Cobb

Preparing for Implosion

For the life of me, I cannot remember the name of the general who was nominated to be VP who turned out to be an inarticulate boob in front of the cameras. He was politely shuffled off the podium and took down his sponsor's candidacy. Was it Eagleberger? I can sort of see his face and uniform but his name... ah.

Well nobody can forget Sarah Palin's name, because we're a tough crowd. A sometimes bloodthirsty crowd that doesn't mind going for the jugular, or the jugular of the daughter, or the baby. And so tonight in the debate between Joe Biden, who really cannot shutup, and Sarah Palin who hasn't said one thing of import or note since her nomination is sending shivers up my spine. It's likely to be a cringe-fest of infinite dimensions. And in the end, I think there can only be one winner, Joe Biden.

Palin can only win by talking common sense and being herself. Except that we are in the midst of a complex finanical crisis that cannot be explained through analogies. There's nothing homespun about this - and the next person who says "Main Street" I am going to crucify. Furthermore, time's up for the common sense and appeal - that moment was completely lost on Katie Couric, or so I've been told. Palin has not become America's sweetheart and time's up for being cool. It's time for the throwdown. Let me put it another way. Palin can only win if she steps inside of the sense of time of the city slicker like the yokel in that famous poetic battle.

It's going to be insider vs outsider, and I am prepared for the worst.

Why, because Palin has been gagged and bound and second-guessed. She has surprised no-one and turned out to be exactly what her supporters expected, meaning nothing more and nothing less. Most disappointingly she hasn't been able to come out swinging like she should have - I see no grit and determination here. We can't handle the truth, and we are not prepared for Palin to bring it like Colonel Jessup. She will have to bitchslap Biden around, and Biden will simply sit up there and issue smug smiling effusive erudite turds of diplospeak. I see it all now. Ewww.

On days like this I wish I had spent all of my excess mental energy studying how to make money on Wall Street... then again, I'd still be at the mercy of clods like these.

The Locus of Black Political Power

Spence notes that "The story is really about the nature of democratic discourse within black communities now that Obama has a legitimate shot." I say nothing changes at the local level. For Obama to go from community organizer to Senator is exactly the cherry picking path of black cultural capital, but there's a difference between cultural capital and political patronage. I say blacks are often still in a political stone age because so little of black grass roots activism matures through the normal paths of power in America. Maybe that's why blacks don't understand Sarah Palin - there's nobody black like her except for Doug Wilder, and he had to be Sidney Poitier.

I've argued that Obama's candidacy, win or lose, takes the national spotlight away from the group formerly known as the Civil Rights Establishment - because Obama has worked his campaign magic without any apparent need for their consent or approval. Aside from that, he simply outclasses them in terms of American political savoir faire. You don't get to be editor of the Harvard Law Review, not having written a single article in it, without having some extraordinary political skills.

As much as I think Obama has collected the last bushel of cherries to be picked for 'first blacks' there are still several trees left on the Right side of the political spectrum and perhaps for Blue Dogs as well. It leaves open the question of what the average hard working activists, pundits and other politicos are to do whether or not Obama wins the White House.

An underlying assumption that I have here is that the past two decades of CBC legislation has been all about nothing and the reason that there is no national black political agenda. That is to say no agenda other than spreading racial fear and distrust of the GOP - in the face of the destruction of Trent Lott, Ron Paul and George Allen over racial remarks. The reality is that Jena has little to do with anything other than Jena, and the journalistic coattails of any major media editor who decides that 'the blacks' need a little more coverage. The incredible success of Obama demonstrates how little has been articulated as a black political agenda.

Tavis Smiley deserves credit here in highlighting by Obama's dismissal of his Covenant with Black America how unconnected are the real political games at the national and local levels. But this also brings to light a deeper issue that as far as I know only Lani Guinier has the temerity to address - as little as she counts nowadays. That is that the creation of majority minority districts as a consequence of Civil Rights agitation has created the net national circumference of black political action. If Maxine Waters isn't whispering in the ear of the Clintons, then nothing is happening for South Central, and this monopoly of black political power established a generation ago has yet to be updated and reformed. Except by the GOP which has dynamically attacked those districts for partisan gain. In other words, black national political representation is deadlocked and moribund in the Democratic party because the same incumbents and their designees have had a deathgrip on minority voting districts since their inception. Hell, I was DJing for Maxine Waters receptions when I was 19. I'm 47 years old.

I think the overwhelming majority of black Americans who pay attention to him would say that Tavis Smiley is certainly qualified to be governor of a state. So what state is it going to be?

The Best Take on the Origins & Effects of the Current Financial Crisis

I've had a pretty good understanding with most things right about this financial crisis, but this piece fills in several blanks. Although I understood that teaser rate mortgages and ordinary ARMs were a big part of the problem, I still don't know what percentage of those were offered at subprime, and non-conforming loans. Therefore it is difficult for me to understand (still) how much the insolvency of the GSEs was part of mismanagement there and how much was not their fault at all.

Still, the best summary I've seen is this one by someone with no name. The author makes no distinction between perjorative 'teaser-rate mortgages' and ARMs (adjustable rate mortgages), but the incentives for banks and brokers to sell them has always been the same. With Greenspan lowering interests rates, sooner or later those rates would come up - certainly within the lifespan of a mortgage - and those loan originators would want to get the benefit of those higher interest rates. So instead of fixed rate mortgages, they would sell ARMs knowing that more cash would be forthcoming as they adjusted.

The best (and scariest) part here is the description of the extent of the toxic chains.

If the loan is secured (as mortgages and many other links in debt chains are), the lender is typically less interested in the creditworthiness of the borrower. The lender relies primarily on the collateral, not the borrower, for assurance of repayment.

As a result, each financial intermediary can be thinly capitalized. So a company with $10.1 billion in assets and $10 billion in debt may have a small amount of net equity. Indeed, the more thinly capitalized a company, the higher the return it can make on its capital.

Unfortunately, what this means is that when A’s mortgage goes bad, it’s not just the loans up the chain that go bad – financial intermediaries in the chain often go bust as well. A thinly capitalized intermediary cannot absorb many losses. And that is why teaser-rate mortgage defaults triggered and are still triggering defaults and failures across the entire financial sector. Almost everyone was in the debt-chain business and extended themselves to the max to take advantage of the extraordinary profit opportunities of that business.

I’ve explained the transmission mechanism in terms of debt because readers have an intuitive understanding of how debt works. In fact, however, many of the most important links in the chain were not technically “debt.” Some were shares in “mortgage pools”; some, “derivatives”; some, “credit default swaps.” What they all had in common was that each transferred some risk of default up the chain to someone else. Wall Street sometimes calls links in such debt chains “toxic waste,” because today no one wants them.

Why is this scary?

..at least $500 billion more of teaser-rate mortgages are scheduled to reset over the next several years. In all likelihood, they too will go into default and become toxic waste. Nothing in Mr. Paulson’s original proposal was intended to do anything about this next $500 billion installment – or, indeed, to prevent lenders from making more teaser-rate mortgages in the future.

Similarly, Mr. Paulson’s proposal was not intended as a general Wall Street bail-out, although to some extent it would have had that effect. Note that the outstanding overhang of credit default swaps alone is estimated to be between $45 and $60 trillion – three to four times the size of our annual gross domestic product. The requested $700 billion, although the single biggest appropriation request in U.S. history, was miniscule when compared with the toxic waste problem as a whole. Mr. Paulson’s proposed solution was to cost just 1% of the size of the problem and was aimed only at a small part of that problem. (It is unnerving to realize that the U.S. government – the “beast” we have been starving for so long – may now lack the borrowing capacity to solve the problem as a whole. We need to get our financial house in order.)

Yike, and double yike.

The Best Take on Congressional Dodgeball

The best take on Congressional dodgeball is Patterico's.

John McCain set up a dramatic moment where he would come in and save the day by convincing Republican lawmakers to support the bailout. But he made this move in a Congress completely controlled by Democrats.

And the Democrats clearly didn’t like it. Harry Reid demanded to know where McCain stood on the bill — but after McCain surprised Reid with his overly dramatic campaign “suspension,” Reid told McCain he wasn’t needed. He told the press that McCain wasn’t being helpful or even articulate in the meetings.

McCain worked the phones, while Obama didn’t call a single Democrat lawmaker. McCain reportedly turned around about 60 lawmakers. It wasn’t quite enough.

People are now arguing about where the blame lies. Democrats point out that Democrats supported the bill, while Republicans opposed it. Also, we’re told, Republicans promised a certain number of votes, and didn’t deliver. Meanwhile, Republicans point out that Democrats controlled the chamber. If they really wanted a bill passed, a bill would have passed.

Who’s right? I don’t know. But I remember hearing before the fact that Democrats didn’t want to pass the bill without a majority of Republicans in favor. Did they change their minds?

And isn’t it odd that this all ends up making John McCain’s gesture look empty and incompetent?