A Kansan’s Elegy for George Tiller

Dr. George Tiller, the well-known Kansas doctor, was shot to death today at his church in Wichita.  Tiller has been a fixture in Kansas my whole life.  I was in grade school during the Operation Rescue’s “Summer of Mercy,” 1991, when Randall Terry led daily protests and blockades outside of Tiller’s Women’s Health clinic in Wichita.  Wichita was an hour from where I grew up and our main source of nightly news, which meant that my mother spent several evenings that summer trying to explain to preteen girls what this whole mess was about.

So Tiller’s story and his work have shaped my own opinions, my own decisions, about where to stand in the abortion debate.  Tiller could have operated with more safety in many other locations, but he chose, instead, to stay in Wichita, to offer health services — yes, including late-term abortions — to the women of south central Kansas and Oklahoma, women who already see their options for care reduced by distance and time.  George Tiller kept going to work after he was shot in 1993; he kept going to work after his clinic was bombed; he kept going to work after numerous threats, after vandalism earlier this month, after protests.  He kept going to work, and I have to believe that’s because he felt it was his duty to help women get the best care possible, and to help us — no, to allow us to make some of the most difficult decisions we face.

As a Kansan, my sadness is both for Tiller’s family and for my state, which finds itself not just deprived of a necessary physician but also thrust back into the culture-war spotlight.  We deserve to be there, perhaps — Kansas is a crossroads for religious conservatives and old-school progressives — but what a terrible way to reignite the conversation.  Tiller kept going to work — and I hope his death ends up as meaningful as his life.  I hope this starts an honest, national discussion of the dangers that Tiller faced, and that the women who trudged through the protesting crowds just to receive care faced.

But what terrible means to achieve this end.

Could a Blog have Saved Edmund Andrews from Foreclosure?

About two weeks ago, the New York Times ran an excerpt from Edmund Andrews’s forthcoming book, Busted: Life Inside the Great Mortgage Meltdown.  I wasn’t alone in saying it would be the weekend’s must-read; Andrews’s tale of how he, a successful business writer for the Times, and his new wife were facing foreclosure makes for a fascinating read.  It’s a very personal story:

^{Image by: Respres (Flickr)}

The panic attack hit me around 2 a.m. on Patty’s birthday. It was Oct. 17, 2007, and I was lying in bed obsessing over bills that couldn’t be postponed and the money we didn’t have to pay them. Like many of my predawn fear cascades, this one had its start with a specific unpaid bill: $240 in traffic tickets — $140 for speeding, $50 each for expired tags and inspection. The fines would double if we didn’t pay them in less than a week. The tickets had uncorked the bottle on all the other “must pays”: the $400 electric bill with the cutoff date printed in red; the $220 cable/telephone/Internet bill for the past two months; the MasterCard and American Express bills — at least one of which had to be brought current or I wouldn’t even be able to travel for work. And of course, there was the $3,271 mortgage payment.

After its publication, Megan McArdle at The Atlantic found that Andrews neglected to mention in his piece or his book that his new wife filed for bankruptcy just after they first married — and had also filed once before, during her first marriage, making her not exactly the kind of good-credit help-mate that one might think she is from Andrews’s descriptions.  McArdle:

Andrews’ desire to shield his wife is understandable–hell, laudable.  No decent person wants to parade their spouse’s financial trouble in front of the world.  But this is material information that changes the tenor of his story.  Serial bankruptcy is not a creation of the current credit crisis, and it doesn’t just happen to anyone, particularly anyone with a six figure salary.

While I agree with her conclusions, I also agree with Andrews’s response that it’s not terribly material to the story he was trying to tell, about the ease with which he — clearly unqualified — got massive loans and credit he couldn’t afford.

But what I find even more interesting was a piece McArdle wrote that same morning, about Credit Reports and whether black marks “have staying power.”  She writes:

On the other hand, I can attest from personal experience that those smudges have staying power.  Through a series of bizarre events including a misfiled state tax return, multi-state residence, and an apparently incorrect address, the state of New York slapped me with a tax lien a few years back.  The State of New York has since admitted they were entirely in error, and indeed, that they owed me about $500 in refund.

(Not that they paid.   Funnily enough, the statute of limitations for getting a refund from the state is much shorter than their statute of limitations for coming after arrears.)

Megan McArdle is the Business and Economics Editor for The Atlantic, as well as one of its leading business bloggers.  Just in replying to the day’s news, above, she brought in her own personal experience — instant connect between what’s happened to her and what’s happening in the world.

Edmund Andrews, as an economics reporter for the NYT, says, “I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years.”  Yet Andrews was able to disconnect himself so completely from what he was writing about that he fell into a terrible trap despite being so well informed.

If in 2004, Edmund Andrews had been blogging for DealBook at the Times in addition to supplying objective reports on the “spike in go-go mortgages,” maybe he would have been forced to realize what was coming for him.  Maybe one day he would have posted, “My wife and I are thinking about buying a $500,000 house –” and would have had to stop right there, hit in print by the impossibility of that ever working out.  And, I guarantee, if just writing it wasn’t enough to shake him into reality, the fiery comments that would have followed would have offered at least 75 persuasive descriptions of what he could do with that idea.

This thing we do, blogging — it’s in first person for a reason.  To do it well requires an amount of honesty that often leads to self-awareness, whether through realization or through readers forcing it upon you.

I’m continually bothered by the way that we cheer for distance between reporters and what they report on.  I understand the desire for objectivity, but not the belief that it’s possible.

Were I To Be Nominated

Were I to be nominated to the Supreme Court, I think I’d like everyone to know I, too, used to read a lot of Nancy Drew books.  The new case files, not the old set, but only because they were cheaper and more readily available.  These were the days before Amazon.  Don’t judge me too harshly.

Were I to be nominated to the Supreme Court, I’d like everyone to know that the last album I bought was Green Day’s “21st Century Breakdown,” and that I listened to it all the way through twice.  I’d also like them to know I do this with nearly every album I buy, because I respect the order that the artist chooses for their songs.  It might be important to note that, while I do buy the occasional single, I am mostly an album collector, whether through iTunes purchase or through gifts/trades from friends.  Into this you may read either an abiding regard for, or a blatant disrespect of, intellectual property rights at your will.

Were I to be nominated to the Supreme Court, I hope no one would hold it against me that I use both a P.C. and a Mac.  I understand that this kind of open-minded technological embrace could be seen by some as signaling a flippy-floppy, go-with-the-flow nature that would make me a danger on the Court, likely to be swayed by whichever side had the shiniest apps.  In reality, though, I think it speaks to my ability to see both sides of an argument.  (And if forced to choose sides: Apple.  See?  I’m decisive).

Were I to be nominated to the Supreme Court, I worry I would have to buy more suitable clothing, and possibly hire a stylist.  Since people are already comparing Sonia Sotomayor to Susan Boyle, I can’t imagine any flattering comparisons in my own future.  I can’t sing, for one.  And I think there may be salsa on my shirt right now.  Does this disqualify me from the bench?

Were I to be nominated to the Supreme Court, I wonder if those columns I wrote for the college newspaper would come back to haunt me.  I suppose they would, despite often being composed during almost out-of-body experiences brought on by massive doses of caffeine, grease, fluorescent lighting, questionable (but loud, god, so loud) music, second-hand smoke, and long stretches without sleep.  I’m not saying I don’t take responsibility, but I’d like to see the people at Pepsi on the hook a bit, too.  But maybe the context isn’t important, and it should be assumed that the way I thought ten years ago is the way I think now.

Were I to be nominated to the Supreme Court, I hope I’d have enough notice to send out some very belated thank-you notes to everyone who attended my Kindergarten birthday party.  It was at McDonald’s and we had cake with whipped-cream icing, and I was so focused upon that cake and upon the various burdens of being six years old, I may have seemed distracted, or uptight, or even difficult.  I would hate to have anyone approach a reporter now and offer stories of my ungracious behavior, particularly knowing that filtering these things with something like research is not always how the journalism world works.

Were I to be nominated to the Supreme Court, I’d like to ask in advance that my name be spelled out for Mike Huckabee.  I know he’s busy, and it’s a hard name to remember, and through the telescope in his backyard maybe many planets seem to be of similar shape or something.  So if we could get someone to send him a little memo, that might make things easier.

Were I to be nominated to the Supreme Court, I believe I could learn to live with the disappointment I’d cause Rush Limbaugh.

But I doubt I’ll ever know, since this present pick seems to be going OK.

VP vs. VP: Speak Up, Dick Cheney

^{By Simone.Brunozzi, via Flickr/CC license}

I love Al Gore.  I’ve spoken of this before.  I am almost irrationally attached to the man, and his 2000 loss was as crushing to me as… some great, crushing thing, like an anvil — no, like 50 anvils falling on your dreams of justice in the world, if you’d decided to store those dreams in a hollowed-out egg. 

But he’s currently making an argument, and being used as the basis for an argument, that I disagree with: he’s saying Dick Cheney should lay off because he laid off the Bush administration from 2000-2002. 

Wait wait wait.

First, to make that argument, you have to believe that it was valuable for Gore to lay off Bush for those first two years.  These were terrible years.  The election left the country divided (and half of us very, very hopeless).  Then came 9/11, which left us scared and hopeless, and vulnerable not just to external threats, but internal threats under the guise of protection.  The Patriot Act passed — and it took Gore three years to call for its repeal.

But throughout 2002, the Bush administration was planning — sometimes quite publicly — a war with Iraq.  And Gore was silent.  He was silent until September 23, 2002 — well after war planning had gone public.  (I assume that someone with Gore’s government contacts would or could have known more about the planning earlier than nearly anyone in the press).  Everyone hid behind a “we support the Commander in Chief” banner, probably partly from fear that to do differently would hand the GOP the chance to question their patriotism.  When Gore did speak out, his speech was factually quite fiery — but also of the typical, tepid Gore-ese, a dork-wonk’s paradise, but not the kind of rhetoric that was going to overcome the “you’re either with us or against us” line popular at the time.

 Six weeks later, the GOP took control of both parties of Congress.

How were we served by Al Gore’s silence?  Poorly.

So, then, let’s make the opposite argument.  I read Dick Cheney’s speech today [.pdf], and predictably, I disagreed with almost every word of it.  I would love to never hear anything from Dick Cheney again.  I’d love to see him retire peacefully to Wyoming, or Texas, or anywhere he wants, to fly fish and write scary letters to his grandchildren.  In fact, I’d be happy not to hear from him again until the day he’s called to testify before the Leahy Truth Commission.

But if he wants to talk — if he feels it’s necessary to talk, and to talk over the current president — then I think he should go for it.  I don’t think it’s particularly damaging to President Obama’s efforts for Dick Cheney to make the talk show rounds or speak at friendly think-tanks.  Obama has a much bigger platform to speak from — and, hey, he has a Vice President of his own that he could send out to meet Cheney on these shows.

What I really don’t understand is why the Obama administration isn’t using these opportunities to openly debate Cheney’s positions.  Send Joe Biden — or better yet, Hillary Clinton — to every think tank and talk show and radio station and newspaper reporter to whom Dick Cheney speaks with.  Make a standing offer that the administration will gladly answer any charges Cheney makes.  This guy is wrong, but ignoring him doesn’t prove that.  Wishing he would go away — or suggesting that he has a duty to do so — doesn’t prove it, either.  And since the media is clearly still willing to give him attention — the Washington Post, for instance, is letting him share the front page with President Obama at the moment — it seems like it’s time for the administration to step up and answer.

If Gore had made a similar tour in 2002, if he’d aired his complaints on TV, if he’d shown just how wrong the administration’s stances were on any number of issues, if he’d insisted he be heard… would we be where we are today?  If we’d had an open debate on whether the Iraq invasion was a good idea instead of long, obvious silence from the only party leader Democrats really had — what would America look like today?

Maybe it would be the same.  But maybe things would be better.  And if the Obama administation believes in what they’re doing, that they’re making the world safer, that they’re trying the right things, then they should welcome Dick Cheney’s criticism, because it can only make us stronger, as a country and a party.

Car Efficiency Standards: Who Are We Trying to Help?

President Obama proposed nationwide emissions and fuel standards for cars today, a move that’s been long anticipated and has been greeted pretty warmly around the blogosphere.  Warmly enough that I assume the facts of the case are known — so let’s move on to the weird bits.  What’s interesting is the way the story is being framed.  Take Politico’s opening paragraph:

President Barack Obama will announce plans on Tuesday for a national fuel-economy and greenhouse-gas standard for automobiles in an effort to give more certainty to car companies as they struggle for survival.

So… this is something we’re doing to help out the auto industry?  Yes, they’ve responded so well to rules in the past.

The New York Times has a different take:

WASHINGTON — Why, after decades of battling, complaining and maneuvering over fuel economy standards, did carmakers fall in line behind the tough new nationwide mileage standard President Obama announced on Tuesday?

Because they had no choice. The auto industry is flat on its back, with Chrysler in bankruptcy, General Motors close to it, and both companies taking billions of dollars in federal money. Foreign automakers are getting help from their own governments. Climate change legislation is barreling down the track, and Congress showed last fall that it had no appetite to side with Detroit any more.

So it’s not an effort to help — it’s an instance of “we did it because we could.”  But why?

Ask The Washington Post, which had an A-1 story starting thus:

The Obama administration today plans to propose tough standards for tailpipe emissions from new automobiles, establishing the first nationwide regulation for greenhouse gases.

Oh, so it’s about the environment!  Now I understand.

Everything with the auto industry is like this at the moment.  When we talk about G.M. facing bankruptcy, we’re not just talking about a business going under, but about a possible bank failure.  When we talk about how to reduce carbon emissions, we’re talking about a future disaster for the auto industry.  And when the government is at the same time proposing stricter standards that will increase the price of an automobile by an average of $600 while simultaneously offering people $4,500 bonuses to buy current models — we run into a problem.

I expect government to contradict itself; it contains too many multitudes not to.  But the ground we’re currently treading with car-makers is getting increasingly tricky, and will only get worse if the government gets its majority stake in G.M. (and GMAC).  So it’s important to see how the White House itself is framing the issue, because we need to know, at the end of the day, who, exactly, we’re trying to help.  So, here’s the way the White House blog shapes the story:

This week the makings of a change in the culture of Washington will be on display, and as the President’s words above indicate there could be no better example than today’s announcement of a breakthrough on fuel economy and greenhouse gas emissions standards. Whereas these issues seemed destined to be the subject of eternal political clashing just last year, today the President was joined on stage by the Presidents, CEOs, or other top executives from Ford, Toyota, General Motors, Honda, Chrysler, BMW AG, Nissan, Mercedez-Benz, Mazda, Volkswagon, and the United Auto Workers to announce a new consensus. 

In the course of his remarks, the President made clear that ending America’s dependence on fossil fuels will be one of the greatest challenges the country has faced, and that this is only one of steps already being taken to address it. However, he also made clear that this was a historic day.

Indeed.

Better Angel or Bushian Demon? Is Obama Another Bush?

I’ve left the detainee abuse photo scandal alone this week, because my basic rule of blogging has been if you don’t have anything new to say, don’t say anything at all.  I’ve now reached a limit, though, of how many posts I can read that are taking this presidential decision as a sign of the coming Obamapocalypse, where, apparently, the Better Angels that Obama appealed to in his speech in Chicago have, instead, turned to hidden conservative Demons, bent on hiding information from the public, concealing torture, supporting evil regimes, and generally being as Bushian as possible.

To everyone making that argument, I say: Knock it off.

At least ten times in the past week I’ve read declarations by liberal bloggers about how they’ve lost faith in the president, how they’ve been deeply disappointed, how they’re disillusioned by his conduct, because he’s turned out to be just like his predecessor.

Seriously?  It’s taken fewer than 120 days to forget how bad things were?  Is the GOP that slick?

Let me remind you:

Barack Obama is nothing like George W. Bush.  Nothing.  Argue this any way you want, but his 120 days so far have so widely diverged from what we’ve seen in the last eight years that it’s almost a new country.  Take the photo scandal: We have a president who, having seen these photos, says releasing them into the world would only enflame anti-American sentiment.  That, my friends, is a debatable point — but what it isn’t is an endorsement of what’s in the photos.  Instead, it’s an admission that what’s in the photos is terrible, horrible stuff — not just embarassing stuff, as seemed to be the position at times of the last administration, but stuff that would make other people want to kill Americans.

That’s a leap forward from the previous president’s position that everything we did in Iraq and Afghanistan made America safer.  Bush left office still smiling, still saying that Operation Iraqi Freedom had helped not just Iraq but America and the entire world to become a safer place.  Our new president — the guy some would like to brand “Bush-lite” — has a pretty firm grasp on how unsafe things are for Americans in the world.  He understands there’s a balance to be struck.  He seems to also understand, if the switch of military personnel in Afghanistan this week is any sign, that our two on-going wars may not be winnable in conventional terms.

Think back to those shocking days in 2004 when the photos from Abu Ghraib were first released.  Think back to the administration’s reaction.  Donald Rumsfeld eventually testified before Congress that he took “full responsibility” for the events at that prison… and then continued to serve in the same job for another two years, during which he was frequently congratulated and celebrated by the president for the good job he was doing.

This president asked for the resignation of a guy who missed an e-mail about a plane making a photo-shoot pass by the Statue of Liberty.

We have an administration that is committed to greater accountability.  We have a president who comes out and explains his decisions, who takes responsibility, who seems focused on not just results but on the nuances of world diplomatic opinion.

Every time someone starts down the “just like Bush” path, it minimizes the tangible harm that Bush and his administration did to our country, by suggesting that the differences of opinion we have over how Obama is treating the clean-up are of similar magnitude to the differences of opinion we had over the things George W. Bush decided were OK: invasion of other countries without cause; abuse of the environment; rampant restriction on personal liberty; and an almost isolationist stance with friends and enemies alike that reduced America’s influence diplomatically worldwide.

Barack Obama is nothing like George W. Bush, except that he must now deal with issues that George W. Bush left behind.  The left is likely to disagree with his tactics for dealing with these things, but to say that the clean-up crew is in any way as responsible or reprehensible as the parties who made the mess in the first place is despicable and damaging.  Is it the maid’s fault that you didn’t make your bed?

I’m not saying Obama is above criticism.  I think many of his early moves have been questionable, particularly in the area of civil liberties.  But I’m tired of seeing the debate continue without context.  You can’t say, like the New York Times did, that Obama is acting like George W. Bush if you’re accurately remembering Bush’s positions at all.  When the Bush administration pushed to limit civil liberties, they did it to protect themselves; so far, the arguments that the Obama administration has made in court and in public have seemed more focused on actual points of security.

Criticism of the president is welcome.  But comparison to Bush, though tempting, is so far undeserved.

G.M., Chrysler Announce Thousands of Dealership Cuts

It hasn’t been a good year for car dealerships.  Gas prices skyrocketed, meaning more people were eyeing the bus and the bike; the economy downshifted, meaning more people were eyeing the electrical tape than the new-car circulars; and now two of the Big Three U.S. automakers have announced plans to cut a combined 3,158 dealerships in the next year or so.

G.M. made its announcement today.  The company plans to cut its network of dealerships by 2,369 (40 percent) by 2010.  These cuts will come from cutting off 1,100 dealerships that underperform, closing 500 dealerships that only sell the Pontiac, Saab, Hummer, and Saturn lines that G.M. is looking to get rid of, and by combining other franchises.  Right now, G.M. says this will happen in late 2010, when contracts expire, but if it files for bankruptcy, the closures might move up significantly — say, to this fall.  They haven’t yet announced which dealerships will close, but have said they’re focusing on underperformers, a logical way to make cuts.

Chrysler made its announcement yesterday, complete with a list of who’s going to close, where.  They’ve asked the court to cut off these contracts on June 9.  You can download the full bankruptcy filing [huge .pdf] and search for your home state, if you’re curious (I was). 

What you might find is that some dealerships aren’t closing outright — they’re just losing the Chrysler side of their business, as the Jeep-Volvo-Volkswagon dealer near me will be.  That’s still a big hit in product supply, of course, but the reports that say unambiguously that 3,000 dealerships are going out of business seem to miss the nuance: 3,000 dealerships will lose supply of brand-new G.M. and Chrysler vehicles, but the industry is so cross-pollinated now that it doesn’t automatically mean 3,000 dealerships will fold.  It will be a huge loss for these businesses, which will also (presumably) lose financing arrangements through GMAC, but it’s not the end of the road for every one.

Yet G.M. in particular seems to be ready to cut off its smallest dealerships, those that sell only a few dozen cars a year and are probably likely to be heavily tied to one brand.  While that makes perfect business sense, I wonder if won’t also contribute to the declining economy in the middle of the country, where, like the slogan says at one my old hometown car-dealerships, “a handshake is still a deal.”  Small dealerships are everywhere in the Midwest, and while they do a fair trade in used cars, there’s still a culture of The Car Dealer, the small town salesman who can talk you into a new Cadillac when you came in for a tire rotation, that seems sure to die.

Should Treasury Bail Out Califonia?

This may come as quite the shocker, but California has bigger problems right now than its wayward Miss USA contestant.  The treasurer of the State of California has asked U.S. Treasury Secretary Tim Geithner to use TARP to guarantee the state’s debts.

California faces a budget shortfall of $13 billion next year.  There’s a state constitutional amendment that says California must always balance its budget, and the state got into a DEFCON-1 fight this year because no one will raise taxes.  Bill Lockyer, the California Treasurer, predicted that the state will be out of money by July, and will have to “delay” paying what’s owed to “school districts, counties, social service providers, vendors,” and other State-dependent agencies.  Lockyer predicts this will force some school districts into bankruptcy.  So, like any financially struggling institution that is too big to fail, they have turned to the federal government.

Lockyer’s request is particularly clever, almost Citibank-like.  He proposes the following: California needs to borrow in order to make up for the shortfall.  It wants to borrow by issuing Tax and Revenue Anticipation Notes (TRANS), which are what they sound like: they sell $X billion in these notes, saying, hey, look, we’re anticipting tax revenue down the road, and we’ll pay you back when this hits.  So investors (banks) buy the notes, expecting that they’ll get paid back what they put in plus interest.  But, as with any investment, there’s a risk involved.  If California defaults, then the banks that they issue the bonds through are left holding the $X billion bag.  They would still be required to pay the bonds off — California isn’t going to file for bankruptcy protection, after all — but no bank wants to take the chance that it will be left holding a multi-billion dollar outstanding debt.  California’s credit rating is the lowest of all 50 states.

So Lockyer has asked Treasury to guarantee California’s borrowing.  If California defaults, he wants Treasury to say, we will step in and buy their debt from you, the banks.  This way, the banks feel confident that they’re going to get paid no matter what, and California will be able to borrow more easily because Treasury has just made them a sure-fire investment.

If this sounds familiar, it’s because it is very, very close to what the intention of the TARP is: Treasury guarantees bad assets, so that banks are more willing to loan money.  Lockyer — and California — are right to say that this is the point of TARP.

Lockyer also argues — again, correctly — that the overall goal of TARP and all its acronymish brethren is to improve financial security and stability in the market overall.  A default by California, or even a major stall in its payments to state agencies, wouldn’t exactly help the nation’s economy.  Please imagine the unequaled BAD of schools staying closed, fire stations shutting down during fire season, mental health centers shuttering, and everyone who works in those places sitting at home, not spending any money.

Now, I’d expect yelling from the right about this.  The governors who have declined (or tried to decline) stimulus spending have all done so standing on the soap box of States’ Rights, which would seem to imply that they believe each state should have to stand on its own.  If California should default, here, then residents of faraway states would end up paying for their debt, at least immediately.  California would still eventually have to pay the government back, but the big outlay necessary to pay off its bank debts would be more money coming out of Treasury and less money that could go toward… well, toward the original goal of the TARP, shoring up banks.

Yet this seems to me a better way to spend that money, or at least a more urgent need.  If California, which is something like the world’s sixth largest economy, has to undertake IMF-levels of austerity in its budget, the impact on the national economy would be dramatic.  This wouldn’t be wilting green shoots: this would be like setting the green shoots on fire and then putting them out by pouring concrete on top.  Hate on Cali all you want, but as it goes, so goes 13 percent of national GDP.

I suddenly feel a need to buy an avocado.  Short of a similar massive national sentiment, the TARP bailout sounds reasonable.  I hope Geithner writes a positive reply to the letter — and soon.

Whirling Derivative Dervishes: Treasury Takes on the CDS Market

Also in the news yesterday (underneath the photo-release reversal madness, which I think Glenn Greenwald has pretty much covered) was the Obama administration’s proposal to press for regulation of Credit Derivatives [emphasis added]:

The administration asked Congress to move quickly on legislation that would allow federal oversight of many kinds of exotic instruments, including credit-default swaps, the insurance contracts that caused the near-collapse of the American International Group.

The Treasury secretary, Timothy F. Geithner, said the measure should require swaps and other types of derivatives to be traded on exchanges or clearinghouses and backed by capital reserves, much like the capital cushions that banks must set aside in case a borrower defaults on a loan. Taken together, the rules would probably make it more expensive for issuers, dealers and buyers alike to participate in the derivatives markets.

The proposal will probably force many types of derivatives into the open, reducing the role of the so-called shadow banking system that has arisen around them. 

I know, not nearly as sexy as the legal intricacies of a fight against FOIA, but still important.  (Believe me, I tried for at least five minutes to think of a way to attach Paris Hilton’s picture to this, too, but I’ve got nothing).  This is a dry topic, and if I didn’t know Americans so well, I’d say the boring tedium of it all was one of the reasons no one took this up a couple of years ago when it might have actually made a difference.  Oh, wait, it turns out I do know Americans that well.  Anyway, now that the financial world is falling apart, suddenly everyone’s concerned about the “shadow banking industry,” so we might see some real change, since voluntary national alcoholism doesn’t seem like a passable strategy to get through the days.  Like Andrew Leonard says, it is a bit like “closing the barn door after the derivatives escaped,” but there are still plenty of derivatives in the barn that could use some supervision.

It turns out, though, there was somebody pushing for this exact strategy five years ago.  Wait, did you say five years ago?  I did, self, I did.  Who was this forward-thinker?

Waaait a second.  Where’s his Darth Vader mask?

In 2004, Tim Geithner gave a speech¹ on “Hedge Funds and Their Implications for the Financial System,” in which he discussed, briefly, the need for credit derivatives to be traded more openly, and with some system of regulation.  Later that year, he convened the heads of the banks and got them to volunteer to update their tracking systems and get things onto a standardized computer system, instead of everyone running their own haphazard (think: sticky notes) show.  But the actual regulation of derivatives never went any further than that, whether because Geithner lacked the power, the resources, the guts, the inclination, the kickback, the conspiracy, or the political savvy or support (please remember who was running Treasury back then) to see that it did.

So, unlike PPIP and TARP and TALF and WTF (yes I made that last one up), this is a plan that someone’s thought about for more than a week or two.  Consider this Revenge of the Government Servants.  The plan for regulating derivatives is… well, I won’t risk putting you to sleep, but it’s been in the works for a while — we heard shades of it mentioned during Geithner’s earlier Congressional testimony — and it would consist, essentially, in rolling back big slices of the Commodities Modernization Act of 2000, which was adopted under the Clinton administration and, oh yeah, as both Andrew Leonard and the New York Times point out, with the full approval of one Larry Summers.

^{“Stop trying to help, Larry! Seriously!”}

It would push for most “derivative instruments” to be traded openly, so that investors and regulators could actually get a look at the ways companies hedge themselves against risk.  And it would also require certain capital reserves to be on hand before banks could trade these things — so an insolvent, constantly-borrowing-to-survive guy like Bear Stearns would have some trouble here. 

Openness?  What?  Accountability?  On Wall Street?  Surely you jest.

Well, a little bit, I do, because one of the agencies likely to be charged with overisght responsibilities is the Securities and Exchange Commission.  If you haven’t read TPM’s overview of the scathing GAO report on the SEC, well, that’s ten minutes of appalled laughter and stomach-sinking dread that you really owe yourself.  The SEC is pretty much a dead agency.  Giving it new things to do will only help if the President and Congress have plans to staff it up — and they’d better not be sending Summers over there.  SEC restructuring or, honestly, replacement is the biggest missing piece in this plan.

But overall, this is good news.  Yes, it comes too late, and yes, it’s probably not a perfect plan, but it’s complex with some pleasantly optimistic overtones and just a hint of bitter, bitter regulatory nuttyness.  Vintage government-label work, here.  I’ll drink to it.

^{1 Should you ever have trouble sleeping, I really, truly recommend perusal of the New York Fed’s speech archive, btw.  Skip the lively speeches by the other guys — Dudley’s “May You Live in Interesting Times” is just no match for the somnia-inducing Geithner tome, “The Economic Dynamics of Global Integ...”  Wha?  What?  Oh, sorry, nodded off.}

Jindal Wins: LA Loses Stimulus Funds

Governor Bobby Jindal’s rejection of $98 million in stimulus funding allocated to expand unemployment benefits in Louisiana will, apparently, stand, as a Louisiana House committee voted 6-3 today against a resolution to override Jindal’s wishes.

The House Labor Committee voted 6-3 against House Concurrent Resolution 8 by Democratic Rep. Rickey Hardy that would have been the first step in sidestepping the Republican governor’s decision. Committee Chairman Avon Honey, a Democrat, sided with opponents of the measure.

Hardy, D-Lafayette, said unemployed workers need the expanded benefits to help them take care of their families and cope with the national recession.

“Surely we can agree that we would like to see our citizens benefit from the money being offered by the federal government… It’s their money and they want it now,” he said.

The stimulus money would give unemployment benefits to thousands of people who normally wouldn’t be eligible for them, like certain part-time workers and people who leave jobs because of domestic abuse or a family member’s disability, and it would expand benefits to some others, including those with dependents.

Jindal opposed Louisiana getting the money because “it does come with strings attached,” according to his spokesman, namely that the increase in benefit allowance could increase businesses’ unemployment tax levels down the road.

Louisiana’s unemployment rate was 5.8 percent in March.  That’s not one of the highest rates in the country — it’s in fact half of what unemployment is in Oregon — but what that number hides is that government spending is a big part of the reason (h/t publius) that Louisiana’s unemployment rate has been steady to begin with:

NEW ORLEANS — Years before Washington spent $787 billion on a national stimulus bill, it staged an unintended trial run in Louisiana, a huge injection of some $51 billion for which historians find few, if any, precedents in a single state.

The experiment is still playing out, but some indicators suggest that what occurred in Louisiana — dumping a large amount of reconstruction money into a confined space in the three and a half years since Hurricane Katrina — has had a positive outcome. The state’s unemployment rate of 5.7 percent in February was considerably below the national average of 8.1 percent, and it was the only state to see a drop in unemployment from December to January. It was also the only state with an increase in non-farm employment in February.

So Jindal and state lawmakers can rest easily, almost happily, on that cushion of federal aid that’s keeping their unemployment low when they refuse to expand benefits.  In so doing, Jindal can throw down an impressive political gauntlet for whomever chooses to challenge him in 2012.  Look forward to a lot of, “Louisiana kept its unemployment low without taking needless monies from the government” ads.  (And then, let’s hope, look forward to rebuttals about the $1 billion he’s planning to add to the state’s budget this year thanks to that same stimulus).