Tuesday, March 18, 2008

What reforms are required?

I agree with the points in this article, especially in regards to the feeling of this being a historical moment. In the position I'm currently in—forced by circumstances to sell my house at this time (it's nothing tragic, my wife got a job in St. Louis and we're moving there from southern California) and working for a public company neck deep in the subprime mortgage crisis—I'm feeling pretty exposed to the financial and economic winds blowing around.

I remember a few times like this before. The dot-com crash, which I was also exposed to in the software industry, although my dot-com era start-up had been bought out by a more established company prior to the crash. I did end up getting laid off, though. The various crises of the '90s like the peso crash and Asian currency crisis were also historical, although these didn't really stir the relatively provincial consciousness of the American public to a great extent. I think that the Clinton administration and international institutions managed the '90s crises pretty well and, all things considered, the recovery from the dot-com crash was well managed (although there's a convincing case that the crisis was merely pushed off through making money easily available and leading directly to today's credit crunch).

All of that said...

When I try to think about what sorts of reforms are required to prevent this sort of problem in the first place, I keep coming back to the most perplexing issue of this whole time. Why are those who have been the primary authors of this current disaster—the CEOs and chairmen, the high-flying executives with salaries and benefits that would make Midas blush, the "smartest guys in the room" who are concocting and institutionalizing these exotic financial instruments that would considered immoral and unethical if concocted in a virus laboratory—why do they seem to be the only ones who are assured of coming out unscathed in the end? Why are they the ones who must be rescued from the perdition of moral accountability, primarily because we need their superhuman analytical and leadership abilities to get us out of the mess that they made in the first place??

So my next obvious complaint is to blame those people, right? Well, to some extent, yes, they're morally and ethically culpable for their failures. Japanese feudal culture may have been messed up in a lot of ways, but a person took responsibility for his or her fuck-ups, you have to give them that. At the same time, it's simply human nature: get what you can and cover your ass along the way. Yeah, there's art and why are people altruistic and all of these questions, and I have a generally sunny assessment of most people's intentions. But I think that people try to work towards what motivates and inspires them. So it shouldn't be surprising that business people are willing to do whatever it takes to succeed at business and business is all about getting paid. And you can't deny that these people are gettin' paid.

That irritating parable about the frog and scorpion is now invoked.

But CEOs and chairmen of the board don't have the capacity to hire and fire themselves, nor do they have the capacity to negotiate their own contracts? So why do all of the contracts seem to read like that?

The composition of the boards of directors of publicly traded companies must be forced to be more open. I don't really know what this means. I know at the very least that shareholders must receive a lot more control over the composition of the board. There are huge questions today about the propriety of the deal selling Bear Stearns to JP Morgan, including the possibility that the executive staff at Bear Stearns were covering themselves from criminal or civil liability or trying to procure greater financial benefits for themselves at the expense of the shareholders. If the executive staff felt more at risk if the company failed, they would then be more likely to protect the interests of the shareholders precisely because those interests would parallel each other.

Anyways, I'm going to research this topic over the next few days. From what I know of the current structure, it incentivizes risks and completely defangs failure as an offsetting punishment. If there's only upside and no downside for the people running financial institutions, we're going to see more Bears Stearns, more S&L crises, more dot-com crashes, and so on. It's no way to run a railroad.

Friday, March 14, 2008

Hard feelings

I hate to admit it, but I'm in this area myself. As I mentioned, there's a great deal of enthusiasm for Hillary here in Long Beach. There's a lesbian couple that lives a few doors down from us and they have Hillary signs up, Hillary bumper stickers, etc. Prior to the California primary, these didn't really prompt a reaction from me, since I figured everyone in my Zip code was voting for either Obama or Clinton, no big whoop. Now, every time I walk or drive by, I'm seized by an urge to tear the sign down, to knock on their door and ask them if they approve of Hillary being such a destructive bitch, and all kinds of insults and means of lashing out that I'm uncomfortable even thinking.

It comes down to this: I'm not angry and disillusioned with Hillary because she's an assertive woman participating in the rough and tumble of politics. I'm angry and disillusioned with her because she's playing exactly the same politics of destruction and deception that have poisoned the well of American democracy for the last twenty or more years. In spite of her partisan differences with the man, Hillary is the fruit of the Lee Atwater revolution in politics. As Andrew Sullivan has noted, this is to a large part still the same damned fight—culturally, politically, societally—that started with Vietnam and the civil rights movement. Most Americans under 50 are past that conflict and this election represents our first real chance to get past it. Hillary's tactics represent the establishment's struggles to keep us in it and her supporters are the enablers who keep that struggle going.

Wednesday, March 12, 2008

Is McCain screwed?

His finance director is an active lobbyist for the firm that lobbied on behalf of the McDonnell-Douglas/Airbus consortium. Two of his other senior staff are on leave from the same firm.

I'm not arguing whether this contract was fairly won by MD/Airbus or not. The rule interpretations that were made in reaction to a number of points raised by MD/Airbus seemed reasonable to me. The fact that Airbus successfully made the case for their plane (their main advantage involved size, with the adapted Airbus planes carrying much more cargo per plane and having much longer range) is precisely what you're supposed to do. Most of the assembly will be done in the U.S., so you're not talking about a lot of jobs lost.

But on the merits of the sale, MD/Airbus being chosen seemed reasonable, with Boeing's indignation somewhat tempered by the lease agreement scandal from a few years ago. That company doesn't deserve the benefit of the doubt.


McCain's top advisors work for a company that actively lobbied on behalf of a company based in France over a good American company.

How about them apples? How do you think THAT is going to blunt McCain's recent attempts to start raising funds for the general election?

Tuesday, March 11, 2008

Maybe Ferraro has a point

She says that Obama is only where he is in the polls because he's black. Well, that lucky ducky! Sure, I can see that. He's definitely benefited from the support of blacks in the Democratic primaries.

Now, as Josh Marshall points out, you have to counterbalance that with the fact that a lot of white people won't vote for him because he's black. Ferraro says, in the interview linked above, "Sexism is a bigger problem... It's OK to be sexist in some people's minds. It's not OK to be racist."

Granted, it's not OK to admit to being racist. But does she seriously believe that there are no racists left in the United States because it's just not OK?

But for the sake of discussion, I'm willing to grant her this point: Obama has benefited from both the support of black voters who support Obama at least in part because of the color of his skin and from the support of white voters for the same reason. The old liberal race guilt thing. I'm quite willing to admit that I think it's thrilling that a black man is so close to becoming President. Certainly part of the enthusiasm for his candidacy across the board is the history in the making, the sense that his election would in some way and in some small part correct one of the original founding sins of this country.

And this is a historic election. Because women did not get the vote in this country until even after black men, those who were mere property becoming (at least de jure) members of the body politic even before women. So we've got people who are supporting Obama at least in part because he's black and...

We've got people who are supporting Clinton at least in part because she's a woman.

And not just a woman. Let's turn Ferraro's assertion back at her preferred candidate. Hillary Clinton is in this race not just because she's a woman, but because of the fact that she's a woman married to a powerful man. She benefits twice over from these accidents of circumstance.

I live in a town with a pretty significant lesbian population and they overwhelmingly support Hillary. Do you think it's because they all happen to have exactly the same issues on health care reform and relations with countries perceived to be hostile to the U.S.? The positions on the status of NAFTA and future trade negotiations as well as environmental policies? I think they probably do support much of Hillary's platform. And I'm sure that they support much of Hillary's platform because it's Hillary's platform and she's a woman and they're voting for (or really have voted for; the primary's already happened here) the first serious woman candidate for the Presidency.

But Hillary benefits from that support because she's a woman. And she's a woman in that position because she's married to Bill Clinton.

So I score it this way:

  • Obama benefits from being black, but blacks comprise only 13% of the population. Clinton benefits from being a woman, and women comprise 52% of the population. Advantage: Clinton.

  • Hillary has accomplished little that doesn't rely on her position as Bill Clinton's wife. I'm not saying that if she wasn't married to Bill Clinton that she wouldn't now be a formidable person in her own right. But she was mentioned as a Presidential candidate (and got her Senate seat as a clear carpetbagger) even prior to Bill leaving office in 2001 in large part because she was his wife. Obama is no fortunate son, brother, friend, or husband. Advantage: Clinton.
So fair enough, Geraldine: Barack benefits because he's black. But in the benefits sweepstakes, Hillary takes the prize.

Update: Kevin Drum piles on.