Crony capitalism

I haven’t yet, and probably never will, fully think through this editorial from today’s Wall Street Journal, titled An Economy of Liars. The author is from the Cato Institute, a right-libertarian group, so read it discerningly for that bias.

Thomas Carlyle, the 19th century Victorian essayist, unflatteringly described classical liberalism as “anarchy plus a constable.” As a romanticist, Carlyle hated the system—but described it accurately …

The idea that multiplying rules and statutes can protect consumers and investors is surely one of the great intellectual failures of the 20th century. Any static rule will be circumvented or manipulated to evade its application. Better than multiplying rules, financial accounting should be governed by the traditional principle that one has an affirmative duty to present the true condition fairly and accurately—not withstanding what any rule might otherwise allow. And financial institutions should have a duty of care to their customers. Lawyers tell me that would get us closer to the common law approach to fraud and bad dealing …

Hayek’s mentor, Ludwig von Mises, predicted in the 1930s that communism would eventually fail because it did not rely on prices to allocate resources. He predicted that the wrong goods would be produced: too many of some, too few of others. He was proven correct.

In the U.S today, we are moving away from reliance on honest pricing. The federal government controls 90% of housing finance. Policies to encourage home ownership remain on the books, and more have been added. Fed policies of low interest rates result in capital being misallocated across time. Low interest rates particularly impact housing because a home is a pre-eminent long-lived asset whose value is enhanced by low interest rates.

Distorted prices and interest rates no longer serve as accurate indicators of the relative importance of goods. Crony capitalism ensures the special access of protected firms and industries to capital. Businesses that stumble in the process of doing what is politically favored are bailed out.

Note through this that it’s not just big business lying. Big business and government are in bed together.

But “financial institutions should have a duty of care to their customers”? And “Deregulation is not some kind of libertarian mantra but an absolute necessity if we are to exit crony capitalism”?

Yes, but who will enforce that if not the “cognitively captive” regulators? Class action lawyers? Sheesh! They’re as unpopular as bureaucrats, and justifiably so in many, many (most?) cases. Dismantling regulation per se is not an adequate response. That will only leave us captive to megacorp or to a new cartel of judges and shysters with a chaotic jumble of 50 different rules, one per state.

On the other hand, a local bank, not answerable to a Mother Ship in New York City, might behave itself without massive, Washington-based regulation and without big gun bullshit slingers like the Breck Girl, John Edwards, to sue them if they do get out of line.

Isn’t this another indicator that we need some trust busting of the “too big to fail”? Then we can deregulate. Right?

Is it possible better to distill Goldman Sachs than this?

J. Bradford DeLong, an economist at Berkeley, distills the Goldman Sachs allegations so thoroughly that it would be foolish for me to try to excerpt it. This is, maybe, a 5 minute read — if you’ve never cracked an economics textbook in your life.

UPDATE:

Here’s a half-hearted defense of Goldman Sachs, not surprisingly from the Wall Street Journal.

After 18 months of investigation, the best the government can come up with is an allegation that Goldman misled some of the world’s most sophisticated investors about a single 2007 “synthetic” collateralized debt obligation (CDO)? Far from being the smoking gun of the financial crisis, this case looks more like a water pistol.

The column suggests that the SEC overlooked, or is trying in its Complaint to ignore, “the difference between a cash CDO—which contains slices of mortgage-backed securities—and a synthetic CDO containing bets against these securities … The existence of a short bet wasn’t Goldman’s dark secret. It was the very premise of the transaction.”

Did Goldman have an obligation to tell everyone that Mr. Paulson was the one shorting subprime? Goldman insists it is “normal business practice” for a market maker like itself not to disclose the parties to a transaction, and one question is why it would have made any difference. Mr. Paulson has since become famous for this mortgage gamble, from which he made $1 billion. But at the time of the trade he was just another hedge-fund trader, and no long-side investor would have felt this was like betting against Warren Buffett.

Not that there are any innocent widows and orphans in this story. Goldman is being portrayed as Mr. Potter in “It’s a Wonderful Life,” exploiting the good people of Bedford Falls. But a more appropriate movie analogy is “Alien vs. Predator,” with Goldman serving as the referee. Mr. Paulson bet against German bank IKB and America’s ACA, neither of which fell off a turnip truck at the corner of Wall and Broad Streets.

Greetings, Masson’s Blog followers

There’s no explanation for the traffic spike today besides Doug Masson’s kind words at his blog. Welcome to you all.

I’ll see if I can come up with something new to say, but meanwhile those of you converging from the left coasts should like “Places not worth caring about” from last night. James Howard Kunstler posits, among other things, that if we keep building places not worth caring about, we’ll soon have a Country not worth caring about – a point on which there should be ample ground between thoughtful liberals and conservatives, I’d think. We’re embodied creatures, after all, and the space we inhabit affects us powerfully.

Like a lot of young men, I once thought I’d be an architect. I quickly learned that I did not have what it took, so I thought I’d be a homebuilder. I abandoned that for different reasons – heck, it was the 60s and early 70s and everything was unsettled – and eventually landed in the disreputable profession of law, having tired of making an honest living. [Note to self: locate smiley-face icon. Or winky-face.]

Doug described me as a true conservative, which I’ll take as high praise. Religiously, I went off the scale 13 years ago, embracing Eastern Orthodox Christianity – which it’s critics fault for not changing with the times. To that, I say, “Damn straight!” That’s as conservative as it gets religiously, though you’ll find some Obama bumper stickers in our parking lot on Sunday. Religious and political conservatism are not, except for perhaps a few issues, a package deal.

Back to places worth caring about. I’m Chairman of my Church Building Committee as we plan a new building that we intend to be very much worth caring about. Here’s a few thoughts I shared along with two key renderings. [Note to self: incorporate PayPal button for friendly Church Building Fund donations.]

We’ve hired a Charleston, SC designer to lead in the design of an Orthodox temple and site to cherish for centuries. His sensibility is New Urbanist, but we’ll be building at 43N and 225 just west of Battle Ground, on 8 acres currently supporting corn or soybeans.

As important as the temple itself – which will even have real plaster walls to receive iconography in the future – is the site plan, creating a fitting sense of both invitation and separation, with a courtyard that will serve a fairly important purpose at “Orthodox Easter.” The idea is not alien to the points Kunstler is making about urban spaces in “Places not worth caring about.”

Again: welcome, visitors/newcomers.

Places not worth caring about

In James Howard Kunstler’s view, public spaces should be inspired centers of civic life and the physical manifestation of the common good. Instead, he argues, what we have in America is a nation of places not worth caring about.

And argue it he does, with passion in the greatest tirade I can recall ever watching. Take 19:48 to watch it yourself and see if you can keep from laughing – and agreeing. (Oh yeah: watch it with your earbuds or after the kiddies are down for the night.)

“Suburbia – Advanced Mutation” and “What’s Really Going On Here?” look too much like the postwar excrescences in my hometown. I used to think it was my town that was the problem, but most of the stuff built since World War II – i.e., most of the stuff built in my lifetime – is not worth caring about.

Big military as small government?

Heritage Action for America will guarantee that when a wavering congressman thinks of voting for higher taxes, increased regulation, or a weaker national defense, television ads in his home district will remind him that a vote for bigger government is a vote for less freedom.

(Edwin J. Feulner and Michael A. Needham of the Heritage Foundation, announcing  formation of Heritage Action for America as a lobbying arm; emphasis added; subscription may be required.)

Strong national defense as small government? What cosmos do these guys inhabit?

And would “increased regulation” include trust-busting of those intolerable “too big to fail” banks and other businesses? Gee. I feel freer being held hostage by Megacorp already.

Where’s a Conservative to turn on election day?

There’s too many good, smart people blogging and too few running for office.

Daniel Larison, to whose blog I just resumed subscribing, has several items in the last week on the incoherence of “movement conservatism” – i.e., the fake conservatism of the current G.O.P., Fox TV, TownHall.com, etc..

In The “Republican Obama” Syndrome on April 6, he writes, in the context of Movement Conservative Hosanna’s for some neophyte named Marco Rubio, about a paradox:

Obama causes a very strange reaction in Republicans. On the one hand, they want to regard him as a joke and an incompetent, but they also desperately want to find someone who can imitate his appeal and success, and so it is almost as if they go out of their way to anoint whatever young politician they come across as their new hero and then disregard all of the person’s liabilities by saying, “Well, he’s no more inexperienced than Obama was” or “She’s still better than Obama!” It is an odd mix of contempt for Obama mixed with admiration for Obama’s success and an even stranger need to outdo him in the categories that originally caused them to view Obama so poorly.

In Hawks Are Just Embarrassing Themselves on April 7, he deconstructs a particular hawkish comment (about Obama’s supposed contribution to “a startling period of auto-emasculation” in nuclear policy) and thus reveals a common genre of attack on Obama:

“The substance of Obama’s positions is unchanged from the previous administration, but it is imperative that I make him appear as a weak buffoon, so I will simply invent a complaint about entirely superficial appearances that mean nothing.”

[The author of the lame hawkish comment] is just one among many conservatives thrown into apoplexy by basically nothing.

One Republican Obama critic actually lamented that “Obama will downsize the military-industrial complex.” Really?! And that’s bad?!

On a roll, on Thursday Larison questions in The Triumph of Ideology the claim that the conservative mind has closed by denying that the “Movement Conservative” mind was ever open.

The conservative mind of the sort described by Kirk is one that is both grounded in principle and also very capable of critical thinking and self-criticism, but what I think we have seen in recent years is not much the closing of such a mind as its replacement by an ideological mentality that is basically hostile to a conservative mind …

Where conservative intellectuals once had to prove themselves by the strength of their arguments, they could now increasingly get along by repeating not much more than slogans and audience-pleasing half-truths …

The creation of the conservative media as an “alternative” to mainstream media gave way to conservative media as a near-complete substitute for their conservative audience. At one point, there was a desire, which I think was partly very genuine, for greater fairness to the conservative perspective, but this soon morphed into the need to construct a parallel universe of news and commentary untainted by outsiders …

[T]he supposed radical reactionary extremists [so labeled by Movement Conservatives] were actually the far, far more reasonable ones who were not advocating all of the things that have become so important to movement conservatives: aggressive war, reckless power projection, expansion of state surveillance and detention, exaggeration of the nature and scope of foreign threats, and absolute deference to the executive in “time of war” ….

I’m not keen on Obama (and neither is Larison), but give me some criticisms that aren’t brain-dead sound bites, for gosh sake!

One wonders where Republican hawks can possibly go from here. They have almost three more years of an Obama Presidency to endure, and already they have gone mad with alarmism, hysterics and overreaction to fairly ho-hum policy decisions. Obama needs a credible, sane opposition to keep him in check and challenge him when he is actually wrong. Right now, he doesn’t have that, and all of us will suffer for it. His own party will not hold him accountable, because a President’s party never does, but in any contest between an erring Obama and a mad GOP the latter will keep losing.

(Deterrence and Disamarmament, April 8, again by Larison – emphasis added).

I’ve been reading for the first time Russell Kirk’s classic, The Conservative Mind (alluded to by Larison), and I am struck by the extent to which today’s putative conservatives are not true conservatives, but hawkish and cynical statists. Having lost the “evil empire” in 1989, they keep looking for enemies we supposedly can and must eradicate, and dissing the Democrats for insufficient eradicatory zeal.

Do you think I exaggerate? Are you going to fling 9-11 at me?

My take on 9-11 and terrorism, after more than a little vacillation, is “if there’s no solution, there’s no ‘problem.'” Problems have solutions. Terrorism has no solution and thus is not a problem. Terrorism instead is an evil, a dark mystery with which we must live for the foreseeable future – taking reasonable precautions, of course, but stopping short of “aggressive war, reckless power projection, expansion of state surveillance and detention, exaggeration of the nature and scope of foreign threats, and absolute deference to the executive in ‘time of war.’”

In 1972, I voted for McGovern over the patently-crooked Nixon. Having absorbed in subsequent years the radical change wrought in the Democrat party that year (I’m thinking of blogging on that change), I’m not sure I could do something like that again. Not that I slavishly follow its endorsements, but Indiana Right to Life announced this week a blanket policy of endorsing no Democrats in 2010. My first reaction was negative, but it’s a decently-thought-out position:

Whereas the Democratic Party officially endorses the right to unrestricted abortion on demand; and

Whereas Democratic leadership continues aggressively to advance federal policies that undermine the right to life of unborn children; and

Whereas Congressman Brad Ellsworth, Congressman Baron Hill, and Congressman Joe Donnelly betrayed the trust of pro-life Hoosiers by voting for the pro-abortion federal health care reform bill; and

Whereas the Democratic caucus in the Indiana House, under the leadership of Speaker Pat Bauer, continues to block all legislation aimed at limiting, restricting, and reducing abortions in the state of Indiana; and

Whereas candidates of the Democratic Party are responsible for the policies and actions of the party and its leadership;

Be it resolved that the Indiana Right to Life Political Action Committee will grant no endorsements to any Democratic candidates for any public office.

Still, Republicans: give me a credible choice! Voting for McCain was the hardest Presidential vote I’ve cast since 1972. I’m beginning to understand people who stay home muttering “to hell with them all.”

Play with the cards you’re dealt

Interesting column today from David Brooks of the New York Times.

[M]uch research suggests that extremely self-confident leaders can also be risky … [C]harismatic C.E.O.’s often produce volatile company performances. These leaders swing for the home run and sometimes end up striking out. They make more daring acquisitions, shift into new fields and abruptly change strategies.

Jim Collins, the author of “Good to Great” and “How the Mighty Fall,” celebrates a different sort of leader. He’s found that many of the reliably successful leaders combine “extreme personal humility with intense professional will.”

You don’t have to be a corporate leader to appreciate some of the insights.

Obamacare and the future of the Democrat Party

Interesting column at the Washington Post today from a columnist I can’t remember reading before, Matt Miller, a progressive think-tanker, about why Obamacare is driving Republicans to distraction. (I guess I’m going to use “Obamacare” as shorthand for a while, although Obama let Congress write “his” signature legislation.)

Shock 1: Losing big. For starters, Republicans simply have not lost on an issue this big in decades…

Shock 2: The quest for security. The next blow is the dawning awareness that the quest for economic security in a global era is reshaping politics. The instant premise of Republican analysis — that the public will never tolerate Obamacare’s repeal once it is implemented — concedes the point that health reform will bring a measure of security that families crave…

Shock 3: The death of the tax issue. The final shock is the cruelest of all: the demise of the tax issue that’s defined the Republican brand since Ronald Reagan…

Until Obamacare, I had said that the parties had become very similar in economic policy. Miller thinks the Republicans engineered that, and I think he’s onto something:

Media coverage features so many breathless political ups and downs that it’s easy to assume each party tastes victory and defeat in equal measure. But as a matter of ideology, these overheated fights take place between the 45-yard lines on a field that conservatives shrewdly tilted to their advantage several decades ago.

Meanwhile, in the less-august-than-Washington-Post blogosphere, a Democrat explains with many charts and graphs why his party is doomed because their “tent” is too big:

Time and again in American politics, Republicans have voted as a unit to frustrate our disorganized Democratic majority. No matter what’s on the table, a few Democrats will peel away from the party core; meanwhile, all Republicans will somehow manage to stay on-message.

I think that’s what Matt Miller is referring to as the GOP keeping the game between the 45 yard lines.

After the Market State: Phillip Blond on the Future of a Free Society

I must pass along an important lecture which summarizes the direction my thought has been heading in politically.

Society and the private sphere have become increasingly monopolized by the state and the market, which seem inadequate for dealing with increasing economic and social dysfunction. Phillip Blond, the influential Director of the London think-tank Respublica, argues for the necessity of the enduring bonds of family and local community, and the wide distribution of property and public responsibility that these require. Blond will outline the vision that has increasingly captured the attention of Britains Tory Party in his lecture, Red Toryism: What it means and why it is a genuinely radical alternative to the Market State.

I tried to embed the YouTube video here, but couldn’t get that to work.