"I'm guilty, guilty, guilty," Bernie Madoff told the court this morning.

From Crunchy Con:

"Thank you, Bernie Madoff
Thursday March 12, 2009

Categories: Economics

"I'm guilty, guilty, guilty," Bernie Madoff told the court this morning. Chadwick Matlin has written the World's Greatest Swindler a sarcastic thank-you note that makes some good points. Excerpt:

I, unlike the rest of our compatriots, will choose to exalt your gifts, not just your sins. Like the way you single-handedly forced Congress to acknowledge just how crappy the SEC is at doing its job. Like when your downfall helped unearth a dozen other Ponzi schemes, proactively saving millions of dollars. And I, for one, do not think you're only the basest kind of American--a man driven by greed, power, and an unchecked case of OCD. No, you, sir, are an American patriot. Your selfless sacrifice is overlooked by the hate-first-think-second mass media. You gave the American people somebody to despise when they needed it most. In our economic era, you may not have been the villain we wanted, but you were the one we needed.

Bernie--may I call you Bernie?--you arrived at just the right time. In December, when you admitted your fraud, we Americans were spewing anger, but it wasn't directed at anyone in particular. President Bush? He was on his way out of office, and we had already vented our frustrations at the polls. The CEOs of subprime lenders? Countrywide was absorbed by Bank of America; Fannie Mae and Freddie Mac belonged to us, the very people they helped ruin. Wall Street? Too many CEOs, all of whom you could call greedy only if you understood what in God's name a credit-default swap was.

But then you descended from the Lipstick Building: a middle-aged, extremely wealthy white guy from New York--exactly the demographic at which Main Street wanted to direct its scorn. (Your Judaism probably didn't hurt.) Instead of conning via derivatives, you conned through deceit. And we can understand deceit. That you had nothing to do with the root cause of our economic crisis didn't matter. You messed with Elie Wiesel, and when you screw with Holocaust survivors, it doesn't matter what kind of financial villain you are. You were evil. Case closed.

But that's all surface-level. I believe your real use came in the kind of scam you were running. If I may put it so baldly, Bernie, you made wealth disappear overnight. Money that your clients thought was there actually wasn't. This is the same thing that happened to homeowners when the housing bubble burst. And it's the same thing that happened to investors when the Dow started its death march. Even though your clients were mostly rich, we could sympathize with their loss, because it was a proxy for our own. We found common ground in our hatred of you.

Bernie, this all sounds awful, I know. But there's a reason I'm dragging you through this painful retelling of your greatest sins. We needed to be united, Bernie, and without you we wouldn't have been. The real cause of our financial meltdown is too nuanced, too impossible to cause total agreement across the country. You, however, were different. You gave us an easy target--a man who was selfish, greedy, and indiscriminate in his destruction. You offered an outlet for our frustration, and now your life sentence gives us a small piece of justice to cling to in these dark, hopeless days of the recession. You were our catharsis."

Me:

Don the libertarian Democrat

March 12, 2009 11:51 AM

http://don-thelibertariandemocrat.blogspot.com/

"and now your life sentence gives us a small piece of justice to cling to in these dark, hopeless days of the recession"

Unfortunately, since he's Jewish, as am I, the sentence doesn't do him much good. Neither does God's forgiveness. In Judaism, God cannot forgive you for crimes against others. You need to individually ask those you harmed for their forgiveness, and, if they are deceased, even go to their graves in some cases. Maybe he can get some kind of cemetery furlough for this purpose.

In any case, he's going to be very busy for a long time. He'll take your forgiveness though, I'm sure. That's one less person on his phone book length list.

"This is the sort of thing of which political revolutions are made"

Rod Dreher gets it:

"Dr. Doom speaks:

U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is "effectively insolvent," said New York University Professor Nouriel Roubini, who predicted last year's economic crisis.

"I've found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers," Roubini said at a conference in Dubai today. "If that's true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion. This is a systemic banking crisis."

More:

"The problems of Citi, Bank of America and others suggest the system is bankrupt," Roubini said. "In Europe, it's the same thing."

Meanwhile, Financial Times columnist is so angry at the mess bankers have made that he counsels, only half in jest, it would appear, that it's time to "Shoot the bankers and nationalize the banks." Get your Trotsky on, lad!

More seriously, if Obama is ultimately forced to nationalize American banks, he had damn well better throw the entire leadership class of those failed institutions out on their ear. It is revolting, the idea that those top bankers could have driven their institutions into the ditch, and still be in the driver's seat after the taxpayers, at monumental expense to themselves and their children and children's children, will have hauled them out.( THAT'S IT )

This is the sort of thing of which political revolutions are made."

I agree. This could turn very ugly if the government is seen as rewarding an incompetent and even fraudulent financial sector, while leaving average citizens out in the cold. A bad brew.

"the vice-president long ago became an enemy to the Constitution and to all it represents. He should have been impeached long ago"

Rod Dreher with a great comment, followed by an excellent Andrew Sullivan post:

"Dick Cheney: It's good to be the king

Monday December 22, 2008

Categories: War

Because, says our vice-president, you can do anything you want, regardless of the law, as long as you say you're doing it to defend the country."

Here's Andrew Sullivan:

"One thing you have to concede to Dick Cheney. He says what he thinks. And so we get this:

WALLACE: This is at the core of the controversies that I want to get to with you in a moment. If the president during war decides to do something to protect the country, is it legal?

CHENEY: General proposition, I'd say yes. You need to be more specific than that. I mean — but clearly, when you take the oath of office on January 20th of 2001, as we did, you take the oath to support and defend and protect the Constitution of the United States against all enemies, foreign and domestic.

The irony seems lost on him. How can the suspension of all laws into the power of the executive branch in wartime be seen as a defense or protection of the Constitution? Perhaps for a brief amount of time in a dire emergency, after which there would be a thorough accounting to the Congress and the Courts. But indefinitely? As inherent in the office? And with jurisdiction over the entire United States as well as the world? With "enemy combatants" defined as anyone the president calls an "enemy combatant" and no distinction between citizen and non-citizen? Including the right to torture? Indefinitely?

What Cheney has advanced is that the president has the right to dissolve the constitution permanently. That he has the right to commit war crimes with impunity. That there is no legal authority to which he is ever required to pay deference in a war that is his and his alone to declare and end. Now when you consider that, in Cheney's view, these war-powers are limitless, and that war is declared not by the Congress but by the president, and can be defined against a broad, amorphous enemy such as "terrorism", and never end, you begin to see what a dangerous man he is, and how much danger we have all been in since he seized control of the government seven years ago.

And Cheney's colorful explanation of this theory is also extremely revealing:

The president of the United States now for 50 years is followed at all times, 24 hours a day, by a military aide carrying a football that contains the nuclear codes that he would use and be authorized to use in the event of a nuclear attack on the United States.

He could launch a kind of devastating attack the world's never seen. He doesn't have to check with anybody. He doesn't have to call the Congress. He doesn't have to check with the courts. He has that authority because of the nature of the world we live in.

What Cheney is saying is that if the president of the United States has the power to destroy all civilization alone, he has the power to do anything up to and including that. Chris Wallace asks the right questions, but it is very telling that he didn't ask about torture. I presume that was agreed by Fox and Cheney in advance. I can see no other reason for the lacuna.

But what we know with real clarity is the following: the vice-president long ago became an enemy to the Constitution and to all it represents. He should have been impeached long ago; and the shamelessness of his exit makes prosecution all the more vital. If we let this would-be dictator do what he has done to the constitution and get away with it, the damage to the American idea is deep and permanent."

It doesn't get worse that Cheney in US Politics. I'd prefer Spiro Agnew. At least he was sane.

"Responsibility and restraint are moral sentiments. Remorse is a product of conscience. None of these grow on trees."

Rod Dreher posts about a post in the WSJ by Daniel Henninger:

"The WSJ's Daniel Henninger sees the economic crisis as fundamentally a crisis of faith and morals. Excerpt:

What really went missing through the subprime mortgage years were the three Rs: responsibility, restraint and remorse. They are the ballast that stabilizes two better-known Rs from the world of free markets: risk and reward.

Responsibility and restraint are moral sentiments. Remorse is a product of conscience. None of these grow on trees. Each must be learned, taught, passed down. And so we come back to the disappearance of "Merry Christmas."

It has been my view that the steady secularizing and insistent effort at dereligioning America has been dangerous. That danger flashed red in the fall into subprime personal behavior by borrowers and bankers, who after all are just people. Northerners and atheists who vilify Southern evangelicals are throwing out nurturers of useful virtue with the bathwater of obnoxious political opinions.

The point for a healthy society of commerce and politics is not that religion saves, but that it keeps most of the players inside the chalk lines. We are erasing the chalk lines.

Feel free: Banish Merry Christmas. Get ready for Mad Max.

Well, everybody said "Merry Christmas" back in 1929, and still. But I see his point."

I do as well, in the sense that I believe fraud, negligence, and fiduciary mismanagement are major causes of this crisis, but he didn't exactly bring a strong torch with which to illuminate his point. Here's my comment:

Don

November 20, 2008 9:37 AM

http://don-thelibertariandemocrat.blogspot.com/

"The point for a healthy society of commerce and politics is not that religion saves, but that it keeps most of the players inside the chalk lines. We are erasing the chalk lines.'

There is a problem with this argument, which I most enjoyed when presented by Bolingbroke. He argued that organized religion was important in order to keep the masses law abiding. Of course, this had nothing to do with whether or not they were true, or even whether or not there's a God. He was a deist. He also believed that the elite didn't need these silly constraints, and should govern intelligently, irrespective of what the masses needed.

The main problem with this argument is that it makes organized religion a utilitarian and sociological concern, and so, should it ever be shown to outlive its usefulness, it should be discarded.

There is also a the problem that in WW II, say, atheists like Camus and Amery behaved courageously, while many others did not. There are some missing steps or data he'd need to be able to buttress his argument. Maybe he has it, I don't know. But I'd stay away from utilitarian reasoning, as it has a nasty tendency to end up leading to moral conundrums and two-edged swords.

"we'd have to find a new Saudi Arabia every 18 months."

Rod Dreher on peak oil, something I have a hard time understanding:

"Sharon Astyk explains why peak oil hasn't gone away, despite the rapid deflation in oil prices. The Financial Times this week published findings from a leaked draft of a forthcoming International Energy Agency report showing that output from the world's oil fields is declining faster than experts thought. And a UK industrial task force -- note well: an industry task force, not environmentalists -- examining the potential for declining oil availability to affect the British economy published alarming results this week. Yes, new discoveries are being made, but if we were going to match the rate of depletion, we'd have to find a new Saudi Arabia every 18 months. Sharon explains why this rate of decline news is so important in this excerpt:"

Read the post. I simply don't understand the economic point being made, but maybe I'm missing something. Anyway, here's my comment:

I read the story in the FT, but I read it differently. It basically says that:

"Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times."

And:

"The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand," the IEA says."

So you need extra investment and new capacity.

What's the problem?

"The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say."

And:

"The watchdog warned that the world needed to make a "significant increase in future investments just to maintain the current level of production".

The only problem I see here is lack of investment.

"The effort will become even more acute as prices fall and investment decisions are delayed.'

The problem of investment could be compounded by the current crisis. This is a problem, but I've read plenty of articles in the FT about what oil countries and companies plan to do about this. The jury is still out.

And note this:

"All the increase in oil demand until 2030 comes from emerging countries, while consumption in developed countries declines.

As a result, the share of rich countries in global demand will drop from last year's 59 per cent to less than half of the total in 2030.

This is the clearest indication yet that the focus of the industry on the demand - not just the supply - side is moving away from the US, Europe and Japan, towards emerging nations."

Our consumption is already going to decline, even under this report.

The other story concerned only the U.K.

This story was about the effect of the current crisis and the drop in oil prices on investment. I don't see the story as saying anything more than that.

You might be right about peak oil, but, unless I'm missing something, this story doesn't seem alarming to me.

PS I don't drive or own a car.

"A mutual trust between client and bank was once the foundation of our financial system - we need to get it back"

I never know what to think of posts like this, but it did make me think of Rod Dreher. William Rees-Mogg in The Times:

"The bank manager then occupied a similar position to the family solicitor or the family doctor. He hoped to maintain a long-term relationship with each client and he hoped that this relationship would survive for generations. He would offer general financial advice, and was concerned to keep the interest of the client and the bank in alignment.

He did not lend the bank's money to people he thought might be unable to repay it. That would plainly be against the interests of the client as well as of the bank. He would, however, try to find a way of meeting the needs of vulnerable groups, including students - which I then was - widows and businesses under trading pressures. The customer who failed was seen as a failure for the bank, because it would be regarded as a lack of banking competence. The customer who built up a successful business would also be a good advertisement for the bank.

Banks were there to help their clients and to keep them out of trouble. "

I have to admit that I like this banker:

"Where relationship banking still survives, there have been relatively few problems of bad debts. The problems have arisen in transactional and unsecured credit card banking with one-off or completely unknown customers. Of course the customers have often behaved badly; if a bank does not know its customers, who are only blips on a computer screen, some of them will behave badly. The bank only has itself to blame...

The decline of moral responsibility has damaged British banks; it is the real flaw behind the credit crisis. There will be new regulation of the world's banking system after the crisis. Governments cannot risk another catastrophe on this scale. The banks need to change their behaviour. They need to re-establish relations with their clients and value experience in their staff. They need to beware of American-style, high-risk, high-return, policies. British banking was based on protecting the client's interest as well as the bank's. Bankers should not be ashamed of their Victorian heritage."

I don't quite see things this way, as I wonder if this bank would have lent money to my family. Nevertheless, there's something to be said for the sentiment, even if it is an idealization.

James Grant On The Fed And The Crisis

Along with William Gross, I'm a big fan of James Grant. He's none too happy. Rod Dreher found his comments a wee bit disheartening. I wonder why?

"Low interest rates, easy money and malleable accounting rules are what plunged Wall Street into crisis. Yet it is low interest rates, easy money and malleable accounting rules that top the list of federal fixes. The unifying theme of the new bailout bill, all 451 pages of it, is the hair of the dog that bit you.

The unblinkable fact is that Americans own too much house. We overpaid and overborrowed, and many of us are "upside down," as the car dealers say. What to do? Recognize the losses and write them off. What not to do? Inflate the currency and debase accounting standards."

Read on.