The Best (Though Incomplete) Case Against the Bailout

House of Debt by Atif Mian and Amir Sufi seems to be receiving a warm reception.  Still, I'm not sure the reviewers have made clear what is truly distinctive about this important and original book.  What we have here, specifically, is a radically unfamiliar narrative of the Great Meltdown, together with the best account I've seen so far as to why the bank bailouts were a mistake.  It's an imperfect or at least incomplete account as I will try to show.  But still, it deserves a place in the curriculum for any study of just what went wrong and how.

For starters, then: M/S undertake to show that the Great Meltdown should not be understood as a crisis in financial system.  There was a financial crisis, granted--it began in September of 2008 and extended through all those months necessary to sluice out all the taxpayer dollars directed at saving the financial system.  Rather, the real Meltdown was was a crisis of debt.  It began more than two years earlier.  It generated to foreclosures and unemployment; it led to an unprecedented collapse in household wealth, particularly among those least able to bear it.

Ar first blush, one thinks that this analysis shouldn't be all so unusual.  It shouldn't be, but it is; just about every other account I've read of those dark days begin with "Lehman Week," when the eponymous investment bank collapsed into bankruptcy and when AIG and the GSEs and Merrill Lynch all passed through near-death moments.  Debt appears in all these accounts, of course--something had to trigger all the trouble.  It appears but it is a curiously abstract and offstage kind of monster, like the Maguffin in a Hitchcock movie.  It is left for M/S to show how turmoil in the real estate market drove people out not just of their homes but also their jobs;  Its a story that would have left a blot on the triumphal narrative of recent history even if (somehow) the banking crisis had never ensued

Having situated the debt crisis at center stage, M/S proceed to an even more provocative suggestion: that the bailout was a mistake, bad or misdirected policy unnecessary itself and probably at the expense of other policies that might have served us better.  Once again, this may sound familiar but it isn't.  Plenty of people have called for the bankers' heads, generally on  some variant on the theme of "greedy bastard."  Many defenses appear to finesse the "greedy bastard" issue, arguing that anything other than bailout would have destroyed the financial system, ruining both Wall Street and Main Street in the process.

M/S also sidestep the "greedy bastard" part of the case. They do argue that saving the banks was solving the wrong problem: that it misdirected resources and attention away from mortgages and related issues. Deal with mortgage, on this analysis, and we get the economy back up on its wheels again; ignore mortgages and we are stuck in a cycle of anemia.

Ah, but what about the larger consequences of ignoring Wall Street you will say).  Didn't you just say that saving Wall Street would have saved Main Street, and that letting Wall Street go would be an unspeakable calamity?   And this is where M/S get really interesting. They argue that there are really two banking systems at issue here: one, the mundane, boring payment system that keeps the fluids flowing through the body politic every day. the other is the business of mega-borrowing and mega-lending that gives Wall Street so much of it swashbuckling charm.   The government did need to step in and save the "fluid flowing" part of the banking system, the authors concede--and it did so.  But here is where it gets really interesting: once they'd saved the fluid-flowing system, they could safely have let the swashbuckling system just dangle from the yardarm.  No, strike that: not only could we have let the swashbucklers go: it would have been good to let them go. After all, the whole cause of the problem was that the bankers had made to many bad loans.  How would it improve them back into the business where they could make bad loans again?

And that, dear reader, is the case.  It's almost elegant, straightforward, and as a contribution to our understanding of the crisis, I'd say it is as helpful as anything since The Banker's New Clothes by Anat Admati and Martin Hellwig,  But there is, I concede a gap in the argument.  That is: I'm not as clear as I would like to be on the relationship between the two parts of the banking system. Can it really be that one could collapse without destroying the other. Perhaps so; I remember Alan Greenspan just a while back defending himself against the charge that he overhyped the market by saying that he only worked with short-term rates and that long-term rates were an independent story.    Maybe it is Greenspan we should call on to show us how random bankruptcy among major banks can be easily tolerated.

Coda:  M/S end their book with a spirited plea that we reconceptualize our banking system and vastly increase the role of equity as distinct from debt.  It is a beguiling argument and it does flow logically out of what went before. Still, it is ambitious enough that it probably requires a book of its own of which this one is, perhaps, just the teaser.

Paris Note: Stripped-down Messiah

I mentioned that concert at  l’église Saint-Eustache although I didn't mention, like, you know, the concert.  But it's worth a word: the performance was Handel's Messiah. The hook was that it was a stripped-down version,with an orchestra of perhaps 20 and a chorus of about the same size.   Suppose to replicate, or at least resemble, what it might have been like in Handel's own day, perhaps even at its first performance in Dublin, where the musical resources would have been more 

The actual performance here was, shall we say, somewhat lacking in polish, but no big deal.  It's (almost) always fun to hear one of the war horses in an antique venue, and I think they got their point across about the virtues of the stripped down model. Having heard my first Messiahs back in the area when the musicians arrived by battalions, I can relate.

For comparison, and for the sheer fun of it, here's a rather different Messiah --this from Vienna, where the Germans so often feel they have to lard up the music with some sort of wacky modernism.  I don't get it but mostly because I didn't watch--just left the sound on and reduced the screen.  I thought the music lovely, even if not of the stripped-down 1740s variety:

France Note: Cathedrals

Paris again, or rather France, or rather Northern France, the potion between Paris and the great battlefields of World War I. The subject of the late outing was cathedrals--more precisely, the cathedrals most easily reached by SCNF. That would include, for one,  Rouen, locus of the pivotal scenes in Madam Bovary; also the great facade which you'd remember from countless Monets, even if you've never seen countless Monets.   Also Reims, where they used to crown the kings.  And Amiens.  My heavens, Amiens.  I probably haven't seen enough to say with confidence, but I can believe those who say that Amiens is the most remarkable of all: massive and yet delicate, as if just this once, the builder(s) kept everything in balance.  And the whole only enhanced by the irony that the city itself is surely as grim and charmless as any you would want to imagine.

The obvious virtue of a trip like this is that you get a chance to assimilate some stuff, to begin to see particulars out of the blur. And perhaps in particular, to begin to see the evolution of techniques, as the builders learned from their mistakes.  It becomes easy to see, for example, how Reims grows out of Chartres and Amiens out of both.  It becomes also possible to understand how Henry Adams might have favored the earlier, more primitive, Chartres over the other two: precisely because the builders of Chartres still needed to learn a thing or two, the building carries a kind of weird otherness that its progeny cannot match.

Aside from ourselves,we traveled in the company of a rewarding guidebook by one Stan Perry, otherwise unknown to us.  It's an amateur's book with the passions and enthusiasm of one's personal taste but hardly less worthwhile therefore.   And another: I tucked in a copy of a little book on the finance of cathedral construction,  by an American, but which I found in a French translation last year in Belgium.  It was useful enough on its own terms but it provided an unexpected extra: in discussing the sources of funds, the author does an admirable job of making vivid the unstable confrontation of social strata--churchmen, townsmen and chivalric rural strongmen--whose contention defined the age.  

I said that Amiens is, or must be, the greatest.  I'll stick to that until I learn better.  But I do have to admit that my personal favorite remains the much less grand little cozy corner at Wells in England, so obviously the local of so many Trollope novels.

Afterthought:  Oh, and I neglected to mention the great cathedral of Paris--i.e., the Gare Saint Lazare, the train station from which Monet himself and tourists today begin their journey out to the gardens at Giverny.

Paris Note: Piketty, and A Second Choice

At Les Cahiers de Colette Bookshop in the Rue Rambuteau in Paris a few days back I came upon a copy of the French edition of the Piketty world shaker, aka Le capital au XXIe siècle.  Best  I can tell, it is even longer than the English language version, and with footnotes.  At 25 Euros, the per-pound price doesn't seem out of line.  I did give it a heft but the--nah, I went for a new Livre de Poche one-volume edition of the memoirs of Casanova. aka Histoire de ma vie, with a rewarding intro by Jean M. Goulemont.    Apparently there was a "new" edition published just last year by Robert Laffont, supposedly from an "original" manuscript but this isn't it.  The edition bears a 2014 copyright but it appears to drive from an earlier publication dated 1993--also, somewhat confusingly, from Laffont.

No matter.  It's a good, clear, readable text which helps one (assisted by Goulemont) to see Casanova as a complex and challenging.  Yes, there is rutting enough to scandalize a Jesuit but as the editor urges, there's a lot more.   Casanova indeed comes across as a man of the 18th Century--alert, inquisitive, energetic with a high sense of self worth.   The comparison that comes to mind is he memoir of Lorenzo da Ponte,  Da Ponte comes across as a lesser figure--odd, when one reflect that he wrote three of the best opera libretti ever.  But they both offer the same posture of restless, worldy self-sufficiency--and both were Venetians who spent a good deal of their life on the run.  One also thinks of the Tiepolos (Tiepoli?) father and son--particularly the son with his dark, ambiguous comic visions of an Enlightenment in decline.

Fun fact: I see there is already an Executive Summary of Piketty, available, so far as I can tell, in France and England, not (yet?) in the US.  So far as I can tell, no executive summary of Casanova. 

Paris Footnote: First Responders

Another Paris footnote: we were at l’église Saint-Eustache the  other night, settling in for a Handel Messiah when a brace of four chairs just next to us began to lean back as if it intended to tumble over.  On closer scrutiny, it appears that the man at the end of the row had fallen victim to some sort of affliction and had collapsed into his chair, as if to take all the furniture down with him.  Several people moved in to prop the chairs up; a couple of others lifted him out of the seat and laid him on the floor (stone cathedral: must have been cold).  One woman knelt beside him and seemed to do some nurse-like things; checked his breathing, loosened his shirt. Another--I gather his companion--seemed to talk with him, but quietly so no strangers could hear.  After three or four minutes someone took out a cell phone and called for emergency aid--he seemed to be describing symptoms.    Another ten minutes and some first responders appeared on the scene, dressed in black polo shirts and slacks.  I think they must also have worn rubber soled shoes; they were so quiet you didn't know they were there until they were there.   I think there were four; one or two had small shoulder bags.  After  exchanging words with the two women an (I think) the victim, one of the men in black emerged from the shadows with a kind of wheely-chair. Two of them lifted him into it, and they disappeared again into the  shadows. The companion made as if to follow after although she set off in the wrong direction; somebody steered her straight, and with word of thanks, she followed after.

And after  few more minutes, the concert began.

The thing is--it was all so quiet, both the crisis moment itself and the response. Well, you say, this was, after all. a church.  Yes, maybe.  And I admit, I can't remember being that close to any such event in America.   But my instincts tell me that we'd do it with a lot more racket.  Particularly the first responders.  I have the vision of them arriving in America with the clatter of footsteps, with an array of hardware, perhaps even the occasional Kevlar vest.   Do I have this wrong?

Afterthought:  Oddly enough, no doctor volunteered from the audience.   I just now remember what my friend Linda used to say about St. Johns Smith Square in London. She said if you shouted "is here a doctor in the hour?"  you might not get a response.  But if you said "is there a licensed professional social worker?"  you'd get a stampede.

Geithner: A Pronouncement

We're back from socialist hell Paris where, I have to say, life seemed not  bit different the day after Marine Le Pen's 25-percent landslide than it did before.  Which means back to decent computer hardware (I'm in love with my iPad mini but as a blogging tool, it really doesn't have the chops).

I do have a few afterthoughts about France that i hope to post over the next few days but for the moment,  a word about Tim Geithner's memoir.  He's certainly receiving a lot of attention, most (not all) from those who want to tie him to an anthill and cover him with honey.  I can relate: I went into the book expecting to dislike him and--

--and, well, I still can't say I really want to sit down and have a beer with the guy.  Nor he with me either, I suppose, but I'm not that crazy about beer anyway.

Thing is, though, it is actually quite good book.  I'm sure there are some self-delusions and some careless errors. But for the most part, it's what you want in a memoir: detailed, intellectually honest, fact-driven record of how and why he did what he did.   He's also refreshing on his likes--Barney Frank, President Obama and lots of other people, really (there are many appreciative comments about his staff).  Also his dislikes--Neil Barofsky and perhaps Ed DeMarco; after that, really not much of anybody.  But no, not Elizabeth Warren--he seems to think she grandstanded him, but in the end, he seems to have enjoyed her company (I can believe both).  And not Sheila Bair, whom he treats with respect, although I'm still not sure he takes her as serious as she deserves to be taken.

I liked the book; this is not the same as saying I'm endorsing the message.  Let's agree that we've pretty much simplified the conflict over policy in recession management down to a sound byte question: bankers or homeowners, Wall Street or Main Street (or both, or perhaps even neither)?  Geithner's clear: he thinks saving the banks was unambiguously right.  He thinks his crowd got the tactics/strategy mostly right, although he certainly is willing to offer up regrets about particulars.  He thinks it is/was important to save Main Street also but that's the thing--he thinks they did do a lot to save Main Street.  He also thinks they did do a lot to help home owners. He would have liked to do more (damn that DeMarco anyway)--although he appears not to give home owner relief the same high priority as many of his critics.

I have to admit, I'm still on the fence on that one.  I'm still hung up on the great counter-factual: what would have happened had we not saved the banks?  And that is the great counter-factual: we don not and cannot know.   I gather there are people--Ludwig von Mises, Dean Baker, who say "let it burn."  And we can't prove they're wrong. And never will, either, because I can't imagine a world in which the political elite will have the will to do nothing while the banking system collapses around them.   I'm on the fence also because just today on the plane, I read what must be the most useful intelligent, thought-provoking challenges on the Geithner (etc.) program that I've seen so far.  I hope to say a word about that reading tomorrow  Meanwhile: agree with him or not, I think Geithner's book will endure as one of the indispensable primary-source documents of the whole sorry business.

Could This Be the Ugliest Public Building in Europe?

Hint, it is only blocks away from what mighty be the most beautiful.

Oh, if you really want to know, go here.

Monumental Paris

And here's a Piketty-inspired inquiry about the nation that figures so high in the historical inequality tables--being, of course, his own France.

We took advantage of an unplanned free day today to ride the Metro out to the Arc de Triomph and walk back to the 

Hôtel  de Ville via the Champs-Elysee.  It's a part of Paris that neither of us has ever spent much time in, but on a sunny afternoon (after a few sprinkles in the morning), it's a splendid and invigorating promenade.  Past the site of the guillotine, past the place where Gilbert told Marcel that he could tickle her again, the whole schmear.  And it gives rise to two questions.

One: is there any city in he world that tops Paris in monumental architecture?   Actually, yes,* but compared with other Western metro centers, almost any other entrant is a piker.  Some this stuff goes back to the glory days of the Sun King; some you can blame on the Little Corporal himself, but from the look of things, the stone cutters and cement mixers kept cutting and mixing almost to the eve of the First World War.

Which brings me to question two: particularly in the 19C, where did they get the money for all this spectacular waste?  They had an empire of sorts, of course, but empires are often a drag on progress, not a spur.   Prosperous, perhaps, but how prosperous enough to throw the great stones about with such profligate abandon?

*Ashgabad in Turkemenstan, for sure, the great hulking ghost town.  Probably Pyongyang, although I've never been there.  Thank God.   Are there others?

The Bastille

Here's a first for the Buces: after all these years, we finally made it last night to the Bastille Opera House in Paris.   Takeaway, it's wonderful.  We'd heard the stories about its scandalous growing pains and also had a vague sense that theg'd turned things around.  The vague sense was right.  Just about everything here is first rate: great acoustics, comfortable seating, big stage.  Although that last could be a problem: the stage actually feels better than the Met, though perhaps only because in a somewhat smaller auditorium.  And the secondary stuff:  helpful staff, convenient signage.  And you walk right in from the Metro, with no risk of winding up in the wrong place.

Apparently some folks still complain that it doesn't look enough like the grand old confectionary of the Palais Garnier downtown.  And they have a point: the Bastille biuilding has all the charm of a Holiday Inn express.  But at least a wel-designed Holiday Inn Express, with findable rest rooms 

The performance--well, pretty good, actually.  Bellini's I Capuletti d I Montecchi, with a capable cast, albeit not the same as the show-stopper with Natalie Dessay and Nicole Cabell at San Francisco a couple of years back.  The staging here at the Bastille was something else again: evidently it's a much-repeated and much-admired rendition. But it struck us as pretty flat.  Maybe our tastes have ben jaded by HD.

The un-Gekkos

Bear with me folks, I think there is an idea in here somewhere.   The subject is bailouts and rescues and in particular, the great slosh of money that we fire-hosed into Wall Street in 2008-9.    It's hard to imagine a sustained public policy more broadly unpopular.  "Oh, we needed to do it," say the supporters, "to prevent a worse calamity."  "Balderdash,"  responds the multitude.  "you were just lining the pockets of your Wall Street pals."

Well.  Let's stipulate that the bailout did in fact deliver whole cargo cults of cash to the undeserving swine.  But look at the senders: the odd part is that the principal architects of the bailout are in many ways the most unlikely of frontmen for privilege and gered.  Call them the Un-Gekkos, the last guys you would expect to see out on the beach, shouting that "greed is good."

Start with Ben Bernanke, the druggist's son, whose idea of a big weekend was/is to hunker down with his wife and the Times crossword puzzle.  Whose co-author didn't even know he was a Republican.  Or  Tim Geithner, son of a government/foundation bureaucrat who spent he first 23 years of adulthood in what I guess we call "the public sector."

Hank Paulson, the third of the set, may seem like a tougher case but maybe not really.  Grant that Paulson had grown pig rich from his time at Goldman Sachs.   But he never seemed like the caricature of the rich man.  His hobby is bird watching.  He lectured his colleagues on their tendency to vulgar display.  The women in his life hated W or loved Hillary, or both.

An odd trio to be handing over so much money to the undeserving.  But maybe that's the thing: maybe they were willing to deliver the swag precisely because it didn't bother them all that much.  Granted, they all believed in "the integrity of the market system," somehow defined.  But the seriously rich, the manic rich--in short, the Wall Street potentate rich--are those who can't get to sleep at night if hey think here may be somebody somewhere richer than they are.  It's a category which precisely does not include any of the three great deliverers.  Which might, ironically, have made them just the men for the job.

Addendum:  Mrs. Buce comments--all very well, but do you suppose any of he three ever experienced any visceral sense of the reality of poverty?  Ah, now that is a good question; one which I leave as an exercise to the reader.

I Don't Think They'll Carry This Precinct

It's the LePen party.  Paris, just behind the Pompidou Center.

Let's See, What Am I Missing?

Oh.  They don't use the f-word any more.

Henry Shows Us How it was Done

Faithful readers who have completed their Thomas Piketty curriculum for the spring may wish to reward themselves with a brief holiday in Paris and in particular, an easy excursion up to Chantilly, just 20 minutes from the Gare du Nord.  It's a magnificent pike with a gorgeous location on the waterside, and an array of manicured green spaces.

But it would be interesting to know just how antique this piece of history really is, in that the commentary conveys a strong inference that it is largely a reconstruction/recreation Henri Eugène Philippe Louis d'Orléans, duc d'Aumale.

Who? Glad you asked.  He was fifth son of Louis-Philipe, the bourgeois monarch and perhaps of greater practical relevance, he inherited some $200 million (in today's money) from his uncle, Henry II, Peince of Condi.

Yes, but what did he do to earn his moment in the sun, young Henry?   Ah, but that's the thing.   He seems to have gone off to war as a very young man and beat up some Algeriians.  Other than that (and picking the right DNA), he seems not to have comprehended his good fortune.  He spent the latter portion of his life expending this cabinet of curios.  For this he gets memorialized unto the Nth generation.   The descendants of the Duke's scullery maid may wish to savor the irony.  And to reflect on Belle Époque France as one of the most unequal societies in recorded (or, at least, documented) history.

You Can Lead a Horde to Culture but you Can't Make'em Think

They say we are a herd animal. Trudging through Monet's garden at Giverny this morning, I came to understand that this is wrong.  We are a horde animal, at least when it comes to thundering across the central European landmass or descending from tour busses. An ordos in the hortos, with hortatory overtones.

Off Again

We're off with the morning plane/across the raging main--hey, somebody has to do it.  And this time I'm not taking much computer firepower with me, which might mean that this will be my most extended blog holiday since I set up shop way back in--what was it, aught six?  I see by the stats that my numbers are way down lately.   That doesn't really mean that I've lost interest in blogging per se.  It probably does mean that I no longer feel the need to be one of those chatterbox wannabees who act as if the world awaits their every word.  I'm more inclined to let it pass for a few hour, maybe even a few days.

No time for that at the moment,  in any event.  I did want to offer some sort of lament/salute to Joyce DiDonato--no, dears, nothing bad has happened to her. But I think I heard her say that last Saturday's performance in La  Cenerentola will be her last in this signature role.  Too bad for us, but I see her point.  I do hope she will continue with other stuff, including that magnificent three-in-a-bed that ends Le Comte Ory.  Never too old for a three-in-a-bed, dear.  Meanwhile, I have a plane to catch...

Optimizing Freakonomics (and Other)

The good folks at The Browser favor me with a link to a Wall Street Journal  clip to the new Levitt/Dubner "Freako" book.  I read the excerpt with interest and a sort-of profit (see infra) but as to the book--I think I'll add it to the "pass" pile, bringing to three the number of L/D books that I have chosen not to read in full.

Nothing personal, guys, really.  As I suggest, I have read snippets, and I've certainly read a fair amount about them. I even heard Levitt do a faculty seminar presentation a few years back, this on the business model of drug gangs.  It was fascinating an instructive and he was a fine presenter,

Why the allergy to the book(s) then?  Hah, glad you asked.   Thing is, vita is still brevis (and getting moreso) while bibliphilia remains unyieldingly longa.  In plain English, there's just too much to read.  And here is Buce's principle of  bibliographic parsimony: there are some books that just do not need to be read.

By which I mean?  By which I do not mean "bad" books or "wrong" books or paltry, trivial books of any stripe. Of course they do not need to be read, but you knew that.  I'm talking about good books that don't need to be read--or at least, good-enough books that don't need to be read--and which do not need to be read precisely because everybody else is reading them.

L/D are a splendid example.  As I suggest, they seem by all accounts to be nice people with interesting stories to tell.  Although just for the record, I had heard of King Solomon before.  I had even heard of the brown M&Ms, although I thought that one had been discredited as a canard.  But forget all that--the point is that whether or not I have read it, I can assume that somebody else will have read it and will want to tell me about it--perhaps ignoring my too-tactful hint that I already know (because I heard it from the last guy).

L/D almost define the category but there are others who fit.  Nassim Taleb is a good example.  Although I'm actually not totally convinced that Taleb is a nice man, nor that his book is important.  But I am willing to assume arguendo.  Still, I haven't read any Taleb and I don't plan on it, and yet I strongly suspect I could ace any conceivable Taleb question on Jeopardy.  I've also read some of G.L.S. Shackle's Epistemics and Economics which, from he sound of things, must have been a major source.  In any event, the number of times I've been told about Taleb and what he says are sufficient to make me suspect I wouldn't gain a lot from tackling the whole thing.

Andrew Ross Sorkin's Too Big to Fail is in a slightly different category.   It's Sorkin's account of the Great Meltdown and I bet he tells the story well.  But Sorkin had been covering the Meltdown for the NYT for months before he did the book, and it is hard for me to believe there is much of anything in the book that hadn't already made it into the Times.  At any rate, not one person has ever suggested to me that there was new stuff in the book: I suppose if I ran into his publicist, I might have to respond differently.

Michael Lewis is a more troublesome character. I actually did read Liar's Poker, and enjoyed it immensely, and still recommend it to students as offering a hint at to what (I suppose) life is like in a big-bank trading room.  The more recent Lewis books--well, I might actually read one or more of them at some point, but if so it would have more to do with the fact that he's an awfully good story teller than with the expectation that I would actually learn much that is new for them.

You get the drift.  I could go on.  Indeed, I suppose the list of "books I have not read" grows every year, just like the list of "languages I do not know."  For the moment, perhaps I would be better served if I pull down my copy of Joanot Martorell's Tirant lo Blanc, in the original Catalan (yes, I do!)--anticipating that there, for once I will find something something that I (somewhat paradoxically?) did not anticipate. Will I really?  No, probably not.  But it would likely be a good use of my time.

Update: A well-wisher asks: what about Kahneman and Piketty, surely the two hottest social science books in the century so far?  Well now, that is a good question.  It happens I have read each. and I'd say that each can be not-unconscionably boiled down to a single-page executive summary (but then, so can War and Peace). And with each, there's no shortage of people who are willing to tell you what the book is about.  Yet I'd say that neither passes the "don't need it" test.  Kahneman is easy enough to understand in general, but the book is a dense thicket of particular examples, quite beyond, I think, the capacity of any individual reader to grasp on his own.   Piketty is a little different.   Forget executive summary: you can probably get his main point down as a sound byte. Still, what makes Piketty so forceful is the sheer heft of his database, which he exhibits like a loving, if somewhat obsessive, curator.  You need to feel the pileup of the examples to get the sense of just how well-rooted his sound byte is.

Hank Paulson Says "I Ain't Yo' Mama"

Gearing up to read Tim Geithner's tell-all about his years on the bridge in the storm, I dusted off the pixels on the memoir of his colleague, Hank Paulson.  I expect I'll offer some side-by-side thoughts in a bit but for the moment, here's a fascinating not-quite-on-topic offering from Paulson on his management philosophy at Goldman Sachs:

Long hours at the office can cause problems at home, and this was a period of great stress in my marriage. I’d come home too tired to want to do much with the children when they were very young. We couldn’t afford to finish our bedroom, so we were living in an open loft, with the kids in rooms right next to us. I sometimes locked myself in the bathroom with Sports Illustrated to relax in quiet . Wendy made it clear I had to help out and get home earlier to give the kids baths, read a story, and put them to bed. With Gorter’s support, I began a pattern where I’d leave the office at 4: 30 p.m., run for the 4: 42 p.m. train, and be home at 5: 25 p.m. After supper, I’d read to the kids. I had them trained so I could zip through a bedtime story very quickly. One night Wendy came in and urged, “Slow down and read with expression.” I tried, but as soon as I did, both kids started crying: “No, no! Read like a daddy , not like a mommy.” Once they were asleep, I’d get on the phone and start talking to clients, who’d say, “Good Lord, you’re still in the office working?” When I tell this story about work-life balance, people say: “Paulson, you SOB, you worked people harder than anybody at Goldman Sachs.” Fair enough. But I always told folks at Goldman: It’s not your boss’s job to figure out your life.   You spend so much time planning your work schedule and your career, you need to make that kind of effort to manage your private life, too. Learn how to say no. Remember, you are not going to get ahead, in any case, being a grunt. 

Paulson, Henry M. (2013-09-03). On the Brink: Inside the Race to Stop the Collapse of the Global Financial System -- With Original New Material on the Five Year Anniversary of the Financial Crisis (Kindle Locations 1104-1106). Grand Central Publishing. Kindle Edition. 

It's a thought, baldly put.  Some will find it severe. But for several years, I've been telling law students--those who are going to the fancy firms, the ones that represent the likes of Goldman Sachs--that one of the ways in which they will be tested is in the determination of their capacity to manage conflicting, irreconcilable, unreasonable commitments. 

Comparison: a colleague whose name I shall not mention got his start at one of those fancy law shops. He quickly learned that there was an office poker game-no, wait, two office poker games: one for the big dogs and one for the puppies.  Your choice.  Anybody could join the puppy game.  Anybody could join the big dog game also but it was made clear to you that the big dog game was not for puppies and that if you went in there, you went at your own risk, with all that the term implies.  I suspect Hank would agree. 

Morgenson/Rosner on Fannie/Freddie etc.

The topic for the moment is Reckless Endangerment by Gretchen Morgenson and Joshua Rosner, which came out in 2011, so I'm only three years late.  The subtitle is "How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon."  You'll recognize immediately that--well no, with a title like that it might as well be about vaccines or tracking, and the title would suit anything new on the South Sea Bubble.   But no: this was the  big book about "the GSEs"--Fannie Mae and Freddie Mac--and their role, or lack of it, in the Great Meltdown.  

Still, you may recall--in the maelstrom of finger-pointing that inevitably followed on the collapse, there was a school of thought that it was all the fault of what I am pleased to call the "Bleeding Gums Murphy" school of financial analysis--that it was all the fault of some old black guy in Detroit who was so uppity as to suppose he could service a mortgage, and who thereby toppled a whole ninepins of  financial titans. Or more prosaically: the Community Reinvestment Act of  1977 (thank the cornpone Jimmy Carter) plus the delusional romanticism of lefties like (the black) Maxine Waters and (the light-in-the-loafers) Barney Frank whose never-met-a-payroll gullibility turned these same titans into the helpless pawns of their febrile dreams.

Though you wouldn't guess it from the title, I somehow got the impression that M/R offered more of the same.  I figured I was OD'ing at the time, so I put it at the bottom of the stack for more leisured consideration.

I finally got around to it this week.  In retrospect, I'm a bit sorry I didn't get to it before.  I'll admit that the book surprised me, in good ways and bad.  It is, as I guess I suspected, a deeply flawed book, but its flaws are not quite what I expected. But it has virtues, and some of them aren't quite what I expected either.

Executive summary: this is a book about "the GSEs," but only in a narrow sense.  First, by "the GSEs," the authors really mean Fannie--Freddie is mostly a sideshow.  And by Fannie, they mean the money machine ginned up by James A. Johnson, CEO of Fannie through the 90s and a master of bureaucratic slash and grab right up there with the best of them.   It also offers, somewhat disjointedly,  helpful narratives on a few--hardly all--of the other chapters in the long, sordid mortgage mania story.  Through all of this, M/R do a first-class jobs of plunging into the weeds of bureaucratic machination (both public and private) to show how it's done.  I see that Johnson has a degree from the Woodrow Wilson School. I don't know if they offer a concentration out there in Power and Intrigue, but if so, I'd say this chronicle of their distinguished alum deserves a place in the syllabus.

But back to the GSEs.   I said already how I had heard so many voices trying to explain away the Meltdown by demonizing the poor and the vulnerable, together with their wicked manipulators in Congress-and how I got the impression that M/R were singing in that particular choir.

Oddly enough, they aren't, actually.  The offer immensely valuable accounts of how Johnson built Fannie power.  But just about nowhere do they plug Fannie into the standard chronicle of blame.  Rather to the contrary, the plain fact is they provide next to nothing about larger context at all--these are gumshoe investigators we are considering, of core, not grand strategists.  Still, the remarkable thing is that based on their own evidence, the reader can draw a moral almost entirely the opposite of the familiar story.

Specifically: everything that M/R present impels the conclusion that it was not Congress that bullied the GSEs.  Rather it was just the other way around.  On the record here, it is clear that Johnson early figured out that he could exploit the politician's enthusiasm for low-income housing to help aggregate his own empire.   He could beguile them with the promise of more low-income housing; he could threaten them with the pains of hellfire if they dare not to cooperate; and he could bully them into submission if they began to slip out of harness.  But at all times, low income was never anything more than the velvet sock puppet on Johnson's iron fist.

So, go ahead and read it, if you are still absorbing stuff about the Meltdown.  I won't even say "read it with skepticism," because I can't even say there is a lot here with which I know how to quarrel.  Read it for the details; read it to stock your own bag of dirty tricks. But for deeper analysis--well, that's fine, not everybody can do every job.

Shadows from My Past

Two shadows from my past crossed my bow this weekend--and from portions of my past that had nothing to do with each other.

One, Harry McAlpin, honored in memory as the first black correspondent ever to cover a White House press conference.

Say again, Harry McAlpin?  Yes, Harry McAlpin.  I knew him in my own newspaper days, in the 60s in Louisville as the executive--CEO?--as a black insurance company.  These were the years of civil rights turmoil and Louisville had its own share of the action, albeit nothing like, say, Birmingham.  The McAlpin I knew (I wouldn't have thought of calling him Harry) was self-contained, carefully put together, always correct in his public presentation.  He wasn't a barricades kind of guy.  But you quickly learned he was somebody you wanted on your radar; somebody who knew and understood the deep structure of the movement and might, if treated with proper respect, be gracious enough to explain.

Among many other things, I owe him for the gift of an important insight about the ways of politics.  As with so many other southern states, understanding the white response to racism in Kentucky required understanding at least two seemingly incompatible constituencies.  One was the silk-stocking liberals in the city, exemplified not least by my employer, Barry Bingham, the publisher of the Louisville newspapers (and a man who enjoyed having people utter his name in hushed tones).  The other was the bumptious, rabble-rousing populist streak, exemplified (and well, too) by the bumptious rabble-rousing A.B. "Happy" Chandler.

I think I had already figured out at that point that Happy, for all his cornpone manner, was purposeful, smart, funny (really funny) and imbued with a deep-seated streak of generosity, not least about blacks.  McAlpin confirmed my view. He let me understand that he liked Happy too, perhaps rather better than he liked his silk-stocking neighbors (who could also be fair weather friends).  McAlpin recalled the kerfuffle over integrating the pubic schools in Sturgis, KY in 1956, when Happy was governor.  "He sent the tanks into Sturgis," McAlpin said.  That was enough for him.  Point taken.

So far, so good, but here's the odd thing. I have absolutely no memory of having known about his White-House correspondent years.  "You're a reporter?" people will always say. "I used to be a reporter"--citing their time doing the social notes for their high school yearbook (I admit I have played this card myself from time to time).   You'd think I must have known--I once wrote a long profile about his career (it's in a box in the shed--maybe I'll fish it out later).   Or maybe--it would have been in keeping with his character--it just wasn't something he was going to talk about.

We turn next to the obituary column of the New York Times this morning,  and its report on the passing of Rabbi Myer Kripke of Omaha, whose main claim to fame in the eyes of the Times copy desk is that he invested early with his bridge-buddy Warren Buffett, and took home some $25 millions for his troubles.   "Took home" is metaphorical here since if I read this right, Rabbi Kripke drove an old Chevvie, lived in a rented apartment, and gave most of the money away.  I'd come across his name last  year in this magnificent piece of long form journalism about his daughter, who shares the queen-sized bed in her Greenwich Village apartment with one of the world's greatest collection of dictionaries.  I learned about papa there; I learned also about his son, her brother Saul, the philosopher.

I never knew the rabbi, the daughter or the philosopher (nor Buffett either, come to that).  But it crossed my mind as I read the obit--could it be? And sure enough, just a moment's Googling makes it clear that Rabbi Myer was the brother of Homer Kripke, who just might have been the smartest lawyer I ever knew.    Well: there's smart and there's smart and I'm sure there are plenty of lawyerly skills that Homer wasn't particularly adept at.  But as a book-lawyer, as a student of bankruptcy and commercial law, Homer had no master.  He came to academia only late, after long years in practice.  I can't think of anybody (well, yes I can, just one) who better married the street with the academy.

Early in my career, Homer invited me to go on one of his course books as co author.  I was flattered beyond imagining.  In the end I turned him down; I came to suspect he wanted an assistant, more than a a partner, and I wasn't disposed to do that. But also, I doubted that I would be able to keep up with the pace and acuity of his understanding.

We crossed paths from time to time in later  years, of which I remember one instance particular.   About quarter of eight one autumn morning  in the 70s, I was in my office at the law firm  when the phone rang.  "This  is Homer Kripke  You published xxx in the yy Law Review. On page nnn, there's a footnote.  It says: etc.  This is incorrect. Actually, our reasoning was just the other way around.  So the solution is not unwise, as you say.  The solution is just what it should be [click]." 

I was about to say "of course he was right," although I'm not so sure.  Fact is, I was enough diverted by the whole presentation that I don't suppose I can make an effective judgment as to whether he was right or not.   

Harry McAlpin.  Homer Kripke.  I wonder if they ever met.  Probably not.  But I met them both, and am the richer for it.

Oh I Think I Get It Now...

Recall: my generation grew up in a world where deals chased money.  Since, oh, say, 1980, we've lived in a world where money chased deals.  Like, for example, Continental Illinois, which shoveled all its (our) cash down an array of ratholes.  Like Henry Kravis and the mother of all LBOs  (on which, it seems, he in the end also lost money).  Like Robert Campeau (boy, does anybody remember him?) who was somehow able to finance "The Biggest, Looniest Deal Ever," (and wound back in his mother's spare bedroom).  

Like the mortgage brokers.  Well no, wait.  Go back a bit in time.  Remember the early mortgage brokers from, say, the 80s?  Here was a guy who found a prospect who could use a loan.  He'd check the credit, he'd set some terms. Then he'd go looking for an investor who could put some money into the deal.   The investor would get his deal with his note.  Some of these brokers were crooks and a fair number of them wound up in bankruptcy.  For others, it was a living--a tough one, but a living.  But that's the thing: they were constrained by the amount of capital they could lay their  hands on.  Always looking for new money.  

Always, that is, until they were "discovered" by Wall Street and its pent-up sluice of cash.  These were the guys who transmogrified the loan brokering business--who found that anybody with a pulse and a laptop could be a broker; who ginned up Alt-A-minus, the sub-640 FICO and the whole cafeteria full of devices designed to get the borrower in through the window and the product out the door.  

You may remember: it all worked find until it didn't work any more and we are still picking up the pieces.  We've sloshed whole barge loads of money into the banks on the premise that if we All Believe in Fairies then Tinkerbell will Get Well Again.

Now this: here's Wolfgang Richter explaining how the new housing "bubble" is driven not by prospective homeowners but by Wall Street investors with more money than they know what to do with.  And  here is Sam Zell buying trailer parks.

There is a common theme here, yes?  I mean, in both cases, the trick is to capture the income stream of the poor schlepps who keep the fat cats juiced and comfy, yes?  In the old days you did it with mortgage payments.  Now you do it with rents.  Haveta live somewhere, they say, although "somewhere" can also include a corrugated refrigerator box under the expressway.  Meanwhile, folks, let's party.  Looks like the money will continue to flow.

The Jesus "Hoax"

Count on the Wall Street Journal to keep me current on early ecclesiastical history.  I'd seen some of the early stories about the Jesus-had-a-wife papyrus.  Somehow I had missed the (apparently rather sophisticated) second-round critique arguing that it's a hoax.  Comes now the Journal with a bonus cluck about all those gullible reporters and how quick they were to jump on the story in the first place.

Me, I have no business opining--ignorance, dear madam--but I do tend to suspect that it is a hoax, as the paper and informed scholars now seems to believe.  Still, I wonder when the Journal  will see fit to show the same sort of skeptical discipline to, say, Obama-was-born-in-Kenya or Hillary-murdered-Vince-Foster or Roosevelt-bombed-Pearl-Harbor or any of the rest of the army of canards that seem to be around since at least the time of Charlemagne.

And while we are at it, note, there are two separate Jesus issues on the table.  One, is the document a hoax?  And two, was Jesus married? The two are not necessarily related; that is, Jesus might have been married even if the document is a hoax.  

Me again: I don't have much doubt that there was an historical Jesus, albeit there is plenty of room for discussion about what such a person said or did.  I am inclined to think he probably was not married: wandering miracle maker, unemployed and likely unemployable--not the best prospect coming out of the gate in the connubial sweepstakes (cue old jokes about mama's boy).  But I'm a bit puzzled that true believers might want to believe that he was not married.  Consider: unemployed 30-year-old, no family man, spends all his time hangin' with his homies.   Eeuw, let's not go there.

Così Followup: What Was Eating Renée?

I've been meaning to follow up on The Curious Incident at the HD Opera the other day--specifically, Renée Fleming as intermission hostess, insisting that the libretto of Così somehow required an apology, as you might apologize if, for example, your football team bore a name that is an ethnic slur.  Of course we wouldn't say that sort of thing today, we nice people, but those were olden times and the music is beautiful so let's forgive ourselves a bit of impropriety.

Say what? Impropriety? How odd. 

The plot is easily told, almost fairy-tale in its simplicity: in the first act, the ladies promise undying love; their lovers depart. In the second a act--uh oh. At the end, a kind-of-a sort of-a-resolution, except maybe not.

Now, I suppose you might find this simply funny (cue: "You find that funny?")  Perhaps more likely, you read it (as I suspect Mozart intended it to be read) as a kind of bleak, autumnal wisdom.  It's mutable, this humanity.  What you thing will last forever--it doesn't last forever, and the chances are you don't even want it to last forever (are you really looking forward to meeting Granny in heaven?  Tell the truth, now.  Really?).  It's the paradox of existence: enjoy yourself, but don't kid yourself. Stuff happens.

With Renée, my first thought was--who wrote her script? Does she have a banker problem?  A political commissar?  But no--on second thought, my guess is that this was her doing, and that the sentiment is deeply felt.  I mentioned before that I read her memoir, which I greatly enjoyed and highly recommend.   I thought it a superb account of how to live in the arts, how to build a career.  But it struck me also as tinged with an odd note of pathos, in the sense of: if I am so successful and famous, why am I not having more fun?

To which, were I her friend, I would say: Renée, love, welcome to hard times.  You are one of fortune's favored, a gift to all humanity and I delight in your success.  But Renée, love, stuff happens.  Even to the likes of you, love, even to the likes of you.

In her perplexity last Saturday, Fleming seemed to try to spin it into a kind of feminist message, as if to say not that "people don't act that way;" rather more on the lines of "women don't act that way, and it is piggy of us to suggest that they do."    Sugar and spice and everything nice (she seems not to have noticed that the men in  Così  are set forth as bearing an equal (perhaps greater) burden of comic humanity--but maybe for the men, it is no more than justice?).  But I don't think she had her heart in the larger political agenda.  It was these women she was thinking about, or this woman, Fiordeligi, whose transition is so central the theme.  Or more precisely, this woman, Renée, who has sung  the part often enough. Personal note, it was my great good fortune to see her sing it there back in '96, and I count it as one of the defining opera occasions of my life.

So, dear friend, go with the autumnal-wisdom flow.  Don't feel any need to try to explain it away and don't ever, ever, try to apologize.  If you haven't got the message yet, you might look back to an earlier New York arts-darlng:

By the time you swear you're his,

Shivering and sighing,

And he vows his passion is

Infinite, undying,

Lady, make a note of this —

One of you is lying.

First printed in Life, (8 April 1926) p. 11

Being, of course, Dorothy Parker. Me, I think I'll revel in Fiordeligi's great (albeit ironic) anthem of faith:

Wrong-footed Harvard

It struck me the other day that Harvard University Press appears to have been caught off guard by the runaway success of Thomas Piketty's Capital in the 21st Century.   They moved up the publication date, apparently once they woke up to the fact that the great and good were already reading it (and in French too, not so?).  They let it go out with dreadful, amateurish, high school graphics--the kind of thing you would expect from an academic on a tight research budget, not from the nation's leading purveyor of learning.*  And now this, from today's email:

They did not add: none of which we expect to find anywhere within shouting distance of the Amazon best seller list, but hey, we never ever expected that of Piketty, either.

Afterthought: shouldn't it be "piqueté?

*But Joel suggests that the lousy graphics have more to do with the economics of publishing.  I.e., ten years ago they might have sprung for better, no budget for that any more.