But It's Even Worse, Isn't It?

If you wait long enough, somebody's probably going to articulate what you are thinking, and probably say it better. Case in point: I haven't had much time to type out my thoughts on the nation's fear of "nationalization", but Robert Reich does a pretty good job of describing something that's been bothering me:

The federal government -- that is, you and I and every other taxpayer -- has taken ownership of giant home mortgagors Fannie and Freddie, which are by now basket cases. We've also put hundreds of millions into Wall Street banks, which are still flowing red ink and seem everyday to be in worse shape. We've bailed out the giant insurer AIG, which is failing. We've given GM and Chrysler the first installments of what are likely to turn into big bailouts. It's hard to find anyone who will place a big bet on the future of these two.

In terms of the companies lining up for bailouts,

If anyone has a good argument for why the shareholders of these losers should not be cleaned out first, and their creditors and executives and directors second -- before taxpayers get stuck with the astonishingly-large bill -- I would like to hear it.

I completely agree. But there's something Reich doesn't mention that concerns me: Our current bailouts aren't working. That is, it may cost us more to continue bailing out loser companies while declining to nationalize them than it would if we nationalized them, ate their bad debt and, as quickly as possible, restored them to private ownership. (Part of the reason, of course, is the appalling greed of incompetent managers.)

I can also tell you this, not far off from one of Reich's points - Chrysler is a black hole. If it weren't, Cerberus would be bailing it out itself. They shouldn't be invited back for more "loans" or bailout funds, save perhaps a bridge loan to help them seal a takeover deal with a viable company.
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Addendum: "Moral haz... whuttard?" David Ignatius flat-out calls for subsidy:

How will the managers of the Bad Bank coax the gremlins out of hiding? With money, of course -- buying up an estimated $1 trillion to $2 trillion in toxic paper. Will the government overpay? Of course it will, especially at first, as it discovers fair prices for securitized debt for which there isn't now a functioning market.

Anybody even casually conversant with this crisis knows that the government will overpay because to do otherwise won't help the banks. We can buy them for the pretend value the banks presently use, knowing we're paying probably two, three, four times their actual value, removing a huge liability from the banks' shoulders, then hope that with actual assets back in their coffers banks will return to "business as usual". Or we can try to come up with something approximating market value, force banks to report multi-billion dollar losses on those assets, and... then most of them have to admit insolvency.

At least people seem to be through arguing that if the taxpayer ends up owning these toxic assets, there's a chance of "turning a profit". Does Larry Kudlow blush when he reads crap like this, or does he shrug, smile at the corporate interests he serves and say, "It was worth a shot."

And Next We Find a Philosopher King, and....

David Ignatius urges Obama to find a Warren Buffet of intelligence to be the next director of national intelligence.

The right answer? Find the Buffett-like manager who can create a truly great U.S. intelligence system at DNI, then let that person pick a CIA director who will be nonpolitical. And then, as the late CIA Director Richard Helms liked to tell his trench-coated colleagues, "Let's get on with it."

Sounds good. But... where do we look?

The War on Terror, On Film

In a nutshell, Body of Lies opens well, and starts building an interesting story. Then it goes off on a dubious subplot that isn't very convincing and takes far too long to develop. As the subplot is crucial to the ending of the film - your understanding of the characters, their motivations and their actions - it is indispensable. Unfortunately, it makes the film a bit too long and at times tedious.

The film tell a story that focuses on human intrigue, an expanding network of dysfunctional relationships with Agent Ferris (Leonardo DiCaprio) at its center. That is, as contrasted with a lot of other modern films about the war on terror, it seems to be trying to put story ahead of politics. But make no mistake, this is a very political film, from its outset unapologetically asserting that the war on terror (efforts to fight terrorist cells and capture terrorist leaders) is crucial to the preservation of western values and freedoms. The Iraq war merits mention, but this film is about what its makers seem to see as the real "war on terror" - an often low-tech war with some high-tech components. There's plenty of double-cross and moral ambiguity.

As overt as the politics often are, as contrasted with a film like Babel or Syriana, the films largely avoids feeling like a condescending lecture or becoming lost in its convoluted plot. But you'll still get some elements of a political lecture, with characters dropping comments here or there describing how "torture doesn't work" (which isn't to say that those same speakers find no use for it) or that Islamic terrorism is predicated upon a misinterpretation of the Koran (while making it clear that you'll have no luck convincing the adherents of that interpretation that they've made a mistake).

I haven't read David Ignatius's book, but if the screenplay is any indication he's given a great deal of thought to the "war on terror", the mistakes we have made, and the reasons for our continued difficulties in identifying and stopping terrorist leaders and terrorist cells. This film sees great value in human capital (agents working in the field, and their building relationships with locals), and is often scornful of the U.S./CIA preference for surveillance technology that arose following the end of the cold war, as well as their treatment of the locals who risk their lives (or die) while working with or assisting field agents. In the film, Agent Ferris is morally elevated over his boss not because of what he does for those harmed or killed by his actions, but because he wants to offer assistance before indifferently accepting that it's not forthcoming.

But Ignatius is no Luddite - far from it. The film depicts whiz-bang, nifty keen technologies in all, or perhaps most of, their glory. While highlighting the limitations of technological surveillance, he also illustrates its usefulness, and showcases how even one or two people can orchestrate a massive disinformation campaign through the Internet.

Leonardo DiCaprio is well cast in this film, although the character he plays will be familiar to those who have seen his recent work. (His accent may change, but it's essentially the same character he played in Blood Diamond and The Departed.) His character is suited to his role. I suspect that Ridley Scott had fun with Russell Crowe, chubby and aged, commenting to DiCaprio at one point that a decade earlier he could have taken him in a fight. (Believe it or not, yes, it's almost a decade since Scott directed Crowe in Gladiator.)

Quite a Piece of Work, Indeed....

Recently, John McCain's campaign manager offered an admission:

Rick Davis, campaign manager for John McCain's presidential bid, insisted that the presidential race will be decided more over personalities than issues during an interview with Post editors this morning.

"This election is not about issues," said Davis. "This election is about a composite view of what people take away from these candidates."

Today, David Ignatius personifies the type of voter Davis is targeting. Ignatius warns that the nation faces big issues, with little time for the candidates left to address them,

But for now, let's enjoy the American tapestry that's laid out before us: quirky, sometimes discordant, with some missed stitches and ragged patches, but quite a piece of work all the same.

No, let's not.

Demonstrating Bipartisanship The Wrong Way

David Ignatius has a silly idea for Barack Obama:

By reaching outside the Democratic Party for his vice presidential nominee -- tapping Republican Sen. Chuck Hagel of Nebraska, say, or independent Mayor Michael Bloomberg from New York -- Obama would in an instant demonstrate that he truly means to change the divisive, lose-lose politics of Washington. It would offer a unity government for a country that seems to want one.

There are all sorts of practical arguments against such an unconventional choice -- not least that it would upset many of Obama's liberal Democratic supporters. But it would make a powerful statement that Obama really does want to govern in a different way. It would make "change we can believe in" more than a slogan.

No, the "not the least of which" argument is that when you vote for a President from a particular political party, you don't expect that in the event of his incapacity that the Presidency will shift to the rival party. If Ignatius brushes up on his history, he should learn that the purpose of joint tickets is to make sure that the President and Vice President are from the same party.

But it does make me wonder... what would the punditocracy say about an Obama/Powell ticket?

By choosing a veteran politician outside his own party, Obama would solve three problems at once: He would undercut the bipartisan appeal of his maverick GOP rival, Sen. John McCain; he would ease voters' fears about his own youth and inexperience...

This would work by sending the message, "I'm like G.W. Bush, and there aren't any Democrats who have sufficient national security credentials to even be as impressive as the mendacious, scheming, non-veteran Dick Cheney"? Great idea. You know what? The innuendo that Obama is "too young" or "too inexperienced" flows not from his actual age or experience, but from members of the punditocracy like Ignatius. So perhaps Obama is better served by scoffing at the suggestion, and challenging Ignatius types to back up their rhetoric with substance.

... and he would find a compelling alternative to Hillary Clinton, who for all her virtues as a vice president would come with heavy baggage - not least the role of her husband, who is even harder to imagine as Second Laddie than as First.

Okay, now that's just silly. If Hillary Clinton wants the VP spot, in all likelihood she'll get it. Nobody wants the fight, or party divisions likely to again erupt, if she lobbies for the job and is rejected. If she does not want the job, she won't be asked. Innuendo Bill Clinton? That's more suited to a Maureen Dowd column, David. Leave that stuff to others.

Moreover, Obama needs to counter the charge that he talks a better game about bipartisanship and change than he has actually delivered. His voting record in Illinois and Washington mostly has been that of a conventional liberal, and there are precious few examples of him taking political risks to work across party lines.

And we're back to, "If the pundits say it, it must be so."

McCain, by contrast, has actually fought the kind of bipartisan battles that Obama talks about - from campaign finance to climate change to rules against torture - and he has the political scars to prove it.

So Ignatius raises three issues to demonstrate McCain's "bipartisanship". First, campaign finance reform. McCain became the "maverick" behind campaign finance reform not by working toward bipartisanship, but by taking a stance against his own party. Look at the actual vote - 60 to 40, with 38 of the "nays" coming from Republicans. That was much less an example of bipartisanship than it was an example of McCain crossing the aisle. Does Ignatius understand the meaning of the word "maverick"? It's not a synonym for "consensus-builder".

The second example, "climate change". If bipartisanship means offering watered down proposals to try to bridge the gap between effective reforms and ineffective reforms, he gets some credit. But if we're actually looking for a President who will advocate the most effective solutions, that brand of bipartisanship falls short. What is Ignatius overlooking? The importance of leadership. That's what Obama is offering on this issue, as the Republican Party is full of climate change laggards. To use a word that G.W. likes to throw around, the type of compromise McCain is offering constitutes appeasement.

The third example, "rules against torture".... Ignatius has forgotten McCain's flip-flop? Or is he speaking of McCain's failed anti-torture amendment, supported in the Senate by a 90:9 vote, that failed due to threatened veto? Are we now defining a proposal that pretty much everybody already supports as representative of "bipartisanship"? If Obama floats a "Sense of the Senate" bill lauding the beauty of the American flag and gets a 100:0 vote of support, is proof that he can "work toward bipartisanship"?

The best thing I can say about this column is that virtually no one will take its suggestions seriously.

Housing Handouts

Pretty much everybody and his brother has published an editorial describing one stimulus or another for the housing market. A minority prefer to leave things alone. George Will, on the other hand, takes a middle road, apparently clinging to his belief that a handout is only a handout when it is made to an individual and not a corporation.

Oh? The idea that protracted golden years of idleness are a universal right is a delusion of recent vintage. Deranged by the entitlement mentality fostered by a metastasizing welfare state, Americans now have such low pain thresholds that suffering is defined as a slight delay in beginning a subsidized retirement often lasting one-third of the retiree's adult lifetime.

You know, for a guy who looks like he has never engaged in physical labor in his entire lifetime, Will should give it a try. He's only 67 years old - let's see how well he does when he's pushing something heavier than a pen, for something closer to minimum wage than his sinecures at The Washington Post and Newsweek.

Subprime mortgages are a small minority of mortgages, and only a minority of subprime borrowers are not making their payments. Casting this minority of a minority as victims of "predatory" lending fits the liberal narrative that most Americans are victims of this or that sinister elite or impersonal force and are not competent to cope with life's complexities without government supervision.

This represents Will at his best - half right. I agree with him that most of the people who are in trouble made poor individual choices. But that does not mean that there were no predatory practices by lenders, and it certainly doesn't justify Will's willful blindness toward the massive federal handouts being given to lenders who were much better positioned than any individual to recognize the folly of these loans - yet made them time, and time, and time again. As is his wont, Will also has to wrap his point in a silly smear against "liberals". (But perhaps he's now among those who think of John McCain and G.W. Bush as liberals, so who even knows what that means at this point.)

But I agree with this point, despite its condescension:

The 96 percent of mortgage borrowers who are fulfilling their commitments, often by scrimping, may be grumpy bystanders if many of the other 4 percent - those who found the phrase "variable rate" impenetrably mysterious - are eligible for ameliorations of their obligations.

The proposed "remedies" to the "foreclosure crisis" seem to be taking the form of handouts - either bailing out borrowers who are in over their heads, or subsidizing new home buyers to try to soak up some of the "excess inventory" in the housing market. Picking up where Will left off, David Ignatius presents a "slippery slope" (i.e., logically fallacious) argument as to where this all leads us.

We're now in a comparable cycle of bestowing special economic favors on members of the national family who have been hurt by the credit market crisis. "It's not fair," argue the housing interests and consumer advocacy groups. "Bear Stearns got a financial bailout, so why shouldn't we?" And they're right, by the simplest schoolyard definition of fairness.

So the line grows of people demanding breaks on financial obligations they can't afford. Last week, the Bush administration agreed to rescue 100,000 homeowners who are at risk of foreclosure on their mortgages. Congressional Democrats promptly announced that this wasn't fair enough and that they intended to expand the bailout to as many as 2 million distressed borrowers.

But why stop there? What about onerous commercial mortgages? And credit card debt? And student loans? Why should anyone have to pay back anything? It's not fair

Well, actually, we do have a mechanism where businesses and individuals can escape debts. It's enshrined in the body of the Constitution. It's called... bankruptcy. With some relatively modest tweaking of bankruptcy law, borrowers facing foreclosure can get individualized relief through the bankruptcy courts. The lenders who chose to give them too much money will take a loss, sure, but often less than the cost of a foreclosure. And there is no need for federal handouts to the borrowers.

As for those handouts, some of them inspire the "Say what?" response....

The only solution is for the federal government to offer a temporary 5 percent tax rebate — up to $25,000 — for first-time home buyers.

Here's where the point made by Ignatius and Will kicks in - that proposal is manifestly unfair to responsible borrowers, including first-time home buyers who may have lost part or all of their equity after buying houses they can afford. It also assumes that the problem exists at the bottom of the market. While I don't dispute that there seem to be many areas where foreclosures are affecting large numbers of entry level homes, there are also many areas where even with a subsidy the homes affected are out of the reach of first-time buyers.

I guess the idea is that making homeowners out of a population that has insufficient savings or interest in presently becoming homeowners will reinflate the bubble, such that other owners "get their equity back". But if that works, does it do more than postpone the present market correction? And don't we risk creating a new population of home buyers who don't have the financial stability or discipline to consistently pay their mortgages, setting ourselves up for "foreclosure crisis II"? There's a reason, after all, that lenders traditionally chose not to give mortgages to first-time borrowers who hadn't saved up a down payment, even if somebody else was willing to give them the money. Also, while the subsidy may inspire renters to buy homes, what happens to the vacant rental properties? Higher vacancies usually lead to lower rent, and rental rates typically correlate to housing values.

Meanwhile it does appear that there are individuals and investors who are bargain hunting, raising the question of whether such a subsidy at the bottom end of the market is even necessary.