JustOneMinute

I Want To DisBELIEVE

Wow, Dick Durbin surges forward in the Dash to Dumb with his call for a national ID card:

A plan by Senate Democratic leaders to reform the nation’s immigration laws ran into strong opposition from civil liberties defenders before lawmakers even unveiled it Thursday.

Democratic leaders have proposed requiring every worker in the nation to carry a national identification card with biometric information, such as a fingerprint, within the next six years, according to a draft of the measure.

...The national ID program would be titled the Believe System, an acronym for Biometric Enrollment, Locally stored Information and Electronic Verification of Employment.

It would require all workers across the nation to carry a card with a digital encryption key that would have to match work authorization databases.

Work authorization data bases?  The ACLU squawked, but let's cut right to the comedy:

But Senate Democratic Whip Dick Durbin (Ill.), who has worked on the proposal and helped unveil it at a press conference Thursday, predicted the public has become more comfortable with the idea of a national identification card.

“The biometric identification card is a critical element here,” Durbin said. “For a long time it was resisted by many groups, but now we live in a world where we take off our shoes at the airport and pull out our identification.

“People understand that in this vulnerable world, we have to be able to present identification,” Durbin added. “We want it to be reliable, and I think that’s going to help us in this debate on immigration.”

We need national ID cards or the terrorist win?  I deplore this fear-mongering, just as I know earnest libs deplored the fear-mongering of the Bush era. 

But reflect with me - forcing passengers to remove their shoes prior to boarding a flight may deter some aspiring shoe bomber, and I think there is a strong societal consensus that having airplanes fall out of the sky unexpectedly is a bad thing. 

But requiring a person to show an ID card before serving coffee at a local deli prevents what - bad coffee?  Forcing a lawn care service to ID their workers prevents what - crabgrass?  I'll take my chances ("Danger" is my middle name...).

Somewhat more seriously (I am making an effort here), the complaint in Arizona that sparked their controversial new law is that they are being overrun with illegal drug smugglers, illegal human smugglers, and illegal workers.  If, I say IF Durbin's new ID card was effective and IF small, off-the-book employers that are currently ignoring Social Security requirements and other work-related rules actually played along, we would still have done nothing to deter illegal drug smugglers.  Or does Durbin think the drug cartels will be applying for ID cards for their workers and enrolling them in the new health exchanges?

Terrorists are physically dangerous.  Drug smugglers are physically dangerous.  Most illegal workers are only dangerous to the wages of the Americans they might be displacing.  Let's not muddle the dangers here.

Dare We Cite This As An Example Of Epistemic Closure?

Harvard Law School has settled the question that cost Nobel Laureate James Watson his job a few years back - any suggestion of genetic or racially-based differences in intelligence is out of bounds.

William Saletan of Slate will no doubt be resigning in solidarity with someone or other; after the Watson imbroglio he explored the available evidence and came away concluding that the case was far from closed.  Saletan was widely rebutted (or at least, denounced), and he did distance himself from a controversial author he cited, Dr. Rushton.

Meanwhile, I am still puzzling over why the same white geniuses that invented these culturally biased tests couldn't rig them so that whites could out-score Asians.  Oh, well - I bet if Asians had designed these tests they would have been able to rig them properly.

College campuses are one of the few places where there might be a suitable context for such a debate, so I will snip this from an old post of mine:

Ronald Bailey at Reason closes with this exhortation:

No matter who turns out to be right in the nature versus nurture debate over why there is a gap in black/white IQ scores, the idea that we must strive to treat every person as an individual, not as a representative of some group or other, seems right to me.

Well, yes, but in that case, a lot of affirmative action would go by the boards, since the campus quest for "diversity" (other than political diversity) is all about group identities.

I must have written that before the Sotomayor nomination kicked the New Haven firefighters into the news.

Immigration Reform Goes DOA [And Then Springs Back To Life!]

The AP reports that a serious legislative push for immigration reform is over for this year, although serious posturing is not.

My favorite straw in the wind:

Rep. Luis Gutierrez, the Democrats' leading advocate for immigration reform, has said he voted for health care reform on the understanding that Obama and congressional Democrats would move a major immigration bill.

That is not exactly a ringing defense of ObamaCare. 

Mr. Gutierrez goes on to explain that we will hear a lot more about evil, racist Republicans in the run-up to the election:

Even though he would like to see Latinos turn out to vote for Democrats in 2010, Gutierrez said "many will probably decide to stay home." However, he added, a strict, new immigration law in Arizona may change that dynamic. The law requires law enforcement officers to question anyone they suspect is in the country illegally.

"On one hand you are not going to vote because you don't believe people you voted for are doing a good enough job," Gutierrez said. "Then you say, 'I got to vote, because the enemy is so mean and vindictive, I got to get out there.'"

Rally the base!

IT'S ALIVE!  Helene Cooper of the Times reports on the same press briefing by Obama on Air Force One:

Obama Says Passing Immigration Bill May Be Difficult

By Helene Cooper

WASHINGTON — President Obama conceded Wednesday that Congress may not have the appetite to deal with the hot-button immigration issue this year, but he vowed to continue to press lawmakers to at least begin work soon on a comprehensive bill to overhaul the country’s immigration system.

In a rare interview with reporters aboard Air Force One, Mr. Obama said it was vital that Congress address the immigration issue, lest more state measures like the tough new law in Arizona sprout up.

But he acknowledged that the road to a comprehensive immigration bill was an uphill one. “It’s a matter of political will,” he said, adding that Congress might not have the stomach for another tough battle after the bruising fight over health care and the prospect of another battle over a climate change bill.

“We’ve gone through a very tough year, and I’ve been driving Congress pretty hard,” Mr. Obama said.

But the president said that “we need to start a process, at least,” adding that he wanted to come up with a proposal that could win broad public support.

If I could find my dead tree version of the Times I think I would find an even more upbeat headline.

Ahh! Here we go, live from the dead tree on Thursday:

"Obama Vows To Push Immigration Overhaul".  Yeah, push it to the back burner while blaming racist Republicans.

The Individual Mandate - Still Not Constitutional

The WSJ runs a guest piece by Randy Barnett, "a professor of constitutional law at Georgetown and the author of "Restoring the Lost Constitution: The Presumption of Liberty" (Princeton, 2005)", explaining that the individual mandate in the new health care bill may not survive legal challenge.

Should We Nationalize Hiring Decisions At The Washington Post?

Ezra Klein surprises no one with his latest insight - the bond rating business is complicated and fraught with potential conflicts of interest, so we had best let the government do it.

Groan.  Folks with lesser fortitude should skip directly to Kevin Drum, who is able to identify a problem with one proposed solution while keeping an eye on other potential issues.

Daniel Indiviglio of The Atlantic tries to guide Ezra back to reality, noting that the good people who missed Bernie Madoff and Fannie Mae might not be our wisest guides here.  He also raises another interesting point:

In fact, there's an even greater likelihood that investors would happily rely on government ratings than they did private ratings: the government could be held accountable. If the government puts a quality stamp on something, but gets it wrong, people will expect it to stand behind its word. That could result in a view that bonds have a sort of implicit guarantee to perform as the government dictates. One can only begin to imagine the investor/bank bailout that would have ensued if the government had made the same mistake as the rating agencies did during the housing bubble. It would have been far more costly than whatever the cost of the bank bailout turns out to be.

And then there are the global consequences. Imagine if the U.S. government mis-rated a universe of bonds that China was heavily invested in. Can anyone begin to doubt that the government wouldn't feel pressured to "make good" on its ratings errors, for the sake of international diplomacy?

Well, yeah.  Tim Geithner was President of the NY Fed, charged with overseeing CitiGroup during its mad dash to disaster.  Now he is Treasury Secretary, so where is the either the wisdom or the accountability?  And as another objection to putting the government in charge, do we really want a system in which the government acts as an important gatekeeper to the capital markets (Hmm, why do I ask?  Of course some of these closet socialists want the government to have greater control of the private markets.) 

Yet another obvious problem - will this government entity provide a calm, clear-eyed assessment of Fannie Mae, Freddie Mac, the TARP banks, General Motors, or any of a number of distressed state or municipal issuers that might need help from Uncle Sam?  Really?  Free of all political influence?  Uh huh.

But let's take a step back.  I question the premise that the ratings agencies were a major problem, or that changing their incentives would have led to dramatically different ratings or investor behavior.  It is not as if S&P and Moody's, alone among the world's analysts, understood that we were in an unprecedented real estate bubble that could only end badly - they lived in and were misled by the bubble, too.  Furthermore, it is not as if the raters sat down with (for example) Goldman in the structuring of a CDO and said, gee, that looks like a BBB security but if you give it a little tweak it will sail to AAA; the stuff that went out at AAA and was bust two years later would have been AA (and bust two years later) if the consultative tweaks had not been applied.  Finally, to stay with the Goldman example, the institutional investors in the infamous Goldman Abacus deal were not hapless grandparents relying on their broker and a Moody's rating to guide their deplorable (ex post) decisions.

I'll accept that the current system, in which issuers pay for the rating, probably results in a slight upward bias from "The Truth".  However, I will also note that in an system in which investors paid for ratings, the results would probably be biased downwards at the  initial rating and upwards thereafter.  At the outset, investors would love to get a plum investment with AAA risk at BBB prices; thereafter, investors won't want to pay for the bad news about their portfolio, but will be happy to have the rating agency upgrade the bonds, if that actually boosts their value.  (This may be moot - my recollection is that academic studies indicate the rating agencies mostly follow the market rather than lead it - big investors do their own research, and downgrades are not normally a surprise.)

Any "solution" will have to overcome some deep problems - first, at a fundamental level information tends to want to be free; keeping a rating secret after one investor has paid for it won't be practical.

Secondly, one might want to ask, just what is it the rating agencies are doing?  My take - no one wants to be sued.  Having the deep-pocketed government in charge could create a problem, as noted.  But if Merrill Lynch (again, as an example) sells a bond to Ma and Pa (or any other sympathetic but unsophisticated investor) based on the strength of Merrill research, they will have a hard time defending themselves from lawsuits if the deal goes south.  Better for Merrill to be able to point to some third party whose job it is to provide CYA material.

And that is the real role of the rating agencies - to act as the heat shield for brokers and investment managers who are inevitably going to make mistakes and inevitably be sued, sometimes appropriately and sometimes by people who think foresight should be 20/20.

Very few (if any) of these wildly complicated structured mortgage deals that later died were being sold directly to unsophisticated retail investors on the strength of the credit rating.  The vast majority were sold to institutional managers who were "earning" a great deal of money to have an informed opinion; the credit rating was valuable to them because the professional investors could point to it later if the deal blew up and they needed legal cover.

Understanding this role is key; otherwise, you end up writing nonsense like this, from Ezra:

But [the rating agencies] play a very important role in the system. So why not make them -- or some basic version of them -- public? It would be better for both accountability and incentives.

The obvious problem is that a public rating agency might be too conservative, but on the one hand, I'm not sure that's a bad thing, and on the other hand, the market could always ignore the rating.

They are vitally important, but they could just be ignored!  Maybe he is describing WaPo columnists.  (Or right-wing bloggers...).

Investment managers are not looking for a credit rating agency that will provide "The Truth".  They are looking for an agency that will certify a security as conforming to the mainstream conventional wisdom of the day, as a shield against unhappy clients and future lawsuits.  In that role, the credit agencies did not fail at all during the bubble.

The Dubious Case For Preemptive Concessions

Andrew Sullivan praises this dubious peace from Gideon Rachman of the Financial Times calling on Israel to make some pre-emptive concessions to fire up the old peace process.  Here we go with what Andrew (or one of the under-Andrews) describes as an "illuminating parallel":

The Israelis’ furious reaction to the pressure they are under from the Obama administration is reminiscent of the British rage early in the Northern Irish peace process, when it became clear that our American allies were intent on “talking to the terrorists” of the Irish Republican Army.

Yes indeed, because if the Brits took a wrong step with the IRA back in the 90's their very survival in England might have been imperiled, since "Brits Out" was shorthand for "Brits out of planet Earth."

And now for some "very sharp analysis of the core question":

For all their long-term concerns, the Israelis have failed to make vital concessions, because the status quo still feels more comfortable.

Israel’s assaults on Lebanon and Gaza have, for the moment, largely stopped the threat of rocket fire into Israel. The wall the Israelis have built around the West Bank has helped to prevent suicide bombings. The economy has done well in recent years. Things look good – if you do not look too far into the future. By contrast, calling a complete halt to illegal Israeli settlements on Palestinian land – as Mr Obama has demanded – entails risks and pain. There are members of the Israeli cabinet who still cling to the idea of a Greater Israel, incorporating all of the West Bank. If Benjamin Netanyahu, the Israeli prime minister, delivered the settlement freeze the Americans want, his rightwing coalition would probably collapse. Many Israelis also worry that an eventual move to uproot at least 80,000 settlers as part of a peace deal could lead to a revolt in the army – some 30 per cent of whose officers are religious conservatives, presumed to be sympathetic to the settlers. Any such military revolt, one respected commentator told me, “would be the end of the state of Israel”.

Right - whether or not the Palestinians are ready, willing or able to make a peace deal, and regardless of whether it has their popular support or is even in the long term interest of the Palestinians (who may think they are winning this siege), the Israelis ought to make concessions on housing just to placate Obama and see what happens.

Obama has already taken the "Special" out of the special relationship with Britain; maybe if they can lead the way on abandoning Israel they can get back in his graces.  Maybe! 

My advice to the Brits would mirror my advice to the Israelis - this too shall pass, and the next US President will know who our allies are.

Tied To The Whipping Post

The Senate Permanent Subcommittee on After-the-Fact Posturing grilled four present and former Goldman Sachs execs today.  It was actually entertaining, in a surreal way - can anything compare with watching a bunch of Senators lecture a bunch of Wall Streeters about candor and ethics?

The NY Times fails to capture the spirit:

Senators Put Goldman on Defensive Over Mortgage Deals

Uh huh.  A bunch of heroes who are afraid to host a town hall where angry voters will bury them on health care (and immigration!) get real brave when they can put under oath some people already facing a civil lawsuit. 

The Goldman guys were on the defensive because the housing market crashed and their deals went south; one Senator admitted that even Congress could share in the blame for the housing debacle, but no one suggested that the Goldman crew be allowed to ask each Senator whether they voted to rein in Fannie Mae and Freddie Mac over the years.  Who'd be on the defensive then?  Yeah!

Oh, well. I will mine this nugget of news from the Fabulous Fab of the SEC complaint and the Abacus deal:

For his part, Mr. Tourre said the two investors in the transaction were institutions with significant resources and experience in the C.D.O. market and had every opportunity to clarify their position with the bank.

He said that he never told one of them, ACA Management, that a hedge fund manager, John A. Paulson, “would be an equity investor in the AC-1 transaction or would take any long position in the deal.” According to the S.E.C. complaint, Mr. Paulson requested the creation of the Abacus instruments in 2007 so as to bet against them.

“Although I don’t recall the exact words that I used, I recall informing ACA that Paulson’s fund was expected to buy credit protection on some of the senior tranches of the AC-1 transaction,” Mr. Tourre said. “This necessarily meant that Paulson was expected to take some short exposure in the transaction.”

Mr. Paulson is not named in the civil suit. Referring to the other investor in the transaction, IKB, a large German bank, Mr. Tourre said: “I wish to repeat — I did not mislead IKB or ACA, two of the most sophisticated institutional investors in these products anywhere in the world.”

He said Goldman had “no economic motive” to design the deal to fail.

The confusion at ACA was a key to the SEC complaint, but it may not hold up to much scrutiny or testimony - CNBC previously reported that a Paulson employee spilled the beans to ACA as well.

A Red America, A Blue America, And The NY Times America

Anyone who wants to bash the Tea Party as dominated by old racist whites will find plenty of space at the Times.  But is Barack Obama especially interested in appealing to "young people, African-Americans, Latinos, and women", as he said in a rrecent DNC get-out-the-vote promo?  Not in Times World!

Here is Jeff Zeleny, bringing us All The News That Fits The Narrative:

Midwest Trip With Political Fortunes on the Line
By JEFF ZELENY

MOUNT PLEASANT, Iowa — President Obama is making an appeal to the legions of new voters who sent him to the White House, imploring them to preserve the Democratic majority in Congress. But party leaders have an even more pressing wish: that he help himself before he helps his fellow Democrats.

For all the ways that Mr. Obama is working to brighten the outlook for Democrats in the midterm elections, perhaps none is more important than raising his own standing and repairing a frayed connection with voters who have grown critical of his presidency.

So on Tuesday, Mr. Obama is returning to the place his candidacy sprang to life, here in Iowa, for the start of a two-day trip to the Midwest. He is not planning to appear with Democratic candidates as he moves from city to city on the latest leg of his Main Street economic tour, but rather to talk — and listen — to factory workers, farmers and citizens he meets along the way.

Yeah, Obama is meeting with all those factory workers and farmers who are bitterly clinging to the notion that one day his stimulus will create a job.

But will the Times report the racially charged appeal Obama made recently?  Well, it doesn't fit well with a trip to Iowa, which is mostly white (although one presumes there are women and young people there).  And apparently it doesn't fit with anything else the Times is covering - the only mention I see on their website is a reprint of a Reuters story.

It is not as if Obama;s strategy is surprising - in Eerie Precognitive coverage, the WaPo had this, in an article on Democratic woes prior to the President's remarks:

Blacks, Latinos and young people made up the bulk of the new voters who secured comfortable congressional majorities for the Democrats in 2008. Each could be a problem this year.

But enough of the epistemic deficiences of the left, and hats off to James Taranto of the WSJ, who reprises Obama's famous 2004 Democratic Convention Speech:

The Politics of 'Anything Goes'

• "Even as we speak, there are those who are preparing to divide us--the spin masters, the negative ad peddlers who embrace the politics of 'anything goes.' Well, I say to them tonight, there is not a liberal America and a conservative America--there is the United States of America. There is not a black America and a white America and Latino America and Asian America--there's the United States of America."--state senator Barack Obama, Democratic National Convention, July 27, 2004
  
  
• "In the video message to his supporters, [President] Obama said his administration's success depends on the outcome of this fall's elections and warned that if Republicans regain control of Congress, they could 'undo all that we have accomplished.' 'This year, the stakes are higher than ever,' he said, according to a transcript of his remarks provided by Democratic officials. 'It will be up to each of you to make sure that young people, African Americans, Latinos and women who powered our victory in 2008 stand together once again. . . .' "--Washington Post, April 26, 2010

I guess 2004 is so last decade.  We have moved on, and Tea Partiers feeling overlooked are just racist.

In Space, No One Can Hear Doc Drezner Scream

Dan Drezner answers the tough questions no one (other than the smartest man in the world) is asking.

National Security Advisor Gen. James Jones Scares Me

Set aside the deplorable joke which was dropped from the transcript (and if it is a metaphor for the Middle East peace process, why disguise the Palestinian as a Taliban but not the Jewish merchant as, for example, an Indian merchant?).

Gen.Jones talks about Obama's global foreign policy vision; after mentioning Iraq (peace with honor!) he lands in the Middle East with this:

Whether or not the rights and responsibilities of nations are upheld will in great measure determine whether the coming years and decades result in greater security, prosperity and opportunity—for Americans and for people around the world.

Perhaps nowhere do we see this more than in the Middle East, where we face two defining challenges that I want to touch on tonight: preventing Iran from acquiring nuclear weapons and the means to deliver them, and forging a lasting peace between Israelis and Palestinians as part of a comprehensive peace in the region.

Jones explains that the Bush policy of not engaging Iran had clearly failed,and now Obama has almost completed his demonstration that engaging Iran will also fail.  Well, he phrases it differently.  But then we get to this,with my emphasis:

Of course, one of the ways that Iran exerts influence in the Middle East is by exploiting the ongoing Arab-Israeli conflict.   Iran uses the conflict to keep others in the region on the defensive and to try to limit its own isolation.  Ending this conflict, achieving peace between Israelis and Palestinians and establishing a sovereign Palestinian state would therefore take such an evocative issue away from Iran, Hizballah, and Hamas.  It would allow our partners in the region to focus on building their states and institutions.  And peace between Israel and Syria, if it is possible, could have a transformative effect on the region.

Really?  Surely that depends on the process by which "peace" is achieved.  We had "peace" after World War I, yet many embittered Germans simply pointed to the Treaty of Versailles as one more grievance and another reason to go back to war.  As David Bernstein and Barry Rubin noted recently, it is not at all clear what Palestinians believe about this. 

Many Palestinians (and their partners in the international grievance community, such as Iran) may believe a narrative in which the tide of history is running their way - Israel is more isolated now with Obama in office, Iran is closer to a bomb, Gaza has been returned to the Palestinians in exchange for not much, and  who knows what the next decade will bring - in this environment, why should Palestinians sign away their imagined "right of return" now?  And how would Palestinians react to a "peace" deal imposed by the US - would they say "Peace at last" and resume something like a normal life, or would this become the Versailles Treaty of the 21st century? 

More from Gen. Jones:

Since taking office, President Obama has pursued a two-state solution—a secure, Jewish state of Israel living side by side in peace and security with a viable and independent Palestinian state. 
This is in the United States’ interest.  It is in Israel’s interest.  It is in the Palestinians’ interest.  It is in the interest of the Arab countries, and, indeed, the world.  Advancing this peace would also help prevent Iran from cynically shifting attention away from its failures to meet its obligations.

Well, is it in the Palestinian interest?  To repeat Mr. Bernstein's question, is there polling or other evidence suggesting the extent of the Palestinian commitment to that belief?

And I hope this is obvious - a cram-down "peace" deal that vindicates Obama's Nobel Prize but leaves the Palestinians embittered is not in America's interest.

The General makes a similar point, unconvincingly:

In our pursuit of a two-state solution, we recognize that peace must be made by the parties and cannot be imposed from the outside.  At the same time, we understand that the status quo is not sustainable.  It is not sustainable for Israel’s identity as a secure, Jewish, and democratic state, because the demographic clock keeps ticking and will not be reversed.  The status quo is not sustainable for Palestinians who have legitimate aspirations for sovereignty and statehood.  And the status quo is not sustainable for the region because there is a struggle between those who reject Israel’s existence and those who are prepared to coexist with Israel — and the status quo strengthens the rejectionists and weakens those who would live in peace.

If the status quo is working for the rejectionists, why are we so sure that a peace deal will command vast popular support?

Let me clip this from recent Times coverage (my emphasis):

The administration’s immediate priority, officials said, is jump-starting indirect talks between Israelis and Palestinians. There is still a vigorous debate inside the administration about what to do if such talks were to go nowhere, which experts said is the likeliest result, given the history of such negotiations. Some officials, like Gen. James L. Jones, the national security adviser, advocate putting forward an American peace plan, while others, like the longtime Middle East peace negotiator Dennis B. Ross, who now works in the National Security Council, favor a more incremental approach.

Troubling.  My suggestion - Obama should offer the Palestinians subsidized participation in the new US health exchanges as part of a peace deal so he can pin down two legacies at once - has not caught fire.

Great Moments In The Epistemic Closure Debate

The reliable Ezra Klein delivers a laugher while surprising the world with his analysis explaining that the right wing is more close-minded than the left:

I think that the counterargument some conservatives might offer would be...

He thinks?  Dare I ask whether Mr. Open Mind has actually asked any of his conservative friends about this, read a conservative publication, or otherwise put this speculation to the test?

I wish I were making this stuff up.

AS TO HIS ARGUMENT... His gist is that the left has nothing like right wing talk radio, so therefore righties are living in a bubble.  To complete his rebuttal:

I think that the counterargument some conservatives might offer would be that the New York Times and CBS News are liberal, but anyone arguing that those outlets are partisan or politicized in the way that Limbaugh is partisan and politicized is, well, sort of a walking example of epistemic closure.

Do tell.  What I would argue (in near-perfect lockstep with righties everywhere) is that Rush et al are *alternative* media - typical righties are still barraged with the viewpoints of the NY Times, the non-Fox evening news, TIME magazine, and the mainstream media generally.  Righties willing to make the effort can limit themselves to Fox News and the WSJ editorial page, but it is an effort.  (Full disclosure - I can't make that effort myself because I have spent several decades reflexively brandishing my fist at the television or shaking my newspaper and muttering "Why are they pushing these lies!"  That makes watching Fox very discomfiting.)

A typical lefty could listen to NPR on the drive to work, pick up the NY Times/LA Times/Washington Post, watch CNN, read Newsweek/TIME, and feel very well informed.  Although Ezra might not agree, some of us think such a person is actually well cocooned.  To be fair, they often get some "Now they tell us" coverage eventually, as on health care, when the time for cheerleading has passed.

To pick an illustrative but otherwise unimportant example seemingly at random - a regular reader Times reader / NPR listener would have no way of knowing that Obama and his team lied throughout the campaign about his relationship with Bill Ayers, and are almost surely still lying.  (David Remnick of the New Yorker preferred the word "disingenuous" in his recent book on Obama.)

Now, if a cocooned lib does not know that Obama has been lying they are more likely to fall in line with the notion that Sarah Palin is a right wing nutjob for even mentioning Ayers.

Obviously, that is not as important as a rational national debate on global warming.  That said, I meet many well-informed libs, and few of them take the position that they understand that Obama is lying about Ayers but don't care.  The most common response is that Sarah Palin is not fit to be President, which is a bit of a non sequitur, one might think.  Bush lied about his military service is another typical but not entirely topical response.

Well.  As a broader theme, the notion that Obama is lying about his biography while our watchdog press looks the other way troubles me; I think most libs are not even aware that it is happening.  Fortunately, I have Rush to open my mind.

EVERYTHING NEW IS OLD AGAIN:  Henry Farrel of The Monkey Cage tells us this has been done by Larry Bartels; in the one instance on offer, conservatives are dismally uninformed as to the change in income inequality over time.

But we righties weren't always stupid!  Or at least, we weren't always alone in our stupidity; this is from a different Bartels paper:

For one thing, voters’ perceptions may be seriously skewed by partisan biases. For example, in a 1988 survey a majority of respondents who described themselves as strong Democrats said that inflation had “gotten worse” over the eight years of the Reagan administration; in fact, it had fallen from 13.5 percent in 1980 to 4.1 percent in 1988. Conversely, a majority of Republicans in a 1996 survey said that the federal budget deficit had increased under Bill Clinton; in fact, the deficit had shrunk from $255 billion to $22 billion. Surprisingly, misperceptions of this sort are often most prevalent among people who should know better—those who are generally well informed about politics, at least as evidenced by their answers to factual questions about political figures, issues, and textbook civics.

And the gloomy consequence:

If close attention to elite political discourse mostly teaches people to believe what the partisan elites on “their” side would like to be true, the fundamental premise of books such as Rick Shenkman’s—that a more attentive, politically engaged electorate would make for a healthier democracy—may be groundless.20

Oh, boy - maybe better informed voters simply do a better job of mastering their sides talking points.

Australian For Dumb

This blunder from Down Under was a dark moment for canine rights:

An Adelaide restaurant that refused a blind man entry because a waiter thought his guide dog was "gay" has been ordered to apologise and pay compensation.

Ian Jolly was told he could not take guide dog Nudge into the Thai Spice last May because a member of staff objected, The Sunday Mail reported.

The restaurant's owners said a misunderstanding had arisen between Jolly's female companion and a waiter who understood the woman "to be saying she wanted to bring a gay dog into the restaurant".

"The staff genuinely believed that Nudge was an ordinary pet dog which had been desexed to become a gay dog," the owners said in a statement to South Australia's Equal Opportunity Tribunal.

...The restaurant, which displays a "guide dogs welcome" sign, refused to comment to the newspaper and was unavailable to respond on Sunday.

I infer that neither gay nor straight dogs are welcome inside the restaurant unless they are employed as guide dogs.  This was less an assault on gay rights than it was an attack on the English language and common sense.

Scheduling The Train Wrecks

Sen. Graham, who seems to be the last Republican standing on a comprehensive energy and climate bill, has announced that he won't discuss that pending Epic Fail unless Senate Leader Harry Reid agrees to give it priority over an immigration reform Epic Fail.

MORE:  The Politico has the text of the letter.

Politics Suspends Critical Thinking At The Times

The Times editors bleat about free speech cases soon to come to the Supreme Court; as usual, they start with their politically correct result and reason backward:

The court has two more important free speech cases coming up. One raises the question of whether people have a right to keep their identities secret if they signed a petition to put a referendum against same-sex marriage on the ballot. Putting an initiative on the ballot is an important governmental act, and we hope the court does not decide that there is a right to do so anonymously.

Of course not, because it is about gay rights!  (Not to mention the right to boycott and harass bigoted homophobes.)  While legal minds ponder this analysis, I will vex the Times editors with some alternatives:

(a) A town, or county is plagued by drug-related violence seemingly abetted by the local mayor and sheriff.  Concerned citizens want to submit a petition to the governor requesting a recall election, but fear retribution.  Can their petition be submitted anonymously, or are recall elections "an important governmental act"?

(b)  Since this might be a week where the Times is backing drug liberalization, let's try a variation - concerned citizens want to petition for recall because the mayor and police chief are racist, sexist, anti-Semitic, homophobic, and incredibly vindictive.  Can they petition anonymously now?  (How about if the mayor is also anti-Obama?)  

(c)  The local mill (a big employer) is spewing noxious fumes into the air; concerned citizens are lobbying for state action.  The CEO of the firm has a petition drawn up explaining that there is no pollution problem and proposing a ballot initiative exempting the industry from some relevant state requirement.  The CEO also makes it clear that he wants to see employees and suppliers of his company sign the petition.

Can people refuse to sign the petition and avoid retribution?  Only if the petition is kept anonymous.  But would that be allowed, or is this ballot initiative "an important governmental act"?

For heaven's sake - if it asking too much of Times editors to reflect for two seconds before they reflexively blurt out their current PC response?  OK, we all understand that when the next case comes the Times will insist that it is completely different and that the living, breathing Constitution can solve the next problem on the exhale. 

But for the rest of us, a little consistency and commonsense in the law would be welcome.

Blazing Into Saturday Morning

For whatever reason (Earth Week?), CNBC recently presented a long special report on "Marijuana in America".

Let's start with the fiscal hook:

The economic argument for legalization is that it is cheaper for the government to deter consumption with a higher tax than with law enforcement.

In his study, “The Budgetary Implications of Marijuana Prohibition”, Harvard Economics Professor Jeffrey Miron estimates that legalization would save $13.7 billion per year in government expenditure on enforcement of prohibition, $10.4 billion would accrue to state and local governments, and $3.4 billion to the federal government.

He also estimates that legalization would yield tax revenue of $6.4 billion annually if marijuana were taxed at rates comparable to those on alcohol and tobacco. (See full interview). Other estimates are higher.

Gee, only $6.4 billion on marijuana taxes?  Just how big a market are we talking about?

Economists, reformists, law enforcement authorities and the pro-marijuana lobby, however, have come up with a variety of estimates. Put them all together and you get a range of $10 billion to over $120 billion a year. Such a wide spread is hardly a solid answer.

The method that impresses me most is the comparison to tobacco and especially alcohol:

A third way to look at the market is by comparing it to other vices that are already legal.

According to a November 2009 Standard & Poor's industry report, the tobacco and alcohol industries generated $263 billion combined in 2008. Alcohol represented $188 billion of the total, with $99 billion in beer, $61 billion in spirits and $27 billion in wine. Tobacco generated $75 billion, including $71 billion in cigarette sales.

This gut-check approach asks, can marijuana be bigger than cigarettes or beer (if it were legal)?

If marijuana were broadly legalized it is a safe bet that some alcohol users would rather switch than fight, so the guzzlers would lose market share to the potheads.  But the question before as is, could the current marijuana market be as large as the current alcohol market?  Alcohol use is so visible, so promoted, and so widespread that it staggers my imagination to think that an equally large amount of pot is being consumed in (relative) secrecy.

Let's bottom-line this:

After looking at all three approaches above, the answer likely falls somewhere in the middle, between $35 and $45 billion.

...Assuming comparable taxes to tobacco of 40-50% (excise and sales tax), a $40 billion marijuana market would yield $16-20 billion in taxes.

So, our current guess is that legalization would raise $16-20 billion in new tax revenue (and displace some alcohol revenue, one suspects) and save another $14 billion in law enforcement costs.

Of course the are health questions and social issues, so the debate will rage.

At the Federal level, Nixon went to China and McCain could have gone to Potville.  Obama's personal history makes that difficult for him.  He will bring to pot legalization the same courage, conviction and leadership he brings to gay marriage.

FULL DISCLOSURE:  I have been advised that my personal experience with this topic is irrelevant and/or misleading, since the tiny amount of marijuana I may or may not have inhaled decades ago is much less potent than the stuff on offer today.

I Rise To Defend The LA Times (Sort Of)

With Israel in the news, Roger Simon has a question:

Why Is the L.A. Times Burying the Obama/Khalidi Tape?

Lest you have forgotten, here is the backstory:

Rashid Khalidi — a Palestinian-American historian known for his strong pro-Palestinian opinions — is currently the Edward Said Professor of Modern Arab Studies at Columbia and director of that university’s Middle East Institute. After Khalidi received this Columbia appointment in 2003, a farewell dinner party was held in his honor in Chicago. A videotape was made of that party where many good things were said about the Palestinian cause and many bad things about Israel. Then Illinois state Sen. Barack Obama was in attendance, as were, some say, William Ayers and Bernadine Dohrn.

That tape, as Leon DeWinter reminded us, was given at some point by an unknown person to Peter Wallsten of the Los Angeles Times. Wallsten then reported on some of its contents in a brief LAT article of April 10, 2008 titled “Allies of Palestinians see a friend in Obama.”

Let's note the timing - as of early April 2008 the Pennsylvania was still ahead of us and Hillary supporters were clinging bitterly to the notion that their gal could prevail.  I would guess that the source for the tape was a loyal Democrat and Hillary supporter hoping to throw sand in the gears of the Obama machine.

So why is the LA Times sitting on the tape today?  Let's cut to Mr. Simon:

In response to a charge of suppression of information by the McCain campaign, the paper’s editor Russ Stanton said:

“The Los Angeles Times did not publish the videotape because it was provided to us by a confidential source who did so on the condition that we not release it. The Times keeps its promises to sources.”

Was this an oral promise made by the paper or by the reporter? Or was there a written agreement, as would be more proper and normal in such circumstances? The Times has not told us, nor have they produced a written agreement of any sort, even without the source’s name. We don’t know either whether a transcription is proscribed.

I assume the paper is happy to stay in the tank for Obama.  However, it is possible, even likely, that the tape was filmed by an amateur whose identity could easily be guessed by those in the know (maybe his table-mates are readily identifiable; maybe table chatter is picked up which would identify the filmer.)

If the LA Times was interested in problem solving they could release a transcript.  Lingering concerns about credibility (if any!) could be solved by inviting in another news source or two (Fox and the WSJ?) to aid in the transcription.

I can believe that releasing the raw tape would present their source with a problem; if the LA Times was truly interested in advancing the news side of this, a transcript would be the solution.

I am not holding my breath.

Fun With Adobe, or, When Is A Redaction Not A Redaction

When is a redaction not a redaction?  When some techno-flop who has never scrolled over a "spoiler alert" at a fan site thinks he has redacted a subpoena to the President of the United States. 

This can be attempted at home!  Open up the .pdf, scroll over a blacked out portion, and use the standard Edit/Copy/Paste.  Ridiculous.

YOUR SECRET IS SAFE WITH US:  Is anyone worried about whether the government can respect and protect our privacy?  Don't be!

Barack Obama Strangelove Backing A Weapon Too Crazy For Bush/Cheney

The NY Times continues to present the Administration spin in favor of reducing our nuclear arsenal.  Part of the rationale was that our conventional weapons, such as smart bombs and cruise missile, are much more accurate and powerful.  Fair enough.  But today the Times describes a weapons system so laughably destabilizing that Bush and Cheney took a pass:

U.S. Faces Choice on New Weapons for Fast Strikes
By DAVID E. SANGER and THOM SHANKER

WASHINGTON — In coming years, President Obama will decide whether to deploy a new class of weapons capable of reaching any corner of the earth from the United States in under an hour and with such accuracy and force that they would greatly diminish America’s reliance on its nuclear arsenal.

Launched from the United States and arriving in an hour?  We could only be talking about missiles or something that looks a lot like one, so the rest of the story could be written by anyone passingly familiar with nuclear doctrine and the theory of MAD.  However, David Sanger and Tom Shanker of the Times overlook the most important point, which we will come to in due course.

The basic problem is that land-based missiles are vulnerable to a first strike attack by incoming missiles.  Consequently, anyone with land-based missiles, such as Russia or China, faces a "Use it or lose it" dilemma when their screen lights up with missiles launched from the US - do they wait to see what lands and goes "Boom", or do they launch their own missiles while they still can?  This is not a new issue - people have been talking about first-strike weapons from the dawn of the nuclear age (It's why we have hotlines).

Mitigating Russian concerns to some extent would be the number of missiles they actually see launched.   One or two missiles would not take out their entire land-based capability, so if (IF!) they could be confident of maintaining their command and control structure, they might be persuaded to sit back and await developments.

However!  All of that is covered by the Times.  What the Times utterly ignores, or overlooks, is the problem a weapon such as this would cause for Iran, North Korea or any other small crazy country with a much smaller nuclear arsenal.  The US weapon could be deployed around 2020.  Will North Korea or Iran have a missile or two capable of reaching the US by then?  If so, they will be stuck with the "Use it or lose it" problem, and may feel obliged to launch on warning.

Now, maybe the plan is that North Korea won't develop the surveillance capability by 2020 to know whether we have launched our own missiles.  That's reassuring!  Or maybe we can count on crazy countries not to do something crazy.  But this is a weapon that should not be built until these problems have been hashed through.

Let's excerpt Times coverage of these problems.  First, it was too crazy for Bush:

The idea is not new: President George W. Bush and his staff promoted the technology, imagining that this new generation of conventional weapons would replace nuclear warheads on submarines.

In face-to-face meetings with President Bush, Russian leaders complained that the technology could increase the risk of a nuclear war, because Russia would not know if the missiles carried nuclear warheads or conventional ones. Mr. Bush and his aides concluded that the Russians were right.

Partly as a result, the idea “really hadn’t gone anywhere in the Bush administration,” Defense Secretary Robert M. Gates, who has served both presidents, said recently on ABC’s “This Week.” But he added that it was “embraced by the new administration.”

My cynical guess - Obama is backing this now in preference to maintaining a nuclear stockpile; later, the obvious problems with this weapons system will become obvious to him.

Here we go on reassuring the Russkies:

But the key to filling that gap is to make sure that Russia and China, among other nuclear powers, understand that the missile launching they see on their radar screens does not signal the start of a nuclear attack, officials said.

Under the administration’s new concept, Russia or other nations would regularly inspect the Prompt Global Strike silos to assure themselves that the weapons were nonnuclear. And they would be placed in locations far from the strategic nuclear force.

"Other nuclear powers" includes Great Britain and France - I think they will be OK with this program, but if they want to send inspectors, fine.  However, "other nuclear powers" might, by 2020, include Iran; it already includes North Korea.  Are their inspectors also welcome?  Did Sanger and Shanker ask that obvious question and bury the answer under "other nuclear powers", or did it escape them?

This is bait and switch by Obama - a guy who couldn't back a missile defense system because it is too destabilizing will never back this, not too mention that his base will howl [See below], but it may be expedient right now to pretend to be a tough guy.

BACKGROUND:  Popular Science explained the original sea-based version and poked at the Armageddon problem.  This 2006 memo from Pavel Podvig of Stanford looked at the Armageddon problem from Russia's perspective, noting that "Today, Russia is the only country other than the United States that has an early warning system capable of detecting ballistic missile launches. This makes it the natural focus of concerns associated with the global-strike plan."  Whether that will be true in 2020, I don't know.

CUE THE HOWLING:

Noah Schachtman: Obama Revives Rumsfeld’s Missile Scheme, Risks Nuke War

Robert Farley:

"This isn’t to say that we should eschew research of any weapon that can decrease the time between order and KABOOM.  Questions of strategic stability, however, need to be taken very seriously."

Kevin Drum: "Sometimes bad ideas are just bad ideas. This really seems like one of them."

This year's funding is a mere $250 million. Every weapons system creates a constituency; for walking around money, Obama gets to placate them and pose as a tough guy.  Come 2020, Obama will be a leader in the "No Prompt Global Strike" movement, with the NY Times as head cheerleader.

Editorializing From The Financial Capital Of The World

Although headquartered in the financial capital of the world, the NY Times editors apparently do not believe they need to understand the first thing about finance.  Here they go again, bleating about the civil suit against Goldman Sachs and comparing derivatives to casino gambling:

What all those proposals don’t address is whether the type of derivative Goldman was selling should even be allowed to exist. The Goldman deal was nothing more than a bet on the mortgage market, in which one side was destined to win and the other to lose, without “investing” anything in the real economy. The C.D.O. did not hold actual mortgage-related bonds, but rather allowed the participants to stake a position on whether bonds owned by others would perform well, or tank. And that helped to further inflate the housing bubble.

That is not investing. It is gambling, and it is abusive. It has no place in banks that can bring down the system if they fail.

Hmm - empowering sellers by creating synthetic mortgages that let sellers absorb the demand created by buyers inflated the housing market?  Would it really be a better world if the German money manager on the losing side of the controversial Goldman deal had used his money to fund more construction of new homes?

I will say this - it appears, after the fact, that the overall effect of making housing-related financing more liquid was not helpful.  Had it been harder for people to finance and re-finance their homes the housing bubble would surely have been smaller.  There are lots of ways the government could intervene to make the mortgage market grind more slowly.  They could start with reining in Fannie Mae and Freddie Mac, move on the imposing more stringent mortgage origination criteria (that would have a disparate impact on minorities, women, and immigrants), limit mortgage securitization by requiring originators to retain a portion of their product, and eventually work up the food chain to derivatives.

But even though derivatives are so unfashionable that a NY Times columnist can boast about her ignorance, the Times really needs to crack open a basic economic textbook to help them distinguish between gambling and speculation.

Gambling can be thought of as the creation and transfer of risk for entertainment's sake; the resulting prices and risk transfers don't guide any useful economic activity.  A bet on whether my next toss of the dice will result in a seven does not guide any real economic activity, other than baby getting a new pair of shoes.  Or not.

Speculation, by way of contrast, can provide socially useful prices and the opportunity for risk transfers.  For example, speculators routinely buy and sell futures contracts on corn, even though they have no interest whatsoever in growing, storing, milling, or selling corn.  Why is that not just gambling?  Because the speculators, through their participation in the market, help guide the behavior of people who do have to make a living growing and handling corn.

Kelloggs will be making a lot of corn flakes next December - should they fill their corn silos now to assure their supply of corn, or wait until the next harvest?  A "bet" with a speculator may simplify their planning.

A farmer has to decide whether to plant more corn, leave a field fallow, or plant something else.  What will corn be worth come harvest time?  The existence of speculative derivative contracts on corn helps provide an answer to that question and an opportunity for a farmer to assure his price today.

The Goldman deal looks like socially useful speculation.  Should mortgage originators push even more money out the door to create more supply for the securitization chain?  There were a lot of buyers lined up saying "Yes!"  However, the use of synthetic CDOs allowed sellers to show up shouting "No."  That price discovery can be socially useful, as the Times editors ought to understand.

I QUIBBLE WITH MYSELF:  What about betting on which teams will go the the World Series next fall - is that socially useful?  I would not dismiss the question out of hand - the mayors and police chiefs of Atlanta, Philadelphia, and St Louis (not to mention New York and Boston) might like to know what October will bring; event planners and convention organizers might like to know whether there will be plenty of hotel rooms, or whether their event will be over-run by a baseball crowd.  That is a thin thread, but it takes us to the gray line between gambling and prediction markets.

You Thought You'd Seen Everything (Baseball Edition)

Pinch hitter Brian Kownacki of Fordham University was hit by a pitch twice in the same inning as his team batted around against Iona; then he decided to do something special.

Covering Up The Cover-Up

The recent NY Times poll and the recent legislation in Arizona have kicked the 'birther' question back into the news, so let's watch how the heirs of Woodward and Bernstein at the Times tackle this:

President Obama was born in Hawaii on Aug. 4, 1961. A scanned image of his birth certificate released during the 2008 presidential campaign says he was, and Hawaii’s health director and its registrar of vital statistics have confirmed it.

Despite all that, a substantial number of Americans are not convinced.

And away we go, with twenty-one paragraphs that never mention or attempt to illuminate the central issue vexing so many - there is a much more complete record of the circumstances of Obama's birth maintained in at the Hawaii Dept. of Health.  They will not (by law) release that file to the general public, but will happily release it to a citizen with a "direct and tangible interest in the record", such as President Obama himself.

So why won't Obama just release the darn file?  Is it possible that the most transparent Administration in history is fanning this particular partisan fire for their own ends?  Why don't they end it, or at least make a good-faith attempt to do so?

And since I am asking silly questions, is it possible that the NY Times reporters are unaware that a more complete record exists and is being kept under wraps by Obama?  Why don't they even want to see those records for themselves?  [An example of the old-style Hawaiian birth certificate is here].

I have this old-fashioned notion that reporters like to ask the tough questions and probe for the truth behind the facade.  As if!  Now the earnest Timesman are probably worried about access for their next White House interview and are afraid of what Gibbs might Tweet about them.

Oh, well - our watchdog press did a great job on Joe the Plumber.  They showed no fear their, and boldly spoke truth to the powerless.

MY QUESTION FOR BEN SMITH OF THE POLITICO:

Ben Smith writes this:

I've been avoiding an immigration critic's unsupported claim about Senator Lindsey Graham's sexuality for the usual reason that reporters shouldn't go around repeating such things for fear of abetting a smear campaign. That was the reason many were slow to cover rumors that Barack Obama was a Muslim.

The Muslim smear (and its birth-certificate heir), however, grew so widespread that the another principle, that sunlight is the best disinfectant, kicked in. In the contemporary media age, whispers spread fast.

Hmm.  Would it be a smear to say that there is a more complete record of Obama's birth which Obama could make public if he so chose?  Would Mr. Smith like to bring a bit of sunlight to the question of why the White House has not requested and disseminated those records?  Or should we all just blithely accept the assurances of some Hawaiian state official - is that how the big time journos roll these days?

WELL SAID:  The AllahPundit offered this incomplete taxonomy of birthers and their fellow travelers:

What I will say in the Birthers’ semi-defense is that I think there are actually two camps inside the movement. One is the group that simply wants Obama out of office as soon as possible and has latched onto this thin, exceedingly lame reed as a way of making it happen. The other is a group that’s grown curious about the fact that … no official enforcement mechanism for the Constitution’s natural-born requirement seems to exist, even though it’s a baseline requisite for the presidency.

A commenter provides this supplement:

I would also posit that there are THREE “camps” of thought that get lumped into the “birther” category.

The first two are as [AllahPundit] stated.

The third is where I would put myself – a person:
1) who wonders why it is so difficult for Obama to provide an actual Birth Certificate; and
2) who sees a connection between the lack of details and secrecy regarding Obama’s birth and the lack of details and secrecy about so much else of Obama’s life – his connections to Ayers, his grades in college, the papers he published, the lectures he taught, etc.

I don’t think Obama was born in Kenya or any other place other than Hawaii.

But I find it outrageous and ridiculous that we know more about Sarah Palin and Joe the Plumber than we know about Obama.

Just so.  But our Don't Ask, Don't Tell media would rather demonstrate their high-mindedness by ridiculing anyone who asks about Obama's birth.  And please don't get me started on their shifting stories on Bill Ayers and the whiz-bang media job there.  (David Remnick described Obama's characterization of his relationship with Ayers as "disingenuous" in "The Bridge", his new entrant in the Obama hagiography sweepstakes; he also took the opposite side of Team Obama and the Times in yet another aspect of the Obama/Ayers cover-up.  Our watchdog press is acquiver!).

I can stop anytime.  Really!

CNBC On The Goldman Complaint - This Is Surreal

CNBC reports that, contra the SEC complaint, ACA was aware of the role being played by Paulson in the controversial Goldman "ABACUS" deal:

The government has testimony from a Paulson & Co. official that could contradict its own claims against Goldman Sachs, CNBC has learned.

Paolo Pellegrini told the government that he informed ACA Management that Paulson intended to bet against, or short, a portfolio of mortgages ACA was assembling.

...CNBC has examined documents in which a government official asked Pellegrini whether he informed ACA CDO manager Laura Schwartz about Paulson's position in the portfolio, named Abacus 2007-AC1.

"Did you tell her that you were interested in taking a short position in Abacus?" a government official asked Pellegrini, referring to the name of the CDO portfolio.

"Yes, that was the purpose of the meeting," Pellegrini responded.

...CNBC further learned that Pellegrini and Schwartz met at least three times to discuss the CDO and Paulson's short position on Abacus.

Because of the deal's structuring, Paulson stood to gain $900 million from the deal but lose only $20 million.

How did that work?  Just roughly, Paulson held $20 million of equity, intended to absorb the first losses on the underlying index bonds.  However, Paulson also bet that remaining $1 billion in bonds would fall by a lot more than 420 million, as they eventually did.

The SEC bobbed and weaved around that in its complaint.  For example, this is from p. 15:

50. Based upon the January 10, 2007, “Transaction Summary” sent by Tourre, the January 12, 2007 telephone call with Tourre and continuing communications with Tourre and others at GS&Co, ACA continued to believe through the course of the transaction that Paulson would be an equity investor in ABACUS 2007-AC1.

Well, ACA may have believed it because it was true; that does not mean that Paulson was exclusively long the bond portfolio.

This is from p. 2 of the complaint:

Tourre knew of Paulson’s undisclosed short interest and its role in the collateral selection process. Tourre also misled ACA into believing that Paulson invested approximately $200 million in the equity of ABACUS 2007-AC1 (a long position) and, accordingly, that Paulson’s interests in the collateral section process were aligned with ACA’s when in reality Paulson’s interests were sharply conflicting.

Was it $200 million or $20 million?  Just how long and how badly ACA was misled is more of a mystery; the CNBC report does not provide dates, but per the complaint, ACA was talking with and about Paulson in January and February of 2007.

I had noted earlier that the SEC inclusion of this email snippet may be out of context and misleading:

32.  On February 2, 2007, Paulson, Tourre and ACA met at ACA’s offices in New York City to discuss the reference portfolio. Unbeknownst to ACA at the time, Paulson intended to effectively short the RMBS portfolio it helped select by entering into CDS with GS&Co to buy protection on specific layers of the synthetic CDO’s capital structure. Tourre and GS&Co, of course, were fully aware that Paulson’s economic interests with respect to the quality of the reference portfolio were directly adverse to CDO investors. During the meeting, Tourre sent an email to another GS&Co employee stating, “I am at this aca paulson meeting, this is surreal.”

Surreal why?  Because ACA was learning for the first time what Paulson was up to?  Because the Paulson people were pretending to be bullish on the bonds, and only later outed themselves?  Because it was surreal watching bullish and bearish investors agree on a bond pool that would lead to the ultimate demise of one side?

I don't know.  And I am beginning to suspect that reading this SEC complaint won't tell me.

Birthers Verus The Electoral College

Here is an interesting wrinkle from Arizona which may have a serious Constitutional impediment:

PHOENIX -- The Arizona House on Monday voted for a provision that would require President Barack Obama to show his birth certificate if he hopes to be on the state's ballot when he runs for reelection.

The House voted 31-22 to add the provision to a separate bill. The measure still faces a formal vote.

It would require U.S. presidential candidates who want to appear on the ballot in Arizona to submit documents proving they meet the constitutional requirements to be president.

Who asked them?  The US Constitution does not specify an enforcement mechanism for the "natural born" requirement, but it is clear that the good people of the great state of Arizona will not be voting for Barack Obama in the 2012 general election.  Instead, they will be voting for electors who will cast their votes as per the procedures of the Electoral College.

In Arizona, Presidential electors must themselves meet eligibility requirements, but they are aligned by party, not specific candidate:

A. The chairman of the state committee of a political party which is qualified for representation on an official party ballot at the primary election and accorded a column on the general election ballot shall appoint candidates for the office of presidential elector equal to the number of United States senators and representatives in Congress from this state and shall file for each candidate with the secretary of state, not less than ninety days or more than one hundred twenty days before the primary election, by 5:00 p.m. on the last day for filing:

1. A nomination paper giving the candidate's actual residence address or description of place of residence and post office address, naming the party of which the candidate desires to become a candidate, stating his candidacy for the office of presidential elector, stating the exact manner in which the candidate desires to have his name printed on the official ballot pursuant to section 16-311, subsection G, and stating the date of the general election at which he desires to become a candidate.

2. An affidavit including facts sufficient to show that the candidate resides in this state and will be qualified at the time of the election to hold the office of presidential elector.

B. The nomination paper and affidavit of qualification pursuant to subsection A of this section shall be printed in a form prescribed by the secretary of state.

They can't disqualify the whole Democratic Party, can they?

Well, maybe - give lawyers a place to rest their fulcrum and they will move the word.  Or sue it.

And they may be able to bar Obama from the state primary election although even that is not immediately obvious - it may be that even in the primary, voters choose slates of Arizonans committed to various Presidential candidates rather than the candidates themselves.

Tricky.  My belief is that it is the US Congress, under the 12th Amendment, that enforces the "natural born" requirement by accepting or rejecting the results of the Electoral College.  I am sure a state could not impose its own eligibility requirements beyond those of the Constitution, but I am hazy as to whether a state would have some right to independently verify Constitutional eligibility to assure that their electors' votes are not being "wasted".

As to the specific question of Obama's birth - geez, presumably they want the long form birth certificate that includes a hospital and an attending physician, not just the summary short form declaring Obama was born in Honolulu.  The obvious problem is that the more extensive documentation backing the short form (held by the Hawaii Dept. of Health, and which would be made available at Obama's request) may not *prove* anything. 

Far and away the most likely result is that we learn that official state records indicate Obama was born at "Kapiolani Maternity and Gynecological Hospital, now called Kapi'olani Medical Center for Women & Children".  For a lot of people, that would settle it; for some, it will simply be evidence that a particular form was generated back in 1961, not that an actual birth took place when and where the form states.

And the long shot is that the supporting documentation is simply affidavits from Obama's mother and maternal grandparents asserting that he was born in Hawaii at their home (maybe the car wouldn't start so she couldn't get to the hospital.)  Again, that might well be the truth, but it might not be the "proof" some people are looking for.

Next, I suppose people could search State Department records from 1961 to see whether there is a record of Stanley Dunham leaving the country and returning after Obama's reported birth.  If those records cannot be found, is that "proof" that Obama was born in the US, a suggestion of incomplete paperwork, or a hint that Rahm Emmanuel is now doing what needs to be done?  No, I am not sure where this ends...

However, if Arizona can persuade Team Obama to ask for and release the complete file and shut a few people up, I am all for it.  Maybe we can look forward to a respectful Times story detailing their search for "the truth".  OK, probably not.  Meanwhile, the most transparent Administration in history is either fueling partisan rancor for their own benefit or hiding something.

Goldman Sachs And Casinos

Andrew Ross Sorkin of the Times surely knows the textbook answer to this:

When Wall Street Deals Resemble Casino Wagers

...But if there is a larger question, it is this: Why was Goldman, or any regulated bank, allowed to create and sell a product like the synthetic collateralized debt obligation at the center of this case? What purpose does a synthetic C.D.O., which contains no actual mortgage bonds, serve for the capital markets, and for society?

That may be a larger question, but Mr. Sorkin never answers it.  Instead, we get this explanation of derivatives:

One side bets the value will rise, and the other side bets it will fall. It is no different than betting on the New York Yankees vs. the Oakland Athletics, except that if a sports bet goes bad, American taxpayers don’t pay the bookie.

“With a synthetic C.D.O., it’s a pure bet,” said Erik F. Gerding, a former securities lawyer at Cleary Gottlieb Steen & Hamilton who is now a law professor at the University of New Mexico. “It is hard to see what the social value is — it’s hard to see why you’d want to encourage these bets.”

Hard to see the social value?  Let me help - speculators and short sellers aid in the process of price discovery, so that market participants can use "real" prices (and I emphasize the airquotes here for reasons explained below) to make decisions.  [What, was 'Casino Royale' on television recently?  Here is a NY Times op-ed that also leans on the flawed casino analogy.]

So for example - imagine it is 2007, there is something Alan Greenspan is calling a global savings glut, and all around the world investors have become persuaded that they must own US residential mortgage-backed securities ('RMBS').

In a world with no synthetic CDOs, would-be investors would have to bid for the existing supply of mortgages, driving up prices and encouraging every builder in America to build more houses and every mortgage originator in America to make new loans.  If and when that bubble pops, the result will be huge over-building in the housing market and a serious unemployment problem as people who thought they could make a career in construction or mortgage origination migrate to new professions.

But suppose we allow the creation of synthetic CDO's.  By itself, that does nothing.  But suppose there also exists a large group of well-financed investors who are prepared to put big money behind the notion that US residential mortgage-backed securities are over-priced and bound to fall in value.

Ah hah!  Now the RMBS bulls and bears can slug it out in a virtual world.  Investors who feel they must own these bonds can buy synthetic versions from bears who are happy to sell to them.  Actual prices may not change and neither real-world builders nor mortgage originators will get a price signal exhorting them to expand the nation's housing stock. 

Then, when the bubble bursts, all that happens is that large sums are transferred from the bulls to the bears (had the bubble not burst, the opposite would have occurred).  The wholesale layoffs in construction and the massive overbuilding of the housing stock don't occur.  And if no bank bet too much (If!), there would be no bailouts.

I exaggerate for effect, of course - in reality, the huge demand for RMBS would fuel both the creation of a synthetic market and expanded real-world construction.  However, to the extent that the bears were able to put their money to work to hold down prices, the magnitude of the overbuilding should have been mitigated.  Put another way, prices are more likely to float above their "correct" value when bears have no mechanism that lets them express their opinion with cash.

So, is the use of synthetic CDO's different from betting on the Yankees or the A's?  Well, the value of the price signal that the Yankees have a more powerful team than the A's is far from clear to me.  I'd hate to say it is useless, but I can't think of a use. 

But here is gambling question I am sure I can answer.  Consider a casino (as alluded to in the headline) where bettors are putting their money or the red or black of the roulette wheel.  I am confident that (assuming it is a fair, properly balanced wheel) the price signal conveys no socially useful information. 

(That said, I will indulge my inner pedant and add that if there is a flaw in the roulette wheel that prompts it to favor a particular color, there is an excellent chance that the price action will deliver that signal to the casino operator, as sharp bettors discover the flaw and put their money down on the winning side.)

So - housing market side-bets can provide a useful guide to real world behavior in a way that does not translate to baseball betting or casino wheel.

Mr. Sorkin presses on with two more dubious but related points.

The Securities and Exchange Commission, in its suit, says that Mr. Paulson asked Goldman to help create a synthetic C.D.O. of lousy mortgage loans that he selected so he could bet that they would go down and then profit on their fall.

That's what they say.  But part of Goldman's response is that hindsight is 20/20.  In 2007 Paulson was a guy with an opinion about housing bonds, just as Nouriel Roubini was a guy with an opinion about the financial system.  So what?  With the passage of time, their opinions were vindicated and others were not.  But who knew events would play that way in 2007?  Sophisticated investors who believed that RMBS represented good value also understood that other market participants disagreed and that the nature of a synthetic CDO required both bears and bulls in the deal. 

Paulson might look at a particular bond with a bearish slant and persuade himself that since it hadn't fallen much yet, it had a lot longer to drop.  A bullish investor might look at the same bond and convince himself that since it hadn't fallen much yet, it would lead the way in the next rally.  After the fact, they won't both be vindicated, but that doesn't mean that the bull should credit Paulson with prescience from the outset.

Put another way, after tonight's game between the Yankees and the Athletics, it will be perfectly obvious that one side bet correctly and the other side did not.  But if the A's go on to win (heaven forbid!), that will hardly prove that everyone who bet on the Yankees was an idiot.

One last gasp from Mr. Sorkin:

Try this mental exercise: Imagine if, a few years ago, an influential investor like Warren Buffett, bullish on real estate, had asked Goldman to develop a synthetic C.D.O. made up of undervalued mortgages.

Now, imagine if Goldman had found John Paulson to take the opposite side of the trade and, lo and behold, a year later Mr. Buffett turned out to be right and Mr. Paulson lost his shirt. Would you call that fraud? Would you be very upset?

Maybe not, but Mr. Paulson sure would be. And he might be inclined to sue over it, especially if he found out that his bet had been rigged against him from the start. Which brings us back to the financial legislation being debated in Washington.

First of all, Warren Buffet has been a legendary investor for decades, so his involvement in the deal would clearly be material.  Paulson was a legend in the making who is now famous for having called the housing turn; back in 2007, he was one more housing bear no one had heard of.

As to the notion that the bet "was rigged from the start", well, that is tricky.  Mr. Paulson (or Mr. Buffet in the hypothetical above) is not, for example, a Cisco insider structuring a short sale of Cisco to dupe some outsiders.  The bears have an opinion, but they have no material inside information unavailable to the bulls.

A synthetic CDO must, by its nature, have bulls and bears.  Saying to one of the bulls, "by the way, do you fully understand that someone is selling what you are buying?" would not have added to their understanding of the deal.  Telling them that the buyer was someone they had never heard of would not have expanded their useful data set either.  On the third hand, telling them that the other side was being taken by the legendary Warren Buffet would have given many people pause (at a minimum, an investor would pause long enough to figure out how to explain to his boss that he is smarter than Buffet.)

Well, that is the Goldman side.  I should add this - if the SEC can establish that Goldman made a deliberate effort to mislead the investors about Paulson's role, it would certainly suggest that Goldman thought there was something worth hiding.  But that evidence is a bit thin.

"REAL" AND "CORRECT" PRICES:  I used the quotes up above because of a common mis-apprehension of the nature of market prices.  The notion of efficient markets is not that prices are always right - it is that prices are wrong in ways that cannot reliably be predicted in advance.

Just for example, tonight, some people will study the rosters and starting pitchers and bet on the Yankees; others will do the same thing and bet on the A's.  Just now, the "right" price might show the Yankees with a 60% chance of winning; by about 4AM ET tomorrow, that price will be absurdly wrong, since the Yankees will have either won or lost.  But at this moment in time, it is a perfectly reasonable price and tomorrow morning it would be unfair to say the losing bettors were buffoons who were duped by the winners (We save "buffoons" for Red Sox fans).

Similarly, back in 2007 different people had theories about the likely developments in the US housing market.  Obviously, some were right and others wrong.  Paulson was right, and good for him.

Newton Nods

Great moments in ducking responsibility:

Luge Federation Says Olympic Track Not to Blame for Death

Two months after a Georgian luge athlete died in a crash on the Olympic track before the Vancouver Games, the sport’s international governing body has upheld its assertion that track design was not at fault in the racer’s death.

In its analysis of the crash, released Monday, it attributed the accident to gravitational forces that overcame the athlete, Nodar Kumaritashvili, and said the death was caused by “a complex series of interrelated events.”

Ahh, it was gravity!  Who knew that they had gravity all the way up in Vancouver?

Please - the Canadians have Neil Young, they have hockey, they have national health, and now we know they have gravity.  And a track that is too fast.

Hard Though It Is To Root For Goldman Sachs...

Prof. Jacobson steps into the breach:

It would be easy to cheer as the Obama administration seeks to take down Goldman Sachs. After all, Goldman Sachs has become a proxy for Wall Street, since so many of the old icons no longer exist or have been consumed as a result of the 2008 credit crunch.

But do not cheer too quickly this time. As even the NY Times now is admitting, the actual civil charges against Goldman Sachs are far from clear cut.

...As tempting as it is to say "to hell with Goldman Sachs," remember the saying about "first they came for ...."

Health insurers, pharmaceuticals have had their day with ObamaCare; the energy industry is awaiting some sort of cap and trade or energy bill.

Taking down the leading, and in many ways last remaining, Wall Street powerhouse will remove yet another center of private industry power.

The serial removal of centers of power outside the federal government in Washington, D.C. is a worrisome trend which becomes more difficult to reverse as the dominoes fall.

Don't wish too hard for the demise of Goldman Sachs. Because Goldman Sachs is not the end game.

Just to have an 80's flashback, when the Feds went after Drexel Burnham, Drexel was an upstart whose takeovers financed by high yield bonds were upsetting the established order; aligned against Drexel were the old line investment banks and much of the Fortune 500, as well as the SEC and DoJ.

My guess is that Goldman has more powerful allies now than Drexel had then.  And so far, the DoJ is taking a pass on what the NY Times is now admitting is a weak suit.  I puzzled over the Goldman response last night; if a careful reader could tell me which side I am on, I would love to know.  Goldman Sachs is as unsympathetic as they come, but I have never been a fan of weak, politically motivated, headline grabbing prosecutions.

Goldman's Defense - Hindsight is 20/20

Two documents in which Goldman responded to the SEC are now available at Alphaville.  They make some interesting points about the importance of hindsight that I suspect will be unpersuasive.

Just to recap - Paulson, now a fearsome hedge fund made famous by third successful call of the hosing meltdown, was just another player back in 2007 when they approached Goldman and sought their help in creating a vehicle that would let them go short some residential mortgage backed securities.

Goldman enlisted ACA as the investment portfolio manager; per the SEC complaint, Goldman then duped them into believing that Paulson was a long investor.  ACA then accepted a lot of input from Paulson in putting together a bond portfolio which ultimately swooned, to Paulson's profit and ACA's surprise.

But Goldman makes some valid points.  Among them:

Who The Heck is Paulson?

...while Paulson‟s investment strategy and success are well known today, nothing in the record establishes that Paulson‟s involvement would have been significant in early 2007 to anyone involved in the 2007-AC1 transaction. All participants in the transaction understood that someone had to take the other side of the portfolio risk, and the offering documents clearly stated that Goldman Sachs might lay off some or all of the short exposure to the portfolio that it had taken on. A disclosure that the relatively unknown Paulson was the entity to which Goldman Sachs transferred that risk would have been immaterial to investors in April 2007.

A Receding Tide Strands All Boats

...there is no basis to suggest that the portfolio would have performed any differently or that the economic outcome for the participants would have changed in the least had Paulson‟s role and interest been more transparent. The portfolio that ACA originally selected had the same characteristics as the Reference Portfolio, and both experienced virtually the same poor performance in the face of the subprime meltdown.

In early 2007 market participants were surely aware that opinions were divided on the outlook for the housing market; per today's Times, opinions were divided inside Goldman Sachs.  Paulson was what - a firm that would be famous in two years for calling the market turn?  What would that mean in 2007?

And the notion that Paulson had an uncanny knack for picking bonds about to collapse may simply be hype - plenty of other bonds bought in utter good faith also collapsed, and it may be that, as Goldman says, any portfolio ACA put together would have fared poorly over the next few years.

Good points but... if that is all true, then why not tell investors and/or ACA about Paluson's role?

Their response also circles back to a point I had mentioned in passing earlier - is this really all the SEC has?

...there is no basis for a finding that Goldman Sachs made any alleged misrepresentations about Paulson‟s role with the negligence required under Section 17(a), much less with the scienter mandated by Section 10(b). The Staff has pointed to two ambiguous statements contained in an e-mail from Goldman Sachs that it contends caused ACA to infer that Paulson would be an equity investor.  As an initial matter, it is difficult to reconcile such an inference with the Staff‟s theory that Paulson tried to influence ACA to select dozens of riskier Baa2-rated securities, which would have raised questions about Paulson‟s true economic interests for any sophisticated market participant. The record, in all events, contains no evidence that Goldman Sachs caused ACA to infer that Paulson had an equity position. Nor does the record support the conclusion that any confusion by ACA as to the nature of Paulson‟s involvement in 2007-AC1 changed how ACA selected the Reference Portfolio.

It may come out at trial that ACA had formed a pretty accurate sense of Paulson's intentions but was unfazed.  The SEC complaint includes a no-context email in which Tourre, the Goldman deal manager, described a meeting between ACA, Paulson and himself as "surreal".  How conclusive is that?  The meeting could have been surreal because Paulson played along as a bullish investor and ACA was duped; it could have been surreal because Paulson pretended to be bullish and ACA pretended to believe him; it could have been surreal because, rather than lions and lambs lying down together, Tourre was watching bulls and bears sit together and negotiate a mutually agreeable portfolio, knowing one side or the other was likely to be crushed.  Who can tell, from the SEC snippet?

And despite the ghastly ex post outcome it is not as if ACA lacked expertise or confidence in selecting bonds.

Goldman includes these bold words:

If this matter is litigated, Goldman Sachs is confident that a fuller record – including its own discovery of all transaction participants – will underscore that no one in fact considered Paulson‟s role important and that no one was misled.

Good point - what were the ACA people saying to each other and what will they say on the stand?

Eventually, Goldman argues that there is no crime without intent:

[t]o prove scienter with respect to a non-disclosure, it is not enough to simply show that the defendant was aware of an undisclosed fact that a court later determines is material. Rather, a plaintiff must show that the defendant must have been aware of both the materiality of the undisclosed fact and that its nondisclosure
would likely mislead investors.

I think this is where they have a problem.  Goldman can rationalize Paulson's involvement in the portfolio selection process as immaterial, but if the SEC can make a case that Goldman took steps to misdirect ACA about that role, the actions will refute the rationalizations.

HOW DUMB ARE THESE GUYS?  Goldman notes that the ACA people were active in evaluating the proposed portfolios:

Finally, ACA‟s purported belief that Paulson was an equity investor would have been neither reasonable nor credible if one accepts the major premise of the Staff‟s theory that Paulson proposed literally dozens of weaker securities that were systematically rejected by ACA.  If this premise were true, then a market participant as sophisticated as ACA would have quickly recognized this trend, and questioned at least in its own mind what Paulson‟s economic interest was. Certainly, the credibility of ACA‟s purported interpretation will be subject to vigorous attack in a contested proceeding.

I have no idea what ACA people will say on the stand.  However, the SEC brought the suit, so they must have a bit of confidence.  Well, I say that - the final vote was 3-2 in favor of proceeding.  Yike - what we don't need right now is a weak, politically motivated case.  C'mon, bring on a slam-dunk!  That said, Obama gets the headlines he wants now and this case won't go to trial for months or years.

ANOTHER HINT OF TROUBLE IN PARADISE:

From p. 32 of the first Goldman response is this footnote:

The Staff has also asserted that certain internal ACA documents state that Paulson intended to invest in the equity tranche of the 2007-AC1 transaction. Copies of those documents have not been provided to Goldman Sachs.

I don't recall seeing those in the complaint.  Was the SEC bluffing?

Cash For Kaus!

We are raising money for Mickey!  Here is his "heartfelt" fundraising appeal, and the mission-critical web page.

My strong impression is that donations of less than $200 are not reported in the big-time campaign data bases, so the discreet and the paranoid who would otherwise not contribute at all might want to keep that in mind.

And there is an upper limit of several thousand dollars, but if that is a problem, well, find the solution.

Creating Risk, And Shuffling It

Paul Krugman denounces Goldman Sachs with vigor, and well he might.  However, he conflates two types of risk which probably ought to be viewed separately.  Here w ego:

Most discussion of the role of fraud in the crisis has focused on two forms of deception: predatory lending and misrepresentation of risks. Clearly, some borrowers were lured into taking out complex, expensive loans they didn’t understand — a process facilitated by Bush-era federal regulators, who both failed to curb abusive lending and prevented states from taking action on their own. And for the most part, subprime lenders didn’t hold on to the loans they made. Instead, they sold off the loans to investors, in some cases surely knowing that the potential for future losses was greater than the people buying those loans (or securities backed by the loans) realized.

What we’re now seeing are accusations of a third form of fraud.

We’ve known for some time that Goldman Sachs and other firms marketed mortgage-backed securities even as they sought to make profits by betting that such securities would plunge in value. This practice, however, while arguably reprehensible, wasn’t illegal. But now the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That’s what I would call looting.

...So what role did fraud play in the financial crisis? Neither predatory lending nor the selling of mortgages on false pretenses caused the crisis. But they surely made it worse, both by helping to inflate the housing bubble and by creating a pool of assets guaranteed to turn into toxic waste once the bubble burst.

Well.  Predatory lending and aggressive generation of sub-prime mortgages to dubious borrowers are examples of the creation of risk.  If aggressive mortgage originators sign up a million dollars in new mortgages today, that represents a new opportunity for someone to finance that and make (or lose) money.

But the third type of risk described by Krugman represents a shuffling of risk.  In the Goldman instance, a hedge fund (Paulson) wanted to bet against mortgages; to facilitate this, Goldman found clients willing to bet on the mortgages.

Per the complaint, Goldman engaged in a bit of fraud and misdirection in describing the counterparties to each other, and they deserve to get thumped.  But the key point sidestepped by Krugman is that the Goldman fraud did not add (directly) to the supply of mortgages in the world.  Instead, market participants bet on or against mortgages that were already in existence.

Goldman's fraud is problematic here because it interferes with the price signals in the market.  Normally, if there are lots of committed, well financed sellers and fewer, less committed buyers, prices fall.  But Goldman managed to keep some relevant information from some buyers, thereby propping up prices a bit and sending a false signal to the world about the underlying demand for mortgage backed securities.  That is unfortunate - had mortgage prices begun to fall sooner and further, there would have been fewer originations (hence, less new risk) throughout 2007 and 2008.

So, Goldman's fraud muddied the proper price signaling of the market.  But had it been done honestly, would the creation of these securities made the market worse, better, or unchanged?  That is tricky, which is why Krugman danced around it:

As for the alleged creation of investments designed to fail, these may have magnified losses at the banks that were on the losing side of these deals, deepening the banking crisis that turned the burst housing bubble into an economy-wide catastrophe.

Absolutely - they *may* have added to losses at already troubled banks.  Or they may have been bought as a substitute for other securities that also went down in flames.  Hypothetically, a Goldman client may have been holding residential mortgage backed securities yielding 7% and sold them to Goldman in exchange for the shiny new whiz-bang synthetic CDO yielding 7.25%.  In the latter case, the client's actually losses on the Goldman CDO need to be compared with their prospective losses on the bonds they had been holding to get a fairer sense of their fleecing.

And absent fraud, it is obvious to everyone buying a synthetic CDO that there must be a short side to it, so one might hope the normal price signaling would be in effect.

Do keep in mind - AIGFP lost billions by insuring mortgage backed securities, but the parent company lost a comparable number of billions by directly investing in mortgage backed securities.  The problem wasn't derivatives per se - the problem was their ultimately unfounded confidence in the US housing market.

Vigorous regulation at the origination end, by cracking down on no-down payment loans, balloon payments and the like, would have made the overall housing bubble smaller (and shut a lot of working-class minorities out of the housing market.)

Vigorous regulation of the re-shuffling of the risk that has already been created has a more uncertain result.  To the extent it managed to slow the flow of money around the world it probably would have slowed the growth of the sub-prime market, as originators filled their own risk appetite and were left unable to pass the mortgages along.  Had the market been less liquid there probably would have been fewer total buyers and less total risk.  Since the reduced total risk would have been more concentrated, it is hard to say whether we would have seen more bailouts, although I'd bet the foreign impact would have been reduced.  However, making markets less liquid is not the typical goal of regulation.

And to the extent that the buyers and sellers were scarred and scared but not impaired, well, that is a triumph of capital markets!  Setting aside their possible role in Goldman's misdirection play (and they have not been hit with a complaint yet), the Paulson people called the market correctly, deployed their capital accordingly, and now have more capital to direct.  Their opposite numbers called the housing market wrongly and now have less capital to direct.  As long as no one needs to bail out either side (a big IF!), that is just capitalism in action - the dummies have less cash to throw at their next bad idea and the smart guys have more.

Bring Back "Don't Ask, Don't Tell"

Emily Bazelon and Dahlia Lithwick of Slate have an interesting column exhorting us to trust authority and restore "Don't ask, don't tell" to its proper place - the selection of Supreme Court Justices.

The topic is the weird storm swirling around potential Supreme Court nominee Elena Kagan, former Harvard Law School Dean, current Solicitor General, and maybe (or maybe not!) a lesbian.

What creates the odd cross-currents is that proud progressives, including members of the GLBT community (and not to overlook the LGBT and LGBTQ communities) would like to claim her as one of their own.

And apparently sinister righties are hoping to convince the world she is gay, because we all know that is the kiss of death, right?  Don't we? 

Ms. Bazelon and Ms. Lithwick seem to think so - let's see how they courageously confront bigotry side-on:

At the same time, the White House may have disserved the cause by making such a fuss about the CBS piece. The real answer needn't be the insistence that Kagan is straight. It should be that it matters not one little bit. Period.

The White House may be hoping that Kagan's sexual preference is a nonissue for most Americans, especially at the moment when anti-gay-rights groups change their message from "we don't want gay-friendly nominees" to "gay nominees are all sinful," as Focus on the Family has just done.

Just say nothing - that's the fighting spirit!  And if someone says "Obama is black, and blacks are sinful", would these two defend him by saying he is half-white, or that it doesn't matter?  C'mon.

We are also assured that we ought to trust authority:

Whether or not the strategy works politically, the White House's announcement that Kagan isn't gay should end the matter, unless and until someone come up with some real proof to the contrary.

Why should that end it?  What, the White House wouldn't lie?  When did we enter that world?

Howard Kurtz of the WaPo reported the White House denial and left us with another question:

Ben Domenech, a former Bush administration aide and Republican Senate staffer, wrote that President Obama would "please" much of his base by picking the "first openly gay justice." An administration official, who asked not to be identified discussing personal matters, said Kagan is not a lesbian.

And how does that official know this - did he (or some White House vetter) specifically ask Kagan?  Was she asked this during the interview process for Solicitor General, did they ask her after the CBS column, or have they never asked her at all?  And why did they ask her if it doesn't matter - is that how progressives conduct job interviews these days?  

Oh, well - this can just be added to the list of things that progressives "know" are true because Obama said so.

As to the salience of her orientation - one might think that the gay agenda has stalled in the legislative process, so they will be heading back to the courts to look for friendly rulings (such as in California).  Now, one might argue that Ms. Kagan's record speaks volumes on her support for gay rights and that we know enough about her likely views without needing to know her personal orientation.  I would score that as "Maybe".

Most of the normal associations of a Supreme Court seat with various groups are pretty obvious.  When the President nominates a woman, or a black, or a Hispanic, or a Catholic, or a Protestant, or a Jew, there is not a lot of shadow-boxing and uncertainty about whether the nominee is or is not, in fact, a woman, or a black, or a Catholic.  The uncertainty lies in just how much influence that affiliation may have over decisions that come before the court.

It is difficult to think of a plausible analogy to the Kagan case, but here we go.  Suppose a nominee refused not only to answer questions about his personal views on abortion, but also refused to describe whether he was raised as a Catholic.  Would people really just cite religious freedom, focus on his public record and move on?  Or would reporters talk to his family and friends, go to his childhood schools, and generally exert themselves in an effort to pin this down?

There is nothing wrong with being a Catholic, but I think the public would expect a nominee to be forthcoming on that point; we are talking about a lifetime appointment, unlike with the Solicitor General.  But per the Slate women, gays are different.  So now we know.

OTHER THINGS WE KNOW:  I bet a closeted Republican would be outed, since in that context it is all about the hypocrisy.

BACK TO THE 50'S, or OH WHAT A TANGLED WEB WE (MIGHT OR MIGHT NOT) WEAVE:  Let me remind people of the circular logic in play not that long ago - gays were a security risk because their behavior was shameful (and illegal) and exposed them to the threat of blackmail.  If Ms. Kagan is that intent on preserving her privacy, then she is also at a bit of risk here, presumably.  Certainly if she tells a Senate committee that she is not gay she had better be telling the truth, or she will be vulnerable to a lifetime of pressure from those in the know.

A WORLD I WOULD RATHER AVOID:  Suppose Ms. Kagan provides the 5th vote in a 5-4 Supreme Court decision inventing a right to gay marriage and creating social divisions that leave us pining for the comity of the Roe v. Wade days; suppose we subsequently discover that she is a closeted gay.  Yike.

That said, I do think that societal attitudes about gay marriage are likely to change over time in a way that is unlikely to happen with abortion.  Neither science nor custom will resolve questions about when life begins or the soul of a fetus any time soon, but gay marriage polls as a generational question.  Consequently, a Supreme Court cramdown would only be dreadful for a while, but not forty years as with Roe.  Probably.  But I would still not choose to conduct that social experiment led by a stealth judge.

No Minstrel Show Here!

Charles Blow recently deplored the lack of authentic diversity at a Dallas Tea Party, describing it as a "minstrel show".  Conor Friedersdorf notes the heads they lose problem being faced by the Tea Party:

It’s this kind of piece that causes people on the right to think that on matters of race, they’re damned if they do, and they’re damned if they don’t — if they don’t make efforts to include non-whites they’re unenlightened propagators of privilege, and if they do make those efforts they’re the cynical managers of a minstrel show, but either way, race is used as a cudgel to discredit them in a way that would never be applied to a political movement on the left.

Jut so.  Meanwhile, I am eagerly awaiting a correction on this from Mr. Blow:

A New York Times/CBS News poll released on Wednesday found that only 1 percent of Tea Party supporters are black and only 1 percent are Hispanic. It’s almost all white.

It's almost all white and he has the pictures to prove it.  Ooops, my bad - that was a link to the NY Times Board of Directors, which seems to be utterly free of any Hispanic, black or Asian presence. 

Anyway, the NY Times poll reported the Tea Party as 89% white, which makes them a lot more diverse than the Times Board.  And contra Mr. Blow, the Tea Party is reported to be 3% Hispanics.  That won't change his point (as if anything would) but it would be nice to see the Times present the correct figures.

Sunday Morning

Away we go.

Black And White

What's black and white but not read by Times columnist Charles Blow?  The NY Times!

Mr. Blow, the poor man's Bob Herbert, ponders the absence of racial diversity at a Dallas Tea Party rally and tells us this:

A New York Times/CBS News poll released on Wednesday found that only 1 percent of Tea Party supporters are black and only 1 percent are Hispanic. It’s almost all white.

Well, the Times/CBS poll made available to the rest of us had slightly different stats (p. 41):  The Tea Party polled as 1% black, 3% Hispanic, 1% Asian, 6% "Other".  3% of respondents declined to self-identify.

That contrasts with the overall group of respondents (including the Tea Partiers), which were 12% black, 12% Hispanic, and 3% Asian.

The Tea Party is still mostly white - per the Times, it is 89% white.  That makes for a vivid contrast with America, which is 77% white.  Whether 89% reaches the level of "almost all white" is an editorial call, but the assertion that the Tea Party is 1% Hispanic merits a correction.

When You Assume...

When you assume, you make an ass out of "u" and me.  I am reminded of this wisdom when reading Goldman's extended response to the SEC civil complaint against them, which includes this gem:

Goldman Sachs Never Represented to ACA That Paulson Was Going To Be A Long Investor.  The SEC’s complaint accuses the firm of fraud because it didn’t disclose to one party of the transaction who was on the other side of that transaction.  As normal business practice, market makers do not disclose the identities of a buyer to a seller and vice versa. Goldman Sachs never represented to ACA that Paulson was going to be a long investor.

Hmm.  Per the complaint, Goldman described Paulson as a "sponsor" of the transaction; per Felix Salmon, in normal usage that would mean a long investor, an impression Goldman further promoted by alluding to Paulson in the context of the residual equity tranche.  And then there is the email in which the Goldman dealmaker refers to the meeting amongst Paulson, Goldman, and the ACA dupes as "surreal". 

But to be fair, if the SEC had the smoking email or memo in which Goldman specifically presented Paulson as a long investor they would have included it.  And the trial should be fun (if we get that far), as the SEC attorneys try to get the ACA people to admit to being dupes and fools.

Still, if the Goldman defense is that their high priced smoke and fog generators worked, well, good luck with that.  The SEC is going to insist that disclosure means more than creating a mis-impression and then failing to correct it.

Salmon describes the ABC role as useful idiots here, and offers the Abacus pitch book as a prime example of non-disclosure.

There Ought To Be A Law!

The NY Times reports good news about immigration and manages to conflate it to their own editorial ends:

In 14 of the 25 largest metropolitan areas, including Boston, New York and San Francisco, more immigrants are employed in white-collar occupations than in lower-wage work like construction, manufacturing or cleaning.

The data belie a common perception in the nation’s hard-fought debate over immigration — articulated by lawmakers, pundits and advocates on all sides of the issue — that the surge in immigration in the last two decades has overwhelmed the United States with low-wage foreign laborers.

Really?  My impression is that people calling for tighter control of our borders are worried about a surge in illegal immigration.  Conflating that with legal immigration, including the H1B visa program, is absurd.

Doc Drezner summarizes the study.

Hainmueller and Hiscox are arguing that material self-interest does not explain attitudes about immigration.  The findings suggest one of two possibilities:  simple prejudice, or concerns that low-skilled immigration negatively affect overall U.S. welfare. 

And from the Times:

Americans are inclined to welcome upper-tier immigrants — like Ms. Kollman-Moore — believing they contribute to economic growth without burdening public services, the study found. More than 60 percent of Americans are opposed to allowing more low-skilled foreign laborers, regarding them as more likely to be a drag on the economy.

I Provide A Helpful Disclaimer

On the topic of Tea Parties, anger and Bill Clinton Michael Moynihan of Reason offers this:

So after the Frank Rich "they-are-all-Bull-Connor" arguments, we are back to the "they-are-all-potential-Tim-McVeigh" arguments, this time courtesy of Bill Clinton. Is there evidence to substantiate such a claim? Well, no. But there is, after all, "the rise of extremist voices on talk radio...[and] you have a billion Internet sites." Potential fertilizer bombers, all of them.

The fertilizer I spread around here will not explode.  Just so you know.

The Petty Pace Of Hope And Change

Krauthammer on the Obama's nuclear summit:

Obama's nuclear strutting and fretting

By Charles Krauthammer
Friday, April 16, 2010; A25

There was something oddly disproportionate about the just-concluded nuclear summit to which President Obama summoned 46 world leaders, the largest such gathering on American soil since 1945. That meeting was about the founding of the United Nations, which 65 years ago seemed an event of world-historical importance.

But this one? What was this great convocation about? To prevent the spread of nuclear material into the hands of terrorists. A worthy goal, no doubt. Unfortunately, the two greatest such threats were not even on the agenda.

The first is Iran, which is frantically enriching uranium to make a bomb, and which our own State Department identifies as the greatest exporter of terrorism in the world.

Nor on the agenda was Pakistan's plutonium production, which is adding to the world's stockpile of fissile material every day.

When do we abandon Obama's 80's flashbacks and talk about jobs, jobs, jobs?

SEC Sues Goldman

The SEC is filing a civil suit against Goldman, Sachs [here is the complaint]:

The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market. Those deals, which were the subject of an article in The New York Times in December, initially protected Goldman from losses when the mortgage market disintegrated and later yielded profits for the bank.

As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars.

According to the complaint, Goldman created Abacus 2007-AC1 in February 2007, at the request of John A. Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst.

Goldman let Mr. Paulson select mortgage bonds that he wanted to bet against — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.

But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to default. Goldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.

“The product was new and complex, but the deception and conflicts are old and simple,” Robert Khuzami, the director of the S.E.C.’s division of enforcement, said in a statement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

Knowing nothing other than what I am reading here, that sounds like a winnable suit for the SEC.  So why hasn't Goldman settled?  My current wild guess - a spate of private lawsuits will come in the wake of this action if it succeeds.

FROM THE COMPLAINT:

Tourre was principally responsible for ABACUS 2007-AC1. Tourre devised the transaction, prepared the marketing materials and communicated directly with investors. Tourre knew of Paulson’s undisclosed short interest and its role in the collateral selection process. Tourre also misled ACA into believing that Paulson invested approximately $200 million in the equity of ABACUS 2007-AC1 (a long position) and, accordingly, that Paulson’s interests in the collateral section process were aligned with ACA’s when in reality Paulson’s interests were sharply conflicting.

More details follow.  Seems pretty damning.

Krugman v. Sorkin

Fun's fun, but we have to go with Krugman here - not even Sweden nationalized all of its banks.

Oh, well - let me go back to a darker day when I grasped the extent of Krugman's nationalizing schemes but thought his notion was absurd:

Nationalizing one bank will freeze private equity investment in many others while people await developments.  But setting that aside, what is the precedent?  Krugman is taking his inspiration from the successful nationalization of some Swedish banks in the 90's.  For heaven's sake - two banks no one ever heard of on the periphery of international finance were successfully nationalized by the Swedes, so therefore the US government can manage two (or more!) of the largest, most complicated, most interwoven institutions in global finance.

My simple test for advocates of nationalization - name the Swedish banks that were nationalized.  And good luck; most people will have a better chance naming the members of ABBA.  (You might find the names here, here, or here or in two efforts by the Cleveland Fed.)

I still can't pass that test.

WAVE IN THE REF: Times Public Editor Clark Hoyt makes the call for Krugman but gives us this insight into Krugman's character:

Krugman and Sorkin told me that they talked Thursday. Sorkin said the conversation was “very cordial.” Krugman called it “not much fun.” They agreed that they disagree on the definition of nationalization.

Well, Krugman isn't having fun unless he is denouncing someone.

An NSA Leaker Indicted

Interesting - Team Obama indicts a Bush-era leaker: [the newspaper is reported by Fox and the Times, sort of, as the Baltimore Sun; see NOW WE KNOW, below]

A former senior executive with the National Security Agency has been indicted on 10 felony charges related to the alleged leaking of classified information to a national newspaper in 2006 and 2007, the Justice Department announced Thursday morning.

Thomas A. Drake, 52, headed an office in the NSA's Signals Intelligence Directorate at Fort Meade between 2001 and 2005, and continued to work with the agency as a high-ranking contractor through 2008, U.S. officials said. The indictment alleges that Drake exchanged hundreds of e-mails with an unidentified reporter for a national newspaper and served as a source for its articles about Bush administration intelligence policies between February 2006 and November 2007, U.S. officials said.

Captain Ed of Hot Air takes the money bet and guesses we are talking about a NY Times source here.  I'll say, maybe.  The WaPo and USA Today eventually got some stories, and the first big NY Times story was from the fall of 2004 (they held it until December 2005); if Mr. Drake's indictment really covers articles beginning in Feb 2006, he had to be a secondary source for the Times, which is entirely possible.

But let me just toss in this WaPo story from Feb 5, 2006, which has 'NSA' all over it.  And USA Today broke the names of some cooperating phone companies (as best memory serves, here) in Feb 2006.  (This EFF page provides a good cheat sheet of the big NSA stories.)

Leslie Cauley led the charge on the USA Today stories, but she came at it from the business side, not the cloak and dagger part of the room.  So since I can't have the Times, I'll bet on the WaPo.  To be fair, let's note that The Politico is backing Ms. Cauley as the dark horse.

NOW WE KNOW:  From Fox:

In an indictment unsealed Thursday, federal prosecutors said 52-year-old Thomas Drake illegally retained classified information, passed some of that classified information to a reporter with the The Baltimore Sun, who was identified only as "Reporter A," and then tried to cover up his actions.

"Our national security demands that the sort of conduct alleged here - violating the government's trust by illegally retaining and disclosing classified information - be prosecuted and prosecuted vigorously," Assistant Attorney General Lanny A. Breuer said in a statement.

Fox News has learned that "Reporter A" is Siobhan Gorman, who now works for The Wall Street Journal, which is owned by the same company that owns Fox News.

And Scott Shane of the Times:

The indictment, handed down on Wednesday by a grand jury in Baltimore, does not name either the reporter who received the information or the newspaper, but the description fits articles written by Siobhan Gorman, then a reporter for The Baltimore Sun, that examined in detail the failings of several major N.S.A. modernization programs and problems with supplying its huge electric power demands. Some of her articles were honored with a top prize from the Society for Professional Journalists.

The N.S.A., which monitors phone calls, e-mail messages and other electronic communications, had spent hundreds of millions of dollars to update its systems to collect and sort the huge amount of data it was collecting. The modernization programs were plagued with technical failures and cost overruns, and Ms. Gorman, who now works for The Wall Street Journal, was the reporter who most aggressively covered the problems.

WHERE ARE THOSE LONG-FORGOTTEN TALKING POINTS WHEN WE NEED THEM?  There was a time when something like this, especially from The Captain, would set me off or turn me gray:

Oddly, though, the same people who expressed outrage over the exposure of Valerie Plame as a CIA analyst never got terribly exercised over these breaches of national security (and to be fair, the same holds true in reverse). 

Ahhh!  There has never been evidence that Richard Armitage, Scooter Libby, Karl Rove, Ari Fleischer or anyone else thought that they were revealing a Big Secret when they mentioned that Joe Wilson had been picked by his wife to check out a story from Niger.  Nor is there evidence that Bob Novak thought it was particularly consequential when he published it.  Nor is there evidence that it was in fact consequential, other than as a political club for beating Republicans.

But it is quite clear (at least, from my seat here on the right) that some of the Times outings were unhelpful.

Prisoner Of Gitmo

Dana Milbank watches Eric Holder flounder and flail:

Eric Holder is a Guantanamo Bay prisoner.

He's not imprisoned at Gitmo, but he's imprisoned by Gitmo. The Justice Department he leads, and to some extent the whole Obama administration, has been detained -- tortured, even -- by the star-crossed attempt to close the military prison.

It began in the first hours of the administration, when Obama pledged to close Gitmo without a plan for doing so. It got infinitely worse in November, when Holder announced that 9/11 mastermind Khalid Sheik Mohammed would be tried in New York City.

So when Holder came before the Senate Judiciary Committee for questioning Wednesday morning, Democrats and Republicans confronted the attorney general with the same question: What's the plan? And Holder had no answer.

The plan was to strike a "Not Bush" pose, which was great fun while it lasted.

A New Direction On Israel

Following the Times story that Obama has taken a new direction on Israel, we see from Laura Rozen that the deputy US Ambassador to the UN has urged that body forward into the MidEast breach.

In describing Obama's apparent decision to blame Israel for the (eternal) lack of progress on peace talks, the Times resorts to a bit of "Bush did it, too" subterfuge:

The glimmers of daylight between United States and Israeli interests began during President George W. Bush’s administration, when the United States became mired in wars in Iraq and Afghanistan. Three years ago, Condoleezza Rice, then secretary of state, declared during a speech in Jerusalem that a peace deal between Israel and the Palestinians was a “strategic interest” of the United States. In comments that drew little notice at the time, she said, “The prolonged experience of deprivation and humiliation can radicalize even normal people.”

Let me help the Times find the context and complete the first quote:

Peace between Israelis and Palestinians is in the strategic interest of the United States, yet we will defend against any action, as we always have, that would compromise Israel's security. That is my commitment to you.

If Obama remembered the second part, the Times forgot to report it.

Here is the transcript of the press conference from which the Times extracted this story.  I think the President was extremely opaque, and the fact that it took two days for people to interpret his words makes me wonder whether there is some hype in play here; perhaps one faction or another is overstating the case in order to force the President forward, or back.  In any case, the Times did talk to "administration officials" and we do have the push at the UN, so something is moving.

However, Obama sidestepped an opportunity to bash Israel when asked at the press conference about Israel's non-signing of the Nuclear Non-Proliferation Treaty.  And his "vital strategic interest" comment was quite general:

Q    Thank you, Mr. President.  Good afternoon.  Given the progress you have cited in recent days on your foreign policy agenda, to what extent do you feel like you have gained political capital with which to take further to the international stage for the rest of this year, to perhaps rejuvenate some initiatives in trouble spots such as the Middle East and elsewhere?

THE PRESIDENT: ...And I remain committed to being a partner with countries around the world, and in particular hot spots around the world, to see if we can reduce those tensions and ultimately resolve those conflicts.  And the Middle East would be a prime example.  I think that the need for peace between Israelis and Palestinians and the Arab states remains as critical as ever. 

It is a very hard thing to do.  And I know that even if we are applying all of our political capital to that issue, the Israeli people through their government, and the Palestinian people through the Palestinian Authority, as well as other Arab states, may say to themselves, we are not prepared to resolve this -- these issues -- no matter how much pressure the United States brings to bear. 

And the truth is, in some of these conflicts the United States can’t impose solutions unless the participants in these conflicts are willing to break out of old patterns of antagonism. I think it was former Secretary of State Jim Baker who said, in the context of Middle East peace, we can’t want it more than they do. 

But what we can make sure of is, is that we are constantly present, constantly engaged, and setting out very clearly to both sides our belief that not only is it in the interests of each party to resolve these conflicts but it’s also in the interest of the United States.  It is a vital national security interest of the United States to reduce these conflicts because whether we like it or not, we remain a dominant military superpower, and when conflicts break out, one way or another we get pulled into them.  And that ends up costing us significantly in terms of both blood and treasure.

So I’m going to keep on at it.  But I think on all these issues -- nuclear disarmament, nuclear proliferation, Middle East peace -- progress is going to be measured not in days, not in weeks.  It’s going to take time.  And progress will be halting.  And sometimes we’ll take one step forward and two steps back, and there will be frustrations.  And so it’s not going to run on the typical cable news 24/7 news cycle.  But if we’re persistent, and we’ve got the right approach, then over time, I think that we can make progress.

For my money, someone ought to ask him about Kashmir - resolving that would reduce tensions between Pakistan and India, thereby helping to mitigate Pakistan's nuclear aspirations and support of terrorist groups aimed at India; it would also reduce Pakistan's need to promote allies in Afghanistan.

Well.  Kashmir won't be solved by the US or noted by the US press, but if glorious multi-national conferences are Obama's goal, it would be a great topic.

IF YOU ARE HAVING TROUBLE GETTING NERVOUS ABOUT THIS: From the Volokh Conspiracy we find David Bernstein wondering why Obama is so sure that Palestinans even want a state.  They have reclaimed Gaza, the world is on their side - why not hold out for the whole ball of wax, which would include a right of return and perhaps the destruction of Israel?

And if a notable subset of Palestinians and the "Arab street" believe time is on their side, then the following suggestion by Barry Rubin and linked by Mr. Bernstein comes into play:

And so if Obama were to implement any conceivable negotiated solution--even an extremely pro-Palestinian one by Western standards--he'd be labelled as the man who sold out the Palestinians and go down in history as a betrayer and Zionist imperialist. I'd bet money on being able to collect a considerably large set of clippings denouncing him as worse--more "anti-Muslim" and "anti-Arab"--than George W. Bush! And if you think that isn't likely then, forgive me for saying so, you don't really understand how Middle East politics work.

Whoa!  Obama standing in the way of the (illegitimate) aspirations of the Palestinian people!

I'LL GIVE YOU A NEW DIRECTION:

From the Times:

The administration’s immediate priority, officials said, is jump-starting indirect talks between Israelis and Palestinians. There is still a vigorous debate inside the administration about what to do if such talks were to go nowhere, which experts said is the likeliest result, given the history of such negotiations. Some officials, like Gen. James L. Jones, the national security adviser, advocate putting forward an American peace plan, while others, like the longtime Middle East peace negotiator Dennis B. Ross, who now works in the National Security Council, favor a more incremental approach.

Obama doesn't do incremental!  I say, offer the Palestinians subsidized participation in the new US health exchanges as part of a peace deal.  Then he can pin down two legacies at once.

I don't foresee any problems.

Leads You Will Never See

The Times did some polling on the Tea Party; their lead:

Poll Finds Tea Party Backers Wealthier and More Educated 

By KATE ZERNIKE and MEGAN THEE-BRENAN

Tea party supporters are wealthier and more well-educated than the general public, tend to be Republican, white, male, and married...

I await the day we see a Times story that opens "Obama supporters are poorer and less well-educated than the general public, tend to be Democratic, darker-complected, female, and single...".  Even though it might be true.

Praising The Drone Wars

I am delighted to encourage Team Obama's use of drones against terrorists; if praising them pushes them forward, let's praise away!

However, the day may come when public sentiment turns against the use of drones (the left has already begun).  Come that day, when Team Obama segues to "Bush did it, too", they will be pleased to present the following accounting as a counterpoint to the current hype that "It is widely known that Obama has ordered more drone strikes in his year in office than George W. Bush did in his entire administration.

There are several of reasons Obama has ordered more strikes.  First, we have more and better drones, as well as more and more experienced pilots.

Secondly, a lot of drone usage occurred in the conventional battlefields of Iraq through the military chain of command; the "more drone strikes" refers to CIA-sponsored missions.

But, lest anyone doubt the martial ardor of Bush-Cheney, consider this:

The Obama Administration has dramatically increased the number of CIA drone attacks since taking office. Under President Bush, the CIA carried out only 2 strikes in 2006 and 3 in 2007. In July 2008, Bush increased the number of drone strikes, totaling 34 attacks in 2008. Most of the key CIA personnel from the Bush Administration’s drone program remain, but the Obama Administration has far outpaced its predecessor in the frequency of drone strikes. By October 19th, 2009, the CIA had conducted 41 strikes under President Obama, compared with the same number over three years under former President Bush. CIA drone strikes under the Obama Administration show no signs of abating. The agency has conducted 11 strikes in Pakistan during the first month of 2010.

By my arithmetic, Team Obama continued the pick-up of the pace that was established in July 2008.  In 2008 there were 34 strikes, mostly in the second half; in 2009, there were 41 strikes through the first ten and a half months.  Those numbers are not starkly different.  The eleven strikes in the first month of 2010 were prompted by the horrific Taliban attack that killed seven CIA people in late December.

But hey!  If praising Obama for his vision and courage is what it takes to get results, let's start singing.

Maybe Later

Henry Waxman cancels his war on accounting.

The Last '42'

The Times fawns over Mariano Rivera and I totally support their effort.

And fair's fair - let's balance that with a typical Mets headline:

In Defeat, the Mets Show Some Encouraging Signs

The Mets are off on another typically encouraging season.

Shadowboxing On Health Care Reform

The a new CBS/NYTimes poll is out that may have been commissioned by Nancy Pelosi and the DNC.

The focus of the poll is on the Tea Party.  However, questions 55-57 plumb public perceptions of health care reform.  Here we go:

55. As long as the federal government provides financial help to those who cannot afford health insurance, do you think the federal government should or should not require all Americans to have health insurance?

('Should' beats 'Should not' by 49-45 among the public a large)

56. Do you think it is a good idea or a bad idea to raise income taxes on households that make more than $250,000 a year in order to help provide health insurance for people who do not already have it?

('Good idea' prevails over 'bad idea' by 54-39)

57. Do you approve or disapprove of requiring health insurance companies to cover anyone who applies for health insurance regardless of whether or not they have an existing medical condition or a prior illness?

('Approve' is a winner by 81-15).

So now we know - just as Pelosi, Reid, Obama, and every Democrat with access to DNC talking points has been saying, parts of the new health bill are popular.

The Times does not risk making news

by including poll questions such as, "On balance, do you support the new bill or favor repeal?".  Nor does it risk vexing Dems with questions such as "When Obama says his health reform bill will reduce budget deficits, do you fall down laughing or just roll your eyes?".

And questions such as "If you work for a company with less than a hundred employees, do you seriously believe you will be able to keep your current coverage?" might be too complicated.

Instead, the Times tells us what we already knew - after laboring for a year, Democrats managed to produce a bill some parts of which have public appeal.  The most direct evidence as to the overall popularity of the package comes in the news that the public disapproves of Obama's handling of healthcare by 41-51 (Question 7).

We look forward to their poll on the popularity of vanilla-frosted dandelions, but I am already confident the vanilla frosting will poll well.

Wave In The Soccer Moms (And Dads!)

I love a mystery as well as the next person, but the American Thinker is leaving me feeling shortchanged.  Cat Corben puzzled over a gap in Obama's schedule when he ditched the press pool, and came back with this:

Obama Attends Non-Existent Soccer Game?

Reading the story about President Obama breaking tradition and ditching the presidential press pool over the weekend to watch one of his daughter's soccer games, it appears harmless, right? Not so. It is rather disturbing when you dissect it.

Let's skip to the dissection:

Seems simple enough. But the story has several problems. The first one is a biggie in that there were no scheduled soccer games for Sidwell Friends April 10, as evidenced here.

Sidwell Friends, the Obama girls school?  Who cares?!?  Schools are not the only venue for soccer, and are not even the most common for pre-high schoolers.  Youth soccer, town soccer, and travel soccer are where it's at.  I can quickly find the Washington Area Girls Soccer League and I am sure there are more.

Let's press on:

The second [problem] is that the area reported that the game was played at appears to be one of high crime, as documented here and here. Additionally, this is a picture of the field via Google Maps, where Obama went to watch the game.

The field is at Fort Reno Park; the Washington Area Girls Soccer League and other leagues play there.

Another problem is that when the press pool got close to the reported location, they were told that Obama was leaving and to turn around. The press pool complied, but why? Wouldn't they have wanted a photo of him, even leaving the event, to formally document his whereabouts? What's also suspect is the very casual, nothing-to-see-here tone of the Time article.

Something is most definitely wrong. The President of the United States venturing out to a soccer game that didn't exist in a high-crime area.

I am far from convinced that no game existed since the site in question does host youth soccer games.

And let me go a bit further - the WAGS have no games scheduled for Sat, April 10 at Fort Reno Park.  However (and I hate to vex the Secret Service with this, but if I can figure it out, so can others), in another rec league I won't name, two Girls Under 12 teams played at 9AM at Fort Reno Park.  (My guess - the schedule will be taken off the web shortly, and don't even ask me for a copy.)

Since Malia Obama turned 11 last July, she might well be playing in an Under 12 league this spring.

OK, fun's fun, but Obama was probably at a soccer game.

A PREEMPTIVE PLEA FOR MERCY:  Please, Secret Service guys - I did you a favor.  Blame the press pool reporting. 

TRUST BUT VERIFY (OR NOT):  I am not going to play Twenty Questions so trust me or Google for yourself - I did find the league and the Girls Under 12 schedule with team names (but not rosters) and all the games for the rest of the spring.  Paparazzi, stalkers and terrorists will have to take it from here.

LEAVE IT TO TWEETER:  Via The Captain, we get this from Tweeter:

@RoseDanna Actually a CBS colleague happened to be at the soccer game on his own & saw the Obamas there.

You Can Keep Your Health Care... Unless You Are In Congress

Legislate in haste, repent in leisure - Congress may have legislated itself out of the Federal health insurance plan and into exchanges that won't be operating until 2014, and I bet they are sick about it:

In a new report, the Congressional Research Service says the law may have significant unintended consequences for the “personal health insurance coverage” of senators, representatives and their staff members.

For example, it says, the law may “remove members of Congress and Congressional staff” from their current coverage, in the Federal Employees Health Benefits Program, before any alternatives are available.

The confusion raises the inevitable question: If they did not know exactly what they were doing to themselves, did lawmakers who wrote and passed the bill fully grasp the details of how it would influence the lives of other Americans?

The AllahPundit is braced for the next Pelosi presser:

Looking forward to tomorrow, when we’re inevitably told that they meant to do that.

He may be right!  Back to the Times:

“It is unclear whether members of Congress and Congressional staff who are currently participating in F.E.H.B.P. may be able to retain this coverage,” the research service said in an 8,100-word memorandum.

And even if current members of Congress can stay in the popular program for federal employees, that option will probably not be available to newly elected lawmakers, the report says.

It's an incumbent protection plan!  All those Evil Republicans who thought they would sweep into power next fall will think twice, now that they know the job comes with no health benefits.

Then again, any newly elected Congressman can certainly make a stronger case for Repeal and Reform, since Reform (or at least a little legislative nip and tuck) looks inevitable.  But maybe Congress will pretend to talk about jobs, jobs, jobs for a day or two before solving their own self-inflicted insurance problem.

BUT WHAT ABOUT THE STAFFERS?  Ahh, well, it seems that new hires will have a problem.  Meanwhile, two clauses of the new law stand in opposition.  From the CRS report, we are reminded that everyone can be grandfathered into their existing plan:

Section 1251(a) states that:

[N]othing in this Act (or an amendment made by this Act) shall be construed to require that an individual terminate coverage under a group health plan or health insurance coverage in which such individual was enrolled on the date of enactment of this Act.

However, the language causing the problem is this:

§ 1312(d)(3)(D)(i), specifically requires that:

the only health plans that the Federal Government may make available to Members of Congress and congressional staff with respect to their service as a Member of Congress or congressional staff shall be health plans that are--
(I) created under this Act (or an amendment made by this Act); or (II) offered through an Exchange established under this Act (or an amendment made by this Act).

For new Congressman and staffers to whom this applies, the result is clear, at least after 2014.  For incumbents, it is not clear what Congressional intent was, how a court might resolve this, or who would proceed with a suit.

Business as usual.

Everybody's Getting Into the Animal Act

Our Quote du Jour comes from Michael Caputo, the campaign manager of an embattled Tea Party /Republican candidate for NY Governor:

Caputo accused Democrats of wanting to change the subject from substantive issues to "having sex with horses."

I don't want to know.  But at least we haven't let California outpace us with their wild Senate race.