Friday, April 30, 2010

A National ID Card?

Ezra on the viability of a national ID card as a component of immigration reform.
But it's still a biometric national ID card. It's handed out by the Social Security Administration and employers are required to check it when hiring new employees. Essentially, if you want to participate in the American economy, you need this card. "Within five (5) years of the date of enactment, the fraud-proof social security card will serve as the sole acceptable document to be produced by an employee to an employer for employment verification purposes," the bill says. "This requirement will exist even if the employer does not yet possess the capability to electronically verify the employee by scanning the card through a card reader."

The theory here is simple: Illegal immigration is a problem because illegal immigrants can get jobs. As the bill says, "in order to prevent future waves of illegal immigration, this proposal recognizes that no matter what we do on the border, our ports of entry, and in the interior, we will not be completely effective unless we can prevent the hiring, recruitment, or referral of unauthorized aliens in America’s workplaces. Jobs are what draw illegal immigrants to the United States."

That's why some think the biometric ID card a game changer for immigration politics. Enforcement might be popular, but the public knows full well that it doesn't really work. As things stand, the border is pretty militarized but the flow of illegal immigrants hasn't stopped. By focusing on the employment prospects of illegal immigrants and forcing workplaces to use biometric identification, Democrats hope to convince people that they have a real strategy for ending the problem of illegal immigration. And if they can convince people of that, they think they can get a path to legalization for the existing community of illegal immigrants as a way to mop up the remainder of the problem.

The oddity of this strategy, of course, is that anti-immigration sentiments run highest among the same communities that are most opposed to national ID cards. Now, it's also the case that if you're going to support citizenship searches for people with Hispanic-looking shoes, it's a bit odd to worry about an ID card to verify employment. But even so, without Republicans on the bill to give this strategy cover, it'll be interesting to see whether the anti-immigrant right embraces the ID card as a way of staunching the flow of illegal immigrants or assails Democrats for trying to create a biometric police state.

Monday, April 26, 2010

The Case Against Goldman Sachs

Barry Ritholtz (who is a lawyer, as well as a financial advisor and blogger), lists 10 points supporting the case against Goldman Sachs.
1. This is a Weak Case:  Actually, no — its a very strong case. Based upon what is in the SEC complaint, parts of the case are a slam dunk. The claim Paulson & Co. were long $200 million dollars when they were actually short is a material misrepresentation — that’s Rule 10b-5, and its a no brainer. The rest is gravy.
2. Robert Khuzami is a bad ass, no-nonsense, thorough, award winning Prosecutor:  This guy is the real deal — he busted terrorist rings, broke up the mob, took down security frauds. He is now the director of SEC enforcement. He is fearless, and was awarded the Attorney General’s Exceptional Service Award (1996), for “extraordinary courage and voluntary risk of life in performing an act resulting in direct benefits to the Department of Justice or the nation.”
When you prosecute mass murderers who use guns and bombs and threaten your life, and you kick their asses anyway, you ain’t afraid of a group of billionaire bankers and their spreadsheets. He is the shit. My advice to anyone on Wall Street in his crosshairs: If you are indicted in a case by Khuzami, do yourself a big favor: Settle.

3. Goldman lost $90 million dollars, hence, they are innocent:  This is a civil, not a criminal case. Hence, any mens rea — guilty mind — does not matter. Did they or did they not violate the letter of the law? That is all that matters, regardless of what they were thinking — or their P&L.

4. ACA is a victim in this case: Not exactly, they were an active participant in ratings gaming. Look at the back and forth between Paulson’s selection and ACAs management. 55 items in the synthetic CDO were added and removed. Why?
What ACA was doing was gaming the ratings agencies for their investment grade, Triple AAA ratings approval. Their expertise (if you can call it that) was knowing exactly how much junk they could include in the CDO to raise yield, yet still get investment grade from Moody’s or S&P. They are hardly an innocent party in this.

5. This was only one incident: The Market sure as hell doesn’t think so — it whacked 15% off of Goldman’s Market cap. The aggressive SEC posture, the huge reaction from Goldie, and the short term market verdict all suggest there is more coming.
If it were only this one case, and there was nothing else worrisome behind it, GS would have written a check and quietly settled this. Their reaction (some say over-reaction) belies that theory. I suspect this is a tip of the iceberg, with lots more problematic synthetics behind it.
And not just at GS. I suspect the kids over at Deutsche bank, Merrill and Morgan are working furiously to review their various CDOs deals.

6. The Timing of this case is suspect. More coincidental, really. The Wells notice (notification from the SEC they intend to recommend enforcement) was over 8 months ago. The White House is not involved in the timing of the suit itself, it is a lower level staff decision.

7. This is a Complex Case:  Again, no. Parts of it are a little more sophisticated than others, but this is a simple case of fraud/misrepresentation. The most difficult part of this case is likely to turn on what is a “material omission.” Paulson’s role in selecting mortgages may or may not be material — that is an issue of fact for a jury to determine.  But complex? Not even close.

8. The case looks thin: What we see in the complaint is the bare minimum the prosecutor has to reveal to make their case. What you don’t see are all the emails, depositions, interrogations, phone taps, etc. that the prosecutors know about and GS does not. During the litigation discovery process, this material slowly gets turned over (some is held back if there are other pending investigations into GS).
Going back to who the prosecutor in this case is: His legal reputation is he is very thorough, very precise, meticulous litigator. If he decided to recommend bringing a case against the biggest baddest investment house on Wall Street bank, I assure you he has a major arsenal of additional evidence you don’t know about. Yet.
Typically, at a certain point the lawyers will tell their client that the evidence is overwhelming and advise settling. That is around 6-12 months after the suit has begun.

9. This case is Political: I keep hearing that phrase, due to the SEC party vote. It is incorrect. What that means is the case is not political, it means it has been politicized as a defense tactic. There is a huge difference between the two.

10. I’m not a lawyer, but . . . Then you should not be ignorantly commenting on securities litigation. Why don’t you pour yourself a tall glass of STF up and go sit quietly in the corner.

Sunday, April 25, 2010

Tea for Dupes?

Jonathan Chait looks at the fundamental duplicity behind the Tea Party movement.
Jonah Goldberg says the Tea Party movement is, in part, "a delayed Bush backlash." George W. Bush, the argument goes, was a squish who betrayed the conservative philosophy. But since the right had nowhere to go, the current backlash against deficits and the financial bailout is a time-released backlash against his policies, because "Conservatives don’t want to be fooled again."

But they are being fooled again. Indeed, the Tea Party movement is a vehicle of the fooling. The conservative movement is organized around the principle of opposition to progressive taxation. Tax cuts -- the more regressive the better -- take priority over everything else. That was also the organizing priority of the Bush administration -- which, unsurprisingly, enjoyed overwhelming support from conservative elites and conservative voters in both 2000 and 2004.

Now, one problem with the conservative movement's monomaniacal opposition to progressive taxation is that it's a poor way to shrink government spending. People don't favor tax cuts for the rich, so the only way to enact those tax cuts is to deny that there's any trade off between them and more popular spending programs. Bush was never going to be able to oppose the wildly-popular prescription drug benefit in 2000 while also favoring a huge tax cut. He may have gotten away with abandoning the prescription drug benefit in 2003 by telling the public it was no long affordable, but that would have complicated his ability to pass another huge tax cut in 2003. So he did it all and set a fiscal time bomb.

The backlash against Bush from the right is largely a way of absolving conservatism of Bush's failures. Indeed, the Tea Party movement is largely driving the Republican Party along the same lines that Bush did. The central emphasis of the movement is opposition to progressive taxation -- hence the emphasis on Tax Day rallies, the defining of "Tea" as an acronym for "Taxed Enough Already," and the general Randian flavor of the movement.

On the merits, taxes are a strange focus of conservative ire. President Obama has kept in place the Bush tax cuts for 98% of the public, tax revenues are at a low point, and the stimulus included hundreds of billions of dollars in new tax cuts for businesses and individuals. (To be sure, you can dismiss these as temporary, and I'd agree, but on the same grounds, you ought to dismiss as temporary the rise in stimulus spending that went along with the tax cuts.)

But the emphasis on opposing progressive taxation does serve the interests of the Republican Party just fine. If you look at the general thrust of the Tea party complaints -- the focus on taxes, the persistent denunciations of Medicare cuts -- you can see it's pushing the GOP in the direction it already wants to go, which is to replicate the policy mix of the Bush administration. This isn't a rebellion against Bush's policies but a way of displacing anger at their failure.

Tuesday, April 20, 2010

Brown for the Count

Steve Benen on Massachusetts Republican Senator Scott Brown's TV appearance on Sunday.
Yesterday, the dimwitted senator appeared on CBS's "Face the Nation," and was asked about far-right Tea Party activists and their fears about "socialism." Host Bob Schieffer wanted to know if Brown agrees with their paranoia. Here's the senator's response in its entirety, exactly as it appeared in the official transcript:
"I know that the President should start to focus on jobs and job creation and -- and -- and -- and -- and that hasn't been done. Since I've been here we've done health care, which they obviously rammed through by using a parliamentary procedure that has never been used for something this big ever. And then the bill as we're finding out is -- is flawed, seriously flawed. It's going to cost medical device companies in my state, you know, thousands of jobs. But then, we're taking -- we're talking now about regulation reform. We're politicizing that. Maybe -- I've heard illegal immigration is going to come forth. When we're in Pakistan and Afghanistan, the only thing they talked about from the Presidents all the way down to the poorest farmer were jobs. Since I've been here, I've heard zero talk about jobs. So, I'll let -- leave that up to the political pundits, but I know from what I've seen that we need to focus on jobs and the President should start to do so."
Now, with a response like this, it's tough to know where to start. One could point out that Brown is wrong about the focus on job creation by pointing to the stimulus bill that rescued the economy. One could note that Brown is wrong about health care, which wasn't "obviously rammed through by using a parliamentary procedure," but rather, passed the Senate through regular order.

But I was particularly struck by the notion that Brown believes he's "heard zero talk about jobs." I realize Brown isn't the brightest light in the harbor, if you know what I mean, but after only three months in the Senate, I do expect him to have some sense of the bills he's already voted on. For example, he might remember voting on this "tax extenders" bill last month, which was intended to spur job creation, or perhaps voting on this job bill in February. In both instances, Scott Brown voted with Democrats, which was a fairly big deal with his far-right buddies. Seems like the kind of thing he might remember. It really wasn't that long ago.

And yet, there was Brown, telling a national television audience he's "heard zero talk about jobs." That's true, so long as one ignores all the talk about jobs.

Wednesday, April 14, 2010

Financial Reform: Regulations or Wall Street?

Ezra shifts his focus from health care reform to financial regulation reform and points out the difference in the background of the debate, especially the divergence in the views of Washington and Wall Street reform advocates.
Financial regulation reform has been just the opposite. The administration and Hill sources I've spoken to have been much more positive on the regulatory proposals than the experts and analysts I've sounded out. Indeed, it's been hard to believe the two sides are looking at the same legislation.

The difference, as far as I can suss it out, appears to be this: A lot of the people examining the bill from afar believe that it doesn't go far enough in reforming Wall Street itself. The financial sector after regulatory reform will look a whole lot like the financial sector before regulatory reform. A lot of the people helping to write the bill see it differently: The regulatory structure will look a lot different after reform than before reform. There will be a body charged with watching systemic risk, and systemically important non-bank entities will be subject to regulation, and derivative bets will (hopefully) be a lot more visible and the Federal Reserve will have a lot more power and information when it needs to break up failed banks.

That difference in what the bill needs to do -- change Wall Street or change the regulation of Wall Street -- is leading to a much more divided elite discussion than we saw during health-care reform. in part, that's because the two sides don't see their interests as aligned. Many people who supported more radical health-care reform proposals saw the Affordable Care Act as a step in their direction. Many people who want more radical reform of Wall Street do not see the proposals on offer as leading to the same endpoint. Regulating this system more effectively is not the first step to changing the sector dramatically.

But as often happens, that distinction is getting confused in the political discussion. The Democratic National Committee's press e-mails have taken to calling this "Wall Street reform." Wall Street reform is what a lot of people would like to see us do. But it's not, as far as they can tell, what we're doing.

Saturday, April 10, 2010

Blame the South

Noah Millman at The American Scene (h/t Sully) posits that the cause of the closing of the conservative mind in recent decades is the growing power of the South in its ranks.
Blame the South. The argument, in a nutshell, is that a successful political coalition in America cannot be dominated by the South, as the GOP currently is. The South is a distinct region in America, significantly different in history and political culture from the rest of the country. Moreover, regional identity in the South is manifested substantially in opposition to the rest of the nation. A political movement dominated by the South will necessarily manifest a political culture that is more similar to that of the South than to that of the rest of the nation, and that political movement is also going to absorb this oppositional element of Southern identity, and will necessarily become overly invested in intellectual shibboleths. What looks like epistemic closure is really just identity politics.

I don’t think this explanation can be dismissed out of hand – in particular, dismissing it out of hand as “insulting” to the South would be in instance of precisely the dynamic I’m outlining. The South does have a distinct history and culture; that culture is substantially oppositional; and the American right is dominated by the South in a way that it has not been before. Dominance of a party by an atypical and oppositional region is just a structural problem. And, if this is a problem, it is going to be a hard one for the American right to solve, because the South is now large enough and strong enough, and remains cohesive enough, that its leaders should expect to lead any coalition of which they are a member.

Thursday, April 8, 2010

There Are Idiots

Ezra riffs on an underlying theme of Michael Lewis's new book on the financial meltdown, The Big Short. He starts by referencing Larry Summers and goes on from there.
Larry Summers famously wrote -- but sadly, did not publish -- a paper that began with a timeless bit of wisdom: "THERE ARE IDIOTS," Summers said. "Look around." That paper was written decades ago. Maybe it's time to finally publish it. Particularly that second line.

Michael Lewis's latest book, “The Big Short,” is an attempt to explain the financial crisis, and in doing, it goes through correlation errors and collateralized debt obligations and mortgage fraud and all the other financial arcana the meltdown forced onto the front pages of our newspapers. But in the end, Lewis's explanation is simpler than all that: There were idiots. And no one was looking around.

The worst of the idiots were the ratings agencies: By slapping that "AAA" seal of approval on packages of bonds made from packages of subprime loans, they said those bonds were no riskier than treasury securities, which are considered virtually risk-free. In retrospect, their analytical mistake was almost comically ridiculous: They figured that each subprime mortgage was a unique little snowflake unto itself, and that what happened to one was irrelevant to what happened to others. Nice thought. In reality, when the teaser rates vanished and the loans revealed their true nature, they all went belly-up at the same time, for the same reason. The rating agencies' idiocy was the idiocy that made everyone else's idiocy possible, because it was what they all pointed to in justification.

But why were they justifying it? The downside risk turned out to be tremendous. And yet the big banks were full of idiots who were selling bonds based on mortgages they knew nothing about. They were run by idiots who were rolling in profits coming from underlings selling bonds based on mortgages they knew nothing about. As things began to go south, they started aggressively selling those packages of bonds to smaller investors who were also dumb to the nature of the underlying asset.

And you could drill down further. There were consumers buying into mortgages they didn't understand at prices that were too good to be true. There were regulators who refused to see the very excesses they were supposed to stop. There was a media that occasionally mentioned the odd divergence of housing prices from their historical norms but didn't see the enormity of the problem.

Partying in the Past

Ta-Nehisi Coates of the Atlantic pithily eviscerates the modern Republican Party.
The GOP is, effectively, the party of willfully unlettered Utopians. It is the party of choice for those who believe global warming is a hoax, that humans roamed the earth with dinosaurs, and that homosexuals should work harder at not being gay.
That the party of unadulterated quackery also believes that Birth Of A Nation is more true to the Civil War than Battle Cry Of Freedom, is to be expected. Ignorance does not respect boundaries. It is, at times, qualified and those who know more, often struggle to say more. But people who believe that the Census is actually a covert attempt to put Americans in concentration camps, are also likely to believe that slavery was incidental to the Civil War. 
This is who they are--the proud and ignorant. If you believe that if we still had segregation we wouldn't "have had all these problems," this is the movement for you. If you believe that your president is a Muslim sleeper agent, this is the movement for you. If you honor a flag raised explicitly to destroy this country then this is the movement for you. If you flirt with secession, even now, then this movement is for you. If you are a "Real American" with no demonstrable interest in "Real America" then, by God, this movement of alchemists and creationists, of anti-science and hair tonic, is for you.

Sunday, April 4, 2010

Steve Benen reviews the recent decision by the Texas School Board to shift educational guidelines away from established history in such areas as separation of church and state and the role of Thomas Jefferson to promoting Phyllis Schlafly and the Heritage Foundation and extrapolates its impact on policy debates.
It's not especially surprising, of course. Reading this, it's hard not to think of the Ron Suskind classic when a senior adviser to then-President George W. Bush dismissed those who "believe that solutions emerge from your judicious study of discernible reality.... That's not the way the world really works anymore. We're an empire now, and when we act, we create our own reality."
If today's conservative Republicans reject reality, it stands to reason that they'll reject history, too.

But it's nevertheless a reminder of why conversations with those immersed in a right-wing ideology tend to be rather frustrating, if not futile, experiences. In order for political discourse to have any meaning or value, there have to be certain agreed upon facts that serve as a foundation for the dialogue. But as the McClatchy piece notes, that foundation is no longer stable -- conservatives frequently choose to believe versions of events that aren't real, because the make-believe version makes them feel better.

The result is an American history in which every era can be distorted to satisfy the far-right ego. Indeed, it continues to apply to more contemporary events -- tell the typical Republican that Ronald Reagan raised taxes in six of his eight years in the White House, and he/she will probably look at you as if you've lost your mind. That is, in fact, what happened, but the right chooses to reject this history, because they don't like it. (Tell these same Republicans that Barack Obama's health care plan is in line with what moderate Republicans have supported for years -- and that the individual mandate was actually a GOP idea -- and you'll get the same reaction, even though it's true.)

For all the talk about getting reasonable people with different ideologies into a room to find common ground on a host of complex issues, it's worth remembering that for many political actors in 2010, there isn't even agreement on the basics. When dealing with a large group of influential conservatives who believe FDR created the Great Depression, Theodore Roosevelt was a socialist, and Joe McCarthy was a hero, what's there to talk about?

Saturday, April 3, 2010

Affordable Care Swindles

Suzy Khimm guest posts on Ezra's blog about the newest in health care scams.
NPR has a good story about how swindlers are already trying to take advantage of the confusion over the Affordable Care Act to run health-care scams:

Days after President Obama signed the $938 billion bill into law, a cable television advertisement exhorted viewers to call an 800-number so they wouldn't miss a "limited enrollment" period to obtain coverage available "now that historic health-care legislation has passed."

And there have already been reports of door-to-door salespeople peddling "Obamacare" insurance policies.

There is, of course, no limited enrollment period for any coverage, and no such thing as a new federal insurance policy named after the president.

As NPR notes, the "bitter and divisive" debate over health reform has been a boon for the scam market, which has sought to exploit the public misconceptions about the bill. Given how quickly the "death panel" meme caught on -- and how long such fabrications have persisted in the political discourse -- the idea of purchasing an "Obamacare" insurance policy might not seem so far-fetched.