Appeared on the Jaco Report on Fox News in St. Louis. We had a good talk about foreclosure fraud, the "automated greed factories," and the dead soul of modern banking:
The foreclosure fraud scandal is a big deal (or a big "effin'" deal, as Joe Biden might say). But its real significance is an even bigger deal. Foreclosure fraud is one domino, and if it falls others will follow. The result could be an end to the "invisible bailout" - the one you never hear about, the one that forces millions of people to subsidize bad lending practices in order to prop up Wall Street.
The invisible bailout is the reason why the government isn't pushing to freeze foreclosures. If the foreclosure process is halted and lending practices are thoroughly investigated, it might eventually force bankers to own up to their own lawlessness - and write down billions of dollars in artificially inflated assets. How are they going to pay themselves record bonuses if that happens?
How much could that cost? One in four US homes is underwater, which means that proper accounting would require a writedown of enormous proportions. And, as the AP reported, "forecasters at John Burns Real Estate Consulting predicted that 41 percent of residential sales this year would be on distressed properties." The banks have been counting on that revenue.
Write down one mortgage in four? Halt nearly half of all home sales?
Now that's a big effin' deal.
To play the game, first place the blame
Ever wonder why so many pundits and politicians keep hammering underwater homeowners as morally reprehensible, while giving bankers a free pass for lending to them? It's because the ongoing success of the bank bailout depends in part on protecting banks from having to account for the billions of dollars in bad loans they generated. How do you do that? By convincing the public that borrowers are the ones who were irresponsible, if not downright criminal, and that they have a moral obligation to pay banks the full value of these loans.
That's the agenda that gets served by pieces like last year's "Homeowner Bailouts Reward Irresponsibility," which singled out real estate flippers and lambasted people who overspent for houses they couldn't afford. But flippers are a tiny percentage of the real estate market, and those people with houses they "can't afford" were told they could afford them ... by the banks!
That's also why so many stories of mortgage fraud singled out homeowners who overstated their incomes or otherwise provided falsified information in obtaining a mortgage. But the FBI - hardly a bastion of socialism - estimated that 80% of mortgage fraud was performed by businesses ("Fraud for Profit") and not individuals ("Fraud for Housing"). Yet homeowners are being stigmatized in order to reduce political pressure to provide them with some form of mortgage relief.
As for the noncriminal loans, which presumably remain the majority of those outstanding, borrowers didn't take them out as part of a nationwide attempt to live beyond their means. These loans were aggressively marketed to homeowners by banks. A lot of people got rich giving out these loans. But our "invisible bailout" policy requires a public belief that homeowners are morally obligated to pay full value on loans written at inflated house prices.
That's where pieces like one written by Fareed Zakaria (and discussed here) were so important. For this argument to succeed, it was necessary to believe that the economic crisis was the result of their "bad habits" and their own native greed. "We ... took out a massive mortgage and financed our fantasies," Zakaria writes.
But who fueled the fantasies? Who offered consumers these mortgages?
Catch-22 for Homeowners
Banks convinced people their homes were worth an inflated amount and persuaded them to borrow against that amount. The "invisible bailout" strategy relies on homeowners to pay them the full amount of that inflated loan, with no penalty to the bank for its role in that transaction. To help homeowners, the government's response has been to lower interest rates. But the banks won't lend money to someone whose collateral is worth less than the value of the loan! (Banks suddenly get religion about a home's real value when it's time to issue credit.)
That leaves homeowners in a Catch-22. Who benefits? The banks, of course. They still collect against the inflated value of the house, and at older, higher interest rates - while pocketing the zero-interest money the Fed is throwing their way.
That's the invisible bailout, and it's worked like a charm ... until now.
Bled dry
Of course, when you're bleeding people like they're meatlocker inventory in a vampire delicatessen you're going to lose some of them. Foreclosures - lots of them - are the cost of doing business this way. But the banks must have decided that it's better to go through the foreclosure process than to write down their stated assets to a reasonable level.
But there's a problem with that. They had themselves quite a little party by swapping these inflated mortgages as securities, but now that the party's over it's getting messy. Nobody knows who owns what, exactly. That left them with a choice: Admit that they can't always trace the chain of ownership, or falsely claim that they had this information when they really didn't.
Remember, if banks admit that they can't prove ownership, then they have to write down a lot of assets. If their lack of information had become known, they might have had to negotiate with homeowners ... for the actual, current value of the home! That's exactly what they don't want to do.
Blackmail on the books
So the banks bluffed it out instead and hoped they'd get away with it. That's a reasonable enough assumption. After all, they've gotten away with so much already. As "Synthetic Assets" points out: "over the past half century the financial industry has not treated the law as a bedrock institution that constrains ... its activities, but rather as a set of rules that can be forced to adapt to the industry's needs and desires."
As long as a financial collapse threatens the entire economy, these bankers understand that the government will retrofit the law to fit their behavior. The alternative would be an economic crisis. (That's why we need to break up the big banks.)
Bankers. Aren't they supposed to know something about managing money?
Mortgage fraud was a huge business in the 2000's, leading to more than a billion dollars in restitutions in 2003-2005 alone (and identified cases were a tiny fraction of the total). Bank assets are loaded down with fraudulently written loans which, if acknowledged, would hit them hard (and make it more difficult for bankers to pay themselves record bonuses again this year).
Then there are the legally obtained but still highly overpriced assets, mostly real estate that's worth much less than what's on the books.
And consider this: We have a massive problem with homes under foreclosure, because bank haste and greed have left them with no clear title. That means it's not clear who owns these houses. We only learned about it through the foreclosure process, but the same title problems must exist for homes that aren't going through foreclosure. We could be looking at millions of homes whose ownership is unclear. No wonder bankers tried to hide the problem with fraudulent affidavits.
The IMF estimated that banks worldwide still needed to write down $550 billion in bad debt - and that was before this problem arose.
Investors hate banks right now, and no wonder. Non-interest revenue has fallen by more than $10 billion since 2007, while this kind of problem will cause their expenses to rise. Banks are trading below book value on the open market, which should be (but won't be) celebrated by the Right as an instance of an informed market making a wise decision. (Only 8% of banks traded below their book value in 2001, and by 2008 that was up to 60%.)
As the IMF says, bankers are running a "very fragile" business. Even with a license to break the law, profits are down and they can't dig their way out of the hole they made. That suggests they're not very good at their jobs. What's the right set of incentives for that kind of record? Record bonuses, of course - even if it means taking a bigger percentage of their reduced profits to do it.
But what they must do at all cost to protect those bonuses is pretend everything's fine. They're not even writing down second liens on homes, which are notoriously over-borrowed. (Did I mention that these guys are giving themselves record bonuses?)
Dominoes
Nobel prizewinner Joseph Stiglitz, who also bears the distinction of having been correct about the housing bubble, thinks it's time for the banks to write down the excess value of these loans. As Stiglitz observes, that will be painful for the banks in the short term, although it would be "nothing in comparison to the suffering they have inflicted on people throughout the rest of the global economy."
But the Administration's reluctant to do that. That's why we heard such tepid remarks from the White House about the foreclosure fraud scandal over the weekend. If the foreclosure fraud issue is pursued too aggressively, it throws 41% of all expected housing sales into question. It raises even more questions about the ownership of millions of loans in good standing, potentially giving homeowners leverage to renegotiate based on the actual market value of their homes. And it reopens the issue of "writedowns."
Illegal submission of foreclosure documents was part of a larger cover-up. People need to be arrested for it - but that, of course, would open up a larger can of worms. The legal process could very well reveal the extent of the title problem, as well as other potentially widespead criminal practices.
Still, that's no reason not to cuff 'em and book 'em. If you can't do the time, don't do the crime ...
Foreclosure fraud is the first domino. If it's tipped over, the "invisible bailout" would end. Banks would no longer be subsidized by American homeowners. Know what that means? Bye-bye, bonuses. Hello, increase in discretionary spending for American consumers. And hello there, new jobs.
Anyone for a game of dominoes?
___________________________________________
This post was produced as part of the Curbing Wall Street project.
(Image via Wikipedia Commons)
Get this: Republicans on the Deficit Commission aren't just refusing to consider any tax increases. Now they're proposing tax decreases designed to help the rich while taking benefits from everyone else. Dealing with people like that is like negotiating with somebody who's high on drugs.
Most members of the Commission seem to want a deal -- any deal -- so they've decided not to address the real causes of current and future deficits: health costs, tax cuts, war spending, runaway bankers and the growing inequality between rich and poor. Instead they're going after something that doesn'taffect the deficit: Social Security retirement benefits.
Why? Apparently, because they can.
Today's GOP is so extreme that it's rejecting a framework for Social Security endorsed by Ronald Reagan and Alan Greenspan. (They'd probably call Reagan a socialist if he were alive today.) And some Democrats are playing along.
The Deficit Commission was designed to show the world's financial markets that the US is serious about cutting its debt. Some of its members certainly offered chest-thumping, near-simian displays of "seriousness" when they met today. "It's not going to be easy, it's not going to be fun, and in many cases, it's not going to be popular," said Co-Chair Erskine Bowles. "It is going to require sacrifice."
In response, the markets yawned. They're not worried about US debt. (Only the politicians are.) What's more, the "market" -- usually so beloved by conservatives, but not in this case -- understands that the Commission's unlikely to propose anything that would seriously affect the deficit. When the radical right's driving the fiscal Crazy Train, it can't. So it's Social Security cuts or nothing. (The latter's not impossible. Commissioner Andy Stern said, "There has been absolutely no formulation" of recommendations.)
The reality is the Commission's not going to affect future deficits much either way. But if they're able to push their benefit cuts through Congress, they'll try to have it both ways politically. One the one hand, they'll insist that they're "only doing this to protect the program for future generations" and not to reduce the deficit. On the other hand, they'll also try to take credit for... reducing the deficit. Then they'll wait in vain for the financial markets to reward them for it.
Despite the fiscal illogic, Social Security cuts will in fact be both "easy" and "popular" in the high flying world where commissioners like Erskine Bowles reside. For Alan Simpson, they may even be "fun." And only the people they never see -- the ones who worked all their lives and paid their payroll takes -- will be called upon to "sacrifice."
To understand how wrongheaded they are, it's important to know what's really driving the deficit and what created the current mild imbalance in Social Security.
This is your budget. This is your budget on drugs.
Most people (even skeptics like me) assumed that, even in the worst-case scenario, the Budget Commission would try to temper the impact of its proposed cuts with a few symbolic tax hikes. Even if the increases were so tiny they were practically homeopathic, they'd have to do somethingfor appearance's sake. That's what makes reading a news report like the one in today's Talking Points Memo so... so... hallucinogenic.
I know, I know: That's hardly a somber, analytical word. But, honest to God -- if you understand the numbers at all, reading a sentence like this will make you feel like your coffee's been laced with peyote. From Talking Points Memo:
"Republicans have not even said that we should get any revenue from taxes," the source said. "Even tax expenditures. They appear to want to use the savings on tax expenditures to cut corporate taxes."
You read that right: "Deficit" commissioners who won't allow any new tax revenues. Oh, they'd cut benefits for the elderly, alright, but they'd use the money to reduce corporate taxes -- and capital gains taxes, too. That will make the deficit worse and it will widen income disparity, further enriching the wealthy by cutting benefits that lower- and middle-income people paid taxes to provide all their lives. That's what passes for fiscal sanity in the econo-millenarian saucer cult the Republican Party has become. And that's how a nation that's already radically redistributed its wealth upward could do it even more.
Here's what Republican Sen. Judd Gregg, a member of the Commission, said today: "I think everybody understands that the majority of the issue is on the spending side, and so this commission, to the extent that it reports, I suspect is going to have a heavy tilt toward controlling spending."
But the GOP has ruled out cuts to the military or homeland security. That narrows the "spending" side of the equation down to about one-seventh of the budget. That brings us right back to raising taxes. The GOP response? "We need to change the conversation," said Sen. Bob Corker, "and I think that means focusing on the big picture first... agreeing on the amount of spending we can sustain."
"Changing the conversation," aka "changing the subject," is probably Corker's best bet. Because the deficit was really caused by this:
(source: Center for Budget and Policy Priorities)
That's two wars (which the GOP wants to continue), Bush-era tax cuts (which the GOP wants to expand to benefit the ultra-wealthy even more), and the direct and indirect costs of a crash brought on by inadequate banking regulation that enriched many of the same ultra-wealthy (the GOP is resisting all attempts to increase banking regulations.)
When it comes to deficits, the GOP is the problem, not the solution.
Sure, Social Security's a big-ticket item. But it's self-funded. If we went back to Reagan era principles, it would be fine. There's not much out there to cut, proportionally, except health-care spending. Our health-care costs are far above those of other developed nations and give us much poorer results. What if we could get our health spending in line with countries like Canada, the United Kingdom, or Germany? Thanks to Dean Baker at the Center for Economic and Policy Research, we have the answer:
Last November, when the Tea Party Express was just building up a head of steam, it seemed worthwhile to stop for a minute and listen to a country song. Why? For one thing it's a really good song, and it had a great hook. "Here in the real world," it says, away from those powerful guys in Washington and New York, "they're shuttin' Detroit down."
That theme was so inclusive and compelling that conservative singer John Rich (John McCain's campaign troubadour) was able to get noted lefty Kris Kristofferson to act in the video, along with Mickey Rourke. That made the song important and interesting. How was John Rich's message able to win over those guys? Because it was simple and true: The people who got us into this mess are doing just fine, and the people who worked hard and played by the rules aren't. What concerned me back then was that this message, while compelling and accurate, could wind up benefiting some of most bank-friendly politicians on Earth. The Republicans who deregulated banking (along with centrist Democrats) could wind up with more power. They'd then be in a better position to carry out their agenda of blocking the modest banking reforms and economic fixes being recommended by the White House and Congress.
Isn't that pretty much what's happening?
Reading Arianna Huffington's new book Third World America made me think of that song again. There's a medical phenomenon called "blindsight," where people who seem to be partially or completely blind are able to respond to visual information under test conditions. The theory is that they're not blind at all, but are unable to consciously process the information they're receiving from their eyes. Isn't that what's happening in the country right now? Most people aren't economists or policy wonks, after all, so they probably haven't "seen" this chart:
(source)
But on some level they know it. And they may not have seen this chart, either (from CBS Moneywatch via Mike Konczal), but you can bet they "know" it too:
People need ways to integrate and process all the information they're receiving. They're struggling with the cognitive dissonance they experience when they're told the economy's doing better, because they know that in their world it's not. Human beings have always used stories and songs to integrate the information they receive, and we need better stories and better hooks than we've been getting lately.
Know what's a good hook for these troubled times? "Third World America." Know what's not? "Recovery Summer." So score one for Arianna before the cover's even cracked. The "recovery summer" theme was bound to ring false for the millions of Americans who still live in a devastated economy. That was destined to reduce the credibility of the very institutions that prevented even greater damage - institutions that could do more to help them.
We've seen the Administration move toward a more coherent narrative in the last week, but will it be enough? "I ran because I felt that we had to have a different economic philosophy in order to grow that middle class and grow our economy over the long term," the President in Friday's press conference. That sounds like a story worth telling.
Third World America is direct and clear in its message: Decades of aggressive corporate lobbying, driven by bankers and other large corporations, have led to a series of policy decisions that are eroding the American standard of living. The details are all there: The financial industry's gone from 2.5% of our GDP in 1947 to 8.3% right before the meltdown. Financial profits went from a maximum of 16% between 1973 and 1985 to 41% right before the crisis hit. And rather than being chastened by their failure, or disciplined by taxpayers in return for being bailed out, bankers have embraced their old ways with enthusiasm. Meanwhile the American households that rescued them lost $13 trillion in wealth between mid-2007 and March 2009.
There has been, in economist Simon Johnson's words, a "quiet coup" led by a classic "oligarchy." Bankers now exert enormous control over both the economy and the political process. People see that, and they're angry. Anyone who wants to discuss the current state of affairs better be prepared to speak plainly - "third world America," "quiet coup," "oligarchy" - or they'll be ignored.
Some of us are actually old enough to remember when the American dream was at its peak. Even if you were just a kid, you knew certain things: If you worked hard, you could retire in financial security. You lived in a country that led the world in science research, education, and social mobility. We designed things, built things. We were creating the future. Many of us later traveled into Third World countries for work or pleasure. We were saddened by the crumbling roads, unsafe bridges, and unregulated companies poisoning the air and water. The income inequities seemed so unjust, and the people's inability to heal their country through a free political process was tragic.
Little did we suspect we might be looking into our own future.
But Arianna's not just crying in her beer. The final section of the book details a series of fixes, which include: Campaign financing. Citizen activism, with less reliance on politicians as saviors and more on ourselves as the agents of change. Spending on infrastructure and education. Bank reform with teeth. Homeowner relief. Service to others. Moving your money away from predatory financial institutions.
I'd add another to that fine list: Stop judging the tea party radicals around you. Sure, some may be extremists and racists, but lots of them are just frightened and angry. They're trying to reconcile what they "see" with what they're being told. Right now they believe a false story, but it hangs together and makes them feel sane in a seemingly insane world. Demogogues have always used these kinds of stories to exploit human fear. You can't blame people for believing a false story if they haven't heard the real one.
So don't blame the individuals, blame the story. Tell them a better one. The truth is a helluva story. But even the truth works better if it has a good hook.
(originally written for The Huffington Post)
From a while back ...
Now I watch HIS fingers ...
LA Reception for Progressive Champion David Segal for Congress
Location:At the beautiful gardens of Jodie Evans
Time:6:00PM Thursday, August 26th
Let's get this one out of the way first: Why is Sarah Palin upset about anything that happens in New York City? She’s already made it clear that she doesn’t consider New York part of the “real America.” So why does she care what happens there?
Sensitivity question #1
Israeli Prime Minister Yitzhak Rabin was not a religious believer. He was assassinated by a fanatical follower of Orthodox Judaism. Yet the Orthodox Religious Council and Rabbinate is located less than two blocks from the site of his assassination. Should it be moved - out of sensitivity for his widow’s feelings, and those of his supporters?
Sensitivity question #2
Two people died when Christian extremist Eric Rudolph bombed the Olympic Centennial Park. One of them was Melih Uzunyol, a Turkish cameraman who suffered a fatal heart attack. He was presumably not a Christian. Nevertheless, a church called the Baptist Tabernacle is located immediately next to the park. When should it receive its notice of eviction?
Out of sight, out of mind
The so-called “mosque” is actually planned as a community center - which prompted Al Franken to speak of "Muslim point guards" in its gym. It would include a prayer room, which is supposedly part of the problem. But Muslims pray anywhere.
How far away must Muslims be in order to perform the act of prayer? What if they only pray inwardly? Would a Muslim community center be permissible if no prayer was conducted?
Airports are sacred, too
There are interfaith prayer rooms or chapels in all major US airports. Should we station armed guards at the door to make sure they're not used by Muslims?
Such a deal
I worked in the World Trade Center neighborhood for years. Friends of mine died there. So I remember the Burlington Coat Factory that once occupied the planned site of this so-called “mosque.” Occasionally you could find a good deal, but frankly most of their merchandise was crap. Would it be permissible for Muslims to open a store that sold mostly crappy clothing, instead of a community center?
Hear me out: The old Jewish guys on Seventh Avenue could sell wholesale merchandise to the moderate Muslims downtown, who could then sell it retail. If my grandfather the tailor were still alive he could mend the clothes. The whole thing could be a beautiful interfaith experience.
But I still wouldn't wear those ugly overcoats they used to sell. You know the ones I mean, the brown ones with the fake-fur collars? Ech.
Bad seed
The “Reverend” Franklin Graham says that Barack Obama carries the “seed of Islam” because his father was a Muslim. But Obama's father was an atheist. For how many generations does this “seed” and its presumed curse survive? Should we forbid people descended from Muslims from congregating near the World Trade Center?
A few more questions for Reverend Graham: Are you suggesting that "Muslims" like Obama who convert to Christianity aren't real Christians? That they're not equal to born Christians like yourself in the eyes of the Lord? If so, where does that leave the twelve disciples?
And a last question for the Reverend: Why did it only take one generation for Billy Graham's "seed" of basic courtesy and tact to disappear so completely?
Disappearing act
The Anti-Defamation League was formed after World War II on one of the most inspiring of premises: The Jewish people, who had suffered the most massive and horrifying act of institutionalized hate in history, would create an organizationto fight discrimination - not only against themselves, but on behalf of all victims of prejudice. Once it would have responded to this controversy by bringing people together to address the survivors' pain and overcome bias. Now it opposes the building of this “mosque” near the World Trade Center, a position that's premised on the collective guilt of the world's billion Muslims.
Will there be a memorial service to mourn the beautiful thing the ADL once was?
Penultimate question
For “moderates” and the news media who keep this controversy alive: When can we start talking about the economy again? Or the climate? Or the war in Afghanistan, which on last report is still killing people?
Compromised positions
The last question is for “moderate” liberals like Howard Dean who think the community center’s founders should “compromise” and move somewhere else:
If you guys had been in politics in 1955, would you have suggested that Rosa Parks “compromise” by sitting in the middle of the bus?
_____________________________
“(S)egregation distorts the soul and damages the personality. It gives the segregator a false sense of superiority and the segregated a false sense of inferiority … (S)egregation is not only politically, economically and sociologically unsound, it is morally wrong and sinful. Paul Tillich has said that sin is separation. Is not segregation an existential expression of man's tragic separation, his awful estrangement, his terrible sinfulness? …An unjust law is a code that a numerical or power majority group compels a minority group to obey but does not make binding on itself.”
--Martin Luther King, Letter From a Birmingham Jail
Woke last night to the sound of thunder.
How far off? I sat and wondered.
Started hummin' a song from 1962.
Ain't it funny how the night moves
With Autumn closin' in … ?
Haiku or not? In the strictest definition, clearly not. It's not even close to the 7-5-7 syllable structure that makes the haiku form so compact and elegant. (I think people sometimes admire haiku for the same reason they admire microchip design: Look how much you can put it such a little space!)
Seger's lyric is closer to the five-line tanka form. Since tanka are generally concerned with love or mortality, the Seger lyric is a good candidate (except for the syllable counts, which are way off). And the entire lyric to the song from which this comes, "Night Moves," would be a chōka , if anything. It's way too long for any other Japanese form. (The reader will presumably remember the song, with its "I used her, she used me, and neither one cared/we were getting our share" challenge to feminist critiques of male exploitation.)
That said, a seasonal reference is customary in the haiku form, and Seeger delivers. It might be argued that he also provides a kireji, or "word which cuts." Kireji often express wonder, and he uses that word explicitly. Kireji can also be in the form of a question, like a Jeopardy answer.
Parts of this lyric could almost qualify as a Zen death poem, or as a premonition of death:
Woke last night to the sound of thunder.
How far off? I sat and wondered.
That could be a meditation on the nature of mortal existence.
Ain't it funny how the night moves
With Autumn closin' in … ?
That really does sound like a death poem. Would Bob Seger write something like that? He put out a pro-Vietnam-War (and anti-peacenik) song called "Ballad of the Yellow Berets" when he was a kid. But we all mellow with time.
Hey, am I kidding about all this? Sure. But that lyric from "Night Moves" really is beautiful and well-written (as opposed to, say, that other line about the young woman in question having "points of her own/way up firm and high." That's just icky, especially coming from a thirty-something rocker reminiscing about teen sex.)
Still, Seger's a hell of a songwriter - "Get Out of Denver" is terrific, for example, and so's "Turn the Page." He doesn't get enough respect for his craft, and it's possible he never will.
Maybe he could write a haiku about that ...
Somebody really, really doesn't want Elizabeth Warren to run the new Consumer Protection Financial Bureau, or "CFPB," which she first envisioned and proposed. Who? The big banks, for sure, as well as others who don't want their misbehavior brought to light. And Tim Geithner, whose vision of Wall Street and its problems is fundamentally different from Geithner's. There are others, too - ideologues like Megan McArdle of theAtlantic, who has made something of a cottage industry out of attacking Warren on specious grounds.
The President's attempting to split the baby when it comes to appointing Ms. Warren, but the facts and public perception are aligned and present him with a stark reality: He must choose between appointing Ms. Warren or placating the big banks. There is no Third Way. Unfortunately for the President, Elizabeth Warren is a yes or no question.
The ideological opposition to Warren's appointment is usually grounded in the false notion that the relationship between, say, a bank and a lender, is a symmetrical exchange between equals taking place in a mythical "free market." They've failed to heed the lesson taught by Freud in Civilization and its Discontents: "Civilization ... obtains mastery over the individual's dangerous desire for aggression by weakening and disarming it and by setting up an agency within him to watch over it, like a garrison in a conquered city."
An agency outside the individual is necessary to a well-functioning civilization, too, especially when confronting an oligopolistic banking system with a history of fraud and predation.
There have been at least two empty and ineffective lines of attack against Elizabeth Warren: The first is that she's opposed to "financial innovation," and the second is that she lacks the necessary "managerial experience." Ms. McArdle attempts to open a third: That Prof. Warren is a bad scholar. McArdle fails miserably, misquoting or misunderstanding other academic papers and Warren's own work while failing some basic analytical challenges. She does succeed, however, in showing the lengths to which some will go to block this appointment.
Despite the fact that McArdle is " the business and economics editor for The Atlantic," numbers don't seem to be her thing. She infamously miscalculated the effect of repealing Bush's tax cuts for each American by a factor of 10, arriving at $25 instead of $250 per person, and then blithely explained: "The calculator on my computer won't go into the billions, and I truncated incorrectly. The main point stands; even a very optimistic set of assumptions doesn't yield huge net benefit." Actually, $250 for every man, woman, and child in the US - and that's only for the next two years - is serious money. And as for that calculator problem, Ms. McArdle, there's only one word for that: Spreadsheets. You've heard of them, I trust.
Spreadsheets are particularly handy when you're making statements like this: "Does it matter if we have a regulator that can use data consistently?" In this piece McArdle leans on an old Wall StreetJournal anti-tax screed by Todd Wysocki. "More weird metrics for Elizabeth Warren," her headline quavers. McArdle eagerly repeats Wysocki's suggestion that family living expenses are actuallyless than they were in the 1970s. But Wysocki's stacking the deck (and making a completely different point) by using pre-tax rather than after-tax figures. Warren's point is that two-earner families have less disposable income today than one-earner families did in the seventies, even with both adults working.
She's right. I used a spreadsheet (highly recommended) to look at the increases in expenses, using the figures Wysocki (and the McArdle) cites. Here's what I found: Mortgage costs increased from 18% to nearly 20% of after-tax income. Health insurance premiums increased from 3.5% to 3.63%. (That doesn't include increases in out of pocket expenses like copays and deductibles.) And there was a whopping new expense of nearly 20% for day care, which wasn't needed with a one-earner family. Add in car payments and the expenses Wysocki cites went from 39% of after-tax income to 62.3% - which pretty effectively underscores Prof. Warren's point, don't you think?
McArdle saves her real "firepower," such as it is, for a piece she calls "Considering Elizabeth Warren, the Scholar." It's a blend of deception, misdirection, and poor analysis, chock full of comments like this one about Warren't book on two-earner families: "... Warren simply fails to grapple with what her thesis suggests ... Admittedly, I don't quite know what to say, but at least I can acknowledge that it's a pretty powerful problem for the current family model. Warren kind of waves her hands and mumbles about social programs and more supportive work environments. There is no possible solution outside of a more left-wing government."
Got it? McArdle says Warren's book is a failure because a) Warren fails to solve one of the problems she identifies, b) not that McArdle knows what the answer is, but c) "Warren kind of waves her hands" (get me rewrite!) and "d) mumbles about social programs etc." - which means she doespropose solutions, but they're ones that involve e) "more left-wing government." Which McArdle doesn't think is the solution, even though she acknowledges that she doesn't have a solution.
Does it matter if we have a "business and economics editor" who can use data ... and logic ... consistently?
McArdle then suggests that Warren doesn't understand numbers because Warren asserts that (says McArdle) "housing consumption hasn't increased much ... by less than a room per house." McArdle conclues that this is a "twenty percent" increase, given a starting size of five rooms per house, although if consumption's gone up by less than a room per house it's less than twenty percent per house (no calculator needed for that one!) And that's with two people working full-time instead of one.
"The square footage of new homes has increased dramatically since 1960," writes McArdle. But how much of that is McMansions and other high-end homes? She doesn't say, presumably because she doesn't know. Since we're talking about housing consumption among middle- and lower-income working families, a basic understanding of "mean," "median," and "average" would make that kind of information critical to McArdle's argument.
But McArdle's main line of attack is on the papers that Warren has co-authored on medical bankruptcy. Yet at times she's not criticizing the paper itself, but what Warren's co-authors may or may not have told the press. As for the article itself, it's entitled "Illness And Injury AsContributors To Bankruptcy," and comes replete with appropriate cautions like these: " We cannot presume that eliminating the medical antecedents of bankruptcy would have prevented all of the filings we classified as 'medical bankruptcies.'" Yet McArdle repeatedly claims Warren et al. suggested medical bills were the sole cause of these bankruptcies, then beating this nonexistent claim to death.
McArdle also makes the analyst's most basic mistake - fallacy based on anecdote - by repeatedly saying that by definition "Patty Barreiro" is a "medical bankruptcy" case. Barreiro is the wife of Edmund Andrews, the financial writer who wrote about their own bankruptcy. She's become a bete noir for all of those who believe that bankruptcy is most commonly a character defect, not an unfortunate combination of circumstances. McArdle's fixation on her isn't just bizarre. It's also bad analysis. The definition Warren et al. use for "medical bankruptcy" is $5,000 or 10% of income, and those are appropriately high figures for anyone familiar with the real world.
( McArdle also grossly mis-states the contents of another academic paper, but fortunately this piece does the heavy lifting on that misrepresentation - hat tip Atrios.)
For those who argue that Warren lacks managerial experience, I have three words: "Chief Administrative Officer." Warren understands the mission better than anyone, and she'll be able to hire someone to handle the logistics. And, as for her alleged hostility to "financial innovation," there's no sign of that. Some "financial innovations" destroyed the economy, and she's right to be a little "hostile" to them.
Elizabeth Warren's view of what needs to be done to fix Wall Street is fundamentally different from Tim Geithner's or Larry Summers'. Her view is correct - and it's also more popular politically. The President's attempt at a "nuanced" solution - that Elizabeth Warren will "play a role" even if she's not appointed to lead CFPB - is a nonstarter. The banks, and the public, would see that decision for what it is: A surrender to financial interests at the expense of the American consumer.
The Megan McArdles of this world will wail and gnash their teeth If Elizabeth Warren is appointed, but that doesn't matter. What does matter is that if Warren doesn't run CFPB, the same regulators who mismanaged the economy in general - and consumer protection in particular - will still have the upper hand. Any answer but "yes" to the Warren question would be a disaster, both on its merits and politically. You don't need a spreadsheet to figure that out.
I've been named an "Affiliate Scholar" at the Institute for Ethics and Emerging Technologies, so I thought I'd think about where I fit in the Humanist/Transhumanist matrix. Then I thought I'd draw a Venn diagram or two.
Somewhere along the line we've developed the habit of announcing that, thanks to new technology, we're forever on the verge of revolutionizing what it means to be human. Maybe it came in with the Industrial Revolution and our parallel discovery of modern medical science. Whatever the source, consider this 1933 quote from British engineer Allan Young, in his book Forward From Chaos. As Jo-Anne Pemberton noted in her book Global Metaphors, Young heralded the dawn of what he called the 'Electric-Machine-Power Age' as follows:
"The advent of radio art has provided a revolutionary change in the method and rate of thought dissemination. The human voice is now able to encircle the globe in the twinkling of an eye ... It is thus possible for me to project my thoughts instantly into the mind of someone living on the opposite side of the planet ..."
To which the modern mind can only add, "Really? From radio?" If he were alive today, Allan Young would probably be a Transhumanist like most of my friends at the IEET. In 1933, as in the decades before and since, people have been announcing that technology is about to radically alter the scope, power, and nature of human existence."The evolution of the radio machine ... seems to be one of the very biggest happenings in our civilization ... I stresss the importance of the great acceleration we are now witnessing in the whole process of translating thought into action ..."
And the funny thing is, then it actually does. Humanity was transformed by radio - and by what Young called "the aeroplane." By the time these transformations became ubiquitious, however, they had also become ordinary - even boring. The truth is that we've been transforming our minds and our bodies for generations. Take life extension, a favorite topic for Transhumanists: Life expectancy increased from 18 years in the Bronze Age to 25 years in Colonial America (although infant mortality affected the numbers significantly), and it approaches 80 years in that country today. Medicine and public health lowered infant mortality in
Somebody already engineered the human lifespan - but they did it with the (often unequal) distribution of resources like food, shelter, disease and accident prevention, and medical care.
