links for 2008-03-24

• Bar Tabs and Tax Cuts - Lane Kenworthy
• The ... Soul of the Monetary Economist: A Platonic Dialogue - Brad DeLong
• You Tube Tip - Unfogged
• The War Endures, but Where’s the Media? - New York Times
• Last year's Easter post: Horton Hatches the Easter Eggs
• Austin Kelly: Zero Down Mortgages perform really badly - Richard green
• Too Dumb To Fail - James Surowiecki
• US can learn from Japan’s crisis - FT
• Salon shows how to read WSJ for free - Boing Boing
• Kicking the Can down the Road - Econbrowser

Comments

[Rates]

"Because investment banks’ trades and investments are typically very highly leveraged—Bear Stearns, for instance, had borrowed thirty dollars for every dollar of its own—the banks need to be exceptionally good at managing risk..."

This is what happens when real short rates are negative for years on end. Too much risk, followed by a Minsky moment. The Fed lost control when they provided low rates during a boom time for no other reason than to "fight deflation". Policy cannot be flexible enough to deal with excessive credit, if a cushion above the zero bound is considered essential. Unconventional tools must be developed so excessive credit can be tamed when prudent.

[anne]

http://query.nytimes.com/gst/fullpage.html?res=9E0CEFDD1431F93BA25750C0A9659C8B63

March 18, 2003

Good Reasons for Going Around the U.N.
By ANNE-MARIE SLAUGHTER

With the news that the United States was abandoning its efforts to get United Nations approval for a possible invasion of Iraq, yesterday looked to be a very bad day for staunch multilateralists and critics of American policy.

That view is understandable, but incomplete, even after President Bush's speech last night made it clear that America would be going to war largely on its own. By giving up on the Security Council, the Bush administration has started on a course that could be called ''illegal but legitimate,'' a course that could end up, paradoxically, winning United Nations approval for a military campaign in Iraq -- though only after an invasion....

Anne-Marie Slaughter is dean of the Woodrow Wilson School of Public and International Affairs at Princeton.

[Thinking back....]

[anne]

http://query.nytimes.com/gst/fullpage.html?res=9400E7D91231F93AA25750C0A9659C8B63

The Tense Wait: Is War Just Hours Away?

To the Editor:

Anne-Marie Slaughter (''Good Reasons for Going Around the U.N.'') suggests that the war against Iraq could still be legitimate.

Is it legitimate for a small group of countries, two of which have huge stocks of weapons of mass destruction, to decide to remove by force such weapons from another country without the consent of the United Nations or another well-established organization (like NATO, in the case of Kosovo)?

Is it legitimate for such a small group of states to act as enforcers of past Security Council resolutions for the disarmament of Iraq without the Council's agreement?

Ms. Slaughter seems to suggest that any bad, cruel and arbitrary government can from now on be removed by democratic states without any consent from the United Nations or from an organization like NATO. Her conception of legitimacy would lead to world chaos.

STANLEY HOFFMANN
Cambridge, Mass., March 18, 2003
The writer is a university professor at Harvard.

[anne]

http://www.foreignaffairs.org/20040101faessay83113/lee-feinstein-anne-marie-slaughter/a-duty-to-prevent.html

January, 2004

A Duty to Prevent
By Lee Feinstein and Anne-Marie Slaughter

Summary: The unprecedented threat posed by terrorists and rogue states armed with weapons of mass destruction cannot be handled by an outdated and poorly enforced nonproliferation regime. The international community has a duty to prevent security disasters as well as humanitarian ones -- even at the price of violating sovereignty.

DISARMING ROGUES

The Bush administration has proclaimed a doctrine of unilateral preemption as a core part of its National Security Strategy. The limits of this approach are demonstrated daily in Iraq, where the United States is bearing the burden for security, reconstruction, and reform essentially on its own. Yet the world cannot afford to look the other way when faced with the prospect, as in Iraq, of a brutal ruler acquiring nuclear weapons or other weapons of mass destruction (WMD). Addressing this danger requires a different strategy, one that maximizes the chances of early and effective collective action. In this regard, and in comparison to the changes that are taking place in the area of intervention for the purposes of humanitarian protection, the biggest problem with the Bush preemption strategy may be that it does not go far enough....

[anne]

http://query.nytimes.com/gst/fullpage.html?res=9E0CEFDD1431F93BA25750C0A9659C8B63

March 18, 2003

Good Reasons for Going Around the U.N.
By ANNE-MARIE SLAUGHTER

So, how can United Nations approval come about? Soldiers would go into Iraq. They would find irrefutable evidence that Saddam Hussein's regime possesses weapons of mass destruction. Even without such evidence, the United States and its allies can justify their intervention if the Iraqi people welcome their coming and if they turn immediately back to the United Nations to help rebuild the country....

[anne]

http://www.nytimes.com/2008/03/16/opinion/16slaughter.html

March 16, 2008

Das Loot
By ANNE-MARIE SLAUGHTER

IN April 2003, just after American troops secured Baghdad, Iraqis looted the Iraqi national museum. American soldiers nearby made no effort to stop them, much less provide a guard. We either did not have enough soldiers to protect the museum, or we did not care enough to try.

This failure was simply a “matter of priorities,” according to Gen. Richard Myers, chairman of the Joint Chiefs of Staff. Defense Secretary Donald Rumsfeld thought it was a “stretch” to attribute the theft and destruction of priceless Mesopotamian artifacts to “any defect in the war plan.”

Our government knew how to destroy but not how to build. We had toppled a regime, and in coming months we would dismantle Saddam Hussein’s bureaucracy and disband his army. But we did so with absolutely no understanding of how to build a liberal democracy, or even a stable, rights-regarding government with broad popular support.

Such a government requires a prosperous economy, a secure society and sufficient cultural unity to allow everyday interaction among different ethnic groups in workplaces, schools, hospitals, the army and the police. Protecting the symbols of a common and proud heritage is Democracy Building 101 — at least for anyone who understood anything about Iraqi history and culture.

Americans are still living with the aftermath of this ignorance, and we will be for decades to come....

[anne]

So that we understand; from before the war Anne-Marie Slaughter was wildly for war, wildly for any excuse for war especially war that ignored the United Nations just to show others that we could and would always act in place of the United Nations and the rest had best follow along to avoid being appropriately shocked and awed. Beyond the war Anne-Marie Slaughter was a wild supporter of occupation from the beginning, occupation again for the sake of showing that we could and would.

This is what a nihilist political philosophy is about, and is about still as there are ever reasons why we must preside over the crushing of what is not crushed yet in Iraq.

[Down Payment]

"...borrowers who provide down payments from their own resources have significantly lower default propensities than do borrowers whose down payments come from relatives, government agencies, or non-profits..."

People who don't have the financial discipline to save up a reasonable down payment often don't have the financial discipline to make regular payments either. A 20% down payment would not be an unreasonable burden, if affordable homes (sub 100k range) were allowed to be built. Low cost housing is the best way to house the less well to do, not no down payment loans on expensive homes.

[anne]

http://economistsview.typepad.com/economistsview/2008/03/links-for-20-22.html

March 23, 2008

The Nation: Toward a New Deal
Edited by Mark Thoma

Bill McKibben: A Green Corps
http://thenation.com/doc/20080407/mckibben

Michael J. Copps: Not Your Father's FCC
http://thenation.com/doc/20080407/copps

Andrea Batista Schlesinger: A Chaos of Experimentation
http://thenation.com/doc/20080407/copps

Eric Schlosser: The Bare Minimum
http://thenation.com/doc/20080407/schlosser

Frances Moore Lappé: The Only Fitting Tribute
http://thenation.com/doc/20080407/lappe

Adolph Reed Jr.: Race and the New Deal Coalition
http://thenation.com/doc/20080407/reed

The Rev. Jesse Jackson: For the 'FDR'
http://thenation.com/doc/20080407/jackson

Andy Stern: Labor's New Deal
http://thenation.com/doc/20080407/stern

Anna Deavere Smith: Potent Publics
http://thenation.com/doc/20080407/smith

Sherle R. Schwenninger: Democratizing Capital
http://thenation.com/doc/20080407/duncombe

Stephen Duncombe: FDR's Democratic Propaganda
http://thenation.com/doc/20080407/duncombe

Howard Zinn: Beyond the New Deal
http://thenation.com/doc/20080407/zinn

Kim Phillips-Fein: Hard Times
http://www.thenation.com/doc/20080407/phillips-fein

[ddt]

so *apparently*, according to Dealbreaker, there was a second run on Bear Stearns this week, and that's why Dimon is renegotiating to get rid of the guarantee that was in the original contract:

Why The Bear Stearns Deal Is Being Renegotiated: The JP Morgan Guarantee Wasn’t Working
Bear Stearns Faced A Second Run-On-The-Bank As Counter-Parties Feared Deal Would Fall Apart
http://dealbreaker.com/2008/03/why_the_bear_stearns_deal_is_b.php

The guarantee of Bear Stearns’ liabilities from JP Morgan Chase wasn’t working. Although the banking giant had put its “full faith and credit” behind Bear’s liabilities, some of Bear’s largest customers were refusing to do business with it. Counter-parties were fleeing, and Bear’s collateral was being refused up and down Wall Street. The guarantee, which was intended to keep Bear in business, had failed to provide customers with enough assurance to prevent a second round of the run-on-the-bank that nearly bankrupted Bear, people recently familiar with Bear’s operations are saying behind the scenes. (Guess who those people are!)

Customers were concerned that working out the guarantee would take too long and involve too much uncertainty. People familiar with the operations of Bear say that many customers simply found it easier to take their business elsewhere. They feared that if Bear shareholders rejected the deal, JP Morgan’s guarantee would not get them a quick and “dollar-good” resolution to their trades.

Now JP Morgan is claiming—albeit off-the-record through prominent business reporters—that they were forced back to the negotiating table because of “mistakes” in the contract. The guarantee is alleged to have “inadvertently included” provisions that made it overbroad and survivable even after the rejection of the deal by Bear shareholders. But this is a cover-up, an attempt to take out a provision that at least some of the JP Morgan deal team fully understood. The reality seems to be that JP Morgan wants to rescind the guarantee because it could involve serious costs without achieving the customer-assurance benefits that provided its original rationale.

What’s worse, JP Morgan and Bear Stearns quickly realized that the survivability of the guarantee would allow dissident shareholders to seek other investors while Bear stayed in business under the cover of the guarantee. The provisions of the agreements between Bear and JP Morgan require Bear’s board to continue to cooperate with JP Morgan but do not bind outside shareholders. JP Morgan, which eagerly cooperated with the Fed to buy Bear, did not anticipate the danger posed by shareholders using the 12-month lock-up period to find alternative buyers. If there was a negotiating mistake, perhaps this oversight was it.