring edition, doubling its normal size to 436 pages, to carry an extraordinary investigation by a Columbia law school professor and his students. The book sets out in precise and shocking detail how an innocent man was sent to his death on 8 December 1989, courtesy of the state of Texas. Los Tocayos Carlos: An Anatomy of a Wrongful Execution, is based on six years of intensive detective work by Professor James Liebman and 12 students."

Speaking Truth to Powell. Charles Pierce: "Has there been a more vastly ove rrated person in the past 50 years than Colin Powell? He helped cover up My Lai. He did his part to make sure that the Iran-Contra mess never came fully to light. He buckled under to chickenhawk bullies in the Bush White House and did his part to lie us into a destructive war with a speech to the U.N. that he knew was based on stovepiped bullshit from people he already didn't trust. And still, people trust him and revere him.... And now, of course, he's back with another book in which he polishes his own apple to a high gloss while ducking his responsibility for the greatest foreign-policy foul-up of our time."

NEW. Oh, dear. Could these patriots be breaking the law they hold so dear? Stephanie Mencimer of Mother Jones: "the Tea Party Patriots ... is recruiting volunteers for phone banks and promising a massive outpouring of support for embattled Wisconsin governor Scott Walker.... As a nonprofit group, TPP is banned from devoting the bulk of its resources to campaign activities.... If it goes in for a big campaign in support of him, it may risk violating its tax exempt status. The IRS recently announced its intention to crack down on nonprofit groups operating as thinly veiled political campaigns, and many of its recent targets have been tea party groups."

And Krugman gets zapped:

     ... Via Daily Kos.

Presidential Race

Priorities USA, the pro-Obama superPac, provides the two-punch in the Obama campaign's attack on Romney's tenure as head of Bain Capital (but of course they don't coordinate with the O-campaign, because that would be illegal):

... I don't agree with Michael Scherer of Time on this, but he thinks the attack on Romney's business acumen might not work. ...

... For one thing, Pat Wells, who stars in the Priorities USA ad, is a self-described conservative who voted for Dubya & McCain. ...

... Steve Benen: "... for months, there's been a standard line from the GOP campaign...: what Romney did at his vulture-capital firm was similar to what the administration did when it saved the auto industry.... Romney exploited the companies he gutted to line his pockets and those of his investors. That isn't the same as what Obama did for GM and Chrysler; it's the opposite.... Obama ... wasn't motivated by profit; he was trying to save the American auto industry, the backbone of the nation's manufacturing sector, millions of American jobs, and the economy in the Midwest."

Are These People Paying Attention??? Lucy Madison of CBS News: "Presumptive Republican presidential candidate Mitt Romney has a slight edge over President Obama in the race for the White House in the latest CBS News/New York Times poll. According to the survey, conducted May 11-13, 46 percent of registered voters say they would vote for Romney, while 43 percent say they would opt for Mr. Obama."

Tim Egan: Mitt Romney is a weasel.

Say What? Greg Sargent: "... the Obama campaign began airing an ad attacking Mitt Romney over layoffs at Bain Capital, which the Obama team is holding up as emblematic of Romney's economic philosophy. Byron York reports that the Romney campaign has settled on a line of pushback -- compare what Romney did at Bain to what Obama did with the auto companies. ...

... Jon Chait of New York magazine: "One of the hidden reserves of profit discovered by Bain was the moneymaking potential opened up by breaking a social compact between workers and their bosses, a compact that increased the security of working life but held down the profit potential.... The old corporate ethos was well embodied by George Romney..., who as head of American Motors repeatedly turned down bonuses because he believed $225,000 a year (about a million and a half dollars today) was the highest salary an executive ought to earn.... Conservatives [today] have coalesced around the view that market incomes are inherently just. [Mitt] Romney himself has argued that to the extent that unfairness exists in the economy, it consists of intervention by the government or labor unions. The market is fair by definition." Read the whole post. ...

... Dueling Views of Bain. Amy Gardner & Philip Rucker of the Washington Post: Both the Obama camp & the Romney campaign produced ads yesterday about Mitt Romney's tenure as head of Bain Capital. "How the public comes to view Bain, a Boston-based company Romney led for 15 years, is critical to the former Massachusetts governor's chances in November. He has pointed to his time at Bain and the business experience he gained there as the singular reason he is the right man to fix the nation's troubled economy."

Shannon Travis of CNN: "A well-known, openly gay supporter of Mitt Romney in New York has decided to withdraw his support for Romney and back President Barack Obama instead.... Bill White wrote in a letter addressed to the former Massachusetts governor and obtained by CNN, 'You have chosen to be on the wrong side of history and I do not support your run for president any longer.'"

"Mitt Likes Music, Including This." A fairly funny auto-tune video by the Gregory Brothers, a New York Times "op-doc":

Marin Cogan of GQ reads the Ron Paul forums and reports on the "Seven Stages of Ron Paul Supporter Grief." Kinda funny. Unless you're a Ron Paul supporter.

News Ledes

Raleigh News & Observer: "John Edwards seemed surprised to hear from Rachel 'Bunny' Mellon in August 2008 that she had been providing money to Andrew Young, a friend of the former presidential candidate testified on Tuesday."

ABC News: "A medical report compiled by the family physician of accused Trayvon Martin murderer George Zimmerman and obtained exclusively by ABC News found that Zimmerman was diagnosed with a 'closed fracture' of his nose, a pair of black eyes, two lacerations to the back of his head and a minor back injury the day after he fatally shot Martin during an alleged altercation."

Washington Post: "The Justice Department has initiated a criminal probe into the $2 billion trading loss at JPMorgan Chase, according to a law enforcement source familiar with the situation."

AP: "Greece is headed for another month of political paralysis ahead of new elections in mid-June, after party leaders on Tuesday failed to reach an agreement to build a coalition government."

Washington Post: "Newly installed French President Francois Hollande declared Tuesday that he would propose a 'new pact' to his European partners emphasizing economic stimulus, as he opened a new chapter in Europe's push-pull dispute about whether growth should be stoked through spending or saving."

New York Times: "The Virginia House of Delegates rejected the judicial nomination of a gay prosecutor on Tuesday after conservative Republican lawmakers argued that the nominee would press an activist agenda."

President Francois Hollande shakes hands with his predecessor Nicolas Sarkozy before the investiture ceremony. Photo: AFP/Getty Images.

Guardian: François Hollande, France's first socialist leader in nearly 20 years, was sworn in at the Elysée palace on Tuesday in a deliberately low-key ceremony ahead of a meeting in Berlin with the German chancellor, Angela Merkel, at which he will begin his quest to temper Europe's austerity drive."

Guardian: "Rebekah Brooks, the former chief executive of News International, is to be charged over allegations that she tried to conceal evidence from detectives investigating phone hacking and alleged bribes to public officials. Brooks, one of the most high-profile figures in the newspaper industry, will be charged later on Tuesday with three counts of conspiracy to pervert the course of justice in July last year at the height of the police investigation, the Crown Prosecution Service (CPS) announced." New York Times story here.

Reuters: "Jamie Dimon faces growing calls to give up the chairmanship of JPMorgan Chase & Co when shareholders of the bank convene on Tuesday, days after it revealed losses of billions of dollars in trades that were supposed to protect it from risk."

NEW. Politico: "Americans Elect, the deep-pocketed nonprofit group that set out to nominate a centrist third-party presidential ticket, admitted early Tuesday that its ballyhooed online nominating process had failed.... Just after a midnight deadline Monday, the group acknowledged that its complicated online nominating process had failed to generate sufficient interest to push any of the candidates who had declared an interest in its nomination over the threshold in its rules." CW: somewhere in the world, Tom Friedman is weeping.

New York Times: "Iran said on Tuesday it had executed a man accused of being an Israeli intelligence agent responsible for the assassination of one of its nuclear scientists, Iranian state media reported." ...

... Reuters: "Iran's talks with the U.N. nuclear watchdog about Tehran's atomic activities are going well, a senior Iranian official said on Tuesday, the second day of discussions."

Comments

[JJG]

Marie; great essay today in the NYTX.

[Haley Simon]

What JJG said.

[alphonsegaston]

Thanks for the link to the article on Colin Powell. He is so right. Powell compares unfavorably to many other generals who served in the government, especially the one with the Polish name I can't remember who worked--I think--for Bill Clinton. Watching the UN speech today it seems obvious that he knows he is lying.

[Jack Mahoney]

Marie,

As usual, great NYTX piece. What follows, however, is a response to Joe Nocera's article today.

In a country in which online poker companies are shut down by the Federal government it seems strange that the sorts of speculation indulged in by the TBTF banks would not only be allowed to take place but also backed by taxpayer dollars.

Let's revisit AIG's "London Whale," Joe Cassano, who got rich from the premiums on "insurance protection" he sold to all comers on Wall Street. At some point at least the brighter cohort on the Street must have realized that not only that AIG was severely overextended ("If AIG is selling these CDSs to me at fire sale prices, isn't it likely that it's selling them to everybody?") but also comforted that if AIG didn't come through Wall Street had enough friends in Washington and on the Fed that the "insured" would not only be reimbursed for "losses" but paid in full.

Although AIG could not possibly pay off the claims on the protection it sold, as far as I know not one penny from Joe Cassano's bonuses based on his fraudulent activities has been clawed back. In fact, Cassano was kept on the books at a salary of $1 million per month after the depth of his fraud was uncovered.

So, in the long run, the London Whale is not gambling. Wall Street, along with its enablers in the Clinton, Bush, and Obama administrations, has created a bizarro image of Las Vegas, in which the American taxpayer is the house, and the house always loses.

[Carlyle]

In the army, subordinates that did their betters dirty work were called "dog robbers." Colin Powell, for his cover up of the My Lai massacre and his sale of war at the UN, qualifies as the all time champion "dog robber." He is a weak and obliging man.

[Akhilleus]

Marie,

Thanks for that exhaustive review of the background to this latest cluster fuck courtesy of those responsible Wall Street Masters of the Universe.

The JP Morgan fiasco reveals an essential truth about the Myth of the Free Market. Adam Smith’s invisible hand is often covered by the black glove of the career criminal. No self-respecting thief would break into your house, steal your belongings and leave incriminating fingerprints. But Jamie Dimon, his Wall Street cronies, and their friends on the Right in congress have been pretending—and want you to think—that everything is on the up and up, that they know best.

Sure they do. That’s why they just made a bad bet with our money, regardless of Dimon’s assurances that the taxpayer off the hook here, their risky decisions are still backed by you and me. The invisible hand makes yet another dip into our pockets. A few people are fired but life—and thievery—go on. There really is no other way to put it other than thievery. If someone backed your business with their own money and you went to the track with your payroll money and blew it, knowing that other person would not let you go under, what else could you call it?

Does this point out anything other than the fact that greed is at the heart of so much of Wall Street’s business? Yes. It points out that the free market is anything but. For decades we have had to listen to Friedman and Hayek and their political acolytes scream about government intervention in the markets even though government has always been a major player in the success of markets—and failure, when not done correctly, and given the close relationship Jamie Dimon has with little “Timmy” Geithner who has apparently greased the skids for JP Morgan’s fun and games, the possibility of a much bigger failure looms large. As Jack Mahoney suggests, when that happens, it's like a casino run by the American taxpayer. And the house always loses.

But the attacks from the business community, Romney, and pretty much everyone else on the Right, make no acknowledgement of other kinds of government intervention.

Some years back I recall reading the story of a farmer from Utah, I believe, who came to Washington incensed about the estate tax. He rode into town on a swirl of publicity crying that families who had suffered the loss of a loved one would then be forced to suffer the loss of their business as well, even though there has never been an example of that. The storyline being carefully crafted by the Right was yet more interference by the government into this family’s business. What was left out of this narrative was another kind of government “interference”. Over the previous few years, it turned out, this farmer had collected something in the neighborhood of $400,000 in government subsidies that not only made his business viable and helped it through hard times, they helped make him and his family rich; rich enough make them eligible for the estate tax. Maybe he would have preferred to return all that government money and keep his ideology pure. Think so? Nah.

So the story here is one-sided. Hard working farmer builds a profitable business, makes a lot of money and the government comes along and steals it. The REAL story goes like this: Hard working farmer applies for government subsidies to help start a business. Additional subsidies over the years help him through hard times and ensure the profitability of that business. He makes a lot of money through his own hard work and plenty of help from the government. Due to a death in the family, and due to the fact that they are now rich by virtue of government assistance, the government now asks them to pay their fair share in estate taxes so other hard working people can be helped.

But that’s never the story you hear because that story doesn’t support the Free Market Myth or the Great Man Theory, two of the Right's most cherished fairy tales.

Therefore, this kind of government “interference” is never talked about by the Paul Ryans and Rand Pauls of the world who want everyone to believe that all who make it rich do so by dint of their own courage, vision, determination, oh, and don't forget Moral Superiority. The Great Man Theory again (clearly this is how Romney views himself). But there is never any mention of the help many of these individuals received. A great public education, government business loans or, in the case of someone like Ross Perot, a government contract and plenty of money that allowed him to develop, on our dime, a business that made him a multi-millionaire.

It doesn’t matter if you build the world’s best widget, you still need federally developed roads to deliver them. You need multiple systems—all created and protected by government—to ensure that your goods and services will not be unfairly devalued or stolen or infringed upon by unscrupulous competitors. Copyright protection, FDA regulation, protection of police and fire departments, and on and on. Same with market regulations. Without some form of regulation who in their right minds would ever invest in anything? But lax government regulation or the laissez faire attitude of an administration could lead, as it did under Bush, to a disastrous outcome in the market and financial chaos around the world.

So yes, government does have a place in the market. With sensible regulation it can create a more reliable playing field for everyone. The fans of so-called pure capitalism want no regulation at all. They are like children who want their all-chocolate breakfast, lunch and dinner and never want to have to eat their vegetables or exercise. The NEED to be able to tilt the field to their advantage. They NEED loopholes created for their benefit. Is this the Free Market at work?? Not in any way. This is a rigged game. And even with a rigged game they still feel the need to try to cheat the system. Free Market, my ass.

When forced to submit to even sensible regulation they scream, and cry “unfair”. Banking regulation is not the financial version of the Nanny State. One of the other controlling myths of our country is the apotheosis of the rugged individual who should be left alone by the government to pursue his fortune. The government should not unnecessarily curtail the innovations of such individuals, but it also has the responsibility to protect the larger public from snake oil salesmen. What if there were no FDA and manufacturers were allowed to put narcotics in their food products to hook customers? (Not unlike what Big Tobacco did.) Is government intervention to protect the public from this kind of criminality considered “intereference”? Of course it shouldn’t be by any reasonable person.

But since Reagan, who helpfully cast the government in the role of villain (“the problem, not the solution”—okay then what is the solution? A poison pill?) the Right has offered us a false dichotomy. Aided by the Hayek fans (Glenn Beck, are you still out there?), the choice is presented as Free Markets, Freedom (always capitalized), and the American Way triumphant OR socialist slavery, degradation, death of the markets and crushing defeat for humanity.
And like little children unable to accommodate any greater levels of complexity (see: Paul Ryan’s budgets and anything that comes out of Rand Paul’s mouth) they hold onto their mythologies. The Myth of the Free Market being a particularly dangerous one.

And with a little luck, they won’t have to give it up. And guys like Jamie Dimon, after a short hiatus from blatant knavery, will be back to picking our pockets with Adam Smith’s carefully gloved invisible hand. Invisible, perhaps, but not free.

[Victoria D.]

Here's what troubles me about the Obama campaign's attack on Romney's tenure at Bain Capita: it tacitly suggests that Romney's claim that "business experience" is necesary and preferable in picking a president in these tough economic times. This is an utterly false premise for a number of reasons: presidents have many roles other than supervising the economy, and in fact it's doubtful they can even do much in that regard with a totally obstructionist Congress. If running a venture capitalist company is Romney's biggest argument for his election, why not argue that any one of a number of other successful business people should be elected? Carly Fiorina or Meg Whitman, just to name two. Or Jamie Dimon or the head of Massey Coal.
Romney has little governmental experience as a one term governor , none in the legislative area and zero in foreign policy and national security. I say hit him on these issues, as well as his total lack of credible ideas for moving us forward, and some of the awful people in his inner circle who are retreads from Bush I and Bush II (Robert Bork comes to mind immediately).
On another matter: the piece Marie linked by Jeffrey Toobin exploring the genesis of Citizens United was fantastic - and (as she feared) very, very depressing. This Court not only has few scruples, they have no shame at all. The lengths Roberts went to in order to get the result he wanted were astonishing indeed.
Marie, thanks for all the great links !

[Marie Burns]

Thanks to everybody for your comments on Jamie Dimon & on Wall Street bad boys in general.

@Victoria D. Your general point is right: that Romney's "business experience" has little transferability to the presidency. In fact, Romney himself found that it didn't help him run Massachusetts: he got bored with that job right quick. As both Romney found out, you can't order around the legislative branch the way you can a bunch of subordinates, especially when it is controlled by the opposing party.

But I've been reading public polls today, and the American people think that Romney's stint at Bain qualifies him to run the country & manage the economy. In fact, they think he is better qualified than Obama to help the economy. I expect they also think that the fact that he went from rich to super-rich is testimony to his fiscal competency. Most voters are low-info voters & they really don't know how Romney got rich; if anything, they think he turned around unprofitable companies & made them profitable.

So Obama has no choice but to try to punch holes in that widely-held misperception. As Michael Scherer of Time writes, the Obama tack may not work. I think Obama's overall approach on President Bain is going to be that he will be President Bush III, which is accurate, tho he would be worse than Bush -- more like President Paul Ayn Ryan. We'll see. At this point, it sure looks like a close election. As the great man said, "Democracy sucks. Every other form of government sucks more." (Possible paraphrase.)

Marie