Sunday, November 30, 2008

Sorrows of Empire Datapoint

In addition to an eye for telling detail, Walter LaFeber has a nice taste for irony:
A near-perfect metphor [for United States policy in China during World War II] occurred in early 1945 when FDR sent the vain, pompous General Patrick Hurley to China on an important mission. Hurley insisted on shipping over a huge Cadillac for his own use. The car ran three weeks, broke down, and Hurley could not find the necessary parts in China.
--Walter LaFeber, The Clash 233 (1997)

Economics of War Datapoint

In his magisterial history of Japanese-American diplomatic relations, Walter LaFeber offers up a compact history of World War II, with an unfailing eye for telling detail; 
Although Japanese forces were already badly overstretched, Tokyo officials nevertheless held thirteen to fifteen divisions in Manchuria just to keep an eye on the Soviet Union and, mostly, sit on their hands.  This error in decision making, together with the twenty-five and more divisions tied down in the bottomless morass of the China war, ruined Japan's ability to confront ever-increasing U.S. and British forces.  In September 1943, the Emperor approved a decision to forget about thhe Co-Prosperity Sphere and to pull back to the main defensive line. In stark contrast to such belt-tightening, the United States built a ship whose sole task was to produce 5,100 gallons of ice cream per hour for Americans in the South Pacific.

--Walter LaFeber, The Clash 224 (1997)


What a loss (link).

Today's Quote

Chris Blattman, cooling his heels in the Monrovia International Airport departure lounge, and regretting a club sandwich (link):
Little Cipro, this is your moment. Do not fail me now.
Afterthought:They've got Wi-fi in Monrovia?

McCaffrey: The Back Story

David Barstow's superb account of the corrupt relationship between Barry R. McCaffrey and the broadcast networks (in today's NYT) is a special case of a general scandal Barstow spotlighted last spring. In an NYT Q&A on the earlier piece, Barstow explained why he didn't publish sooner: took us two years to wrestle 8,000 pages of documents out of the Defense Department that described its interactions with network military analysts. We pushed as hard as we could, but the Defense Department refused to produce many categories of documents in response to our requests under the federal Freedom of Information Act. We ultimately sued in federal court, yet even then the Pentagon failed to meet several court-ordered deadlines for producing documents. Last week, the judge overseeing our lawsuit threatened the Defense Department with sanctions if it continues to defy his deadlines for producing additional records.
Meanwhile, Glen Greenwald completes the picture with this indictment of NBC and Brian Williams for their shameful role in the business.

Pete Peterson

H/T: Barry Ritholtz.

A McCarthy Gene?

Neal Gabler is getting a lot of attention this morning for a piece in the LA Times arguing that the yahoo populist strain of Republican is nothing new--that it goes back through Richard Nixon to Joe McCarthy (link).

It's a useful exercise, I suppose, but I must say, first, that I'm surprised that he's surprised, and that so many others are surprised. I should have thought that the idea that populism was nothing new was itself nothing new--but maybe you have to remember Nixon. Or McCarthy.

Second, I don't know where he comes off assuming that it starts with McCarthy. Hasn't he heard of the Vendée, the country conservatives who did so much to destroy the French Revolution? Or the masses who brought Napoleon III to power in 1848? Or the humble worker conservatives who bought into Disraeli's dream of empire? Or the former socialist newspaper editor, Benito Mussolini, who did so much for train timetables in Italy? And let's not get started on Hitler. ...

There are, in fact, many strains of conservatism (as there are in any other political movement worthy of our attention). For the moment, I might suggest a topic for Gabler for next Sunday: the strain of conservatism that relly hates the masses; that figures the worst thing we ever did with respect to the masses was to give them the vote. Of course, you don't carry many precincts that way.

Saturday, November 29, 2008


This is late, but I just caught up with it: Marcello Giordani, who spent last Saturday afternoon playing Faust at the Met, spent last Saturday evening playing Pinkerton in Madam Butterfly--a stand-in for Roberto Aronica. What sort of precedents are there for this, I wonder? I can remember a few years back in London when I saw one guy play Prince Hal (Henry V) in all three Shakespeare Henry plays in one day. But tht's just talk. How often does anyone do it with singing?

Bet You Thought He Was a Pair of Pants

Who knew this guy was still alive? An 53 years after his big book, who cared?

Don't misunderstand, I actually think Tristes Tropiques is a wonderful book. But the author has had the misfortune to live long enough to be buried under a virtual solid waste dump of competing products, not many of them any where near as lively, trenchant or insightful as the orignal.

What Does Obama Think He's Doing?

David Brooks (on PBS, with Mark Shields) marvels at the dazzling arrray of economic talent on hand for the launching of the Obama administration and wonders how the president expects to keep them all in line.

I don't know how in detail, but I think I know what Obama has in mind. He's remembering the last time he presided over a flock of turkeys, i.e., in his only other adult management job, as editor of the Harvard Law Review.

My guess is that what is true for many law reviews is true for Harvard: the one who gets the top job is not the most incandescent brain, but rather the safest, surest, most responsible manager. By published accounts, I gather this may be a fair description of Obama's job at Harvard, so it's readily conceivable that this is the model he has in mind today.

It's also been observed--perhaps by Brooks, among others--that a question remains whether Obama really wants to lead or whether he intends to stand aloof and let the big brains duke it out. This might well work at law review. It's quite a different matter to see it tried on the presidency. Roosevelt, to take a favorite example, was famously adept at managing conflicting personalities, or at least at playing them off one against another. But Roosevelt virtually also had a view, a goal, a program, and efforts at people management can be understood as a circuitous path to one or another predetermined goal. How it works when there is no goal--that's a model I suspect we've never really seen.

Yes, No or Maybe

Swiftie challenges me on "yessiree bop." Isn't it (he asks) "yessiree Bob?"

Further inquiry suggests he is right. "Yessiree bop" (with quotes) gets only eight Google hits--two of them to Underbelly's original post. "Yessiree Bob" gts 6,040. (local mileage may vary). I must have been thinking of "Bebop," but even there I should have remembered "Hey bob a re bob" (117 hits)--"Hey bob a re bop" gets only 58.

Other variations invite brief notice. "No siree," it appears, rarely sports a dangling appendage. On the other hand,"Bob" sometimes morphs into "Bobtail," "Bobcat," "Bobtail and a monkey," etc.

'Maybe," vby contrast, remains entirely unadorned--did anybody ever say "maybesiree!" Or I guess you could count what we used to say back in New England:'
And mebbe not.

Thursday, November 27, 2008

Toasters? I Think Not

There's a cute bit of bailout fluff that's been drifting around lately: buy a toaster, get a free bank. I got it first about 10 days ago from my friend Margaret, and then a couple of days later from my friend John (but I think maybe he got it from Margaret). Now, here it comes from Paul Kedrosky tarted up with graphics (link).

Cute, but this joke is like, you know, recycled not so?I'm pretty sure I heard it back during the savings and loan crisis--and it was probably dated even then. How many toasters have been giving away banks banks have been giving away toasters lately? Not many,I think. Indeed, the free-toaster gimmick is an artifact of the old days of "regulated" savings and loans, when they couldn't compete on rates so they threw in lots of goodies--the kind of thing that vanished with the Garn-St.Germaine Acct, which is to say, vanished with the creation of the structural conditions necessary to create the savings and loan mess in the first place.

Hey, I don't mind old jokes. Use 'em all the time, yessiree bop. But they say that the curse of the generals is that they fight the last war. I hope the analytical thinking that goes onto the new round of economic relief is not as dated as the toaster joke.

Thanksgiving: Remembering Parker Fielder

Parker Fielder provided me with one of my very few accounting jokes. Did you hear the one about the Polish accountant? He ran away with the payables. Ka-voom-foosh. If you get it, you are on your way to passing first-semester accounting.
If you don't get it, not to worry, it's not that important. But it is a helpful introduction to a man who, though I did not know him well, I remember as smart, gentle witty—and, though I scarcely understood it at the time, a friend when I needed one.
Parker was a professor of tax law at the University of Texas—he died in 1985, but they still have a tax law conference down there in his name. He was also, not incidentally, awesomely competent: trained as an accountant, worked as an inspector general (a bean counter?) in the Army, graduated first in his class at UT law school, experienced as a tax lawyer in the oil patch, by almost any measure the right man for the job.
But whatever your caricature of a law professor, he probably didn't fit it. He was restrained and low-key, masking his formidable abilities behind a kindly smile.
I met Parker in the fall of 1979 when I showed up in Austin as a visiting professor, keeping the seat moist while David Epstein was off finding out he didn't want to be a dean at Arkansas. It was a transition point for me: I was newly single, on my own for the first time in adulthood. Short of company, I more or less imposed myself on the old boys' conversation in the faculty lounge. Parker was one who received me with courtesy and civility.
Along about mid-November, I got an invitation: would I like to be the guest of Parker (and his wife—to my shame, I do not remember her name) for Thanksgiving dinner. Well now that you mention it, yes I would. I didn't—don't--much cotton to holidays. But the thought of spending Thanksgiving actually all sole alone suggested an experiment I wasn't really eager to undertake.
So at the appropriate time and day, I presented myself Chez Fielder out in Austin's west hills. I found that this was no casual threesome. In fact, there was quite a crowd: in the kitchen, savoring the aroma of roasting bird; in the living room, gearing up for the football, even (though it was pretty chilly) drifting away from the crowds onto the patio.
Besides Parker I recognized, I think, only one person in the crowd—another bachelor law prof. But I figured it was a good day to be on my best behavior, so I started striking up casual chat. I quickly came to a generalization: this is a congregation of broken-winged birds—people with no place else to nest on the holiday. Here was a guy who ran some sort of medical missionary clinic, in a trailer out in the grassland. Here was a hip psychiatrist, recently washed up from San Francisco. And here was—well, here was me. I caught on for the first time: this was a whole flock of broken-winged birds. And I, too, was a broken-winged bird. And they had taken me in.
I can't remember much else in detail, except to say that it was one of the mellowest days of my life. I watched some football—something I almost never do—and I remember letting out a yell. At dinner, they partnered with me with the very Teutonic widow of a formidable professor. “Her husband,” I explained to the person at my elbow, “was the leading international law scholar of his generation.” “Sank you,” she responded gravely. After dinner, we played “Fictionary”--that game where your adversary has to guess whether your word is made up or real. I can still remember the psychiatrist saying “Gondi—the language of the Gonds”with such a leer that everybody voted for the lie (but he was telling the truth).
And so it went. Eventually, we drifted off home and I, at any rate, got on with my life. I hope I sent a thank-you note. I don't suppose I fully understood until much later what a favor they had done me. But hey, to remember this sort of thing, I should say that “Thanksgiving” is just the right time, not so?

Wednesday, November 26, 2008

Humble Paul

"Now he'll be really insufferable." That was my friend Gary when Paul Krugman won the Nobel Prize. Not a crazy call, really: for all his acuity, Krugman has always a had a tendency to run to shrill. One could hardly be surprised if winning The Big One only made him moreso.

But not so, not so? My impression, from what I've seen of Krugman since the prize, is that if anything, it has left humbled. It's hard to imagine he didn't expect it, or at least assume he was entitled to it--but maybe not just yet. And anyway, when it comes--Ma! It's the Nobel!

So maybe he is just in a state of shock. Let him get to Stockholm, let him put on the fancy duds,* let him take the podium. Maybe once it sinks in, we'll see the real Paul. I kind of hope not; the humble one, I kind of like.
*Claude Summers, Penn law prof who won the labor equivalent of a Nobel, likes to tell about how he went to the rental shop to get decked out for the ceremony. The clerk asked-Clyde can do this in Swedish--is it for the funeral, or for the prize?


I spent a couple of happy days at the Taj Mumbai a few years back. I certainly don't know anything special about today's calamity but let me share some thoughts:
  • Mumbai has had, I think, a remarkable record of staying cool in troubled times--I remember being more or less locked down for several days at another Mumbai hotel during a pretty poisonous time for India as a whole. But Mumbai itself stayed quiet and orderly--well, as quiet and orderly as a city of 19 million can expect to be. Of course, all it takes is once...* **
  • The talking heads keep talking about Mumbai as a city heavy with Americans and Brits. Granted, the terrorists may have targeted Americans and Brits, but I think it is worth keeping in mind that a lot of the real action in Mumbai comes from Gulf Arabs, who like to do in Mumbai what they don't want to do at home.
  • Deccan terrorists? Well, what do I know? But I do know that the south of India--the Deccan and beyond--has been a theater of fairly amicable relations between Hindus and Muslims.
  • I suppose you'd have to assume that this means the end for the moderate, technocratic government of Manmohan Singh, surely one of the most knowledgeable and level-headed (if not necessarily effective) of world leaders--and a resurgence of the roughnecks from the BJP, those folks who never have seen a political fire they haven't wanted to pour gasoline onto.
*A correspondent says I am forgetting the July 11, 2006 subway bombings that took 209 lives. I'm not. I still think that all things considered, Mumbai's record is/was pretty good.

**Yes, yes, and the1993 bombings. Well, maybe I can't sustain the point. But Mumbai is a city with an amazing lot of raw energy, and I'd rather think about the things that work.


My day is slipping through my fingers. Meanwhile, consider
  • The thousand yard stare (thanks, John)

  • Ricotta gnocchi

  • One of my all time favorite political slogans: Anita Bryant led a campaign against gay rights. She wa also a paid shill for the orange juice biz. Gays responded with:

Squeeze a fruit for Anita.

See you tonight, maybe.

Tuesday, November 25, 2008

The End of Freakoeverything?

John Sides believes he observes the end of freakonomics--economists eschewing the study of, say, allegedly racist basketball referees, and turning instead to the issue of How the Hell do we Get Out of This Mess Anyway.

It's an insightful suggestion, but I'd go further and postulate the end of freakoverything. On the theory that there are no atheists in foxholes, I'd speculate that the current uproar has had the beneficial effect of scaring some of the silliness out of us. Specifically in politics, you can spend your time worrying about gay marriage and flag pins when there is not a Hell of a lot going wrong. But when the support beams are on fire, go looking for the extinguisher. That would explain of the commentary lately has showed a level of caution and restraint that you wouldn't expecct--well, rather, that you would expect only in troubled times.

Or at least for the moment, while the tsunami is still rolling over us. I do think the newbie Obama is getting a kind of bye at the moment, and deserves it. But if he hasn't magically solved the problem in six months--more specifically, if things have gotten only a little bit better but are not perfect yet, then I suppose we can expect a reverse tsunami that will bid fair to carry him off with it.

Afterthought: Maybe I am just repeating de Tocqueville's dictum that the most dangerous time for a regime is not when things are bad, but when they start to improve.

Palookaville Sightem: awww

Tucked away in the back corner of the coffee shop at the super market: a couple of geezers (i.e., younger than I), he and she, with matching HP laptops and complementary headseats, giggling their heads off. Apparently they had just configured a Skype connection and the sight of each other's face on the screen just cracked them up. Best I could tell, they were not old acquaintances; I think maybe they had just met. Looked like the beginning of a beautiful friendship...

SEC's Chief Accountant to Leave

Here's one that is likely to get less attention than it deserves: the SEC's Chief Accountant is resigning (link). I say prayers of thanks every day I don't have to make my living as an accountant (and so should you--i.e., I would be terrible at it). But as a more-or-less consumer, I've always found the topic fascinating: a market runs, after all, on information, so the nature and quality of the information flow is an issue of the highest priority. Here's

Securities and Exchange Commission chief accountant Conrad Hewitt — after more than two years of an SEC term that saw the rapid push toward international standards, the downsizing of the Financial Accounting Standards Board, and the battle against stock-option backdating — will resign from his post in January.

Hewitt, 72, plans to focus on corporate governance after leaving the SEC, by serving on corporate boards and audit committees. ...

Hewitt was not immune to controversy while at the SEC. He was the top accountant when the commission refused to sign off on FASB's budget until its parent organization, the Financial Accounting Foundation, agreed to SEC demands for more say in the appointment of both FASB members and FAF trustees. Withholding the budget approval in exchange for more authority over appointees was seen as an encroachment by the SEC on FASB's status as an independent standard setter.

The chief accountant also stepped into the credit-crisis fray last month, when he sent a letter to FASB stating the SEC position on allowing companies to delay writedowns on "perpetual preferred securities" that showed paper losses. Hewitt wrote, in answer to a number of inquiries from companies, that issuers may account for the perpetual preferred securities as debt, allowing them to postpone writing down any deterioraton of their value. The SEC's interpretation added to the controversy over the virtues of fair-value accounting, which some critics have blamed, in part, for the global financial crisis and lending freeze.

I'm not sure how to read this: just another tired old guy (as a fellow 72-year-old, I salute him)? Or a man who figures he can do battle better on another front?

I must say, it can't have been fun these past few years to be a person who cares about the quality and integrity of accounting standards--and to have to watch them bruised and bloodied from every quarter. At least we were still shocked by Enron in 2001; in the current uproar, the notion that the books might not tell the truth is more or less accepted as a matter of course. Indeed, so far as I can tell, the only time anyone talks about accounting these days is to complain about mark-to-market, i.e., to complain that the rules tell too much of the truth.

When Veronica ...

For some reason, this brings back memories of that lovely ol' 50s smash, "When Veronica Plays the Harmonica Down on the Pier at Santa Monica" (I have that one filed in my mind somewhere near "The Lady from Twenty-Nine Palms").

Thanks, John.

Update: And here it is (link)! You gotta love:
The seals and haddock get aquabatic
When she plays on her chromatic
Wonder if the lady from Twenty-Nine Palms is any kin to this woman.

Monday, November 24, 2008

Dana Milbank Needs an Index

Message to Dana Milbank: your book needs an index. Well, it's not a book, really; more like a salad bar, or a bag of M&Ms, where you pick and choose an ensemble of goodies to your own taste. But you know what I mean: Homo Economicus, your collection of absurd or salacious or inglorious tidbits, canvassing everything that went wrong in the last eight years.

The book is good fun in its own right, but what you really want to keep for is that time when you are tempted to think that the W years weren't so bad after all. Then you would want to be able to tap an index that says things like:
Hostilities, End of, Word "Major" Added After the Fact

Heart Attack, Suffered by Poor Mug Who Got in the Way of Dick Cheney's Gun, After he Victim Shot but Before Victim Apologized.

Required Bribes, Menu of, Presented By Duke Cunningham (Currently Seeking Pardon)
Milbank wisely (or out of simple cowardice) tries to throw in the odd Democrat here and there, but it isn't easy. You could say that's because they have been out of power, and it is power that tends to corrupt. You could say that, but you would be wrong; these guys, the current lot, when it comes to corruption and incompetence, they really are something special.

But keep some perspective here: one day, perhaps not very far away, you're going to say something about "Those Idiots in Washington" and you will be talking about the new crop of idiots, the ones just measuring the curtains today. You'll feel a twinge of nostalgia; you'll be tempted to think that the old days weren't that bad.

No, they were that bad. Milbank proves it. But he nees an index.

Niall Ferguson Doesn't Know Diddly Squat About Bankruptcy

I'm a big fan of Niall Ferguson: his biography of the Rothschilds (at any rate, the first volume) is one of the best finance books I ever read. His other stuff is somewhat uneven, but good enough that I was looking forward to his latest, The Ascent of Money: A Financial History of the World.

And indeed it is a good book--a survey overview of all of finance from the stone age to last Sunday, with a touch that is light and confident. But boy, he sure doesn't know diddly squat about bankruptcy.

He wants to make the point that the American economy works pretty well, despite a lot of bankruptcies. He goes to Tennessee. On the surface, you can see why he might choose Tennessee: that's the state that consistently stands at the top of the league tables on bankruptcies per capita. See, e.g., this chart, showing Tennessee with a bankruptcy rate of 1.1 per thousand people, higher than any other state, against a national average of 0.55 per thousand (Hawaii is the lowest).

In particular, he goes to the Western District of Tennessee, Memphis, but here is where he goes off the rails. He doesn't seem to understand that Memphis stands almost at the top of the chart (second, behind the Southern District of Georgia) in Chapter 13 bankruptcies--which, for Ferguson's purpose, isn't really bankruptcy at all. In the year ending September 30, 2007, for example, 77 percent percent of all bankruptcies in Memphis were Chapter 13s, against a national average of only 39 percent (Georgia Southern led with 80 percent Chapter 13s).

Bankruptcy groupies will have grasped the point already. For non-groupies, here is the point: in "straight" bankruptcy (Chapter 7), the debtor turns his pockets inside out and the trustee divides the take (usually nothing) among creditors. But the debtor's post bankruptcy earnings do not go into the pot. This gives rise to the old insight, not quite false, that the best time to go bankrupt is the day before you get the good new job.

In Chapter 13, by contrast, the debtor agrees to surrender some or all of his post-bankruptcy earnings to satisfy pre-bankruptcy debts. So Chapter 13, unlike 7, is not (or is only secondarily) about stiffing creditors. Chapter 13 is more like indentured servitude, or a kind of civil parole. If you are trying to prove that a commercial economy survives even when debtors stiff their creditors, then Memphis is the long way to put.

As it happens, I think his main point is perfectly correct: the system does work, even with a high rate of bankruptcy discharges-and for what it's worth, the system worked quite well, thank you, even before the notorious 2005 Amendments, which made it much harder to filing bankruptcy (without, I suspect, putting much more money into the pockets of creditors).

If Ferguson wanted to get it right, he would have been much better advised to go to the Eastern District of Michigan (Detroit), which led the nation in number of cases (33,799), of which 34 percent were Chapter 13s (not far off the national average). Or maybe Colorado, with 14,238 cases, of which only 16 percent were Chapter 13s. But as it stands, his argument just doesn't make a lot of sense.

Pardon Michael Milken

There's already talk about which lucky criminals will get George W. Bush's end-of-term pardons (see, e.g., link). Here's my number one candidate: Michael Milken.

It always surprises me how fast reputations fade. These days, hardly any of my law students has even heard of Michael Milken. Seems like only yesterday (but in fact, it was April 24, 1990-) that Milken was the Darth Vader of finance, the poster boy for everything that was bad in the financial world. That was the day he pleaded guilty to six. That was the day when Milken pleaded guilty to six felony charges related to securities reporting and price manipulation. He also agreed to a $200 million fine and $400 million in disgorgement.

Milken (just to make sure we are all on the same page) may be characterized, not quite incorrectly, as the man who invented the junk bond--the notion that anything is a bargain at the right price, and that you can issue bonds on highly risky asset pools provided the return matches the risk. He was also a center-stage spotlight performer in the great bacchanalian spectacle that was the invesment market of the 80s.

I haven't any doubt that Milken broke the rules along the way. And probably more than he admitted to: although numbers like $200 million may sound like a lot to chumps like me, the fact is that his plea bargain was a masterpiece of litigational artistry on the part of his lawyer (the late Arthur Liman) who got him off on what was, in the context of the matter, pretty much a parking ticket. Per Forbes, Milken in 2007 still ranked as the 458th richest person in the world, with a net worth estimated at $2.1 billion.

Aside from buffing his balance sheet, Milken after his plea spent a few months in prison; he suffered, and so far survived from, prostate cancer; and he sloshed buckets of money-mainly health care, a good bit to his own disease, but also many others. His efforts have so far bought him, if not exactly new celebrity, still perhaps what under the circumstances may be even better than celebrity--a kind of anonymity, in which a generation of law students don't even know what he is.

So Milken paid his money and served his time and has worked to reestablish his place in polite society. All this is wonderful, but the real reason for his pardon is none of these. The real reason is the motivation for his prosecution in the first place. For as any detached observer would have to concede, Milken went to prison not so much for his securities crimes, real though they may be, as because of the way he jolted the old-boy circuit. Before Milken, investment banking, and particularly the bond market, was a tight little club of Episcopalians and German Jews who made life easy for each other and pretty much blew off everybody else. In Chicago, they say the rule is "we don't want nobody nobody sent." The same applied to the old-fashioned bond market: before Milken, no matter how good your idea, if you weren't well-connected, you could pretty much forget it. Milken, an outsider with a cheap toupee, changed all the rules.

Just to close the circle--I should make it clear that in the end, I think this was mostly to the good. Granted there was a lot of turmoil in the Milken market and a good many of his deals went sour. But at the end of the day, I think a good deal of the amazing dynamism of the American economy (the "real" economy, not just the paper economy) in the 1990s can be traced to Milken and the ay he broke the mould.

So I'll accept that Milken probably deserved the punishment he got, maybe more. But I think there is a strong case that he was punished for the wrong reasons, and that it is time to recognize him as a mould-breaker who created a lot of things that are best about our financial system.

Background: The literature on Milken is extensive and almost entirely impaired by partisanship on one side or the other. One of the more constrained inquiries is Jesse Kornbluth, Highly Confident. Daniel Fischel, Payback, is savagely pro-Milken, but it explains the deals more clearly than anybody else.

Idle Thought: Remarkable how often the mould-breakers wind up outside the law. John Law, an ahead-of-his time financial thinker, had to flee Paris after he created the word's first great stock market bubble. Marc Rich, Bill Clinton's pardon poster boy, virtually created the spot market for oil (but unlike the case of Milken, I don't think Rich had/has any legitimate claim for relief).

Martha Stewart? Sure, go ahead. Scooter Libbey? Well, I don't suppose anything I say will stop it (of course, that's true for everybody I write about).

Sunday, November 23, 2008

Waiter, This Fish Isn't Cooked!

The Makioka Sisters was translated from its original Japanese into English in 1957. No surprise, that somebody felt the need to add a footnote defining “sushi” as “balls of vinegared rice, highly seasoned and usually topped with strips of raw or cooked fish."
Although he did give his customers the vinegared rice and fish that any Tokyo sushi man would, the Kobe influence was evident in his choice of materials. He always used white Kobe vinegar, never yellow Tokyo vinegar, and always a thick soy sauce not seen in Tokyo. He offered only fish taken before his very eyes, so to speak, here along the shores of the Inland Sea. No fish was unsuitable for sushi, he insisted—on that point at least he agreed with the old Yobei. He tried conger eels and blowfish and dace and even oysters and sea urchins, and scraps of halibut or clam, and sometimes red whale meat. Nor did he limit himself to fish: he used mushrooms too, and bamboo sprouts and persimmons. But he was opposed to tunas, the most common sushi ingredients; and scallops and omelettes and the commonplace sushi that goes with them were never seen in his restaurant. Though he sometimes cooked his fish, the prawns and abalone were alive and moving when they reached the customer.

--Junichiro Tanizaki, The Malkioka Sisters 292-3
(Edward G. Seidensticker trans. 1957; paperback ed. 1995)

The sushi (do I still need to use italics?) man, by the way, is a character who could serve as a fit model for Seinfeld's soup Nazi. Later in the book, a very proper Japanese matron swallows what seems to be an iffy bit of urchin. She palliates with a wholsome dose of saké.

Crosscultural Footnote: Chez Buce has chosen sushi for Thanksgiving dinner.

Isolationist Footnote: Persimmons?

Justice Thomas' Shadow?

Here's a factoid about Richard J. Leon, the Republican operative turned Federal Judge who last week ordered the release of five Guantanamo detainees (link). Turns out he was as Holy Cross classmate of (future) Justice Clarence Thomas (link). Thomas, of course, went on to law school at Yale. Leon went on to the equally highly regarded Suffolk--"founded," as its website says, "on the premise that capable men and women should have the opportunity to study law regardless of background or circumstances" (link). Suffolk even retains an evening division, although given the dates on his resume, my guess is that Leon did not have to take that route.*

Justice Thomas is extremely touchy about the suggestion that he might have been an affirmative action baby. If he was, in fact, some kind of special admit at Yale, could this be the guy whose place he took?
*Apparently Leon got out of college in '71 and law school in '74. That's only three years; night school (as I know from direct personal experience) almost always takes longer.

Cherie Blair on C-Span

Yes, we all have better things to do (I was multitasking from the exerbike) but if you want a time-out, catch a look at Diane Rhem's interview with Cherie Blair on C-Span. Here's a link that looks stable. I have no idea who Barbara Ellen is and why she might be unhappy, but I found it touching but also instructive--worthwhile insights about the changing nature of Britain and the demands of Downing Street. With, of course, a funny story about how that last little Blair came to the planet. I admit, I am one who had previously--unthinkingly, accepting the verdict of the tabloid press?--dismissed her as nutter. Not fair at all, it seems.

Undocumented extra: I mean this as a compliment honest--Cherie offers the added advantage that you sometimes get in British public people (and British actors)--she does not look the conoction of the febrile imagination of some deranged fashionista. You can imagine her plugging in her own blow-drier. I like that in a woman.

Footnote: Oh that Barbara Ellen. Looks like as a student of Blairology, I am a total fizzle. But I stick to my guns.

Citgroup's Toxic Dunghill: Gone Fishin'

I think the money shot in the New York Times' morning tictoc about the fall of Citigroup is the one about the too-cozy relationship between the cowboy bond-trader and the green-eyeshade risk policeman (think Robert deNiro and Charles Grodin lashed together in Midnight Run). The Times reports:

It was common in the bank to see Mr. Bushnell [the regulator] waiting patiently — sometimes as long as 45 minutes — outside Mr. Barker’s [the trader's] office so he could drive him home to Short Hills, N.J., where both of their families lived. The two men took occasional fly-fishing trips together; one expedition left them stuck on a lake after their boat ran out of gas.

(link--and I wonder, did he have to wait in a plastic chair, like a Bronx trial judge outside the office of his local mob boss?) . That kind of detail is the answer to a reporter's prayer and rightly so, but recall: the presence of this detail in the story means that somebody told it which means that somebody saw it and understood its importance when it was happening. Interesting to wonder what else he saw and what he did about it. Tell the boss? Sell short? Run for the exit?

The piece also offers an inglorious (apparent) farewell for Robert Rubin, who tells us that he was only tickling the ivories in the parlor and had no idea what the girls were doing in the cribs upstairs. Too bad: coming out of the Clinton years, I counted myself among the legions of Rubin admirers, but it's hard to believe he will be occupying a position of high visibility in the Obama regime.

Footnote: I admit I gasp to hear that Charles O. Prince, chief executive, said that "our job incent people." Is he too busy to say "incentivize"? I am incentsed.

Upate: As Felix Salmon points out, all those nasty things said about Bob Rubin this weekend don't just say themselves.

Saturday, November 22, 2008

Spectatum Admissi Risum Teneatis?

If 21st Century Opera descends into self-parody, it won't be the first time. Venetian opera in the 17th Century appears to have had some (perhaps more) of the same capacity for absurd access. George Frideric Handel brought some of that tradition with him when he introduced the latest Italian fashions to an English audience with his presentation of Rinaldo in 1710. He was met with skepticism by the journalist/essayist Joseph Addison (whose own opera libretto, produced just four years before, has long since disappeared into the void). In an essay for The Spectator, Addison visited his contempt on the new style:
As I was walking in the streets about a fortnight ago, I saw an ordinary fellow carrying a cage full of little birds upon his shoulder; and, as I was wondering with myself what use he would put them to, he was met very luckily by an acquaintance who had the same curiosity. Upon his asking him what he had upon his shoulder, he told him, teat he had been buying sparrows for the opera. Sparrows for the opera! says his friend, licking his lips; what, are they to be roasted? No, no, says the other; they are to enter towards the end of the first act, and to fly about the stage.

This strange dialogue awakened my curiosity so far, that I immediately bought the opera, by which means I perceived the sparrows were to act the part of singing birds in a delightful grove; though, upon a nearer inquiry, I found the sparrows put the same trick upon the audience, that Sir Martin Mar-all practised upon his mistress; for, though they flew in sight, the music proceeded from a concert of flagelets and bird-calls which were planted behind the scenes.

.[In Handel's Rinaldo] there have been so many flights of them let loose ..., that it is feared the house will never get rid of them; and that in other plays they may make their entrance in very wrong and improper scenes, so as to be seen flying in a lady's bed-chamber, or perching upon a king's throne; besides the inconveniences which the heads of the audiences may sometimes suffer from them.

--Joseph Addison, The Spectator No. 5, Tuesday, March , 1711
The heading to this post is the epigraph from Addison's essay. The source is Horace, Ars Poetica V, 5. A translation is: admitted to the sight, would you not laugh?

La Damnation de Faust
Aka "Where Will it All End?"

This just in: as of 12:45 pm today ,Palookaville time, Grand Opera was locked in a death struggle with Cirque du Soleil. As of 1245, it wasn't at all clear who would win.

Translation: today was the HD livecast of the Met's new Damnation of Faust (or “Folste,”as Susan Graham somewhat unaccountably insisted on calling him), as brought to you by Robert LePage, Mr. Cirque du Soleil himself, and if you've ever dreamed of seeing opera under water and up in the air, this is surely the place to start.

Granted, Berlioz needs a bit of a jump start here: Faust is a wonderful piece of music. But it' s not an opera: it's more in the line of an orchestral showpiece with voices. The music itself is lovely, but here is not much by way of character development or even engagement—some passing conversation between Faust and the devil, and one somewhat perfunctory trio, but nothing like the drama you get from Verdi or Mozart. So it invites (yields to) almost any kind of three-ring extravaganza.

When you utter the phrase “any kind of three-ring extravaganza,” the name of Robert Lepage just naturally leaps to mind. And the Met surely got what it bargained for here, what with the full deployment of just about every conceivable kind of tech toy, most of them not even invented as little as ten years ago. Whether the Met “got its money's worth” is another story. This his sort of thing does not come cheap. I am reminded of Nicholas Katzenbach, onetime General Counsel at IBM. “We have an unlimited budget for legal services,” he used to say, “and every year we exceed it.”

All this is dazzling to watch—so much so you barely have time to ask whether and to what extent it had anything to do with the performance. I'm sure I'm not quick enough to pick up on all the connections; still, I'd have to concede “probably some.” The question is not so much what you see today, but what they'll do for afters: what do they do for afters? As the inventors of the atomic bomb discovered, you give a boy a new toy and he is bound to play with it. What kind of production will we see next year that is even more loopy and absurd, even less tethered to anything in the composer's (dare one say the phrase?) original intention?

But hey, don't misunderstand he here, particularly James Levine's orchestra, and very particularly the first 20 minutes or so when Faust (Marcello Giordani) reflects back on his life, with the orchestra in conversation. Susan Graham, with the smallest of the three major roles, remains one of the most fully-realized voices on the stage today.John Relyea as Méphistophélès was good enough to keep up with them; he looked suitably menacing and I guess you'd have to be if you walked around his neighborhood with two red feathers in your cap.

Slackers and Bookcases

--Hi! He said.
--Hi, I answered, but I didn't recognize him.
--You don't remember me, do you?
Actually, I had a suspicion, but I didn't say so.
--Those shelves still holding up?
Indeed I did remember. Must have been 20 years ago that he built the shelves in my office. Good work, too, but it took him forever.
--I built good shelves, he said. But I figured out my earnings at about minimum wage. I had to give it up.
--What do you do now?
--Oh, I've got a little disability and I live in my shop. I'm a slacker. I wasn't a slacker when I came here, but I'm a slacker. Easy to be a slacker in this town. Cheap to live. Used to be anyway. Lots of free entertainment. Or used to be. I'm a slacker.

Then he started to tell me how Bush and Cheney and the Mossad brought down Building No. 7 at the World Trade Center.

The devil is, I think he might be right. Not about Bush and Cheney and the Mossad, but the slacker part. Of course, I have no first-hand exposure: I don't live in my shop.

Oh wait: maybe this is my shop.

Friday, November 21, 2008

Kinky Sex in Revolutionary New Hampshire

Does anybody out there edit Wiki? I have tried but they bar as an undesirable (can't imagine why; I have never actually done an edit, so they've never had a chance to figure out how undesirable I really am).

Anyway, for reasons neither here nor there, I fired up the Wiki entry on General John Stark, a soldier in the American Revolution who got a walk-on role in the school curriculum back home in Bedford, NH. My mother, who had a weakness for the dramatic, liked to quote what he (is said to have) said at the Battle of Bennington:

They are ours, or this night Molly Stark sleeps a widow!

Somehow, Wiki gives us

They are ours, or this night Molly Stark sleeps with a black widow!

I doubt very much that he ever actually said either of these. But the second doesn't make any sense.

Afterthought: I had forgotten, but I see at Wiki that Stark is also the culprit for "Live free or die," which you see on New Hampshire license plates. Once again, we may have an error in transmission. My friend Rich, who had a lot to do with the bankruptcy of Public Service of New Hampshire, is actually "live for free or die."

Appreciation: Names on the Land

Kudos to New York Review of Books for bringing back George R. Stewart's Names on the Land (original copyright 1945), surely one of the most affable books ever written, perfect for fending off night sweats. Stewart must have been one of the most affable professors who ever lived--a breed who doesn't exist much of anywhere any more who mixed kind of father-knows-best gentility and gentleness with a bit of honest acculturation. I bet he showed up from time to time at the student dining hall and rooted for the home team at football. He was nominally a professor of English, but as Matt Weiland observes in an appreciative introduction, he was also a pioneer in the teaching of California history--surely his most enduring work is Ordeal by Hunger, the most durable history of the Donner Party.

Names on the Land is just what it purports to be: an account of place names and how they came to be. A superficial reader could dismiss it as mere antiquarianism but it is a good deal more than that: Stewart understood how to weave a good deal of social history into the warp and woof of his material. We learn a lot about patterns of exploration of settlement; about the ethnic patchwork; about fashions in imitation and aspiration (I am pretty sure he is wrong, however, on the etymology of "borough" and "burgh"). We also get a humbling lesson in the accidental nature of fame:
Besides Washington, only three Revolutionary heroes won the honor of large cities. They were Knox the gunner, "Mad Anthony" Wayne, and Frances Nash, whom nobody remembers. ... The story of Nash is this. On a foggy morning in 1777 General Washington launched an attack upon Lord Howe at Germantown. The sudden advance of the Continentals sent the British light infantry rolling back. Then, the defense stiffened and held. Confused in the fog, the American regiments lost contact and fired into one another. In a desperate attempt to restore the line, the Norrh Carolina brigade pushed forward from the reserve under its youthful commander, General Francis Nash. A cannonball struck him down and he was carried dying form the lost field. His own state honored him, and three years later a stockade in its western lands was called Nashborough. In 1784 it followed the fashion by shifting to Nashville.

--George R. Stewart, Names on the Land 199 (NYRB Edition 2008)
It's a mercy they haven't changed it to Presleyburg.

She'll Be What?

The Un-Paulson

I am hardly in a position to evaluate the qualifications of the new Secretary of Treasury but I note one important point on his resume: it appears that he is one person who has mastered the intricacies of the financial system without himself getting stinking rich. I haven't surveyed the roster in detail (but cf. link). And I concede there are some (few?) whose career does speak more of power than mere money. But perhaps it comes with the territory: most ST's appears to have a balance sheet that would do credit to Scrooge McDuck.

Timorhy Geithner's resume bears every evidence of solvency, sure, but riches are a different stdory. I grant that poverty cannot be regarded as necessarily a qualification for ST: if poverty alone were a qualification, why then we could just hoick up some derelict from outside the parking garage. And a taste for power can be just as poisonous to public discourse as a taste for wealth. But it might be refreshing for a change to have someone around who will not simply choke on his own dividends.

Change We Can Believe In! (DST Dept)

Obama wants to get rid of daylight savings time. Something about energy efficiency, but this elides the fact that nobody has ever come up with a good reason for daylight savings time in the first place.

Final Orders?

I'm a big Jamba Juice fan, and I also (kind of) like reading financial statements, so David Phillips gives me a twopher (link). One, JJ (which now trades at a good deal less than its cheapest beverage) does something almost unheard of in the annals of corporate reporting: admits a mistake. Per management, JJ has been growing too fast, or at least too heedlessly, and cannibalizing its own growth. As Phillips says, one almost never finds that kind of candor in the company numbers.

But two, per Phillips, there may not be a good way out of the problem. In two words, "product diferentiation"--or the absence thereof:
I question whether their business model itself can offer sustainable profitability. The Jamba branding message of encouraging "healthy living," though notable, is an easily duplicated strategy, with few barriers to entry — as any purveyor of quick, convenient food and beverage products, such as coffee shops, donut shops and grocery stores, can offer similar fruit drinks and healthy food items.
Sounds persuasive, but I remember thinking the same thing about Subway--can't anybody make a sandwich?--but today (I hear) there are more Subways in Manhattan than there are subway stations in Manhattan. So there must be something in the name.

Disclaimer:This is not financial advice. Indeed, anyone who takes financial advice--or indeed, any other kind of advice--from me is a stark raving lunatic.

Bullets Over the Bible Belt

In which I channel the New York Crank, so he can put food in the mouths of his hungry babes. Start with this:
Cell Phone in Pocket Catches Stray Bullet

COVINGTON, La. (Nov. 20) - A man says his cell phone saved his life. A stray .45-caliber bullet hit R.J. Richard's chest while he was mowing the lawn -- hitting so hard he thought it was a stone kicked out by his tractor. He pulled out the phone. It fell apart.

The 68-year-old man was bruised. He said doctors told him two things prevented worse injury, maybe even death: the phone, and the fact that the bullet came in at an angle rather than head-on.

Reports of pocket Bibles saving their owners' lives pop up every so often. Richard says he's sure that God told him to put the phone in his overalls chest pocket rather than a pants pocket as usual. He said that Saturday's incident increased his faith.
But Crank says it reminds him of the old Woody Allen (sic?) riff:
My mother gave me a bullet for my birthday. And I put the bullet in my shirt pocket and was walking down the street when a crazed evangelist threw a bible from his hotel room window on the 43rd floor. The bible struck me in the chest. And if not for the bullet my mother gave me, that bible would have gone straight through my heart.

Thursday, November 20, 2008

Oh, I Meant to Link this Last Week ...

... but it's still great (link).

I Have No Idea

But thanks, Tom (link).

The Challenge of Travel

Here's one I've been sending to a lot of my old traveling companions (link):
If the explorer moves toward the risks of the formless and the unknown, the tourist moves toward the security of pure cliché. It is between these two poles that the traveler mediates.

--Paul Fussell, Abroad

As one who spends a fair amount of his life looking out of bus windows, I say too true too true. I hope I get beyond cliché; on the other hand, I am too old & sick & stupid & tired for the formless and the unknown

A Meta Puzzle

Here's a Meta Puzzle: from time to time I punch up the "came from" link on my stat counter, to see if anyone but my mother is actually reading this thing. I always marvel at the number of hits whose time spent at this site counts as "zero"--like those elections that the networks were calling with zero votes counted.

But enough of that. My particular puzzle is the number of cases in which the visitors have come here from a Google search for the book Under a Cruel Star by Heda Margolius Kovaly. Now, it is true that I did a review of Under a Cruel Star, back on June 30, 2007 (link). And a very good book it is, and I urge you to take a look at the review. But why are so many people searching for it? And why do they come to me?

My only guess-it is no more than that--is that I am on somebody's course syllabus or "recommended reading" list. Still, why me? And how, exactly, do you get to register as a "visitor," but with time spent as "zero"?

The Other Club Fed

Two stories this morning with a common theme: the clubbiness of the Senate.

First, here's Mitch McConnell, Republican majoarity leader, with a heavy case of hurt feelings that Democrats actually tried to win the election in Kentucky (link).

And second, here's Grand Malefactor Ted Stevens getting a round of applause as he prepares to exit the marble halls for, one hopes (but, in fairness, one does not really expect), the stony lonesome.

I suspect the second is more intelligible than the first. In the case of Stevens--awyers who defend murder cases know that longevity breeds forgiveness: the jury is just not going to fry a guy they sat next to months and months. Especially if they can, um, you know, kind of recognize that they might commit the same kind of crime themselves. Remarkable how this works even in the case of a guy who, by all reports, is so deeply disliked among his peers.

McConnell just strikes me as one more instance of the Republican Vast Sense of Entitlement--rules for thee but not for me. Doesn't seem to bother McConnell, that his team worked so hard to blow the head off Tom Daschel a while back, but if you go after one of their own number, why then you should expect to pay.

Still together they recall the old French insight:
There is more difference betwen two socialists, one of whom is a deputy while the other of whom is not

than there is between two deputies, one of whom is a socialist while the other is not.
Afterthought: Yes, I suppose I could throw in the Dem's unwillingness to punish Joe Lieberman (though with the 60-vote goal line in sight, that may be a different issue). And one could contrast the field-dressing of John Dingell. May be a new reminder of the ancient insight that the Senate is a vast marmoreal geriatric center, while the House is just a loony bin.

Wednesday, November 19, 2008

Reason Enough...

Enjoying a high-class amateur performance of The Mikado at the Palookaville Odeon, it occurred to me why the Obama transition team is grinding its teeth over Bill Clinton:
But I don't stop at that. I go and dine with middle-class people on reasonable terms. I dance at cheap suburban parties for a moderate fee. I accept refreshment at any hands, however lowly. I also retail State secrets at a very low figure.
That would be Pooh-Bah, "First Lord of the Treasury, Lord Chief Justice,Commander-in-Chief, Lord High Admiral, Master of the Buckhounds,Groom of the Back Stairs, Archbishop of Titipu, and Lord Mayor, both acting and elect, all rolled into one."

Well, That's a Blessing...

David provides us with an early edition of the July 4 (2009) New York Times.

Metrics? We'll Show You Metrics!

Or, Calculated Risk will show you metrics, and we will rip them off:
It seems these indicators are stuck ...

  • The three month LIBOR declined slightly to 2.17% from 2.22%. The three-month LIBOR rate peaked (for this cycle) at 4.81875% on Oct. 10. (slightly better)

  • The yield on 3 month treasuries increased to 0.105% from 0.14%. (worse). Close to zero again!

    With the effective Fed Funds rate at 0.37% (as of yesterday), this is probably somewhat in the right range. At some point, I'd like to see the effective Fed funds rate close to the target rate (currently 1.0%) and the 3 month yield within 25 bps of the target rate.

    But for now, the Fed is engaged in quantitative easing.

  • The TED spread: 2.07, down slightly from 2.10 (unchanged)

    The TED spread is stuck above 2.0, and still too high. The peak was 4.63 on Oct 10th. I'd like to see the spread move back down to 1.0 or lower. A normal spread is around 0.5.

  • The two year swap spread from Bloomberg: 105.30, up slightly from 104.25 (unchanged). This spread peaked at near 165 in early October, so there has been significant progress, but I'd like to see this below 100. ...
  • Tuesday, November 18, 2008

    Le Tiers Livre

    I suspect that maybe the least-read “classic” among upmarket literati would be François Rabelais' Gargantua and Pantagruel—long, sprawling and so full of pottty talk, can it really be worth the trouble?

    I admit I'm still on the fence on that one—I've read it (well—maybe not every word, but big chunks of it). I guess I get the point: this is, surely, a "modern" book, in the sense that it is one of those books that you just can't imagine being written at any time earlier than it was. In this sense, it ranks with Cervantes (also a hard read, but rewarding), Montaigne and, yes, Shakespeare—all a bit later in time, but bearing the same whiff of modernity about them. Perhaps a closer contemporaneous example would be Machiavelli: whatever else you may think of him, his sheer originality is a kind of marvel (I like to think of Ariosto as kind of a transitional figure with one foot in each camp, but that's another story).

    One way of judging any writer is by the quality of responses he generates. And here, Rabelais holds up pretty well. In the 20th Century, he generated two of the most remarkable pieces of history/criticism. That would be: Mikhail Bakhtin, Rabelais and his World, which more or less single-handedly reconceptualized the study of the novel; and Lucien Febvre, The Problem of Unbelief in the Sixteenth Century, one of the defining texts of French annales school.

    Citiing Febvre is as useful reminder that the French still seem to cherish a lively attachment to Rabelais. In particular, talk of the “tiers livre”—the “third book” of Gargantua and Pantagruel--remains a staple of French literary discourse. Mentioning the “tiers livre” is a bold declaration on two fronts—one, that the speaker actually recognizes that there is more than one “livre” (there are five, although the fifth is probably a fake);and two, that the speaker has actually read enough to reach the third. It is also, on a more sober note, a claim that this third book is the place where the author really hits his stride, where Rabelais becomes Rabelais.

    So far as I know, talk of the “tiers livre”does serve as a carte d'identité anyplace outside the Francophone world. But in French, it is important enough to get its own bound volume—Le Tiers Livre, an annotated Gallimard paperback published in 1966, with a preface by—who else?--Lucien Febvre.
    Alors, jouir de ses dons et en faire usage pour recréer un monde purgé des sots, des cafarads, de meurtriers d'intelligence et du caractère: … Son oeuvre parle! Son oeuvre, l'oeuvre d'un homme qui veut servir. Faire rire, sans doute, c'est le propre de l'jomme. Mais Rabelais s'enmgage, or, ne saurait s'y méprendre. Il s'engage pour servir un idéal—celui de la génération qu'il incarne, dans le pays qu'il aime: une sagesse selon son coeur, engendrant un bonheur selon ses goûts.

    Then, enjoy his gifts and use them to recreate the world purged of silly things, tattletales, murderers of intelligence and character: … His work speaks! His work, the work of a man who wants to serve. To make laugh, probably; laughter is part of humankind. But Rabelais engages himself, and would not know how to be wrong at his task. He engages himself to serve an ideal — that of the generation which he represents, in the country which he loves: a wisdom that comes from the heart, engendering a happiness according to its tastes.
    That's LeFebvre, in his introduction to the Gallimard edition of Le Tiers Livre. Translation is my own, so try not to giggle.

    Big Three Wages Again

    The trustworthy and honorable Felix Salmon says that the $70-an hour meme is bollox. I bought it (link); if Salmon is right, then I am wrong. But it seems to me the bedrock issue--which Salmon does not address--is how the Big Three package compares to the Asian upstarts. So, how do they compare? Are they on a par, one with another? I doubt it--and if not, the original argument still has traction, even if the particular number is wrong.

    Update: Also a good comment thread, although (virtually) no attention to the "comparison" issue, which is the one that interests me.

    The Paulson Catalog

    This will be everywhere this morning but I might as well join the fray--James Pethokoukis (channeling Ed Yardeni) on "The 11 Blunders of Hank Paulson" (link):
    Strategist Ed Yardeni says that "everything that [Hank] Paulson has done or endorsed has worsened the credit crisis and sent stocks reeling." Like what, for instance? Like these, and I quote:

    (1) Paulson's Super-SIV proposal was a distraction that went nowhere. It was the first clue that he likes half-backed schemes that are hard to implement.

    (2) The vaunted "Teaser Freezer" hasn't worked. Neither has the Hope Now Alliance. Indeed, many borrowers who've been foreclosed never even heard about these new outreach programs to keep them in their homes.

    (3) Letting investment banks borrow from the Fed's discount window just after Bear Stearns failed suggests that letting the firm go was done as a risky gesture to the principle of avoiding moral hazard, which has subsequently been thrown out the window.

    (4) The government's unwillingness to provide transparent rescue plans started with the mysterious $29bn Bear Stearns portfolio acquired by the Fed.

    (5) After multiple assurances that Fannie and Freddie were solvent, they were seized and put into conservatorship. Stiffing owners of their preferreds opened an estimated $25bn black hole in the capital of regional banks that owned these securities. It also seized up the one market that financial firms had for raising capital.

    (6) Refusing to support the suspension of mark-to-market accounting was Paulson's second biggest mistake.

    (7) His biggest mistake was letting Lehman go under. Dick Fuld should have been forced out, and Lehman should have been rescued. A guy who ran GS and all the MS advisors around him should have known that letting Lehman go under would blow up money market funds and the commercial paper market. It also blew up the prime brokerage business and massacred the hedge fund industry, which sent stock prices into a free fall.

    (8) When AIG was seized, the terms of the government's rescue package were punitive. They've been recently eased, but the firm can't raise funds by selling only 49% of its various non-core assets, as required by its "bailout" deal.

    (9) TARP was a really bad idea that was sold to Congress and the public by inciting a panic, and sending the global economy into a tailspin. Claiming that the Treasury could purchase one-of-a-kind troubled assets in reverse auctions made no sense. The RTC solution to the S&L crisis of the early 1990s won't work to end this crisis.

    (10) The Capital Purchase Program of TARP, started on October 14, is providing capital to banks that probably should be forced to fail and to those that don't even need it. Hopefully, Congress won't give the second $350bn installment of TARP to the Treasury.

    (11) Paulson has been aiming to kill "bad" hedge funds. The result of his disjointed fixes has been a massacre of innocent bystanders, including long-only investors getting killed in all the stocks that hedge funds are being forced to sell.

    My take: I think Paulson's credibility with the financial markets has been exhausted. Now I am not sure what the magic solution was. Maybe some recapitalization of key players plus an Uncle Sam-led home refinancing plan. Or maybe a) suspending mark to market, b) a zero capital gains tax for the next five years, and a corporate income tax holiday. But I will give this to Paulson: He does strike me as a guy who is working himself near death to deal with an amazingly tough problem.

    Comment: Some of these are above my paygrade, and not all are of equal dignity. Most important, surely: (9) and (4). I don't agree with (6) although maybe some tinkering with mark-to-market would be possible, and useful. The real point, though, is that the list is so long. As (I believe) John Stewart so wisely put it, we have the impression that Paulson is "flailing wildly at the keyboard." Oddly enough, the focus appears to fall entirely on Paulson. I should think we would give equal billing to the man who is supposed to know more than anyone else in the world about financial crisis--Fed Chairman Ben Bernanke.

    Monday, November 17, 2008

    All Hands on Deck!
    Man the Lifeboats!
    Abandon Ship!

    (Select the nautical-related headline of your choice). Calculated Risk has the depression recession factoid of the day (link).

    Japan: Two Factoids About the Yakuza

    I confess to a certain fascination with the Yakuza, the Japanese mob, not so much for its place in the culture of tattoos as because of the way it seems to be semi-integrated into the larger society, perhaps performing functions the "government" cannot perform, or does not want to admit that performs.

    In their exhaustive study of Yakuza culture, Kaplan and Dubro discuss the provenance of the gang culture. They betray skepticism as to the popular notion that Yakuza are descendants of the Samurai. Instead, they suggest two separate sources:
    • Tekiya, peddlers. They travel. They're rootless. They aren't subject to the kind of surveillance you would get from the home folks in a traditional village society. Not incidentally, the tekiya tended to attract alsop some of the barukumin, leather-workers and the tenders of dead bodies--outcastes, really, people who had no place and no future at home.
    • Bakuto, gamblers. Think of it this way. You're running an irrigation or construction project out in the middle of nowhere. You have to pay your workers, but it is intolerable that these worthless mugs get to keep all the money. What do you do? Why, you hire "a motley crew of outlaws, laborers, and farmers" to gamble the money away from them. Indeed a plausible folk etymology for the word "yakuza" traces it to the name of the worst possible score in a kind of Japanese blackjack--8-9-3, "ya-ku-sa," totaling 20, a wipe-out, crash-and-burn.
    Source: David E. Kaplan and Alec Dubro, Yakuza: Japan's Criminal Underworld (Expanded edition 2003)

    Sunday, November 16, 2008

    Oh, and Speaking of Insolvent...
    (Options Again)

    It seems to me that GM is probably "insolvent" already, in the sense that the value of its liabilities exceeds the value of its assets.*

    But if it is insolvent, how come its equity is still trading at a positive number? Easy. Think of the equity as an out-of-the-money option--worth something as a lottery ticket, even if worth nothing at the moment.

    Here's an example. LittleCo has assets of $80 and liabilities of $100. So, insolvent. If LittleCo liquidates today, its creditors get 80 cents on the dollar and the equity gets bubkas. But LittleCo has a chance to invest all $80 in a new project which will yield (a) $160 or (b) $80, with a 50 percent chance of each. This pencils out right: 0.5(160)+0.5(0)=80.

    But from the standpoint of equity, there is the chance that something may turn up. How to measure the chance? Value the payoffs to equity. That would be: 0.5(160-100)+0.5(0)=30. So equity is worth $30, even though the company is insolvent. By the way, to double-check, figure the current market value of debt. The value is 0.5(100)+0.5(80)=50. Again, this pencils out right: $50+$30 = $80, so everything checks.

    By the way, this is the same logic that leads to the conclusion that a homeowner whose mortgage is bigger than his house may nonetheless keep paying (link).

    *In the bulldog of edition of this publication, I said it exactly backwarads. D'oh, no wonder my students don't understand me. And thanks, Taxmom.

    Look, I've Told You and I've Told You ...

    Look, how often do I have to explain it to you? "Bankruptcy" --for GM or for any other public company--need not mean liquidation and distribution at distress prices. "Bankruptcy" means you maximize the value of the available assets and distribute the proceeds to stakeholders as their interests may appear. If the business is better off dead, this should mean that you put a bullet through the poor beast and go forward from there. But plenty of businesses are worth more as going concerns than they are in liquidation. If that is the case, then the job is to preserve the value of the going concern--whether or not there is anything left for equity. Think of bankruptcy (this line is not original with me) as a kind of forced sale to creditors.

    This is true in Chapter 11, the "reorganization" Chapter. Sometimes stakeholders get to "vote" on a "plan," but forget about that, it's a side issue. Strictly speaking, it is true in Chapter 7, the "liquidation" Chapter, as well. Section 704(a)(8) says that the trustee shall, if the business of the debtor is authorized to be operated, do blah blah. This pretty clearly recognizes thst the court may authorize the trustee to operate the business. Which is just as it should be, if his job is to maximize the value of the assets. Not everyone uinderstands this, but by this time, you should understand it pretty well.

    Rephrased, saving the assets is not the same as saving the old equity owners. Who knows, there may be some value in GM--some lines worth saving and suchlike. But equity has no more than lottery ticket value, even now.

    Oh, and Speaking of Rapture... friend Steve tells about the guy who lived through the rapture and wants to make some human contact so he calls up the Unitarian Church. Nobody answers. Unitarians?--he says. All those guys wanted was closure!

    Good Stuff

    Too much good stuff here to excerpt. Go read the whole thing. H/T Big Picture.

    Saturday, November 15, 2008

    In Which I Find I Have Positioned Myself
    To the Right of Bruce Bartlett

    ...which is not exactly where I want to be. I've been saying "bah, no auto bailout." But Mr. Free Market proves to have a more subtle mind (link):

    I think it would be a terrible mistake to simply write a check to the auto industry without demanding major, major restructuring of its labor contracts. Without that the money will simply go down a rat hole and the automakers will just be back again in a year or two asking for more money.

    Obama has a strong hand to play here and I hope he uses his leverage. With bankruptcy as the only alternative to federal aid, he can drive a very hard bargain with the auto workers. If he caves and just writes a blank check, everyone will know he can be rolled and he will pay a heavy political price for it. If Obama shows toughness on this issue, I think it will pay enormous dividends for him down the road.

    [Italics mine-Buce]
    Mark Perry, who is somewhere to the right of Ivanhoe Bruce Bartlett on this one, points out that the average per hour compensation at the big three is aobut $73; at the US operations of Japan-based companies, about $44 (link). Might be a good benchmark.

    Update: And in case you need any reminders of why we should not mourn for Detroit, go here, and H/T Perry again.

    Baudelaire on Dandyism

    Take it away, Charles:
    It is a kind of cult of the ego … It is the pleasure of causing surprise in others, and the proud satisfaction of never showing any oneself. A dandy may be blasé, he may even suffer pain, but in the latter case he will keep smiling, like the Spartan under the bite of the fox. Clearly, then, dandyism in certain respects comes close to spirituality and to stoicism

    --Charles Baudelaire, The Painter of Modern Life

    Sounds dead on to me. And 50, even 25 years ago I would have said it was a prominent feature of the landscape, particularly the academic landscape. My friend Taxmom has said that the trouble with academic life is that behavior is rewarded there that would be punished anyplace else. And, yes, I wouldn't be surprised if I dabbled in a bit of dandyism myself. In my time, which was long ago. But Baudelaire continues:

    Dandyism is the last flicker of heroism in decadent ages … Dandyism is a setting sun; like the declining star, it is magnificent, without heat and full of melancholy. But alas! The rising tide of democracy, which spreads everywhere and reduces everything to the same level, is daily carrying away these last champions of human pride.
    Can this be right? Is dandyism in decline? And if so, can we blame it on "the rising tide of democracy?"

    Friday, November 14, 2008


    I certainly don't have, and don't expect to have, any regrets about voting for Barack Obama (or at any rate, against the GOP). I figured that I would get mad at them soon but I didn't expect it to be quite this soon. But look at today's news:
    • The auto bailout. Okay, it is not an Obama initiative. But it looks like it is going to happen, and it looks like Obama won't be able to stop it and perhaps won't want to stop it. Ironic that most of the opposition is coming from just those Republicans I would most like to see sent packing out of town. Just one more demonstration that ideas have a truth value independent of those who hold them.

    • Hillary. That's the wha--? part. With so many others, it is hard for me to see why she would want it. But unlike so many others, I can't imagine why he would want her. Yes, yes, Team of Rivals, Lincoln and Seward, a smart guy hires smart guys to work for him. But foreign policy? It has never been her brief, and I don't know of any evidence that she is specially good at. I admit my admiration for Hillary has always been somewhat less than unlimited. But I concede her talents, and she has certainly earned herself a place in public life. But Secretary of State? What am I missing?

    • [For clarification--my own first choice is still Chuck Hagel. I saw somewhere that three percent of voters currently characterize themselves as "moderate." Lonely out here.]

    Accidental Appreciation: Ian Buruma

    It was pure impulse that led me to a copy of Ian Buruma's The Missionary and the Libertine in a Palookaville second-hand shop this week--more precisely, that I wanted to read his piece on Edward Seidensticker, the translator of Tale of Genji (and a lot else). But, serendipidity: the book is a mind-stretcher that gives me a whole new appreciation of some of its subject matter and, not least, its author.

    I knew who Buruma was, of course (although I admit I have probably mixed him up at times with Neil Ascherson). I knew he had something to do with Japan. What I didn't know was how broad and deep his understanding runs--and how it extends outside Japan across a broad swath of South and East Asia.

    It is, I concede, in a way a somewhat unpromising. It is, for one thing, a collection, and not a recent one: the original copyright date is 1996 and some of the pieces go back to the late 80s. More irritating, it is perversely edited: we get years but not precise dates of original publication (apparently there is only one source: The New York Review of Books). Much more interesting--most or all of these appear originally to have been presented as book reviews. Yet some dingbat, for no conceivable reason, has chosen to exclude he names of the books reviewed--you have to infer them from the contents of the essay. There is a "bibliography" at the end, but it only compounds the problem: it appears to include at least some of the books under review, but it also includes at least some of the other stuff to which Buruma adverts in the text and perhaps also some stuff he doesn't even mention. Consistent with the practice in far too many collections, there is no index.

    And yet, what a collection! Buruma is obviously a good journalist: a careful observer with a strong background. But he is a good deal more: though you may have to infer it from the substance, he obviously comes equipped with a well-developed world-view--sympathetic yet skeptical, non-ideological, rooted in the particulars that he observes.

    Not surprisingly, most of the substance draws on Japan--Seidenstecker, but also a sampling of writers and movie makers. There are also some general essays on Japan, including one, perhaps the best in the batch, perhaps the best I ever read on the topic, on Hiroshima.

    But Buruma fills out his picture with material from Korea, the Philippines, India, Pakistan, Singapore. and Hong Kong. Some of this dates, of course: I have a tough time working up enthusiasm for the 1988 Seoul olympics, for example, and Buruma himself admits he may have guessed wrong on Cory Aquino. Still, the remarkable fact is how much of this survives. The essay on Hiroshima, for example, is at once a sardonic reflection on the Japanese response to World War II, and sobersided meditation on the modern response to nukes. Puzzling over the contradictions of the Philippines, he throws off an extraordinary insight into the history of imperialism. There are instructive parallels, he argues, between the imperialism of "old Europe" (not his phrase) and that of Japan, and of the United States. Both the US and Japan, he argues,
    were opposed to European imperialism, yuet at the sme time emulated many of its trappings, down to the white topis and classicist architecturl bombast. Their colonial conquests came tin the guise of anticolonialism: they were, in a sense, the first modern 'liberation' movements, and, like so many such subsequent movements they wer marked by a peculiar savagery.

    This might be explained by a racist element which did not yet exist in earlier European adventures. The British, the Dutch and the French did not arrive in their respective colonies to liberate anybody, nor were they burdened with racgtil or even nationalist zeal. They simply wanted to trade. Their empires grew out of that, though not always peacefully of course. By the late nineteenth century it was too late for empires to grow: they had to be conquered.
    It is hard to imagine how you could cram more insight into just a couple of paragraphs.

    Suitable for one who appears suspicious of ideology, it is not easy to articulate just what it is that Buruma stands for. He's obviously unimpressed by the fraud that passes for democracy in oligarchic Japan; in the presence of those who speak of an "Asian way," he starts to chew the furniture. He makes it explicit that he has no use for a totalitarian dictator like Ho Chi Minh. He shows a perhaps surprising tolerance for the plutocrats who have dominated the Philippines--a plutocarcy it may be, but it's a loose-jointed plutocracy, which may be the best you can do. Perhaps the best index of his tastes is his enthusiasm for two men who have written about India--V. S. Naipaul and Nirad C. Chaudhuri. They're both prickly and abrasive, proud of the enemies they make. But as Buruma perceives them (correctly, in my view) they are both compassionate observers with deep roots in the best of the Enlightenment tradition. It's a good description of Buruma himself, and you could do a lot worse.

    Update: I open my current New York Review of Books and what do I find but a review of the new "authorized" biography of Naipaul--the review by guess who. Turns out he was asked to write the bio, but declined. I skimmed parts of the book at Borders yesterday and it certainly would reward a full reading. The review, as (seemingly) is interesting in its own right.

    We Must Take the Tiger by the Tail
    And Face the Issue

    Did I just hear Ted Turner say that in order to save our economy, we need to put "our shoulder to the grindstone"? Sic., isn't it "shoulder to the wheel?" And "nose to the grindstone?" Or ear to the ground and finger in the air, since we do indeed have our backs to the wall? But this is no time to dip our toe in the water, when what we need is bums on seats...okay, okay, enough.

    General Bloat

    There's a hoary story about the lion who escaped from the Washington Zoo and survived on his own for six months--he went to the Pentagon and ate a general a day and nobody ever missed them.

    I really do not begrudge Ann E. Dunwoody her fourth star, but I am shadowed by two considerations:
    • From now on, every general who actually hears a shot fired in anger will want a fifth star to prove that he (sic?) is a real player.
    • I think I saw on the CNN crawl that there are now 21 female generals in the Army. How long has it been since there were 21 generals total in the Army?

    Thursday, November 13, 2008

    The Bailout and Chapter 11

    Perhaps in his Little League days outside the Fisher Body plant, he took too many high hard ones in the head: anyway, the customarily lucid Daniel Gross has a curiously ambivalent post up about a big-auto bailout (link). He says the no-bailout folks are right. Then he says he dissents anyway. But then he says what he really means is that he is against a Chapter 11.

    Huh? Gross picks up all the stuff about how Chapter 11 takes too long and costs too much money blah blah. It can, but it doesn't need to. The purpose(*) of Chapter 11 is to maximize asset value, including the preservation of going-concern value if, in fact, that is the road to maximization. You deliver the proceeds to the stakeholders as their interests may appear and if there isn't enough to go around, why then the people below the Plimsole line just go away empty handed.

    Plenty of times, it works just that way. If it hasn't worked that way for the auto suppliers, it may be because everyone recognizes that the fate of the suppliers is tied up with the fate of the industry, and nobody wants to move too fast until they understand what will be the fate of the industry. My guess is that a Chapter 11 for the big three would speed up, not slow down, that process.

    (*) Okay, okay, I admit it: as I have written myself more often than I care to remember, the "purpose" of Chapter 11 is a contested concept--there are lots of possible purposes, and they can be in conflict. But most of the horror stories about Chapter 11 as a great formless blob go back to the mid 80s: many companies have learned better since then, and in a great many cases, Chapter 11 has enhanced value.

    College Tuition

    Thumbing through the Yale Law alumni bulletin ( I did a one-year LLM there in in 1968-9), I find that one of my classmates has just run his head into the brick wall of college tuition:
    John Lackey LLM notes tht he paid $6,000 for his LLM tuition in 1969 while his youngest son is graduating from Washington and Lee University, where the combination of tuition and living expenses is almost $60,000 per year. He poses the not-so-rehetorical question many of us have raised: how do hard-working middle-class parents pay for college education these days?
    Copy that. I remember that my Yale bill was actually less than than I had paid as a JD student at the University of Louisville. Yale kindly fronted a good bit of the money; I financed part of it with a 1.5 percent loan. Good fortune put me in a position where I had the means to pay that loan just months after leaving Yale, but to my shame, I nurtured that puppy to the last possible day.

    To pile on an extra insult, just last night at a University of California alumni dinner I heard some of our old timers remembering the days when their tuition was $150 a semester (currently at the law school, we charge $28,000 a year). And to top it all, I didmy Yale gig with a (n0n-working) wife and two children--packed together in a two-bedroom apartment, where the details of our neighbors' private lives were freely available through the heating ducts. One of the kids did a year in public school; the other was in some kind of Montessori day care which must have been a budget item all its own.

    I realize that no amount of prestidigitation can make these days compare with those, but I will round up some usual suspects to put it all in perspective: college these days is a country club. It has become so largely for the reasons medical care is so expensive: we've spent years pumping public money into the demand side with little or no policing of supply. Colleges have found they have to sweeten the package to compete for students and however much we complain, the fact is that up to now, they have found no limit to what the traffic will bear.

    I don't think you can ever completely unring that particular bell and even if you did, I don't suppose we would find ourselves quite back in the palmy days of old. But, shorter Buce on education: college expenses are so high because parents/kids (backed by the sovereign) have been willing to pay.

    Wednesday, November 12, 2008

    Japan: English

    One of the many things that puzzle me about Japan is its use of the English language. It's not as if everyone speaks English--they certainly don't, although you can usually find someone who will muddle through with you when you need them. But there is so much of it around, fragmented and often unexpected. So many subway and train signs in English (or at least "Latin" letters). Company logo names: Sanyo and Toyota, of course, but also "Family Mart," and "Coffee Shop Sushi"--also, come to think of it, "Boulangerie" and "En Provence" (McDonald's, remarkably, uses its English name, but only in secondary letters underneath its Japanese name). And book titles: even if the entire book is in Japanese, the cover title may be in English--what is that about?

    I find I am not the first to note this curiosity. Old Japan hand Ian Buruma points out that it has been going on for a long time:
    What, you might well ask, is a 'mobo' or a 'maihomu papa' or a 'nopan kissa'? Well, mobo is shorthand, current in the 1920s, for modern boy, a young man of fashion; a maihomu (my home) papa is a house-proud family man; and nopan (no-pants) kissa is a bar offering the services of nude waitresses. The English language used in this Japanized way is ornamental, expressing a mood of exoticism or modernity. It sounds cosmopolitan, but isn't.
    --Ian Buruma, "Edward Seidensticker: An American in Tokyo" 37-44, 41,
    in The Missionary and the Libertine (2002)
    [Originally published in the New York Review of Books, 1990]