Bears Stearns, the Wall Street investment banking giant, is now on life support, being kept alive only by infusions of tens of billions of taxpayer dollars courtesy of the Federal Reserve Board. In the months ahead, it is virtually certain that more of the Wall Street big boys will be pushed to the edge, victims of excessive greed and really bad judgment.

Until about six months ago, Wall Street was at the center of the world-wide neo-liberal push to eliminate government regulation and allow the market to operate unfettered. (This was always more hype than reality as I show in The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer [free download available].)

Things are different today. With the banks on the edge of collapse, the bankers are demanding the sort of government help they would deny to working mothers trying to provide their kids with health care, child care, and decent housing and education. Of course the situation is very different. The working mothers are looking for chump change, the Wall Street boys want real money.

Read more »

I’ve said a few times that the culture wars have distorted the real story of how we ended up with religious freedom. But except in very broad terms, I haven’t stated what I think did happen. Obviously, that’s what the whole book is about so I can only provide an absurdly truncated history of religious freedom in America. Here goes:

America was settled to be a Christian land. To be more precise, it was settled to be Protestant nation. Inhabitants of most colonies prior to the revolution were not interested in religious pluralism or tolerance. They wanted society based on Protestant principles, with a strong mingling of church and state and vigilant antagonism towards Catholicism. Almost all of the colonies tried some variant of state-supported religion and everyone one of those experiments failed. Perhaps the most important flair-ups of persecution came in a few Virginia counties, as they were witnessed by a thoroughly disgusted young James Madison. He and the other Founders looked at the wreckage of these experiments and concluded that official state religions led to oppression of minority religions and lethargy among the majority religions.

Read more »

I'm not sure how to analyze this topic, and invite others to participate. Surely, there's a column here for Dr. Krugman.

Starter theses:

1. Spending $1 trillion over the last 5 years, funded with debt, has contributed to long term interest rates remaining higher than the Fed would like;
2. Incurring additional costs of $1 to $2 trillion in payments including, inter alia, medical care for veterans, military equipment replacement, and new weaponry, also contributes to a higher cost of capital for investment by Americans in America.
3. The extra spending on the war has contributed to inflation in commodities.
4. All this extra governent spending represents a very large opportunity cost: if we had spent even $500 billion

Read more »

Here's a surprise. Just as the superdelegates are breaking for Obama, we suddenly are seeing videos of his minister, Jeremiah Wright, saying all kinds of ugly things.

So the same people who are telling us that Obama is a Muslim and controlled by Islamic law are saying that he's a serious Protestant, controlled by his minister. Come on kids, decide on a story line.

Funny we have never heard about any previous candidate's minister. Billy Graham was spiritual adviser to Ike, Nixon, Johnson, the Bushes and Clinton but nobody pointed out that he was an anti-semite (although his anti-semitism is well documented in the Nixon tapes). And rightly so.

But with Obama, for some reason, it's different.

Read more »

What if you held a hearing, but the people who were most directly affected by the proposals were barred from speaking? That's what happened yesterday.

The Financial Services Subcommittee on Financial Institutions of the House Committee on Financial Services held hearings on credit cards. Congresswoman Maloney (D-NY) has sponsored a bill with 82 coauthors that would outlaw some of the worst credit card tricks and traps. The card issuers were there in full force--complete with an army of lobbyists to pack the audience. The professors--Katie Porter, Adam Levitin, Larry Ausubel and I--were there to try to give the other side.

Our panel was supposed to be the second panel. The first panel was four regular people who wanted to give first-hand information about their experiences with their credit cards. While the reps from Cap One, Chase and Bank of America went on for hours about their customer friendly policies and how much value they provided free to consumers, the people who had different stories were never allowed to utter a single word.

Read more »

With all the buzz surrounding Spitzer and Ferraro this week, as well as the (somehow) ongoing Democratic primary discussion, our little salon here has been bursting at the seams with commentary of all kinds.

Here is a selection of some of the outstanding reader blog posts from the past few days:

Despite the fair amount of coverage that's been given to Barack Obama's relationship to his pastor, Dr. Jeremiah A. Wright, Jr., I hadn't, until today, seen a report as thoughtful, thorough, and critical as this piece from reader FlyOnTheWall.

Reader Matthew K. Johnson makes a plea for a renewed American internationalism, and argues that the perception of America abroad is far more than a "bourgeois" issue, "that only people who have all their other problems solved can afford to worry about."

More after the jump. . .

Read more »

By itself, as a primary voting state, Pennsylvania is not the last minute of a tied basketball game.

The main reason is simple: either Obama or Clinton has a good chance of winning Pennsylvania this fall. So Pennsylvania is not the keystone to deciding who should be the nominee. It is only as important as its number of delegates may be relevant to determining who wins the most delegates; it is not more important than that.

Maybe the Clintons will go so negative against Obama that they harm his chances in Pennsylvania this fall. But so far I see little evidence that even her supporters' most offensive racial innuendo has permanently damaged Obama in the states that have voted. Nor is it clear that if Clinton presents herself as an attacker against Obama that she will be able to bolster, or even maintain her chances in Pennsylvania this fall. There is a cost to attack that is paid by the attacker.

Of course, Obama also could engage in mutally assured destruction, and launch negative campaign tactics against Clinton that could hurt her this fall in Pennsylvania, if she won the nomination. I don't see him doing that. It's not his nature and it doesn't come easily to his campaign. Some think he should be able to go negative more easily, but it truly is part of his broad appeal that he is not innately gifted with the instinct to attack.

Read more »

I'm tired of hearing about Eliot Spitzer's "classical tragedy." I'm not interested in whether he was targeted by Republicans, especially since the TPMmuckrakers seem to have shown fairly clearly that his shady-looking wire transfers drew ordinary oversight attention. I'm a little sickened to read that paying thousands of dollars for sex is all about buying a "positional good"--if I understand Harold Meyerson correctly (and Harold is magnificent on other subjects, but very strange here), the point of paying $5500 for sex isn't that it gives you better-than-ordinary sex, but rather, that the cost itself makes it *higher status* than buying your way into a lower-cost vagina.

Here's what I can't stop thinking about: Eliot Spitzer's daughters ... and the women working in prostitution, who are themselves someone's daughters, and are probably selling their vaginas and other body parts precisely because of their daughterhood.

Read more »

At the end of this Times story describing how the FAA had continued to let Southwest Airlines fly planes for months after their inspection deadlines had passed, Kevin Mitchell of the Business Travel Coalition says that FAA officials constantly refer to airlines as "customers." Mitchell correctly concludes that "the culture there is dysfunctional."

The idea that regulatory agencies exist to serve the industries they are supposed to oversee is deeply held by the conservative movement, and has permeated the thinking and actions of the Bush administration. That mindset has exacerbated all kinds of threats to public health, safety, and the environment. But regulatory agencies are supposed to enforce rules, which means that they are supposed to act more like the agents who caught Eliot Spitzer rather than the woman he hired.

Read more »

Children will be abused. Musicians and songwriters will starve. Telecommunications networks will spiral out of operational control. All of these plagues will be visited upon you unless the telephone and cable companies have unlimited power to snoop into the little data bits you put onto the Internet.

This isn't the National Security Agency pushing yet more intrusion into pieces of our lives we thought private. These are well-meaning, but ill-comprehending (some purposely) types who want a benevolent Big Brother. There are two ways to stop them while proving them wrong. Maybe three. One is making sure the Internet stays neutral and so that the carriers don't control your content. Another is to create more competition for Internet services. What we have now is a disgrace. Those are the easy ways. Then, there's the hard way.

Read more »

In a week we will enter the sixth year of our War In Iraq. As some of my correspondents have pointed out the “manufacturing of consent”, first elucidated by Walter Lippmann in Public Opinion, has been marginally successful in that the Pew Center now reports that 53% of the public believe we will ultimately “acheive our goals in Iraq.” Would it be churlish of me to ask what goals?

Would those be President Bush’s goals of a model democracy that causes an spontaneous overthrow of all the authoritarian regimes of the Mid East? William Polk, who lived in Iraq has an answer.

Read more »

Many of you commented that the Founders’ religious beliefs did not determine their approach to separation of church and state. I agree. So let’s turn now to the big question: what DID the Founders believe about separation of church and state?

First, there’s no such thing as “the Founders.” They disagreed with each other on a number of key points. John Adams and George Washington supported more church-state mingling than did Jefferson and Madison. Crucially, while some folks back then seemed to use the term “establishment” to refer to official state religions, Madison for one thought it meant something much broader. During the fight in Virginia over state support of churches, he referred to tax subsidies for religion as being “an establishment,” just as dangerous ultimately as an official church.

Second, though it’s certainly interesting and important what the Founders believed on this – hell, a lot of my book is about that topic – that alone doesn’t determine what the law is on separation of church and state.

Read more »

Eliot Spitzer’s resignation is a tragedy in the strictest classical sense: The legal substance of his offenses pales before his stupidity, hypocrisy, and, yes, immorality in committing them. The legal substance pales also before the damage his character flaws have wreaked upon the public's need -- and, in his election 14 months ago, its hope -- for real government and market reform.

Since Spitzer, the former prosecutor and world-class public moralist, knew that high-priced prostitution rings often swim in organized crime and function as staging grounds for blackmail of prominent people, he has ended his public life perversely incarnating Henry Kissinger’s already perverse observation that “Power is the greatest aphrodisiac.”

But while Spitzer brought this on himself, that doesn’t let his Republican inquisitors entirely off the hook.

Read more »

House Speaker Nancy Pelosi and prominent Democrats (the most vocal being in the Washington State delegation) are slamming John McCain for his role in opening the door to competition from a U.S.-European partnership that recently won a major deal to provide aerial refueling tankers for the Air Force. The main thrust of their critique is that the victory by this team will cost American jobs (many of them in Washington State, surprise, surprise!). But rushing to criticize McCain on the basis of pork barrel politics is not the way to gain the high ground on defense policy, to put it mildly.

Read more »

“But you are a sneaky bastard, just the same. You tweaked the passions with your first installment and enraged them in your second, all without comment to the fire spitting from the belly of our collective beast of burden, the search for truth.”

Guilty as charged. I did start off with two provocative fallacies without shedding all that much light on why this has anything to do with the birth of religious freedom. The main reason I did that (besides hoping to get your attention) was this: the culture wars have distorted the birth of religious freedom and also the Founders’ beliefs.

There’s a common script we see all the time. Conservatives tend to argue that a) the Founders were orthodox Christians and b) that they therefore opposed real separation of church and state. That’s a non-sequitor, and one that would be rather confusing to the Founders. In the 18th century, some of the biggest advocates FOR separation of church and state were the evangelical Christians, especially the Baptists of Virginia and Massachusetts.

Read more »

In this week's reader blogs, David Seaton takes a comprehensive look at the problems facing the next president, from far-flung and superfluous military bases to a domestic infrastructure in decline.

Reader ghaon argues that the Dems' protracted nomination race actually works to their advantage.

Man MKE looks at some striking disparities between the post-exposure treatment of Republican and Democratic johns.

More after the jump. . .

Read more »

Here’s one definition of the middle-class squeeze: it’s the gap between middle-income families’ economic aspirations and their means. And one way that gap expands is when just paying for basic necessities uses up too much of the old paycheck. Obviously, energy prices have been a widely appreciated part of this story. But the recent increase in food prices deserves equal time in any discussion about the squeeze.

The figure below shows two countervailing trends (click on image to enlarge):

Read more »

Forget Obama as Vice-President-- the real conventional wisdom is that Hillary Clinton wouldn't take the VP slot. But the most obvious analogy to this year's campaign is the "inexperienced" JFK beating out the experienced Lyndon Johnson in the 1960 primaries. The view then was that LBJ wouldn't take the VP slot, but he did. And exactly for the reason that it put him so close to the Presidency that any slip of fate would land him with the top job.

As the Elliot Spitzer debacle underlines, top executives do end up in trouble far more often than people expect. For Clinton, the reality is that she won't increase her likelihood of getting to the Presidency if she waits it out in the Senate. So the "LBJ scenario" for Clinton is unfortunately her most likely path to the Presidency, a ghoulish reality, but then the VP job description is all about being prepared for ghoulish circumstances.

It isn’t only New York Gov. Eliot Spitzer who's had a big decision to make these past couple of days. So have Republican federal prosecutors, if they lack proof he misused public funds while patronizing a high-priced prostitution ring.

True enough, even if it's about prostitution alone, the Spitzer scandal is a perfect hit for the U.S. Attorney – ethically and politically as well as technically in legal terms. When Spitzer was New York’s Attorney General, he inveighed so righteously against prostitution rings that, on that precedent alone, he has to resign.

But something else shadows this case besides Spitzer’s hypocritical moralism and even his bionic assaults on the corporate malefactors whose indictments brought him his fame and raised genuine hopes of reform.

There’s also the specter of Republican partisan revenge via politicized prosecutions. That thirst for political revenge is huge, but spending enormous federal resources against prostitution to get it isn’t very right in ethical and moral terms, even if it hoists Spitzer on his own petard.

Read more »

In my last post, I mentioned the number one "liberal fallacy." Here is one of the common conservative myths: "Most Founding Fathers were serious Christians."

Of course it depends on how one defines the term, but if we use the definition of Christianity offered by those who make this claim – i.e. conservative Christians – then the Founders studied in this book were not Christians. Adams became an active Unitarian, rejecting much Christian doctrine. And Franklin, Jefferson and Adams abhored the Calvinist idea that salvation was determined by divine preference rather than good works. Madison and Washington remained the most silent on matters of personal theology and continued to attend Christian churches but in their voluminous writings never seemed to speak of Jesus as divine. If they must wear labels, the closest fit would be “Unitarian.”

Jefferson & Franklin overtly rejected the divinity of Jesus. Jefferson loathed the entire clerical class and what had become of Christianity. It's really quite amazing to read Jefferson spew venom toward religious leaders. Imagine a president saying some of these things today:

On the Apostles: "ignorant, unlettered men" who laid "a groundwork of vulgar ignorance, of things impossible, of superstitions, fanaticisms, and fabrications."

Read more »

After five years of watching "The Wire," I confess to a fear of experiencing withdrawal symptoms. The series ended as it began, with a scathing expose of the corruption that exists among drug dealers, and inside the police department, the school system, local politics and the newsroom. With Dickensian detail, the series portrayed why the few who seek social justice and transparency will always be discredited by those who lust after greed and power and why those who ask what is fair will always be destroyed by those who crave dominance over others.

Read more »

He didn't resign, there's word of indictments but no confirmation, The New York Times says he's Client #9. I have no words, do you?

People across the political spectrum are now running to the government demanding that it rescue the banks and financial industry from the fallout from the collapse of the housing bubble. Some are running to the front door, demanding that the government buy up or guarantee tens or hundreds of billions of dollars of bad mortgage debt. Others, specifically the big New York banks, have gone to the backdoor and are getting hundreds of billions of dollars in cut rate loans from the Fed in secrecy through the Fed’s new “Term Auction Facility (TAF).”

With so many people on all sides of the political spectrum desperately seeking the government’s help, those of us in the sidelines have to ask: “whatever happened to the free market?”

Read more »

The idea for this book came a few years back after I'd gotten a blizzard of e-mails of culture warriors on the left of right, each quoting a Founding Father to prove whatever point the activist was making. One day it would be a conservative using a quote to prove that this was a Christian nation. The next it would be a progressive highlighting a different quote proving the Founder's commitment to separation of church and state.

It felt a bit like a custody battle for the Founding Fathers, and prompted me to get curious what really happened. So, the meta-premise of my book, Founding Faith, is that the culture wars have utterly distorted the history of how we ended up with religious freedom in America. Though the book is written mostly has a historical narrative – starting with the settling of the New World and ending with the Founders in retirement – along the way it argues that several of the most common assumption about the Founders and religion are wrong. In each post this week, I'll address a different myth.

Liberal Fallacy #1: Most founding fathers were Deists or secular.

Read more »

New York Times: Countrywide Financial is on the receiving end of a federal securities fraud investigation.

Little information is available at this early stage, but the investigation is about whether Countrywide misrepresented its financial health in its SEC filings. Cold comfort to Countrywide borrowers who lost their homes, but both the FBI and SEC are involved in what is only the latest in a string of legal and financial problems that may prove fatal to Countrywide’s existence or to its pending acquisition by Bank of America. The Financial Times reported that BoA is experiencing political pressure to discontinue the acquisition.

Until recently, if someone entered formal credit counseling, the card companies would often cut interest rates to zero to keep the customer paying. No longer, reports BusinessWeek. Pay it all, and pay it now.

This tough attitude has at least three implications for the short term future of the economy:

Read more »

The latest jobs data leaves little doubt that the economy is headed into recession. Excluding the health care and restaurant sector, the private sector has been shedding jobs at the rate of more than 90,000 a month since November. Even a mainstream economist can recognize this as bad news.

With the economy headed down, many people are looking for someone to blame. Some have turned to the Iraq War, which is now costing in the neighborhood of $180 billion a year (@1.2 percent of GDP). While spending on the war has been harmful to the economy, it is not the cause of the recession.

The cause of the recession is crystal clear -- it is the collapse of the $8 trillion housing bubble.

Read more »

I have to get this post off my chest. That way, after tonight's finale, I can write effusive and fawning things about the fact that The Wire is The Most Important Television Show Ever with a clear conscience.

The genius of The Wire is that it pushes us to look beyond the comfortable concepts of hero and villain that populate most TV fiction. David Simon and his team of writers ask us to see virtue and flaw in every character, and they demand that we understand the institutional arrangements that define the choices each is making. The "blame" for social problems is shared, not artificially embodied by a super-villain without whom the rest of the characters could live happy, fulfilling lives. And the "solutions" are hard to come by, not brought to us by a knight on a white horse.

But this season's media critique has been a disappointing exception.

Read more »