Beautiful Horizons

The End of the Financial World as We Know It

Michael Lewis and David Einhorn in today's NYT:

OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.

The credit-rating agencies, for instance.

Everyone now knows that Moody’s and Standard & Poor’s botched their analyses of bonds backed by home mortgages. But their most costly mistake — one that deserves a lot more attention than it has received — lies in their area of putative expertise: measuring corporate risk.

Over the last 20 years American financial institutions have taken on more and more risk, with the blessing of regulators, with hardly a word from the rating agencies, which, incidentally, are paid by the issuers of the bonds they rate. Seldom if ever did Moody’s or Standard & Poor’s say, “If you put one more risky asset on your balance sheet, you will face a serious downgrade.”

The American International Group, Fannie Mae, Freddie Mac, General Electric and the municipal bond guarantors Ambac Financial and MBIA all had triple-A ratings. (G.E. still does!) Large investment banks like Lehman and Merrill Lynch all had solid investment grade ratings. It’s almost as if the higher the rating of a financial institution, the more likely it was to contribute to financial catastrophe. But of course all these big financial companies fueled the creation of the credit products that in turn fueled the revenues of Moody’s and Standard & Poor’s.

These oligopolies, which are actually sanctioned by the S.E.C., didn’t merely do their jobs badly. They didn’t simply miss a few calls here and there. In pursuit of their own short-term earnings, they did exactly the opposite of what they were meant to do: rather than expose financial risk they systematically disguised it.

One of the best journalistic pieces to date on the financial crisis, in full,  here.

2009 begins with a bang...

 The war in Gaza brings in the New Year with a sense of foreboding that neutralizes some of my hope for the Obama presidencey - a reminder of how intractable so many of the problems on the new President's table have been and are.  The Israel-Palestine conflict is one on which I've given up long ago viewing in any terms other than despair.  The  almost absurd complexity and sense of absolute futility that it evokes is summed up in a quote from the Israeli Prime Minister I just read in Tony Karon's commentary at "Rootless Cosmopolitan": 

On the election campaign trail in 1999, Ehud Barak was asked what he’d have done if he’d been born Palestinian, and answered without hesitation, “Joined a fighting organization.”

Karon's excellent longer piece, "Understanding Gaza", is here and it's well worth reading as a reminder that the US press isn't a particularly useful guide to the history and politics of the region, as well as a review of some of the complexities and futilities that make my head hurt whenever I think about this ugly mess. It begins with a long dissection of a New York Times op-ed written by Israeli historian Benny Morris, but in its entirety the piece covers much broader ground and contains some very useful additional links and perspectives.

Are there long-term solutions ?  Israeli journalist, former Zionist guerrilla and current peace activist Uri Avnery has a "memo" to President Obama outlining what he should do. I'll post the entire prescription, in the hope that it contains some seeds of reason and resolution:

MEMO FOR OBAMA

For: the President-Elect, Mr. Barack Obama.

From: Uri Avnery, Israel.

The following humble suggestions are based on my 70 years of experience as an underground fighter, special forces soldier in the 1948 war, editor-in-chief of a newsmagazine, member of the Knesset and founding member of a peace movement:

-1- As far as Israeli-Arab peace is concerned, you should act from Day One.

Credit where it is due

Joe Klein is far from my favorite pundit, but he's speaking remarkably honestly and making a lot of sense here.

UPDATE: More here. Strong stuff. Glad this guy's last name is "Klein."

...and a Happy New Year.

Venerable military correspondent Joe Galloway on America's veterans, here.

Will the progressive majority emerge ?

Essential piece by Rick Perlstein, writing in The Nation, on the reality of a liberal majority in the U.S. and some thoughts on why Democratic pols have done such a mediocre job of building on it.

"Combat Liberalism" - The Peretz Imperative

I read The New Republic (online version) because there are, still, a few insightful writers who appear there regularly - John Judis is my favorite. But in the annals of American liberalism, this "flagship" magazine in its recent "Martin Peretz decades" has become, as its only consistent thread, a study in "liberal" self-hatred. It has been almost as prolific in bringing forth serial criticism and self-criticism of liberal error and debasement as a gang of Mao's Red Guards berating village elders in the heyday of the Cultural Revolution.

Eric Alterman has written an engrossing piece on the Peretz-TNR phenomenon for The American Prospect, a liberal magazine that actually is liberal. Its worth a read if you've ever asked yourself how liberalism became so tattered and tentative over the years. A lot of it has to do with a famous, venerable, highly-respected "liberal" magazine - the most high profile of its day (although it's no longer taken very seriously by serious liberals) - that provided a prominent perch for such knee-jerk reactionaries and smear-mongers as Charles Krauthammer, Fred Barnes, Andrew Sullivan and Michael Kelly to spread their contempt for any credible version of liberal politics.

"Gay, Tory, Catholic" Sullivan's finest hour as editor of TNR was providing a megaphone for Charles Murray's psuedo-scientific "Bell Curve" - a thinly-veiled racist tract. Later, after bringing the magazine back from this particular brink, wunderkind editor Peter Beinart managed to find another cliff to leap off of with his vicious attacks in TNR on fellow liberals who doubted either the necessity or the wisdom of invading Iraq. Beinart himself has since recanted, but the damage was done.

Here's a clip from Alterman's piece that sums up the extremist idiocy of TNR's ill-liberal politics, particularly when it comes to all things Israel:

When (Secretary of State, Colin) Powell spoke of the need to find a solution so that Israelis and Palestinians could live in peace, the magazine's editors treated the former general as if he were an underprepared affirmative-action student in a cutthroat Harvard seminar. The editors found "the banality of Colin Powell's address on American foreign policy" to be "breathtaking." The magazine went so far as to accuse Powell of providing "a kind of bizarre ratification of Osama bin Laden's view of the problem." Why? "There is bin Laden attempting to persuade the Muslim world that what he wants is justice for the Palestinians, and here is Powell attempting to persuade the Muslim world that what he wants is justice for the Palestinians." Even to appear to care about "justice for the Palestinians" in TNR World was to give aid and comfort to the terrorist bin Laden.

There's lots more in Alterman's dissection of this shameful chapter in the Peretz-inspired annals of what can only be seen in retrospect as an inside hit job to bring any strong, dynamic, unapologietic liberalism to its knees.

September Song

What's the lyric ? "The days grow short when you reach September...and you haven't got time for the waiting game." So it supposedly goes with Iraq.

"September Could Be Key Deadline in War" headlines the Washington Post. "Congressional leaders from both political parties are giving President Bush a matter of months to prove that the Iraq war effort has turned a corner, with September looking increasingly like a decisive deadline."

Fat chance says Spencer Ackerman, here, "Wake Me Up When September Ends".

Ackerman's conclusion: "The ostensible reason that the Bush administration opted for the (surge) strategy in the first place was to stem precisely the escalation in sectarian acrimony that's unfolding now. Bob Gates, the off-message defense secretary, stated in March that unless the 'reconciliation process (goes) forward… then the strategy won't work.' The process may move forward, but the actual reconciliation is moving backward. That's nothing new: The Bush administration favored process over substance with such sectarian milestones as the 2005 elections and the constitution, both of which exacerbated the problems they were intended to alleviate."

"Already, Petraeus's deputy, Lieutenant General Ray Odierno, has backed continuing the surge into April 2008, regardless of what happens with Iraqi politics. In this manner, escalation becomes its own justification and tactical myopia becomes wisdom. Expect to see a lot of that come September."

Read the whole thing. Excellent - if depressing - background on the current state of Iraq - as the Iraqi parliament prepares for a two-month vacation!

Note: The Ackerman article at The American Prospect's new website requires a one-time registration. It's well worth it. You'll get access to lots of excellent content from folks like Ackerman (who wrote the surprisingly incisive Iraq commentary for New Republic until he was...ahem...fired), Bob Kuttner, Michael Tomasky, Robert Reich and Harold Myerson.

Moyers on Journalism & Democracy

"When I left Washington 40 years ago it took me a while to realize that what's important is not how close you are to power but how close you are to the truth. The talk shows want to make 'news' with the guest of the day whether or not the news has anything to do with reality. If you are a reporter in Washington, the official view of reality organizes your world."

We're still mourning the death of David Halberstam, but let's not forget to celebrate the re-emergence of another rare icon of first-rate, analytical journalism - Bill Moyers - with a new series of shows on PBS. As mentioned previously on this blog, his piece on the failure of the press in the run-up to the Iraq war (Wednesday night at 9pm) is likely to be a definitive critique of one of the most shameful chapters in the history of American journalism.

As Lyndon Johnson's Press Secretary, Moyers has been deep inside of the issues he tackles. Based on his subsequent emergence as the most consistently incisive and humane voice in broadcast journalism over four decades, I consider Moyers a national treasure. Now in his 70s, America still needs Moyers more than ever and I'm thankful that he's postponed retirement for at least another season or two. Here is an excellent current interview with Moyers - "On Journalism & Democracy" - from The Christian Century magazine that the above quote excerpts. Highly recommended.

And so it goes...

"Military planners have abandoned the idea that standing up Iraqi troops will enable American soldiers to start coming home soon..."

"Just One of those Normal Cafeterias, Like In Indiana..."

Some sobering insight from Spencer Ackerman on the bombing of a cafeteria and killing of Iraqi parliament members inside the "super-secured" Green Zone of Baghdad.