What if the financial crisis was more like the Korean Air problems of Malcolm Gladwell's Outliers - i.e. one or two things can go wrong without tragedy, but once you get to the third (or whatever critical mass number it is) layer of failure you are tempting catastrophe?

It did, after all, take us 70 years to completely screw things up to the point of collapse. Critics point to Glass Steagal being watered down or eliminated, but that alone didn't do the trick - it needed the added catalysts of Greenspan's interest rates AND refusal to regulate. It needed states to have no mortgage-issuing oversight (partly why Texas is not Nevada now). It needed corrupt borrowers, bankers, regulators, investors and congressmen. It needed Cajas around the world lending to eastern european citizens and endless houses built for Brits in sunny places. It needed a LOT of people believing their own actions would be inconsequential.

So I think what passed may be *meh* but it wasn't going to solve the next crisis anyway - it just closed some of the most egregious loopholes (although I think the consumer protection could be a very useful agency if it pans out).

IMHO the next financial crisis will be completely and totally different, and will involve totally different 'financial products'.

The speed of technology and transactions, the opaqueness of the entire industry and the overwhelming feeling that the banks are in it only for themselves will keep ma and pa investor on the sidelines for a long, long time. If the public (as opposed to the institutional investors) think the game is mostly rigged the financial industry could evolve into two games: one for the super rich to pingpong their wealth around to each other like an endless poker game, and one for everyone else which involves vanilla products and other low-risk 'normal' tools of capitalism.

So financial reform is not the end-all but it's probably just as well; no reason to stifle sword making when everyone has moved on to guns anyway. Obviously the best thing that could happen is the SEC and other regulators keep the pressure on, relentlessly, until there is a culture of normal compliance rather than cat-and-mouse criminality, which seems to be the norm these days.

I don't know who this person is, but they NAILED it as a response to a horrible piece by Bai:

8. aprudy east lansing June 16th, 2010 6:48 pm

Who is Matt Bai and how can he know so absolutely little about the history of populism? First off, popullism has always been defined as little, local, independent = good and large, (inter)national and (inter)dependent = bad. This is why Populism swings wildly from right to left and back again depending on who the large institutional enemy/threat of the day is.

Second, and completely independent of whatever rhetoric they use, Democrats have long been Progressives, not Populists. Progressives believe in scientific, expert management of economic, political and cultural institutions and so long as the economy, the state and the culture are fairly coherent and fairly strong, Populist distrust of large institutions is held at bay.

Corporate America fostered and allied with right wing Populism under conditions of stagflation in the 70s to generate the de/re-regulatory Reagan revolution. Clinton used "Its the economy, stupid" as an echo of left populism's derision of out of touch Washington DC, when then was populated by Reaganites. Clinton's agenda, however, was Progressive and the Contract on/for America represented right wing populism's response. Clinton's popularity won Gore the 2000 popular election but Bush II, wildly unpopular during his first nine months, cemented right wing populism's position with the cultural side of his response to 9/11 while undermining it at every other turn.

Obama's rhetoric aside, he primarily ran on a platform that argued that he'd run/manage the country and international relations better... and that's what he's tried to do, going so far as to effectively drop the organized collection of grassroots Progressives who worked and volunteered for his campaign. There's not a Populist bone in his body, and corporate conservatives and right wing populists saw this immediately.

Any smart dem funders out there funding Teaparty primary candidates?

I mean, you think about it:

9/11 happened.  Bush started 2 wars and finished 0.  4,000 soldiers killed.  Trillions spent.  Clinton's surplus replaced with deficits.  The outrageous, anemic response to Katrina.  Totally unfunded Medicare part D.  Torture.  Illegal wiretaps.  Keeping Americans in captivity without lawyers or rights.  Workplace safety and environmental regulations gutted.  Government scientist's reports being redacted by politicians; attorney generals fired for their political beliefs.  An attempt at privatizing social security.  Unfunded mandates like no child left behind.  And, the TARP (needed of course, but you know, how did we get there again?).

And Obama passes healthcare reform and it's the end of the American way?  Really?

To the Democrats - THE DEMOCRATS - who voted for health care reform tonight and in the senate.  It's amazing that voting for healthcare is a brave vote, but it was.  To me, if it had failed, it would have marked America as simply too corrupt to function properly, and that was a worrying prospect.  But you passed the bill and if it's not perfect there's nothing keeping us from perfecting it down the road, now that we have STARTED down the road.  So to all those who voted, and all those who helped in whatever way they did, one guy's heartfelt thanks.

TPM Editors Blog

A Real State?

Josh Marshall | February 7, 2010, 7:36PM

If Gov. Paterson has to resign maybe we just put Spitzer back in and pretend the whole thing never happened?

What the hell is that all about?  Why would paterson have to resign, and why would you put a psychopath back in power?  Also, Paterson has shown some brass balls recently, vetoing the "reform" bill and making the "tough decisions" (as politicians call them) regarding the budget.  Why would Spitzer, who as a former D.A. thought he could get away with paying a prostitute because he was just that awesome, be a better choice?  Good riddance, and I'm dumbfounded, frankly.

with all due respect, there are three kinds of deficit birds in washington: ostriches, birds of paradise, and peacocks.  that's it.  no hawks; their eggs were weakened by DDT or something, because they haven't been seen since the 90's (and those were goshawks or other small birds).

Anyway.  The ostriches bury their heads in the sand and ignore reality.  The birds of paradise aka "cheney birds" put on elaborate displays and willfully ignore reality.  Then there are those peacocks.

Truth is when Obama floated some tiny, wee little spending cuts he was mocked!  But those cuts were either not cut or cut after outcries from congress.  Then this year, he proposes a commission (or someone did) and that got hammered in the senate.  And he proposed freezing discretionary spending, and got roundly taunted, but even THAT won't happen (count on congress to protest that the cuts are too small, then try to exempt each and every program that might get cut).

Anyway, bunch of posers.  And by posers, I mean republicans.  And by republicans I mean crack addicts who got addicted to the spending crack - they used to be a heartless bunch, ready to cut the flow of federal dollars to ANYONE (who wasn't big business), but after the bush years they've changed.  You hardly recognize them anymore.  They hang out with a different crowd.  But whatever they are they are not the republicans of yore, and they certainly won't have the balls to cut any spending.  They can't even grow some to cut the 17% of medicare that goes to fraud (where's THAT proposal anyway?).

onwards and upwards...

"Safety is always a concern, but Al Qaeda doesn't operate like a season of "24." Terrorists don't generally strike when it's most symbolic or best serves a story line. They do the things that happen to work out"

http://www.nytimes.com/2010/01/30/opinion/30collins.html

This is not true.  The 3 major disrupted plots (other than Moussoui or however you spell that) were the Millenium bombings on 1/1/01, Richard Reid (christmas time) and the most recent attempt, also a Christmas bombing attempt.  The trade center was the symbol of New York and America's economic prowess, etc.

You miss the point, Krugman.  It's rope-a-dope politics, and it's smart.  By using damn near the exact same line as Boehner, Obama is putting the ball in their court, and he knows that they will say no, despite saying they wanted to do exactly the same thing.  It's the same as the Senate voting against the advisory panel: it allows Obama to call their bluff on being deficit hawks, exposing the Republicans as the deficit peacocks that they are.  And I believe he said it twice: it would not start until 2011 which is a year away minimum (it could still start in dec. 2011 and be almost 2 years away for that matter).

By challenging the Republicans on healthcare, but challenging them on the deficit, he is giving them one last chance which he knows they won't take, and he will stand back and watch as they back out of giving him healthcare reform or discretionary spending or earmark or whatever reform.  The Republicans do not want to reform anything, so anytime Obama challenges them (in public) to bring him something he is just setting them up to be criticized later for failing to live up to the challenge.  It's not at-this-moment strategy, it's 6 months from now I get to call them out for not doing anything strategy and I think it will pay dividends, especially if Dems can pass meaningful financial services and healthcare reform.

Krugman might be one hell of an economist but I would leave his political asides on the table.  He's no Plouffe, and he has trouble distinguishing policy from strategy. 

Update!  Just read Axelrod's "put up or shut up" lines from the front page - exactly.

"We are blessed with vast national resources and we must use them all!" - Bob McDonnell during his response to the SOTU.

I might add, Now!  Now!  Use em all!

So I wrote this last night after reading Krugman's oped yesterday, and think Obama's speech echoed some of what I said so up it goes:

It's not going to happen, and there's no reason to cry out loud that the democrats are spineless when it just can't happen, period. It's simply not fair to say that house members should ignore their constituents for the "greater good" when their constituents insist they don't want it for the exact same reason. You don't tell people to 'man up' after the battle is lost only to suffer more humiliation. This bill is very popular in very blue mind and not much else and I'd wager some house members and senators already showed a fair amount of fealty and courage to vote for it in the first place.  Regroup.  Retrench.  Try again.  Don't turn around and run straight into the bayonets again.

We all know the bill had weaknesses and flaws.  There were not enough cost controls, there was serious disagreement on funding, it DID contain an unfunded mandate that states would have to pay, and it didn't address the systemic fraud that plagues the government programs. It was also incoherently presented.  Obama never laid out exactly what it was because the  thing still wasn't finalized.  Once it came out of committee they never admitted the flaws and attended only the politics of getting it passed; at a certain point getting the best solutions to the problems stopped mattering as much as getting something passed because the media (and some constituents but clearly not most) were demanding that it get passed soon before it lost momentum.  Remember?

The President should challenge republicans to work with democrats to solve these issues.
He should throw out the challenge to democrats and republicans alike: we have a huge, huge problem that's eating a hole in the economy, and I need a bill that can fix the problem, period.  We have found some answers but need to keep looking for the policies that will succeed.  I will wait until I have it, and I will pressure you to produce it for the next 3 years.  As premium costs skyrocket I will point out to americans what it's costing them, relentlessly, until you democrats and republicans can find the answers.

Maybe it wouldn't work, but even I don't like the idea of a bill that house DEMOCRATS were scared to vote for.  It barely passed the HOUSE.

I believe this event either saved democrats from a very unpopular solution that didn't solve cost issues, didn't provide a basic coverage everyone can count on, and would have weighed on states that are struggling terribly already, leading to an outcry from governors.  The public would be horrified if that costs spiraled upwards as the deficit soars.  There could be massive ramifications for passing the bill; almost as severe as not passing it.  It delayed the most needed reforms (the ones that would actually make it affordable and accessible via exchanges or whatever) until 2015, while implementing the needed industry reforms that will immediately, which will raise premiums (end of rescission, pre-existing condition, etc). 

The regulatory hands are tied by cost, so any easy regulatory solution must include cost control mechanisms. This bill still didn't have a funding source and had an unfunded mandate by increasing medicaid enrollment, so clearly controlling costs, while a political 3rd rail, are what's needed.  Republicans tout their skills at cutting costs all the time; challenge them to do so in a way that increases affordability and enrollment and quality. It HAS to be done - how?

So I hope congress, the president, and the american people can slog on through the issue, tire out the loudmouths, and try to find a solution that's not only substantially more popular but more effective. There is the potential, admittedly unlikely, that the american people can finally get what they deserve, which is BETTER from their politicians and themselves. I for one say take the risk and get back to work.  Democrats jobs depend on it short term, but Republicans too long term (rising premiums would force the issue again fairly quickly in my opinion - any severe increase in rates would meet some pretty nasty blowback right now, but the greed will get em eventually).

Unaffordable healthcare is eating a hole in the economy and killing small businessmen like me who can't possibly afford to offer it as I contemplate hiring my first coworker.  It's laughably impossible.  In my profession even the big firms don't offer health insurance (independent contractors by law).  It limits who i can hire, it makes talented people take terrible jobs for the benefits, and on a larger scale our workers are less competitive against countries where the state handles these things. Even on such a tiny scale as administrative costs, never mind workdays missed, homes lost, bankruptcies consummated, etc. 

Worst of all the biggest corporations - who slosh their electronic profits from country to country to avoid taxes - have the biggest advantage of all since they have the most bargaining power. It's a totally corrosive, inefficient system and someday it will have to change: when we simply can't afford it any more because there's just too much profit to spread around.

So we have to find a solution.  Republicans will have to be cajoled into actually bargaining.  Tell the country how you tried to play nice but they didn't bring anything to the table.  But Dems also have a responsibility to vote FOR any republican proposal that does meet the criteria: lower costs, better services, no exceptions to a basic level of coverage.  So score whatever they propose and see what the CBO says.  If it works, do it.

Lets hope congress can realize that voters are now voting reflexively against whoever is in charge.  They did it to republicans, they will do it to democrats, and they will do it to republicans AGAIN if the government doesn't find a way to work properly and take care of business to finally mend what it let tear for so long.  If it doesn't, we will corrode into Rome, and I don't think voters will stand for that - they will keep saying no until someone gives them a reason to say otherwise.

Sorry for the ridiculous length, anyone who read that :)
 

I desperately want health insurance reform AND health care reform, but I think the president may be right (and I will no doubt be pilloried for saying this if anyone actually reads this) because there are several elements that most can agree on, and there are several that could use major, major improvement and I think it's within the realm of possibility to get a better bill even if you lose the PR war. So, I've heard the progressives opinion, but there's something that getting overlooked here: a lot of people think THIS BILL, as passed by the senate, is not popular BECAUSE

the good: end pre-existing conditions, rescissions, and any outright denial of coverage.  emphasis on prevention, taxing "cadillac" plans, creating a ceiling on administrative and advertising costs and federal oversight for the exchange plans which can cross state lines.

the bad: almost no cost-reducing measures such as unfunded mandates for increased medicare, changing the fee structure for doctors, eliminating medicare fraud, [seems to involve] some shell-game financing and the part where Americans can actually afford premiums doesn't kick in until 4 years from now!

So I think the dems need to admit there were 2 problems with the health care bill as proposed: one political (republican opposition) and one practical (not a great bill).  I also think dems need to think like republicans a little bit and pass the popular bits regardless of the implications: pass a ban on pre-existing conditions and rescission NOW.  If premiums go up (as expected) the blame with be passed all around AND it will spur the need for real long term solutions, plus everyone believes those things are basically immoral and will support them regardless of the impact the same way everyone loves medicare part D even though it's totally unfunded and will lead to higher taxes.

Lastly, I think Warshington needs to wake up.  Americans don't want a bill that they don't understand, haven't read, and haven't heard the details of rammed down their throats, and the bill was so troublesome it barely passed the House!  Get a bill together that Democrats can go out there and present to their constituents.  It isn't impossible but it definitely needs leadership. 

Lastly, regarding leadership: this bill, to me, was poorly thought of.  It was in various committees, it took fairly different forms from house to senate, and worst of all it involved murky deals with big pharma and the unions.  Strike all that and try to find a better formal path for the legislation and negotiations to take.  Form a bi-cameral, bi-partisan committee that will make binding recommendations to be included in any bill or start with a commission of experts recommendations, whatever.  The Dems did NOT do a good job selling this bill to the American people, and it showed. 

One of the more interesting (or, insert your word here) parts of the healthcare debate has been the fact that no source of reliable, non-partisan information has emerged.  I had assumed that some blog, MSM, or even gov't source would come to be viewed as a "no-spin zone" that citizens would head to, en masse, to get much needed objective information.

What did the CBO score exactly?  Is there a clear explanation of the costs and benefits?  Where can I find the answers to these questions?

Listening to cspan house debate the financial services committee bill:

and the republicans, one after another, are getting up and saying that it's time to put an end to bailouts.  The bill sets up a fund (like the fdic uses) paid into by banks to provide liquidity should a corporation like AIG collapse, but the republicans are pretending it's using taxpayer money to provide a fund for bailouts.  And it's time to end the bailouts. 

Barney Frank gets up and points out that all the bailouts were during the Bush administration, but it doesn't matter: Mike Pence gets up next and calls it Barney Frank's bill, or at least he was a cosponsor, and it's time to end the bailouts.

Seriously, does it or doesn't it use private funds?  Of course it does.  Does it use taxpayer funds?  Of course not.

It really doesn't matter anymore - one side (and the dems are guilty of this too, but less so) draws up a bill, and the other side creates an imaginary opposition - they oppose something that isn't in the bill but sounds like it could be to their uneducated constituents, and most likely it costs you money and takes away your freedom, and it was the government, not wall street, that caused the economy to collapse.   

Anyway, just update from the frontlines...

Was listening to Coburn speak on the Senate Floor tonight, and as always he gave a very earnest and compelling speech, arguing that we need to fix the problems with health care and leave alone the parts that function better than anywhere else.  And it's hard to argue with that.  Then he delved into tort reform, and really, it's hard to argue with wanting doctors NOT to practice defensive medicine, where the fear of lawsuits leads to too many tests and specialist examinations.

But the problems with Senator (and Doctor) Coburn's speech is that he offered no solutions, and that's the root of the problem.  We have a system that doesn't work well, is very costly, and getting worse, not better, by the day.

What Democrats are proposing is a new system, and there's good reason to fear a new system: we have had it up to our ears with private health care; what if the Democrats plan ends up making healthcare worse?  What if the special interests have succeeded in drafting legislation that benefits them, doesn't fix the problem, and makes our lives worse, and charges more?  I understand why people might feel that way. 

That's why I really, really wish Republicans had made a different strategic decision regarding healthcare: the country WANTED them to be involved, and I mean that.  We needed to make healthcare operate efficiently   according to the principles of insurance: spread the risk and spread the cost - the maximum participants the larger the efficiency of scale the lower the costs.  I believe this is what we all want, regardless of party: reliable, efficient, universal  healthcare that's as affordable as possible without compromising the benefits of the existing system.

It's a shame that they failed to see the potential rewards of a sincere effort and a real accomplishment: the lifting of the burden that healthcare in america is today for individuals, corporations, and the overall emotional and financial health, ironically, of the entire country.  Even amoung the insured, how many people lose sleep arguing over coverage with their insurance company?  How many bills (that should be covered) are paid by a family's savings, rather than their insurance company?  The people who work a 2nd rate job just for the benefits because the cost for large businesses are smaller than for small businesses or entrepreneurs so they can't take the risk of starting their own business or working for a smaller company? And that doesn't count the uninsured who live in fear of getting hurt, or those who have already had to declare bankruptcy and/or lose their home.

Our capitalist system functions most smoothly when capacity exactly meets demand, but that's not the case now, and healthcare is one of the disruptive factors that makes our economy less efficient, and massively so. When thinking about a job, Americans have to take into account whether the employer can provide healthcare, and so long as that's a consideration healthcare is an eddy, a counterproductive force on our economy.  If the humanitarian arguments don't hit the mark the economic ones should.

So I'm sure Republicans see the need to fix the system, and maybe someone has thought about producing some legislation, REAL, CBO scored legislation as a counter-offer to the Democratic plan.  If Democrats tried to block this from being debated the Republicans could raise holy hell in the media and I'm 100% sure they would get heard. 

And what would that get us?  A debate between the 2 plans, with neither able to pass until it got the majority so with any luck at all there would be a meeting of the minds on some of the important issues and perhaps economists or healthcare experts or patients or doctors would be brought in to settle the debate.  Anyway, that's what we needed - for the Republicans to step up and offer a real, REAL plan to compliment or even fix the flaws of the Democratic plan, large or small. 

Instead all we get are the same non-arguments: intrastate regulation, tort reform (which would cap awards without considering the specifics of the case, which is why that's never passed), and really that's all I can think of.  The usual lies and distortions (hello death panels) and teapartiers, etc. 

For a while the Republicans claimed they had a plan: the Ryan plan.  However, as an example, it dealt with the uninsured by allowing states to pool together and decide what to do about the uninsured. That's not even a plan.  It can't be scored for cost so it's basically one question: if we allow states to pool insurance, how much would that lower healthcare costs?  Also, the Ryan plan includes this gem: "Integrating low‐income families with dependent children into higher‐quality private plans through direct assistance".  So one of the features of the REPUBLICAN plan would be to pay for PRIVATE insurance for medicare recipients.  Unbelievable.  So it's a little disingenuous for them to cry about how the Democrats are going to raise taxes when they were perfectly happy with yet another unfunded mandate.

So my take on this whole affair is this: I think many democrats have put down a good faith effort to fix the broken healthcare system.  Republicans have not offered any solutions, and they will try to convince every Republican and some Democrats that it's better to stay with what we know - endlessly - unaffordable as it is for everyone - than to start down the road of trying to legislate a solution to a problem the private sector refuses to acknowledge, never mind fix.  And we all know how well that works out; we are living through the financial services version of that same plan.