Wednesday, February 25, 2009

Are You Kidding Me Bobby?

Republicans went along with earmarks and big government spending in Washington.--Louisiana Governor Bobby Jindal

Went along with WHO??

Tuesday, February 24, 2009

Isn't It Ironic?

The more I read, the more I am struck by the irony of the title of the Stephen Moore article in the Wall Street Journal that inspired my reading in the first place: Atlas Shrugged: From Fiction to Fact in 52 Years.

When Rand wrote the book, it was complete fiction. America was enjoying a time of unprecedented prosperity in the 1950's despite the ascendancy of the "looters" and "moochers" that Rand so despised. Strong unions and a 90% top marginal tax rate did not destroy the economy or cause industrialists to close their factories and disappear.

In the last thirty years, however, American manufacturing has declined precipitously and the United States has gone from the biggest creditor in the world to its biggest debtor. All this happened as American economic policy turned in favor of Rand's "prime movers" with tax cuts for the wealthy and union bashing.

Friday, February 20, 2009

Randian Turgidity

"Hank, this is great."


He said it simply, openly. There was no flattered pleasure in his
voice, and no modesty. This, she knew, was a tribute to her, the
rarest one person could pay another: the tribute of feeling free to
acknowledge one's own greatness, knowing that it is understood.

Atlas Shrugged, p. 86. Any parent who catches their high school aged son reading this stuff should seriously consider disabling the internet porn filters.

Santelli's Rant on CNBC

CNBC's Rick Santelli is getting a lot of press for his rant about bailing out people with bad mortgages.

Rick Santelli says he is an “Ayn Rander.” He also touts the efficiency and fairness of the trading pits in Chicago as opposed to the unregulated markets that produced the financial meltdown.

What Santelli does not mention is that it was the unregulated markets that were supported and defended by Alan Greenspan who was suckled on objectivism at Ayn’s very own tits. When Congress asked Greenspan about credit default swaps and mortgage securitization, he testified that the markets should be allowed to allocate risks as it saw fit.

The trading pits that Santelli loves function as well as they do because they are heavily regulated. There is a centralized clearing corporation that monitors the positions and transactions of all market participants to make sure that they have sufficient capital to cover risks. All market participants can see what is trading and what the open interest is in all contract classes.

Economist Steve Liesman was correct to point out that the market got us into this problem but that it cannot get us out. Left unsupervised, the players went nuts in the markets for mortgage backed securities and credit default swaps. I don’t know whether Liesman is correct about the government being able to get us out. I hope it can.

Thursday, February 19, 2009

Atlas Slugged

I am trying to read Ayn Rand's Altas Shrugged. Since I made fun of the Wall Street Journal's Stephen Moore's last month when he recommended it to every member of Congress, I have noticed a number of allusions to Atlas Shrugged from the market pundits on CNBC. This morning, Rick Santelli openly proclaimed himself a Randian true believer.

While there is nothing surprising in finding Rand fans among CNBC pundits who regularly tout the wonders of free markets and the evils of government, I am curious about the frequency with which I have been hearing her referenced recently. It is possible that they have been making such allusions for years and I just never noticed, but I suspect that there is more to it than that. For one thing, the market failures of the last year have discredited many conservative economists forcing ideologues like Santelli and Moore to cite works of fiction as authority for their views.

I also wonder whether the more frequent references to Rand aren't in part a reflection of the breakdown in the coalition between uber-libertarians and conservative Christians that has powered the Republican party since 1980. I have always thought that it must have been rather painful for fans of Rand's militant atheism and her celebration of "prime movers" to suck up to the anti-intellectualism of the Religious Right. I wonder whether the more open embrace of Rand reflects a loss of patience with the bumpkinism of the Palin wing of the party.

I first tried reading Rand when I was in high school because a couple of guys in the chess club assured me that she was the ultimate font of all wisdom. However, rather than starting with one of her novels, I picked up The Virtue of Selfishness and I got bored with it pretty quickly. A couple years ago though, I caught The Fountainhead on cable and I enjoyed it pretty well. When I ran across a copy that my wife had read for some class in college, I decided to give it a try. I found Rand's prose pretty wooden, but imagining Gary Cooper, Patricia Neal and Raymond Massey delivering the dialogure helped a lot. Unfortunately, Atlas Shrugged is 400 pages longer and I don't have any positive associations to help bring this to life.

I am only about seventy pages in so far and I can't count the number of times that I have cringed in pain at the sledgehammer subtlety with which Rand drives home her themes. I had figured out pretty early that the character of the composer Richard Halley would be a paragon of misunderstood creative individualism like the architect Howard Roark in The Fountainhead. However, Rand takes no chances:
"The music of Richard Halley has a quality of the heroic. Our age has outgrown
that stuff," said one critic. "The music of Richard Halle is out of key with our
times. It has a tone of ecstasy. Who cares of ecstasy nowadays?" said another.
Ouch! Ouch! Alright! I get it, Ayn. I get it! Genius is unappreciated and resented by the masses. It is the one great truth that all high school chess club members understand.

Tuesday, February 17, 2009

Fed Dispels CRA Myth

That blaming the Community Redevelopment Act for the subprime mortgage crisis is bullshit and always was bullshit is confirmed by Federal Reserve Board Governor Elizabeth Duke:
Although the current problems appear to be rooted in high-risk subprime lending, I would like to dispel the notion that these problems were caused in any way by Community Reinvestment Act (CRA) lending. The CRA is designed to promote lending in low- to moderate-income areas; it is not designed to encourage high-risk lending or poor underwriting. Our analysis of the data finds no evidence, in fact, that CRA lending is in any way responsible for the current crisis. In our analysis of loan originations, we found that approximately 60 percent of higher-priced loans went to middle- or higher-income borrowers or neighborhoods, which are populations not targeted by the CRA. Additionally, more than 20 percent of the higher-priced loans that were extended in low- to moderate-income areas, or to low- to moderate-income borrowers, were loans originated by lenders not covered by the CRA. In fact, the analysis found that only 6 percent of all higher-priced loans were made by CRA-covered lenders to borrowers and neighborhoods targeted by the CRA. This very small share makes it hard to imagine how CRA could have caused, or even contributed in a meaningful way, to the current crisis. Further support for this conclusion comes from our finding that serious delinquency rates for subprime loans are high in all neighborhood-income categories, not only those in lower-income areas, as might be thought if the CRA were a contributing force to the subprime crisis.
This was never anything more than an attempt by conservatives to shift the blame for the Republicans' atrocious stewardship of the economy to Bill Clinton.

Sunday, February 15, 2009

My Thoughts on the Economic Crisis

I’m still trying to figure things out but here is my best guess so far.

Alan Greenspan cutting interest rates to 1% and keeping them there for a long time was a huge part of the problem. This brought mortgage rates down and inflated the housing bubble. It also made mortgage-backed derivative securities (with their fantasy AAA ratings) extremely attractive to yield starved investors who were desperate for a better return on their money.

The culture of Wall Street and the finance industry ties everyone’s earnings to the short-term production of transactions regardless of risk rather than the long-term stability in returns of either assets or company. This is a situation that has been building since the Reagan years with plenty of blame to go around.

Deregulation itself really wasn’t the problem because much of this, e.g., credit default swaps, was brand new crap that had never really been regulated in the first place. However, the philosophy that underlies deregulation—i.e., that the free market should be trusted to make the optimum risk allocation decisions—was a huge part of the problem. This was a philosophy that Greenspan and the Republicans unquestioningly defended.

From what I have read, Fannie and Freddie stayed in the very safest part of the mortgage market, i.e., fully documented non-jumbo conforming loans, until pretty late in the game and only then ventured into slightly riskier areas. However, given their size and the fact that they got involved when the bubble was already stretched to the limits, it would not surprise me if they made the popping of the bubble that much messier. However, I am still developing my understanding of this.

I have CNBC on in my office and I cannot count the number of times during the years before the housing bubble burst that I heard officials from the administration tout record levels of home ownership as proof that Bush’s economic policies were good for everybody. On top of this, consumer spending driven by home equity loans and mortgage refinancings was what kept the economy humming from 2002 onward. This makes me highly skeptical that Republicans ever had any will to reign in the housing market. My instinct is that Republican attacks on Freddie and Fannie were driven primarily (if not overwhelmingly) by partisanship and ideology although I definitely have more to learn on this.

At present, I have not run across much to convince me that the conduct of the Democrats was particularly praiseworthy in any general way. Their only redeeming virtue seems to be that the Republicans controlled the House, the Senate, and the Oval Office from 2003-2006. I suspect that there may be a few cases that I don’t know about yet where Democrats acted on principle, but I would not be surprised to find a Republican or two who did so as well.

The CRA didn’t have diddly squat to do with anything. The argument is a bullshit red herring driven by a "blame-Clinton-for-everything" mentality.

Thursday, February 12, 2009

Liberal Billionaire Attacks Economy to Thwart Palin!

It must be true! I heard it from Chicago radio host Sandy Rios yesterday.

After Lehman Brothers declared bankruptcy on September 14, 2008, credit markets froze up. On Tuesday, the 16th, the nation's oldest money-market mutual fund, Reserve Primary Fund, announced that its exposure to Lehman's debt caused its share value to "break the buck," i.e., its share price dropped to 97 cents. This led to massive redemptions of money market funds. To stop the run on the money funds, on Friday the 19th the Treasury announced temporary guarantees of money market accounts similar to the guarantees that the F.D.I.C. provides on bank accounts.

After playing a clip of Congressman Paul Kanjorski (D-Penn.) describing the situation that faced the markets on that Thursday, Christian talk host Sandy Rios offered the following cogent analysis (it's at about the 32 min mark):

Why haven’t we heard about that?
To repeat what he just said: $550 billion were withdrawn electronically from our system, our American system, within one to two hours and if they had allowed it to continue it would have gone up to $5.5 trillion electronically withdrawn.
Who’s doing this? Who’s doing this on that day? And if you go back in time, what was happening? That was right after Sarah Palin, right after Guy (her cohost) and I were at the convention and Sarah Palin was being introduced. Everybody...the polls were showing that people just loved her and John McCain was gaining momentum because of her and suddenly the financial collapse.
You think that’s an accident?
I have to tell you again that George Soros, its documented, was attributed with wrecking the economies of two different countries. Now I don’t know if—I’m not saying that George Soros did this. How would I know? How would I know? But he’s a billionaire who is a leftist who’s been funding the worst kinds of things in this country for the last I don’t know how many years, ten that I know of. So somebody like George Soros . . . . Who’s doing this? Who orchestrated this? Who orchestrated something so dastardly that the entire economy would have been destroyed on that day? Why would they do that? Because its destruction that they seek and that’s at the heart of why we’re in this trouble.
Have you heard this story?
So there you have it. It wasn't subprime mortgages. It wasn't the collapse of the housing bubble. It wasn't the collapse of Bear Stearns, Countrywide, Washington Mutual, or Indy Mac. It wasn't the need to rescue Fannie Mae, Freddie Mace and AIG. It wasn't the Lehman bankruptcy. It wasn't the fact that real people were feeling rational insecurity about the safety of money market funds.

It was George Soros or some other evil liberal billionaire who was more than willing to take down the economy of the whole world just to thwart Sarah Palin.

I tried to call Rios' show today to let her know that I was aware of this story. I had not heard the exact figures that Rep. Kanjorski quoted for money fund outflows, but I trade the stock market for a living and I knew what the scale of problem was. There was nothing scarier in what the Congressman said than in how things felt that Thursday. I believe that was the day that short-term treasury bills traded at negative interest rates. That means that people were so desperate for a safe place to put their money that they were willing to give up $101 just to be sure of getting $100 a month down the road.

Unfortunately, Rios isn't taking calls today because she is talking to a guest about Abraham Lincoln. What I think I find most amusing is that Rios frequently complains about liberals who automatically blamed Bush for everything that went wrong over the last eight years. I will admit that I blame Bush for many thing, but I am confident that I can present reasons for blaming him for each and every thing that I blame him for that are infinitely more rational than Rios' liberal billionaire conspiracy theory.

Monday, February 2, 2009

From Today's Wall Street Journal Op-Ed Page.

How often do Americans want to hear how misguided they were before his (Obama's) arrival?

WSJ Editorial Board Member Dorothy Rabinowitz.

I suspect the guides who did the misguiding may want to hear it least of all.

James White Pats Himself on the Back

From White's list of goals he thinks he accomplished "with great clarity" in his debate with Ehrman.

I succeeded in making the case against any kind of edited control of the text and in demonstrating that this is a far more serious allegation than Ehrman’s “we need the original” argument.

In other words, White succeeded in refuting an argument that Ehrman didn't make.

Sunday, February 1, 2009

Misquoting Ehrman

We can know some things with relative certainty. We can know what Bibles
look liked in the twelfth century. We can know what Christian churches in the
twelfth century, what their Bibles looked like. We can know what Bibles looked
like in some areas in the seventh century. We can know what one community’s
Bible looked like in the fourth century and the farther you get back, the less
you can know. . . . It’s the nature of historical evidence that you have to go
with the evidence if you are going to be a historian and you can’t fill in the
gaps when you don’t have evidence. And in the early period, we not only have
very few manuscripts, but the other striking phenomenon, is that the manuscripts
we have vary from one another far more often in the earlier period than in the
later period. And so the variation is immense and there aren’t very many
manuscripts. So the historical result, whether we like it or not, is that we
just can’t know.

Bart Ehrman in Q&A after debate with Dan Wallace.

I think most people would look at those comments and say, “That sounds pretty reasonable.”

However, the Christian apologist takes a different approach. He pulls the last sentence out, looks at in isolation and says, “Wow! That is like . . . so misleading. It almost sounds as if he’s saying that we that we can’t like . . . know anything. Ya know? I mean, if you’re going to be like . . . that hyper-skeptical, all historical knowledge would in doubt.”

Why do apologists do that?

The problem is that most evangelical Christians spend every Sunday of their lives listening to sermons in which their pastors talk about what the Bible says as if you can be just as certain about the sayings and doings of a first century itinerant preacher as you can about yesterday’s football scores. They hear things like “The Bible says it. I believe it. That settles it.” They hear apologists like Josh McDowell and Lee Strobel tell them that the evidence supporting the New Testament is overwhelming. They are told that no rational person would remain unpersuaded by this mountain of evidence but for a willful rejection of God.

The problem isn’t that reading Ehrman gives them a false picture of the uncertainty of the texts. It’s that they have spent their entire lives developing a false sense of certainty about the Bible.

Most apologists will acknowledge that the evangelical clergy has done a poor job of preparing the laity to deal with the issues that Ehrman raises, but they still want to argue that there really isn’t anything in the field of textual criticism that should upset the believer. After all, no essential doctrines are affected. However, if you are a Christian who has spent his entire life looking at the Bible as the exact words that God wanted you to have in order to guide your life and know His purposes, the fact that you can still be confident of the essential doctrines might not be all that comforting.

The reason that apologists spend so much time trying to exaggerate Ehrman’s skepticism is that they think it makes the Bible look better. After all, even if the texts aren’t as reliable as the average believer always thought they were, they still aren’t as bad as he might think based on the imaginary hyper-skeptical epistemology that the apologists have invented and attributed to Ehrman. As an added bonus, the apologist might get to score some cheap points in a debate with Ehrman by getting him to “admit” that he’s not as skeptical as the apologist claimed he was.