the loquacity crisis

24 November 2008

There’s a pattern to much of the reporting on the financial crisis and the bailout. See if you can identify it.

From “Banking Regulator Played Advocate Over Enforcer” the Washington Post‘s report on the Office of Thrift Supervision:

1.

In 2004, the year that risky loans called option adjustable-rate mortgages took off, then-OTS director James Gilleran lauded the banks for their role in providing home loans.

Gilleran did not respond to multiple requests to be interviewed for this article.

2.

John Reich, who has been OTS director since 2005, and Polakoff, his deputy, were well positioned to have learned the lesson. At the time of Superior’s difficulties, Reich was one of the leaders of the Federal Deposit Insurance Corp. and Polakoff ran FDIC’s Chicago office. Indeed, Polakoff’s office recognized Superior’s problems before OTS and pushed for increased scrutiny of Superior’s bookkeeping.

In testimony before Congress in the fall of 2001, Reich listed what he considered the lessons of Superior’s failure. Among them, he said, “we must see to it that institutions engaging in risky lending . . . hold sufficient capital to protect against sudden insolvency.”

But instead of increasing oversight, OTS shrank dramatically over the next four years.

[To be fair, Polakoff must have agreed to be interviewed: he is quoted in the article.]

Concerns about the product were first raised in late 2005 by another federal regulator, the Office of the Comptroller of the Currency. The agency pushed other regulators to issue a joint proposal that lenders should make sure borrowers could afford their full monthly payments. “Too many consumers have been attracted to products by the seductive prospect of low minimum payments that delay the day of reckoning,” Comptroller of the Currency John C. Dugan said in a speech advocating the proposal.

OTS was hesitant to sign on, though it eventually did. Reich, the new director of OTS, warned against excessive intervention. He cautioned that the government should not interfere with lending by thrifts “who have demonstrated that they have the know-how to manage these products through all kinds of economic cycles.” Reich, through a spokesman, declined to be interviewed for this article.

3.

Countrywide Financial’s decision to reconstitute itself as a thrift and come under the OTS umbrella was a victory for Darryl W. Dochow, the OTS official in charge of new charters in the Western region, home to Washington Mutual, IndyMac and other large thrifts.

In the late 1980s, Dochow had been the chief career supervisor of the savings-and-loan industry, and federal investigators later concluded he played a key role in the collapse of Charles Keating’s Lincoln Savings and Loan by delaying and impeding proper oversight of that thrift’s operations.

Dochow was shunted aside in the aftermath and sent to the agency’s Seattle office. Several of his former colleagues and superiors say he eventually reestablished himself as a credible regulator and again rose in the organization. Dochow did not return a phone call requesting an interview, and OTS said he declined to give one.

4.

As early as 2005, Angelo R. Mozilo, then the chief executive of Countrywide, approached OTS about moving out from under the supervision of the Office of the Comptroller of the Currency, which regulates national commercial banks.

Mozilo declined to be interviewed for this article.

And from the New York Times report on Citigroup’s troubles:

1.

In September 2007, with Wall Street confronting a crisis caused by too many souring mortgages, Citigroup executives gathered in a wood-paneled library to assess their own well-being.

There, Citigroup’s chief executive, Charles O. Prince III, learned for the first time that the bank owned about $43 billion in mortgage-related assets. He asked Thomas G. Maheras, who oversaw trading at the bank, whether everything was O.K.

The bank’s downfall was years in the making and involved many in its hierarchy, particularly Mr. Prince and Robert E. Rubin, an influential director and senior adviser.

Mr. Prince and Mr. Rubin both declined to comment for this article.

2.

David C. Bushnell was the senior risk officer who, with help from his staff, was supposed to keep an eye on the bank’s bond trading business and its multibillion-dollar portfolio of mortgage-backed securities. Those activities were part of what the bank called its fixed-income business, which Mr. Maheras supervised.

One of Mr. Maheras’s trusted deputies, Randolph H. Barker, helped oversee the huge build-up in mortgage-related securities at Citigroup. But Mr. Bushnell, Mr. Maheras and Mr. Barker were all old friends, having climbed the bank’s corporate ladder together.

Mr. Bushnell and Mr. Barker did not return repeated phone calls seeking comment. Mr. Maheras declined to comment.

These are the most recent examples I’ve seen; I’m sure there are more out there.

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the fabric of society

24 November 2008

It seems like Cory Booker is channeling Randolph Bourne (via):

Vodpod videos no longer available.

From Bourne’s “Trans-National America” (in the July 1916 Atlantic):

The foreign cultures have not been melted down or run together, made into some homogeneous Americanism, but have remained distinct but cooperating to the greater glory and benefit not only of themselves but of all the native ‘Americanism’ around them.

What we emphatically do not want is that these distinctive qualities should be washed out into a tasteless, colorless fluid of uniformity.

Bourne’s prefers the metaphor of a weave to food; he comes out against gluttony:

Only America, by reason of the unique liberty of opportunity and traditional isolation for which she seems to stand, can lead in this cosmopolitan enterprise. Only the American — and in this category I include the migratory alien who has lived with us and caught the pioneer spirit and a sense of new social vistas — has the chance to become that citizen of the world. America is coming to be, not a nationality but a trans- nationality, a weaving back and forth, with the other lands, of many threads of all sizes and colors. Any movement which attempts to thwart this weaving, or to dye the fabric any one color, or disentangle the threads of the strands, is false to this cosmopolitan vision. I do not mean that we shall necessarily glut ourselves with the raw product of humanity. It would be folly to absorb the nations faster than we could weave them. We have no duty either to admit or reject. It is purely a question of expediency. What concerns us is the fact that the strands are here. We must have a policy and an ideal for an actual situation. Our question is, What shall we do with our America?


activism and web 0.2

21 November 2008

It seems that Obama has been reading Lincoln; this is encouraging. Some of Obama’s reading about Lincoln may be less encouraging. I am not getting ready to lead a nation or form a cabinet; I have been reading Wendell Phillips. Phillips, you may recall, is the only non-politician profiled in Hofstadter’s American Political Tradition: his type is the “agitator” (something Obama once was, not so incidentally).

I’m reading Phillips mostly because I’ve meant to do so ever since I was a TA in a course on the nineteenth century U.S. whose instructor confessed admiration for him, and I saw a reference to Phillips in something else I read just recently. Many of his speeches are now online, but unfortunately not in easily copy-and-pastable form. I’ve only read a few so far, but I can already say that Phillips is worth a look for anyone interested not just in his history, but in political and social movements and agitation in general.

Here’s Phillips in “Public Opinion” (1851) on the theory of change:

We are apt to feel ourselves overshadowed in the presence of colossal institutions. We are apt, in coming up to a meeting of this kind, to ask what a few hundred or a few thousand persons can do against the weight of government, the mountainous odds of majorities, the influence of the press, the power of the pulpit, the organization of parties, the omnipotence of wealth. At times, to carry a favorite purpose, leading statesmen have endeavored to cajole the people into the idea that this age was like the past, and that a “rub-a-dub agitation,” as ours is contemptuously styled, was only to be despised.

The time has been when, as our friend observed, from the steps of the Revere House — yes, and from the depots of New York railroads — Mr. Webster has described this Antislavery Movement as a succession of lectures in school houses, — the mere efforts of a few hundred men and women to talk together, excite each other, arouse the public, and its only result a little noise. He knew better. He knew better the times in which he lived. No matter where you meet a dozen earnest men pledged to a new idea — wherever you have met them, you have met the beginning of a Revolution.

Revolutions are not made: they come. A revolution is as natural a growth as an oak. It comes out of the past. Its foundations are laid far back. The child feels; he grows into a man, and thinks; another, perhaps, speaks, and the world acts out the thought. And this is the history of modern society. Men undervalue the Antislavery Movement, because they imagine you can always put your finger on some illustrious moment in history, and say, here commenced the great change which has come over the nation. Not so. The beginning of great changes is like the rise of the Mississippi. A child must stoop and gather away the pebbles to find it. But soon it swells broader and broader, bears on its ample bosom the navies of a mighty republic, fills the Gulf, and divides a Continent.

“Rub-a-dub agitation” might be sort of a mid-nineteenth century version of “bloggers in their pajamas.” Later in that same speech Phillips takes up the subject of technology and organization:

In working these great changes, in such an age as ours, the so-called statesman has far less influence than the many little men who, at various points, are silently maturing a regeneration of public opinion. This is a reading and thinking age, and great interests at stake quicken the general intellect. Stagnant times have been when a great mind, anchored in error, might snag the slow-moving current of society. Such is not our era. Nothing but Freedom, Justice and Truth is of any permanent advantage to the mass of mankind. To these society, left to itself, is always tending.

In our day, great questions about them have called forth all the energies of the common mind. Error suffers sad treatment in the shock of eager intellects. “Everybody,” said Talleyrand, “is cleverer than anybody”; and any name, however illustrious, which links itself to abuses, is sure to be overwhelmed by the impetuous current of that society which, (thanks to the press and a reading public) is potent, always, to clear its own channel. Thanks to the PrintingPress, the people now do their own thinking, and statesmen, as they are styled — men in office, — have ceased to be either the leaders or the clogs of society.

_____

Note: I have broken up the speech text into more readable paragraph lengths. The hyperlinks, of course, are in the original – that’s just how far ahead of his times Phillips was.


daguerro-who?

20 November 2008

At first I was going to say that the Life magazine photo archive Google is hosting seems a bit confused about chronology:

life-google-archive1

But it turns out you can search for the French and Indian War and get results.


back to its roots

19 November 2008

I sort of think of this as the canonical form of muckraking.


only in America a democracy

18 November 2008

With the talk of Obama’s election being something that could only happen in America, it’s no surprise to find people pointing out that, well, not only could “it” – meaning a similar electoral victory, of course – happen elsewhere, but “it” has in some cases already happened elsewhere. But this piece in Slate is a bit confused about what “it” is.

On one side, there are some good examples*:

The truth is that Obama-style chiefs of state—people who came out of stigmatized ethnic minorities or “foreign” enclaves to lead their governments—are an uncommon but regularly recurring part of history. Alberto Fujimori, who held both Peruvian and Japanese citizenship, was elected president of Peru in 1990. Sonia Gandhi, born Edvige Antonia Albina Maino in northern Italy, led her Congress Party to a resounding victory in India’s 2004 elections. Daniel arap Moi is from the Kalenjin people, not the Luo or Kikuyu who are the nation’s largest ethnic groups and its centers of political gravity. But this did not bar him being president of Kenya from 1978 to 2002.

To them you could probably add Evo Morales in Bolivia. And going back to the 19th century, there’s Benjamin Disraeli’s selection as Prime Minister of the UK.

But on the other side are the poor examples:

Last week, the New York Times told us Europe would not soon—indeed might never—see a political triumph like Obama’s. It described British politics as though Disraeli had never existed and painted a similar picture of mono-ethnic France.

Desolé, cher collegues, but one year after the far-off, sunny isle of Corsica was acquired by France in 1768, there was born there one Napoleon Bonaparte, whose heavy Italian accent made him seem even more exotic to la France profonde than his strange name.

I guess Napoleon did win a lot of campaigns.

Next up:

And speaking of German accents, the Times thumb-sucker also foresaw that there would be no German Obama any time soon. Bad timing for them: Three days later, Germany’s Greens elected Cem Ozdemir, an ethnic Turk, as their new leader.

And the Greens, being the ruling party of Germany, must make their leader the Chancellor, right? At least that example is still within the realm of electoral politics. Unlike, say,

Stalin, of course, wasn’t Russian.

Stalin vetted his advisers very thoroughly, it should be noted. And he rose from being just a humble secretary too.

Meanwhile,

It’s a matter of some debate whether Alexander the Great was ethnically Greek.

Some said he was too Greek; others, not Greek enough. And Greece was the birthplace of democracy, so he must have been elected.

That not enough for you? The path of liberty soon turned west from Greece. And what do we find?

Quite a few rulers of the Roman Empire came from underprivileged, barbarian families in North Africa, Syria, and the Balkans. The Times‘ portrait of ethnically blinkered European politics would have surprised not only Disraeli and Napoleon, but also, inter alios, such second- and third-century Roman emperors as Philippus (known as Philip the Arab for his ethnicity), Septimius Severus (father Roman, mother North African), and Diocletian (humble stock from Dalmatia, present-day Croatia).

Hey, did you know that the Mongols weren’t Chinese, and yet they ruled China for a while? And the Qing ruled China for even longer, and they weren’t Chinese either! And yet we call their emperors emperors of China.

But why stop there? What about Carl XIV Johan, King of Sweden and Norway, born Jean-Baptiste Bernadotte and once Marshal of France (more French than Napoleon, who appointed him)? And the 19th century Greek monarchy had not just the House of Wittelsbach but the House of Glücksburg (in fairness, the later monarchs seem to have been Greece-born).

Or maybe it would be a good idea to just stop with the good examples, give a bit more depth to the comparisons, and acknowledge that Obama’s victory was not unique, but still quite rare.

____

*Unfortunately, many of these leaders were more successful in elections than in governing.