Gideon Levy is a courageous Israeli columnist who tells his fellow citizens what they do not want to hear.

In today's piece he describes life in Israel as a party, unaffected by what the occupation is doing to millions of people just a few miles away.

"The Israelis don't pay any price for the injustice of the occupation, so the occupation will never end. It will not end a moment before the Israelis understand the connection between the occupation and the price they will be forced to pay. They will never shake it off on their own initiative, and why should they?

There is no "understanding among the Israelis about the connection between cause and effect - between occupation and terrorism." Israelis only know that "Arabs were born to kill, the whole world is against us, anti-Semitism determines how Israel is dealt with, and there is no connection between our actions and the price we pay."

"Neither an international blockade nor terrible bloodletting appear to be on the horizon, to our great fortune. So why should we worry? It's true that the world is beginning to scowl at Israel. So what? The world hates us anyway, Israelis are convinced. As long as they are not deprived of the world's pleasures, there is no reason to worry. Try to ask them why they are ostracized and you will immediately hear scorn about the world, rather than any self-criticism, God forbid. The Israelis are not only enjoying themselves. They are also very satisfied with themselves - over their level of morality and that of their army and state."

Nice.

The WaPo reported that the company making Crocs is going down and Rob Horning, Patrick Appel and Ezra Klein are treating this as the just desserts for an ugly shoe that representing a fad in the bubble.  But while the company may have made business mistakes, the Crocs story is one of shoes based on new technology and designs that protected kids' feet from injury and infection (based on antimicrobial foam) which became fashionable largely in an anti-fashion statement.  As to why the company is running into trouble, there is the story of overexpansion, but then there's this from the WaPo story:

they were a cheap investment (about $30) that felt good and promised to last forever... the problem with a nearly indestructible product is that shoppers rarely need to replace it...Who needs a second pair of Crocs in a recession, particularly when the first pair is holding up just fine?

So you have a company based on new technology that delivered value and is running into problem because its product is too durable?  Not a company that should be condemned or lumped in with bubble-based financial firms or other luxury fads of the last few years.

I'm definitely not suggesting there is nothing to be done. In fact, in the Washington Post today I offered up several suggestions for positive steps Congress could take.

Innovation in any sector disrupts the rules of the game as they previously existed. This is not just the case in financial markets, but everywhere there's innovation (look at how software and telecom innovation booms re-wrote the rules of our IT economy -- there was a stock market bubble then, too, as investors felt there way somewhat blindly toward the limits of new market realities). Periods of rapid innovation prompt markets over time to make sometimes painful adjustments. Often there is a role for a prudential regulatory response.

What is frustrating in the present moment is the political economy involved. Regulators have not bothered to consider the role poor regulation played in generating the bubble. The politically expedient thing to do has blame everyone but themselves. This is not to say regulators alone were the problem. But you are never going to stop financial innovation (or innovation in other sectors) and nor should we. Despite this, I am still hopelessly naive enough to believe we can prod regulators to make better decisions over time.

It had to happen. Once the right wing of the pro-Israel community in the United States--and their Israeli allies--realized that President Barack Obama was serious about pursuing peace, they would go on the attack.

Fortunately, the most virulent attacks have been limited to the extreme right in both countries. These are the same people who attacked Obama with vitriol during the campaign. For them, it was enough to know that he is black, had a Muslim father and had said that the United States should be an "honest broker" in its dealings with Israelis and Palestinians.

The extremists hated him before he was elected and they hate him even more now. The Cairo speech received universal acclaim except from those who clamor for a war of civilizations with Islam.

Add to that President Obama's demand that Israel lives up to its commitments regarding the settlements and you have all the ingredients necessary to drive the right mad with rage.

And others too. Some "mainstream" leaders have expressed "concern" that the anti-Obama view has spilled over to more normal pro-Israel types. They say that they are hearing anti-Obama rumblings from their friends.

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The Myth of the Rational Market recounts the rise and fall of the idea that financial markets are rational, all-knowing entities. I argue in the book that the idea arose in part in reaction to the consensus among respectable American intellectuals from the 1930s through the 1960s that markets were nutty and government regulators were benign and all-knowing (I know, I know, I'm wildly overstating that consensus).

Now the pendulum is swinging back, and both Matt Miller and Nick Schulz, writing here earlier this week, fear that we're going to overdo it. Matt worries that an overemphasis on the nuttiness of financial markets will blind us to the benefits of financial innovation. Nick worries that an overemphasis on the nuttiness of financial markets will blind us to the nuttiness of regulators.

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If ever there was a reason to support the Change Congress organization, it was in three stories in today's paper. Larry Lessig and his partners have maintained since the start of their campaign to change the campaign financing system, that the current power of special interests completely distorts our legislative process. Cases in point:

Lockheed-Martin and Saxby Chambliss-Lockheed doesn't want the F-22 gravy train stopped and since they assemble it in Georgia, Senator Chambliss is happy to jam more F-22's down the Pentagon's throat, whether they want them or not.

Mr. Chambliss said the concern about losing military jobs had also been important, particularly for senators who are "on the fence." Lockheed Martin Corporation assembles the plane in Mr. Chambliss' home state, in Marietta, and uses suppliers in 44 states.

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David Kurtz on the front page asks "If you take card check out of EFCA, what's left?"

Actually, quite a lot.  Let's rename the bill, the "Prevention of Illegal Firings Act" (PIFA) and it's still important labor law reform.  The New York Times story David referred to cited a proposed compromise, where majority signup provisions would be dropped, but elections would be held within five days, employees could not be forced into mandatory meetings, and unions could campaign on company property during the election period.  So what's that add up to in a typical election campaign (see below the fold)

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We are now hearing the drumbeat of opponents of the federal recovery bill now rushing to declare the plan a failure, despite most economists believing that any stimulus was always expected to take time to reverse an economic crisis driven by years of unregulated financial excess and of misguided D.C. fiscal policies.  As a Wall Street Journal report detailed, a survey of 51 economists found that that "53% of respondents said [the recovery plan] has provided somewhat of a boost but that the larger effect is still to come."

Debunking Attacks on Stimulus:  But what is clear is that the
recovery plan has already helped the economy avoid an even larger
catastrophic tailspin by helping states avoid mass layoffs and allowing
them to plan for job creation programs that will bear fruit over the
next year.  The Center on Budget and Policy Priorities (CBPP) outlines in Correcting Five Myths About the Stimulus Bill why the critics of the stimulus are ignoring reality and just trying to score political points:

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Had enough of Michael Jackson's afterlife here on earth? I sure have, and I tuned out 99% of it. But some 31 million people watched his memorial service on 19 channels, and Chris Hedges explains why that's scary in a brilliantly written column at Truthdig. Yet Hedges' accounting falls a bit short in a way that's as dangerous as the choreographed swooning he so rightly condemns:

"In celebrity culture we destroy what we worship. The commercial exploitation of Michael Jackson's death was orchestrated by the corporate forces that rendered Jackson insane. Jackson, robbed of his childhood and surrounded by vultures that preyed on his fears and weaknesses, was so consumed by self-loathing he carved his African-American face into an ever-changing Caucasian death mask and hid his apparent pedophilia behind a Peter Pan illusion of eternal childhood. He could not disentangle his public and his private self. He became a commodity, a product, one to be sold, used and manipulated. He was infected by the moral nihilism and personal disintegration that are at the core of our corporate culture. And his fantasies of eternal youth, delusions of majesty, and desperate, disfiguring quests for physical transformation were expressions of our own yearning. He was a reflection of us in the extreme."

Hedges grows even darker, damning the satanic corporate minions among us:

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A theme running through the comments of Justin, Matt, and Daniel is the supremacy of irrationality and chaos over enlightened order. I tried to say that this is a fundamental misconception of our problem. I will try again.

There is no lack of irrationality on offer in the behavior of those who make up "the market." And the consequences certainly entail chaos. But the historical record of bubbles is too long and repetitive to ascribe behavior to individual deficiencies. This has happened before. People knew it, people could anticipate it happening again (if not the actual timing). We can know with certainty it will rain again without know the day.

What's missing from the meliorist framework of my fellow bloggers is the concept of Power. We're getting progressivism when we need populism.

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China released figures showing that its GDP grew at a 7.9 percent annual rate in the second quarter. It's growth is projected to accelerate further in the second half of this year. While this rate is still down from its growth rate prior to the downturn, there are few countries that would not be ecstatic over a growth rate close to 8.0 percent.This growth rate is especially striking, since China has seen its export market in the United States, and elsewhere in the world, collapse during this period.

What's the secret to growth in China? Stimulus; they threw lots of money at the problem. The government promised to spend $650 billion over 18 months to boost the economy. This would be the equivalent of a stimulus package of $2.3 trillion in the U.S. economy.

Big spending had big results. Now China's economy will be shooting ahead while the U.S. economy will be struggling with rising unemployment rates. If only we could export our Blue Dogs and deficit hawks to China, we might be able to compete.

Besides Goldman Sachs, the Street's other surviving behemoth is JPMorgan. Today it posted second-quarter earnings up a stunning 36 percent from the first quarter, to $2.7 billion.

The resurgence of JPMorgan and Goldman Sachs gives both banks more financial clout than any other players on the Street -- allowing both firms to lure talent from everywhere else on the Street with multi-million pay packages, giving both firms enough economic power to charge clients whopping fees, and bestowing on both firms even more political heft in Washington.

Where are the antitrusters when we need them? Alternatively, why isn't the government charging Goldman and JPMorgan a large insurance fee for classifying both firms as "too big to fail" and therefore automatically bailed out if the risks they take turn sour? Instead, we've ended up with two giants that now have most of the casino to themselves, are playing with poker chips backed by taxpayers, and have a big say in what the rules of the game are to be.

When JP Morgan repaid its federal bailout of $25 billion last month it was, like Goldman, freed from stricter government oversight. The freedom has also allowed JP, like Goldman, to take tougher and more vocal stands in Washington against proposed financial regulations they dislike.

JP is mounting a furious lobbying campaign against regulations that would funnel derivatives trading through exchanges where regulators can monitor them, and thereby crimp JP's profits. Now the Street's biggest derivatives player, JP has generated billions helping clients navigate these contracts and assuming counter-party risk in such transactions. Its derivatives contracts were valued at roughly $81 trillion at the end of the first quarter, representing 40 percent of the derivatives held by all banks, according to the Office of the Comptroller of the Currency. JP has played down its potential risk exposure from these derivatives contracts, of course, but anyone who's been paying attention over the last ten months knows that unregulated derivatives have been at the center of the storm.

The tumult on the Street has also given both firms extraordinary market power. That's where much of the current profits are coming from. JP used the crisis to snap up Bear Stearns in March and Washington Mutual last fall, with the amiable assistance of the FDIC. The deals have boosted JP's dominance in retail banking and prime brokerage, enabling it to charge its corporate clients heftier fees for lending and other financial services, and to corner more of the market in fixed-income and equities. JP also bolstered its earnings by helping other financial companies raise capital following the stress test results in May.

Antitrust law was designed to prevent just this sort of market power and political heft. The Justice Department or the Federal Trade Commission should investigate the new-found dominance of Goldman and JP -- and, if warranted, break them up. Alternatively, Congress should impose a surtax on the newly-exclusive group of Wall Street firms, most notably Goldman and JPMorgan, which are now backed by implicit government bailout insurance guaranteeing that, should they get into trouble, taxpayers will keep them afloat. The surtax would approximate the economic benefit to these firms of such government largesse, which I'd estimate to be at least 50 percent of their profits from here on.

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Today, Israel Policy Forum released a policy paper developed by 15 academics, analysts, and former government officials from the US. This paper was created in the wake of President Obama's Cairo Speech, and the Iranian elections and protests. Among the signatories: Ambassadors Sam Lewis, Robert Pelletreau, and Edward Walker, Congressman Mel Levine and Steve Clemons of the New America Foundation and Prof. Steve Spiegel of UCLA.

It is a serious paper and worth reading. Disclaimer: I work for IPF so I am not disinterested. But, even if I didn't, I would endorse most of the ideas here.

Over the years IPF has become the preeminent publisher of facts -- published roundtables, essays, monographs, reports -- about the peace process. As most TPMers know, I write IPF Friday -- IPF's hard-hitting opinion pieces -- but I leave the scholarly work to the scholars, of which IPF has many. This is one of a series, all of which can be received by contacting IPF.

Here is the paper in its entirety:

Dan Gross's wonderful account of the strange intellectual habits of economists and business-school profs brings to mind an experience I had back in the bull-market days of the late 1990s.

I had been assigned to write an article for Fortune about what was called "earnings management," the practice by which corporations massaged their quarterly earnings to meet the targets set by Wall Street analysts. In process of researching it, I spent some time reading through the relevant accounting literature. It turned out that lots of accounting professors had noticed the tendency toward smoothing earnings and using suspect means to meet analysts' targets. But because they all started from the efficient-market-based assumption that such shenanigans couldn't possibly affect stock prices (because rational investors saw through all that), they advanced all sorts of unconvincing partial explanations for why corporate executives would engage in such practices--loan covenants, bonus targets, etc. They couldn't bring themselves to suggest that maybe, um, executives were massaging earnings in hopes of goosing their company's stock price.

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I've discovered this from hard experience.

If I go out to speak to Jews in college or in their 20's and 30's about Israel. I'll get an enthusiastic response. But if the event is dominated by seniors -- as most Jewish events are -- I'm in big trouble.

Young Jews are either dovish on Israel or, most commonly, not interested in Israel at all (that latter group tends not to show up). But Jews in the 65-100 year old range skew heavily to the right. When I spoke in Rhode Island recently, I think I would have been murdered by rampaging (and racist) seniors if Lincoln Chafee had not been there to offer me ex-senatorial protection.

Why are young Jews so dovish on Israel (or indifferent)? Simple, they do not buy into the ethnic solidarity thing that the WW2 generation adheres to. They are friends with all kinds of people. They are not ethnic chauvinists or racists. They like the nice things about being Jewish (the culture, faith, food, the good parts of Israel) but do not buy into the paranoid "the whole world hates us" shtik. They are Americans. They aren't scared. And, with rare exceptions, they would not go near the mainstream Jewish organizations with a mile long pole.

Here is Isaac Luria, 26, who is the brains behind J Street's communication operation explaining his people to the rest of us here. In Isaac's words: "Consider, for a moment, the world in which my generation is growing up. Previously well-defined boundaries between ethnicities, religions and countries are blurring."

As Whitney Houston taught us :-), "I believe that children are our future."

Thank God.

Justin's book provides an excellent narrative history of how the notion of rational markets came to dominate the academic study of finance (and economics), and then spread into the massive, highly leveraged finance sector, with disastrous results. With a few notable examples, the amazing thing to me is the general absence of irony, self-awareness, and humility among the financial-economic complex.

Anyone who has read any significant amount of history knows that models are always upended, that all sorts of inefficient, whacky things happen, that economic discontinuities are commonplace, and that institutions and countries are frequently led by irrational people doing irrational things.

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It's the most blatant form of Robin-Hood economics ever proposed. The universal health care bill reported by the House yesterday pays for the health insurance of the 20 percent of Americans who need help affording it with a surtax on the richest 1 percent.

I don't recall the last time Congress came up with such a direct redistribution. Occasionally Congress closes a few tax loopholes at the top and offers a refundable tax credit to workers at the bottom, or it creates a poor people's program like Medicaid, paid for out of general revenues from a progressive income tax. But to say out loud, as the House has just done, that those in our society who can most readily afford it should pay for the health insurance of those who cannot is, well, audacious.

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Since the beginning of the Reagan era this country has engaged in a deceitful dialog about taxes. It's getting worse not better. Yesterday the House announced a planned surtax on incomes over $500,000 to pay for the Health Care Plan. This is just dumb. Why can't they just raise the top rate back to where it was in 1984? Look at where it was in the 1950's thought of as the golden age of American prosperity.(Chart above)

On Energy, we have the same problem. We are going to try to institute a very complex Cap and Trade system that will be gamed by companies like Enron did, all because we don't have the political courage to impose an energy tax at the source.

Why can't the Democrats realize that Grover Norquist and The Club for Growth are political eunuchs? The American people would rather have simple straight-forward solutions to these problems.

The level of political cowardice in Washington today is mind-boggling.

You have to give Israel credit. There are few countries in the world where soldiers would go public with stories like these. Of course, not that many western countries engage in this kind of thing either.

The crimes described are indefensible and utterly horrific. Read today's account by Gershom Gorenberg in The American Prospect.

Expect silence from our government. Of course, we are covering up the Bush-Cheney era war crimes. Why would we speak out about Gaza?

As for the mainsteam pro-Israel organizations here, they will either defend this behavior, deny it happened, or look away.

Plus, IDF promotes military commander responsible for Gaza atrocities from Ha'aretz.

I think one of the key points to take away from Justin's indispensable book - and from this exchange thus far - is that we're too often peddled a phony choice between "big government" and "free markets." A wise society should be looking to find the right balance of both to serve its goals - and asking private and public sectors to focus on what each does (or could do) best. Government should set the right "rules of the game" in terms of creating incentives within which competition, greed and so forth work their invisible hand magic. Government is also good at cutting checks, so income supports like Social Security that serve social goals make great sense. And only government can make the public investments that support growth (via infrastructure, basic R & D, etc). The private sector is good at creatively optimizing financial outcomes whatever the rules may be, and at innovating endlessly to offer better products and services at lower prices. Most of our political life is the story of the fight over the proper balance between these forces in intelligent governance; Justin's book is the story of how a misguided idea was able, thanks to various factors, to acquire undue and ultimately dangerous influence in tilting this balance away from a sensible role for regulation.

But there's a risk that the pendulum could swing back too far now the other way. There's a great scene in the last page of Justin's book that offers an intriguing flavor of the big picture here. Robert Shiller, the Yale finance guru, notes that medicine passed the threshold of doing more good than harm to society around 1865. Justin asks him "what about finance?" Shiller's answer is that finance is way ahead, because even with the meltdowns we've seen, financial innovation in recent decades has been a huge net positive for the economy. And, he adds, we've still got a long way to go to develop the technology of finance to make its social contribution greater (and hopefully stabler).

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Take a step back and applaud the accomplishment of the House health care bill released yesterday-- three committees agreed on a consensus draft backed by the leadership of the body. And there looks to be a majority in the House ready to pass it largely in this form and a President praising the results. If we lived in a normal democracy, that would be it and we'd have national health care. Since instead, we live in a deformed country saddled with a Senate where a minority of Senators from tiny states can block reforms, there's more drama to come. But still, it's an amazing milestone worth celebrating.

And the details are impressive, promising according to the CBO 97% coverage of legal nonelderly population with budget outlays of $1 trillion over the next decade-- right on the budgeted number. The key successes:

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The Likud right is really hurting. President Obama had 15 Jewish organizational figures at the White House Monday and refused to genuflect. The last time this happened was 1957. Seriously.

Here's the best part. Malcolm Honeline who is head of the Council of Presidents of Major Jewish Organizations told Obama that he didn't object to him criticizing Israel on settlements but that he shouldn't do it publicly. He said that there should never be "any daylight" between the US position and Israel's.

Obama slapped Honeline down and left him dazed. "'For eight years, there was no light between the United States and Israel, and nothing got accomplished.," he said. Not having been invited to the White House, I missed that moment. I'd have given a lot!

Wow. Poor Honeline. He may have to return to his day job. Recording messages to the Iranian people urging them to shape up or else.

Meanwhile, Martin Peretz is all hissy-fitting because the Obama who is President is not the one he supported. I could have told him that. The old Jabontinskyite should have joined his mentor, Jackie Mason, and supported McCain.

And here's Bill Kristol. All my favorites are so miserable!

I just watched the 11-minute video clip "Women of Afghanistan", from Rethinkafghanistan.com.

It is very compelling.

At about 6:40 minutes, there's a great short interview with Wall Street Journal correspondent Anand Gopal who explains very clearly that, while Afghan women were "imprisoned inside their houses" both under the Taliban and today, today many of them are also, in addition, living in the middle of a war zone in which women and children are disproportionately casualties.

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All this week you will hear Jewish voices lifted on behalf of Sonia Sotamayor as the first Hispanic Supreme Court Justice. No doubt all the dozen or so Jewish senators will vote for her confirmation. Like other minority strivers before her, Sotomayor's story resonates for American Jews because it recalls our own struggle to come inside the American establishment. Republican Arlen Specter praised diversity yesterday and said that it was wrong that it took till 1967 for a president to name a black justice to the Supreme Court, Thurgood Marshall. From the Times coverage of the hearing's opening day:

As he introduced her, Senator Charles E. Schumer, Democrat of New York, choked up with emotion over her life story. Mr. Leahy compared her to Louis D. Brandeis, the first Jewish justice, and Thurgood Marshall, the first African-American justice.

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I don't usually write about movies in this space, but after seeing Michael Mann's impressive Dillinger flick, Public Enemies, and then reading the usually astute David Thomson's takedown in The New Republic, I want to rise to Mann's defense--without spoilers.

Thomson doesn't get the title--why isn't the movie called Dillinger? Here's why, I think. This gorgeous, rich, deeply anti-romantic but strangely stirring movie pits two cabals of public enemies against one another: Dillinger and his largely affectless bank robbers pals versus the grim-faced, soulless FBI (featuring a wonderful star turn by an unrecognizable Billy Crudup as J. Edgar Hoover). All the guys stand a bit outside themselves watching themselves play themselves--and watching the press, and the movies, fall all over them. Johnny Depp's underplayed Dillinger gets away with huge amounts of crime in a little more than a year, and his motives are sunk deep behind his eyes. His method is not The Method. He doesn't show many autobiographical cards, which makes him more of a blank, noirish antihero than we're used to these days. Depp splendidly impersonates a hollow man who lives for the rush--especially a long sequence near the end as he steps off the edge into memorable oblivion.

It was those closing moments that flooded me with all the feeling that I'd been missing--suppressing?--up to that point. But why whine? This movie rewards the senses but also challenges you to think: What's really going on here? Where's the joy and the doom in crime? Why isn't the passion screaming nonstop out of the screen? In the depth of the Greatest Depression, it's as if the blood's sapped from the country. There are schemes, ambushes, prison breaks, and betrayals galore, but no grandeur. People do their jobs. Bonnie and Clyde, which as Pauline Kael wrote in her greatest piece, "put the sting back in death," this isn't.

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Justin Fox has written a terrific book, and anyone who wants to make sense of what has happened in financial markets in this century needs to read it. Seriously, buy it now. I adored the late Peter Bernstein's books on the evolution of capital markets and Justin has written a more accessible version of those works.

That said, I'll take the bait in his latest post:

Finally, post-World-War-II-style corporate paternalism may not have been sustainable. But it needn't have been replaced by exactly the "ownership society" that we got. As a former gung-ho free-marketeer it pains me somewhat to say this, but government may be able to more efficiently provide for (or at least set the ground rules for) health insurance and retirement income than either big corporations or the free competitive market can.

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It's been a while. Anybody miss me? Anybody remember me? Ah well. I no longer blog. It was like when I was a hippie. The hours were good but the pay was lousy. As to being an expert, on finance I'm a rude amateur. I will now prove this.

I've been reading books on finance for the past six months. All I can say is I know what I don't know, which is a lot. I'd like to talk about the Fox book, but unfortunately I haven't been able to lay a hand on one. Hopefully the TPM genie will cause it to materialize on my doorstep and I'll take a glimpse before the week is over. At any rate, failure to read never stopped a book reviewer.

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Should we breath a sigh of relief that Goldman Sachs has posted record earnings as revenue from trading and stock underwriting reached all-time highs (second quarter net income was $3.44 billion) -- less than a year after the firm took $10 billion directly from taxpayers and $13 billion indirectly through AIG?

In some ways, yes. That Goldman is back signals that the worst of Wall Street's recent meltdown is over. And at least New York City's economy will again benefit from the trickle-down effects of the multi-million dollar bonuses of Goldman's executives and traders.

But in another respect, Goldman's resurgence should send shivers down the backs of every hardworking American who has lost a large chunk of retirement savings in this economic debacle, as well as the millions who have lost their jobs. Why? Because Goldman's high-risk business model hasn't changed one bit from what it was before the implosion of Wall Street. Goldman is still wagering its capital and fueling giant bets with lots of borrowed money. While its rivals have pared back risks, Goldman has increased them. And its renewed success at this old game will only encourage other big banks to go back into it.

“Our model really never changed, we’ve said very consistently that our business model remained the same,” Goldman's chief financial officer tells Bloomberg News. Value-at-risk -- a statistical measure of how much the firm’s trading operations could lose in a day -- rose to an average of $245 million in the second quarter from $240 million in the first quarter. In the second quarter of 2008, VaR averaged $184 million.

Meanwhile, Goldman is still depending on $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation. Which means you and I are still indirectly funding Goldman's high-risk operations.

Goldman is skillful at playing the market. Now that most of its major competitors are out of the action or still under the strict control of the Treasury and the Fed, it has the market mostly to itself. Expect the others to jump back in to high-risk deals as soon as they can. But Goldman is also skillful at playing politics -- something its rivals aren't nearly as good at. Recall that last fall, at a closed meeting between Treasury Secretary Hank Paulson (formerly Goldman's CEO), Tim Geithner (then at the New York Fed), and a handful of others to decide on the fate of giant insurer AIG, Goldman's cheif executive, Lloyd Blankfein, was at the table. The decision to bail out AIG resulted in a $13 billion giveaway to Goldman because Goldman was an AIG counterparty. Indeed, Goldman executives and alumni have played crucial roles in guiding the Wall Street bailout from the start.

So the fact that Goldman has reverted to its old ways in the market suggests it has every reason to believe it can revert to its old ways in politics, should its market strategies backfire once again -- leaving the rest of us once again to pick up the pieces.

Jerry Davis writes that the theories of financial economists helped pave the way for a transition from a corporation-dominated economy to a financial-market dominated one. He tells the story of this transition in his fascinating new book Managed by Markets, which I've just started reading.

I'm not so sure, though, that this shift was entirely a bad thing. Jerry writes of how we've shifted from an economy in which people looked to careers at GM and AT&T as "the surest path to financial security and prosperity" to one in which we depend on our investment portfolios to get us by. As one of the commenters to his post, destor23, responds, "I don't want to work at GM for my entire life." And the fact that lifelong careers at one corporation aren't really viable for most of us anymore can't be chalked up entirely to the influence of financial markets. GM is able to provide jobs for far fewer people now than it used to mainly because it no longer dominates the U.S. auto business as it used to--and the increased competition that has spelled so much trouble for GM has also brought vast improvements in the quality of automobiles.

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AIG, the basket case insurance company, wants to pay out another $230 million in bonuses to its top executives. The word is that the government contractually obligated to make these payments. Furthermore, if we don't cough up the dough, AIG supposedly will lose good people. The claim is that this will cost us even more money, since the replacements will not be able to fix the AIG mess as well.

Why should we believe that claim? After all, the people who make the claim were either too incompetent or too corrupt to recognize an $8trillion housing bubble. These were the people who at every step along the way said that everything was fine. Even when things started to unravel, they told us that the problems would be contained in the subprime market. The question these people should answer is: "when did they stop being wrong about the economy?"

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I was watching Fox and one of their nutty commentators said that it would be a mistake to write off Sarah Palin's chances of becoming President. "The liberals wrote off Nixon too. But he wasn't a quitter and neither is she."

Let's look at the record.

Nixon. 1952. Eisenhower asks him to quit GOP ticket over Checkers scandal. He refuses to quit. 1956. Eisenhower asks him to quit the VP job and go into the cabinet. He refuses to quit. 1960. Nixon runs for President. Loses. Refuses to quit. 1962. Runs for governor of California. Loses. Refuses to quit. 1968. Runs for President again. Wins. 1974. After a two year fight to withstand Watergate, Nixon resigns. Spends rest of his life trying to redeem his reputation. Writes 20 books. 1994. Dies. Quits.

Palin: 2009, After a half term as governor. Quits.

Both Palin and Nixon said, "I am not a quitter." One was telling the truth.

PS This is not a Nixon apologia. After Andrew Jackson, James Buchanan, Andrew Johnson, Woodrow Wilson and George W. Bush, he is the President I dislike the most.

This had to be unsettling to the "mainstream" Jewish organizational figures who met with President Obama today.

Instead of the President telling them that they are all on the same page, he said that, in fact, they aren't and he will keep up the pressure. When one of the main rightwingers told Obama that he should keep his differences with the Israelis private, Obama said that had not worked in the past and he'll go the public route.

This is unprecedented. In the past a president would diverge from the Israeli position and then quickly tell the American Jews that it would never happen again.

Those days are over. Check out this report from J Street about the meeting.

Note: none of the right-of-center leaders ran to the media after the meeting to complain. They understand that they will not intimidate this President. And they fear Rahm.

Now we need to see results. Actually, not us so much, we're fine. The Palestinians have to see results.

... is now up on the Boston Review website, here.

I found it a really tragic article to work on. I have admired the Israeli peace movement since its inception. I still think its finest hour was when it mobilized hundreds of thousands of Israelis to take to the streets of their cities in September 1982, to protest the role Defense Minister Sharon and the IDF had played in orchestrating the massacres in Beirut's Sabra and Shatila refugee camps.

From the late 1980s through 1993 I worked pretty closely with Naomi Chazan and other leaders in the movement, particularly in organizing and facilitating some of the early contacts with various Palestinians and Arab-state nationals in which these women and men started hammering out the details of what a viable two-state solution might look like and how it could be achieved.

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The myth of the rational market caused plenty of mischief when it was applied to personal finance. Those of us that followed the advice to invest our kids' college savings in index funds in the late 1990s, when the S&P 500 was at 1400, see the appeal of a "gap year" now that the index is below 900.

But the spread of financial thinking has caused collateral damage for the culture. Many of us came to view just about everything as an investment--from a college education that was an investment in our "human capital," to houses that were essentially options on the real estate market, to communities that had more or less "social capital" (depending on how many bowling leagues they hosted).

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John Mearsheimer sent me the following email:

There is not going to be a debate between me and David Harris [executive director of the American Jewish Committee]. As you know, he previously said that he wanted to debate me, but that I was afraid to engage him. However, it seems clear from my negotiations with one of his key deputies at the AJC that the opposite is the case: David Harris is afraid to debate me.

As you and many of your readers know, I declined to debate David Harris on the Dom Giordano radio show out of Philadelphia on March 12, 2009. What he wanted was for both of us to appear together for a few minutes on that show to debate the Chas Freeman affair. I did not want to do that, mainly because it is impossible to have a meaningful debate in such circumstances, as I told the host of the radio show. I thought that was the end of the matter, but the next day the AJC put out a press release titled: "Don't Run Away From Debate, AJC'S Harris Tells Mearsheimer."

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Universal health insurance won't happen unless Obama can light a fire under the Senate Finance Committee this week. Within the next two weeks, the Committee must report out a bill that contains a public option and a credible source of money (either limiting deductions of the wealthy to 28 percent or capping tax-free employer-provided health care, or some of both). Obama then has to get both the Senate and the House (which reports out a bill today) to approve their respective bills before August 7, when Congress heads home for recess.

Why is timing so important? Because the health-care clock is ticking, and doesn't have many weeks left. Universal health care is so complicated -- touching on so much of the economy, stepping on the toes of so many vested interests -- that to allow the bills to languish past recess risks the entire goal. Speed is essential. Recall that after Bill Clinton was elected, universal health insurance looked inevitable; a year later, it was doomed. As Lyndon Johnson warned his staff after the 1964 landslide, "every day while I'm in office, I'm gonna lose votes."

Republicans don't want any bill. Blue Dog Democrats are afraid of the costs of any bill. The AMA, private insurers, and pharmaceutical companies would be delighted if universal health care died. If bills aren't passed in the House and Senate before August 7th, the fights in both chambers over the public option and money will carry over into the Fall, where they'll become more intense and more prolonged. Obama won't have a bill on his desk before the end of the end of the year. That's a death sentence for health-care reform. The gravitational pull of the mid-term elections of 2010 will frighten off Blue Dogs and delight Republicans.

This week at Cafe, Justin Fox joins us for a discussion of his book The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. Fox is the business and economics columnist at TIME and author of The Curious Capitalist blog. Publishers' Weekly describes the book as "a chronological journey of modern economic theory...[a] a singularly compelling and rare business history that reads like a thriller." Fox has already put up his first post here.

Joining the discussion are Max Sawicky, expert economics blogger and Cafe contributor; Gerald Davis, the Wilbur K. Pierpont Collegiate Professor of Management at the Ross School of Business at the University of Michigan and author of Managed by the Markets: How Finance Reshaped America; Daniel Gross, senior editor at Newsweek and economic columnist and author; senior fellow at the Center for American Progress and author of The Tyranny of Dead Ideas; and Nick Schulz, the DeWitt Wallace Fellow at the American Enterprise Institute and Editor-in-Chief of American.com.

The Myth of the Rational Market tells the tale of how economists' and finance scholars' views about financial markets evolved over the past century. Actually, evolved may not be exactly the right word--there's been as much fluctuation as forward progress. My book begins with the story of Irving Fisher, the Yale economist whose work presaged most of modern academic finance and who infamously declared in 1929 that stock prices had reached a "permanently high plateau." By the 1990s, academics, central bankers and investors were repeating Fisher's errors and adding all sorts of new ones of their own.

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[Originally posted at SCOTUSblog.]

As-it-happens coverage of the Supreme Court nomination hearings for Judge Sonia Sotomayor before the Senate Judiciary Committee will occur on various broadcast or online outlets, beginning at 10 a.m. on Monday.

The first day session is expected to be occupied largely by opening statements from members of the Committee. As expected, live coverage will be available more widely when the nominee begins her testimony.

As is customary these days, full gavel-to-gavel coverage will not be available on the major commercial television networks. ABC-News, for example, will provide full coverage only through a special online presentation, here.

C-SPAN, the cable network, will begin coverage on its main TV channel on Monday, and switch to C-SPAN3 for the following days. The network will also have continuing coverage on radio and online.

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Thursday evening I put up a short post about the fears swirling around the Middle East about the possible physical weakening of Egypt's 81-year-old President Hosni Mubarak, an authoritarian ruler who is a key US ally in the region.

More than 18 hours later, the vast (and vastly expensive) newsgathering operation of the NYT finally caught up with the story.

Their Cairo-based correspondent Mona el-Naggar provides a few more details than I did.

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Check out this new commercial from the Israeli cellular provider Cellcom:

Noam Sheizaf translates the ending, "What do we all want? Some fun, that's all." He then adds "And what's more fun than not seeing the Palestinians around anymore, thanks to the 10 meters high wall?"

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I watched the Sunday shows.

The GOP is openly saying not only that the economy is failing under Obama but that it's his fault. New line: he owns the economy now.

When, dear God, will the Dems just point out(1) that the Republicans destroyed the Clinton economy and (2) that it is utterly unpatriotic to openly wish for more Americans to lose their jobs and their homes just to help them in the midterms.

The Republican party wants America to fail. Fer chrissake say it.

Like FDR.

IT"S not just Republicans either. Sen. Bob Menendez is blocking Obama's ambassador nominee to Mexico because he favors normalization with Cuba. The Cuba lobby is AIPAC on steroids.

There is a guessing game going on in Washington this weekend over the nature of the secret program initiated by Dick Cheney that CIA Director Leon Panetta just found out about on June 23rd and immediately stopped.

The report that Mr. Cheney was behind the decision to conceal the still-unidentified program from Congress deepened the mystery surrounding it, suggesting that the Bush administration had put a high priority on the program and its secrecy.

My money is on the revelation that Sy Hersh quietly dropped on a shocked audience at the University of Minnesota in March.

Investigative reporter Seymour Hersh dropped a bombshell on Tuesday when he told an audience at the University of Minnesota that the military was running an "executive assassination ring" throughout the Bush years which reported directly to former Vice President Dick Cheney.

If we find out that Cheney was running an international hit squad out of the VP Office, I don't see how he can avoid prosecution. The Cheney apologists will suggest it wasn't "fully operational", meaning the first hit of a foreign leader had not been accomplished by the time he left office. That quite frankly is a distinction that escapes me.

The Washington Post, which gained worldwide fame for its effort to sell corporate lobbyists access to its reporters and Obama administration officials, wants 15 million workers in the United States to be unemployed. Of course that is not exactly what they said; the Post argued against another stimulus package. But 15 plus million unemployed workers is the certain effect of the Post's preferred policy.

We will go through the Post's logic, but the simple fact that the Post opposes the policy should pretty well establish its usefulness. After all, the Post has a near perfect track record of being completely wrong on the economy at every turn.

Remember back in January of 2008 when the Post told readers that: "There is not yet any proof of a recession, .... Nor is there any consensus that a recession, if one comes, will be severe."

And then one week later we got the line: "timely, targeted and temporary." This is a paper that had no space for those warning of the dangers of the stock bubble in the 90s and the housing bubble in the current decade.

In short, given its near perfect track record of being 180 degrees wrong on the economy, the Post's opposition to more stimulus makes a compelling case for its merits. But, let's look at the argument.

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Say what you will about Prime Minister Netanyahu. But he understands his options are limited in dealing with President Obama because the United States provides the money and weaponry that keeps Israel afloat. He knows that it is the bank that holds the mortgage that ultimately owns the house.

So he's conflicted. He does not want to defy the United States because, not being insane, he understands that the United States is in charge. So he's torn and some say even losing it in the face of US pressure.

Not so his supporters. They think he should just tell America to go to hell. To hell with the aid. To hell with American support. To hell with everything but Israel's right to keep the territories.

Here is a typical example of what Bibi has to deal with.

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There are many things about Jerusalem that make life very difficult for the average New Yorker--many inconveniences and annoyances, but one thing that is sooooo much better is the medical system. I now have clinic envy-and hope that President Obama can bring this easy bit of life to America: the walk-in health clinic.

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