Constructive Populism

By James Kwak

I don’t expect to get a holiday card from Tim Geithner this winter. Nor do I expect one from Larry Summers. Or even Michael Barr, despite everything I’ve written in favor of consumer protection. (I probably will get one from Barack Obama, since I donated money to his campaign.) But they might want to consider putting me on their lists.

“Populist” has mainly been used as a smear over the past year and a half, to connote irresponsible pandering to . . . well, to the people, actually. Simon and I have been written off by many people as populists, as if that alone were enough to settle the argument. But if and when financial reform does finally get passed by both houses of Congress, the administration will owe a major debt to the recent resurgence of anti-Wall Street sentiment, which can only be called populist.

Politico ran a story on Monday about how, contrary to everyone’s expectations (including mine), the financial reform bill is getting stronger as the days pass, not weaker. Goldman Sachs has a public approval rating of 4 percent. There is even chatter among a few Republican Senators that they should let the bill pass now, because as time passes it will get worse (from their perspective). The original Republican strategy — denounce the bill as a sell-out to Wall Street — has completely failed.

Yes, the Brown-Kaufman amendment failed — although thirty-three votes were a couple dozen more than I would have bet on just a few weeks before. The New York Times earlier reported that the big banks’ lobbyists were so focused on defeating Blanche Lincoln’s proposal to split off derivatives dealers (into independent subsidiaries of bank holding companies, it must be pointed out) that they had given up on virtually every other issue. Now the bill even regulates debit card fees.

This situation is not entirely welcome to the administration, which is in the somewhat uncomfortable position of having to fight off some of the more liberal amendments, such as Brown-Kaufman or “audit the Fed” (which they succeeded in watering down somewhat). But on balance, they’d much rather be in that position than where they were with health care, begging moderate Democrats to stay on board in the face of increasingly negative poll numbers.

The background to this political story is the return of what can only be called populist, anti-Wall Street sentiment. It was fueled a little by the SEC’s lawsuit against Goldman, a little by media stories such as the This American Life episode on Magnetar, and probably a lot by the increasingly stark contrast between a dismal job outlook and the return to profits and bonuses on Wall Street. I think our book helped a little, too, although we were admittedly more a beneficiary than a cause of this trend; there were a lot of people in Washington who read it, and maybe it made a few of them a little bit more nervous about being seen as part of the “Wall Street takeover.”

At the end of the day, I think populism can be a constructive political force. We will still end up with a relatively moderate piece of legislation (and maybe some people are hoping that the anti-Wall Street wave will subside before conference committee); but without it, we might have ended up with nothing.

60 responses to “Constructive Populism

  1. Yes, “We the People” is such an archaic concept.

    Any argument, proposal, or document that begins with “We, the People” is totally discredited and best ignored.

  2. mondo pinion

    We ARE archaic, Nemo. We the people breathe air, must eat, need to build our lives and procreate in security. That’s real. And when that is threatened you may learn something. Most of the time we go about our daily business, compete with one another, fall prey to the manipulations of power. But not always. Remember people massing in the streets day after day when the Soviet system was breaking down? Things change.

  3. Sure, populism can be a constructive political force; or not. (Just look at Venezuela or Zimbabwe for recent examples of “Populism Gone Wild”.)

    I believe the key difference between a constructive and destructive outcome lies in how well the population is educated, and how fiscally reasonable the desired changes are.

    If most Americans, though I do not know factually that these statements are true: Are relatively (willfully) uneducated & ignorant, and can not — or will not balance their own finances, how is it reasonable to expect their Government (which is run, in theory, by the same fellow Americans) to act responsibly?

    Money for nothing (and chicks for free); we’ll, that is just a calling card for Dire Straights.

  4. The Soviet system literally broke down because of its lack of change! The Union had no more money. And how is the former super power doing these days?

  5. Ah yes…Populism? Its ringtone sends out a vibing auspicious interpretation of a freedom lost, in a country gone awry? The esoteric meaning of a word that’s sequestered by a more aptly fatalist cult, fed only by fait ac`compli` postured by the bully pulpit. Yes,…”Wall Street” controls, as it seems, all media,free speech, but not the minds of a proud commoner that has tasted freedom! I,and others, will never prostrate or better said, capituate to their ill will. So yes James ,…the word “Populist” is frowned upon in closed circles ,but burns bright in the hearts,and souls of all Americans. No one knows what tommorrow brings,…but most often its the “Sun”! Thanks James ,and Simon,…and please never stop, “The good Digging for America’s Sake” ;^)

  6. There is a snowball effect, for good or ill.

    Television is powerfully recursive. If the knowledge of what Wall Street is actually doing, as opposed to what compliant media might say (CNBC here), penetrates far enough then no banker or politician who opposes restrictions, is safe.

    Roubini, as one example, is all over the place recommending strict restraint on both IBs and commercial banks as just ONE move to pull back from some future meltdown. He’s even on CNBC fairly regularly.

    Even Taleb is gaining a national audience.

    And both men predicted the meltdown. Taleb particularly specified the problems in some detail.

    “13 Bankers” is well read already and will become more so, no doubt, amongs a mostly powerful group of opinion makers.

    Add to that a farly large group of US Senators who are listening, and you you get the feeling the horses are already out of the barn.

    I’m definitely staying tuned.

  7. You’ve really got this slave morality thing going on, James.

    I am all for financial reform. What I can’t stand is listening to policymakers talk passionately about things they clearly do not and will not make an effort to understand. Listening to them talk about market-makers having a fiduciary duty, for example. Or talking about short positions generally as if they are evil. Or talking about derivatives as if only credit default swaps exist. That’s what critics of “populism” are about. It’s not about “pandering to the people.” What I need is a term for someone who does not want financial reform legislation drafted by either the banks or clueless idiots. Right now, it’s pick your extreme. There’s little sense on either side.

  8. mondo pinion

    So . . what is the difference between populism and democracy?

  9. hears hears bond girl

    although, if the bill was written by someone who REALLY understood financial system, the banks would like it even less than they will likes this bill

  10. Until the Federal Reserve is abolished there will be no real reform. This is all bread and circuses.

    Sadly, sometimes I wonder if Baseline only plays the white knight to throw people off of the real financial crimes-fractional reserve banking which allows the private creation of public money.

  11. Geoffrey Nunberg wrote a great essay on “populist rage” against Wall Street a year ago.
    “Sure, people are angry…. But why do we have to reach for a special word populist when we’re talking about the anger directed at the venality and arrogance of the rich, as if it’s inevitably the product of class antagonisms? Can’t I be angry just in my capacity as a citizen?”
    Nice to see people acting as citizens on this bill.

    http://people.ischool.berkeley.edu/~nunberg/populism.html

  12. We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
    We, should all strive to honor the concept as written, by living the dream.
    Jim

  13. Oligarchs use the word populism when they don’t like democracy.

  14. mondo pinion

    yep that’s what i think too — populism as it is used is a bogus word — kinda like the n word.

  15. mondo, Nemo was being facetious.

  16. Kliment Voroshilov

    Johnson and Quack populists? Don’t make me retch.

  17. mondo pinion wrote:

    Spartacus: “And maybe there’s no peace in this world, for us or for anyone else, I don’t know. But I do know that, as long as we live, we must remain true to ourselves.”

    Spartacus

    “Appian says he was “a Thracian by birth, who had once served as a soldier with the Romans, but had since been a prisoner and sold for a Gladiator”.[3] Florus

    In these altercations Spartacus proved to be an excellent tactician, apparently confirming that he had previous military experience. Though the slaves lacked military training, they displayed ingenuity in their use of available local materials, and in their use of clever, unusual tactics when facing the disciplined Roman armies…..”

    http://en.wikipedia.org/wiki/Spartacus

  18. Good news James, and Simon,…the board is getting flooded with sewage by way of a broken conduit from the “Far Side”! It seems your “13 Banker’s” best seller is catching on fire. Please don’t stop guys.

  19. Kwak?

  20. Hey Bond girl-

    Short position are not evil. But…

    Space exists between fiduciary duty owed to a client and scheming against same client.

    I’m tired of financial professionals not understanding that.

    You think indictments are coming in the municipal bond interest rate scam? If you do as I do – watch the populism then.

    Cheers

  21. I’d like to see a detailed alternative to fractional reserve banking which can meet the credit needs of expansion. Not that I favor this Federal Reserve system. I don’t, as currently constructed by statute.

    However, no one has come up with an attractive alternative to fractional reserve banking (forget the Fed for a second) which will assure me that an average unconnected American stands a chance getting a good loan to fund an idea.

  22. the word populism is such a scam, isn’t it? This country is trapped in its language like 1984. We just don’t grow out of it, do we?

    I blame alternative media as much as MSM. They might be alternative, but they haven’t broken the language (concept) barrier. They use the language of the languishing establishment to their own peril!

  23. Here is one of the key “populist” amendments that Senator Dorgan is a lone voice, “ban naked credit default swaps”. The Derivative Project supports Senator Dorgan’s threat of a filibuster if his amendment does not come to a vote.

    Take a look at this amendment, call and email your Senator tonight before the vote tomorrow.

    http://www.thederivativeproject.com/Blog.html

  24. On a not entirely unrelated subject, I received a request for support from the California Association of Realtors (CAR) today. It was for a bill in the California assembly to stop banks from going after defaulting homeowners for deficiency judgments. In most cases, and in all cases where the entire loan is a purchase money loan, the bank can only go after the security. If that security is sold for less, the bank eats it. However, during the big refinance go-go years, people were taking out loans, often taking cash out to buy new toys, vacations, big-screens, college tuition, credit card debt consolidation, etc. What most people don’t/didn’t understand, is that when the refinanced their house, the loan was not longer considered a purchase money loan, and the bank could go after them for the amount that they are deficient, after the bank sells the house at foreclosure. Yes, the bank needs to go through a judicial foreclosure in order to do this, rather than the traditional California trustee’s sale.

    In years past, when real estate was a more stable investment, the banks generally would not go through the trouble and expense of a judicial foreclosure. Today, they must be either giving it consideration, or are starting to go after those who have been foreclosed upon for deficiency through the courts. I’m sure that the court system, already overstressed, is not looking forward to that wave coming in. However, the banks are within their rights to go after the deficiency this way. Just because they hadn’t done so in the past, doesn’t preclude them from taking advantage of their contractual protection today.

    I appreciate that CAR is trying to protect the already burdened upside down homeowner, but I don’t think they’ll succeed, at least not fully. Why should they? Walk-away, strategic foreclosure folks have been taking advantage of the banks’ anti-deficiency standing in purchase money loans for a while now. The banks don’t like this very well.

    A more reasonable approach might be to have the banks limited to any cash-out amount, added to the loan during refinances, for their deficiency. After all, those who took out money during the refinance, probably enriched their lives somehow. This enrichment is at the expense of the banks, if they can’t go after defaulters for a deficiency. Borrowers who only repaid the original loan, plus origination of the refinance fees, should be protected under anti-deficiency, as the money really is “cleaner” purchase money.

    I have been railing about this for the last few years, but nobody was listening. I guess I don’t get out to raise hell enough. It was during my either taking continuing education for my real estate salesperson’s license, or for my broker’s license, that I read that refinance borrowers often give up their anti-deficiency protection. Even being a working Realtor, this surprised me. I had no idea, even though I had refinanced my house, and taken money out. Did the mortgage companies not think that this was important? That house has since been sold, and the bank got all of their money. This was fortunate for both of us.

    What I’m getting it, is that if I didn’t realize that I was giving up the anti-deficiency protection, how could you expect the average American borrower to know? The mortgage brokers were not highlighting this point anywhere. Had they have done so, my guess is that they would have lost a large number of refinance customers. So, we know why it wasn’t highlighted. In fact, I’d lay odds that somewhere at the top management of Countrywide, et.al, they were told to “low-light” such clauses during the boom years. Now, the questions may be, where do we go from here? If the banks started flexing this muscle, will it cut down on strategic foreclosures? I believe it will. Time will tell.
    Now, the reason that the banks may even be talking this up, if that’s what prompted the bill to be written, may be to dissuade those who are considering a strategic foreclosure from doing so. These people, who walk away from their homes, despite being able to afford the payments, risk losing not only their home, but all of the money they saved by walking away. The fact that some many financial self-help gurus are advising people to walk away, must really have the banks reeling. As much as I don’t like the banks, per se, I see their point in this one.

  25. I assume you are talking about bid-rigging in muni derivatives that has received some press lately, even though the investigation started in 2006? CDR Financial Products was indicted last fall.

    I guess you meant a firm most non-professionals would recognize. That’s the essence of populism right there. No one is quoting an approval rating for CDR in articles. Yet the firm had its paws in many billions of dollars worth of muni deals.

  26. Well, the Declaration of Independence was hardly authored by anything resembling “the people.” It was well-intentioned nonetheless.

  27. James Kwak and Simon Johnson populist. That’s funny. I’m not being judgmental but these two guys are among the .001 of the elite in this country. It just goes to show that the elite are not homogeneous.

  28. Here is one more critical “populist” amendment that is in danger, here is Reuter’s update on Senator Lincoln’s Amendment. Contact your Senator before the vote tomorrow and let them know you don’t want a “two year study” on the impact of separating derivatives, you want them to implement Senator Lincoln’s amendment now.

    http://www.thederivativeproject.com/Blog.html

  29. publius wrote:

    “Hey Bond girl-

    Short position(s) are not evil. But…”

    My short positions and commodity speculations are restricted to my risk capital, >10% of my net assets, something I won’t lose much sleep over if damaged or lost. I view it as insurance and the spreading of risk, not unlike a few N95′s in the cupboard. :-)

  30. I’m sure many borrowers were unaware of the antideficiency provision in the first place.

  31. A few local politicians are already in jail for taking the bribes. CDR was the local government advisors, part of the conspiracy… right. But, at least a dozen of the biggest banks are on the other side of that trade, of course.

    I hear the testimony in the local criminal cases makes interesting reading which might further convince someone of big indictments to come.

    Mississippi, for one, claimed the gov had 670,000 audio tapes of the “conspiracy”. That’s a lot of tape, either way. If the gov didn’t indict, I might have darker thoughts about all that audio taping.

    Six months till November.

    Shorting is definitely not evil.

    http://www.bloomberg.com/apps/news?sid=anW3hAG0Zw5k&pid=20601087

  32. All this blogging and book-writing, and these media appearances — it all looks great, and many windmills sustain dents, but why do you do it? And who is subsidizing it? Who recruited whom to the blog? A while back James mentioned that he tried for an important internship or fellowship of some sort and was declined, which I guess was supposed to make us think that the doors to privilege might not be as open as we think they are for him. But there is a nice juicy job waiting for him after school end, yes? Something to do with global issues and property rights?

    How much time does Simon dedicate to his MIT-related activities? A month or two a year? Less? You seem to be getting through law school in the off hours, but what does his typical day look like when he’s not on tv, guiding students through the great game of global entrepeneurship, writing blog posts?

    We finally figured out a little more about Konczal’s background, discussed it publicly (and then Krugman curiously and immediately wrote a fierce “Konzcal’s with me!” post). But we still no nothing about Simon prior to or during his days with the Dons. Where does that accent come from? It’s more frustrating than Russell Crowe’s.

  33. Rick -

    Absolutely. The Germans are suggesting this week that shorting sovereign bond is fine too, so long as you own them. I don’t know how their ban on otherwise-shorting will work out for them. I’m curious and watching.

  34. Bayard Waterbury

    No doubt, as most have determined by now, populism is a two-edged political sword. Shame. I hate politics. It’s interesting, in a vacuum, but in reality, it just sucks the logic out of governance. I am for the formation of a party called the Realists, which would be based entirely on the politics of making logical (forget left and right) decisions about everything. The Realist Party members in Congress would not only require that a bill be “paid for”, but would also require that the purpose, in the broad context of governance is truly, and logically, worthwhile. Bills like health care reform would be taken away from every special interest, and given to the population and academia to devise a solution. Financial reform, the same. I would form a national constitutional (Article V) convention, and reform elections, lobbying, and all political contributions. It always amazes me that so little of true, positive, meaningful nature comes from Congress (like Gramm-Leach), and even after that, an administration can so successfully turn its back on actually doing the regulation which still exists even after the deregulation. Look at Christopher Cox, what a shame. Yes, we need true populist movements, especially now, when the elitists are hitting the flush lever and we’re in the toilet.

  35. Lady in Red

    Best of all: for every new piece of legislation passed,
    make a law that Congress would have to repeal five old laws.

    And support congresspersons who introduce legislation
    to repeal. We need fewer, simpler laws. No one can
    deal with, manage, the weight of the mess we live under.
    …..Lady in Red

  36. Art-

    What makes them .001 elite to you? Intelligence, wealth, popularity, trendiness, ideas? Would they be invited to a Truman Capote party?

    Maybe this month, but not last year.

    I think they’ve done a great job of offering some gravity to a necessary anti-establishment banking movement, as have others.

    They contribute.

  37. Are you getting the bid-rigging cases confused with the Jefferson County, Alabama swaps, regarding the local indictments?

    There actually is a litany of cases involving the muni derivatives market, which have been going on forever and have driven major players out of the market. I doubt most people realize this.

    Part of the issue with the muni cases is that unless something blows up a la Jefferson County, and it actually translates into astronomical rate increases, people do not care.

    So the municipality pays a massive swap termination fee. That fee gets built into the costs of issuance with their next bond issue – i.e., it is financed over time. People do not notice additional debt until they are forced to notice it… And that takes a very long time, usually after the government is bullied by the credit markets and has to pay more to borrow funds. People might get upset out of principle in phases, but they move on. Politicians understand this dynamic very well, as do bankers.

    That’s with swaps. But how many average joes can explain the cost of the GIC bid-rigging scheme? How many people can even tell you how much debt their state or local government has outstanding, let alone explain tax arbitrage and yield burning? All they have is an impression that the bank did something wrong. And what’s the shelf life on an impression? Maybe the timing is good and it forces politicians into doing something, anything to survive the election cycle. That does not mean that the reforms will be sensible, that the system will be more stable, etc. Even on this site, things are now more about which “side” someone is on than the details. But that is how politics goes. Politics is more about fulfilling a sense of belonging than anything else. The populist movement is as much about developing a fraternity as any investment bank is. This is why getting any lip service from senators is a triumph, even if what said senators come up with is totally insane and incoherent.

    But yeah, for those who appreciate the mechanics of what is being alleged, this stuff is pretty wild.

  38. A critical move was made by Germany today. Our Senators cannot ignore this in their votes tomorrow, otherwise they will be creating an unhealthy arbitrage, that will cause global financial system instability.

    Our Senate was preempted by Germany, who banned naked credit default swaps today. Unless the Senate wants to create global financial instability, which is an inevitable outcome with the arbitrage opportunities if Germany bans naked credit default swaps, but the U.S. allows them, our Senate has no choice but to follow Germany’s lead and ban naked credit default swaps immediately, then Congress can also “study” the issue, after the ban, along with Germany.

    Checkmate, Congress.

    http://www.thederivativeproject.com/Blog.html

  39. The time has come to take the initiative away from the right and the left and all politicians, and corporate handmaidens.
    Let’s re-label the ‘populist’ movement as the movement of ‘Responsible Citizens’?
    This is a movement to join together a diverse citizenry. It seeks to address poor governance, corruption, term limits, absence of integrity, ad infinitum. Whatever the responsible citizens decide is necessary to be responsible and make responsible choices.
    The ‘game’ currently seems to be “….whomever controls the language, controls the argument”. Populists are languaged as nut jobs and eccentrics. Well… let’s give ourselves a label that cannot be twisted. An unambiguous label.
    The real reason we’re in this mess is a very immature and un-responsible citizenry allowing too few to control too much with too few responsible citizens involved in the process. The majority of people have believed in the tooth fairy and that government is inevitably our ‘daddy’, and that everything will turn out alright.
    Well, it isn’t, and it won’t!! We have only ourselves to blame.
    Welcome tea party, welcome left, welcome right, welcome libertarian, welcome disenchanted republican, welcome disenchanted democrat.
    Join together with us to form the party of RESPONSIBLE CITIZENS. Our aim is simple. Take back government, and restore integrity to our society. We oppose no one, we fight no one. We merely address issues as adults without regard to non-citizens (read corporations). We only regard the opinions of other citizens— not non-citizens. We recognize that only Responsible Citizens can act from a conscience based upon the values of the individual—not non-citizens.
    We are a group of people (responsible citizens). We are now here to become active locally, regionally, nationally and Internationally. Our currency is that of a Responsible Citizen….Nothing more.

  40. the derivative project wrote”

    “A critical move was made by Germany today…who banned naked credit default swaps today.”

    Hedge Funds Bet Europe’s $1 Trillion Bailout Won’t Solve Crisis

    May 18, 2010, 10:22 PM – excerpt

    May 19 (Bloomberg) — “Kyle Bass, who made $500 million in 2007 on the U.S. subprime collapse, is betting Europe’s debt crisis won’t be solved by the $1 trillion loan package the International Monetary Fund and European Union agreed on last week.

    “The EU and the IMF effectively went all-in with a bad hand in the highest stakes game of financial poker ever played with the world,” wrote Bass, head of Dallas-based Hayman Advisors LP, in a letter to clients sent after the bailout was announced.”

    http://tinyurl.com/39o49j4

  41. Bonds girl

    pls tell me, in abacus, was goldman in your opinion more market maker or more underwriter?

    Senators do not know difference, but blankfein was preying on their ignorance

    what do you think?

  42. Maybe we could make you dictator for life since everyone else is so ignorant and uneducated. Or, maybe the machines will do us a favor and take over soon so we can rest our pudding-like brains. Then all our decisions will be “fiscally responsible” because the supercomputer won’t have all those pesky moral conflicts that us woefully stupid humans waste our time arguing about – maybe we can feed the poor with something along the lines of Swift’s Modest Proposal – that would certainly help reduce the deficit.

    Seriously: our current defecits are the result of an ersatz capitalist system whose ruling elite have plundered our nations’s wealth for they’re own enjoyment while socializing the debt. If you consider the two most recent items that have exploded our deficit – the Iraq War and spending related to the financial crisis (Recovery Act, TARP) – it is apparent that the elite have enriched themselves at our (and our grandchildren’s) expense. Is that reasonable? From their perspective, very much so. And, as for long term obligations such as Social Security, Medicare/Medicaid lets remember that it is the weatlhy elite, with its army of lobbyists, that are keeping us from doing anything on that front. Why can WalMart negotiate with the Rx industry so it can offer 4 dollar generics but the Federal Government cant for Medicare Part D? Does Walmart have more juice than Uncle Sam? Why was cost control mainly left out of the healthcare bill? Why are we still the only wealthy nation to have a for-profit healthcare system? Why is Arnold proposing to slash welfare-to-work programs in California but wont even think about raising taxes on wealthy individuals or wealthy coorporations that can afford to pay them?
    Please. Don’t blame working class people for this debt – rembemer, wages have been stagnant for the last 30yrs. This debt was foisted upon society by the wealthy which makes it even more egregious. And since you’re quoting rock anthems from the ’80s may I suggest “Eat the Rich”.

  43. ‘German Chancellor Angela Merkel accused the financial industry of playing dirty. “First the banks failed, forcing states to carry out rescue operations. They plunged the global economy over the precipice and we had to launch recovery packages, which increased our debts, and now they are speculating against these debts. That is very treacherous,” she said. “Governments must regain supremacy. It is a fight against the markets and I am determined to win this fight”.’

    http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7687790/ECB-paralysis-rattles-markets-as-debt-costs-hit-new-highs.html

  44. Bondgirl,
    The duty of market maker and underwriter are two different functions, or are you one of the “clueless idiots” who can’t figure that out???

  45. She sounds like a populist doesn’t she? Nevertheless, I am down with Angela Merkel. Who’s side are you on?

  46. ‘So what is unfolding is a Social War on a global scale – not the class war envisioned in the 19th century, but a war of finance against entire economies, against industry, real estate and governments as well as against labor.’

    http://michael-hudson.com/2010/05/euro-bankers-to-greecethe-wealthy-won%e2%80%99t-pay-their-taxes-so-labor-must-do-so/

  47. You’re still mucking around in all this garbage? Thought you were going to go to pharmacy school or something instead. It’s a Rube Goldberg device. It’s cute that you have intimate knowledge of the bond markets, cute like when a little kid recites all the presidents, but it has negative social utility. All this crap has to go, and unfortunately so do all the cottage industries populated by president reciters.

    But if the plan is to really burn everything down ala Dr. Mabuse, all this blathering must, of course, continue for quite a while. Apologize for the tone. I just can’t stand to see thoughtful people engaged in this garbage.

  48. bob goodwin

    Effective populism is often not liberal or conservative and not republican or democratic. I agree the republican senators are more wrong on this issue than the democratic senators, I can say that is true of the people in those parties.

    Libertarians have noticed that the free market was not free – it was betting with public money with assymetric incentives. Conservatives have noticed an entire profession overtaken with sociopathy. Liberals noticed that the powerful owned the field.

  49. Re: @ Gene____ Nice read. :^)

  50. Were you in Kentucky last night by any chance?

    Are you talking about the gold standard? If so, come out and say it so you can be aptly thumped. How is the Federal Reserve “privately” creating money when it’s a “public” institution – albeit, one that should be under way more scrutiny and routinely audited.

    I’m getting the feeling you think “The Fountainhead” is actually philosophy and not what it really is, a pretentious, elitist, romance novel that draws all the wrong lessons from Fredich Neitzche. Seriously — lets have all the smart, beautiful people go live on an island paradise so they don’t have to be annoyed by the ugliness and mediocrity of the “common folk”.

    Ann Rand was disturbed and so is anyone that would name their son after her.

  51. This could also be called “highly informed” populism since one reason why you and Simon are so effective is because you understand the complex issue so well and have bothered to take the effort to explain it so well to non-specialists. There’s a generosity to that which in itself is in stark contrast to the obfuscation that characterizes the whole problem of the financial crisis. Regular people without this kind of knowledge or perspective cannot reasonably be expected to comprehend it all, or to advocate for appropriate interventions. And unlike some personal financial advisors, you’re not taking a commission after convincing us to roll over our 401K’s (meaning, that’s the usual price for explaining complex financial products to regular people). So this experience has been very interesting, and likely historic. What else might FDR have accomplished (or not) if there had been an informed blogosphere in the 1930′s.

  52. It was indeed. It also does not start with “We, the People”.

  53. Kliment Voroshilov

    No, Quack.

  54. Kliment Voroshilov

    “… but these two guys are among the .001 of the elite in this country.”

    Well, of course, that’s the whole point, isn’t it. The education elite is just as much a part of the ruling class as are Wall Street investment bankers and the scum in Washington taking campaign cash from lobbyists and calling themselves “public servants”. By always encouraging the delusion that the system can be reformed, Johnson and Quack simply offer tacit support to those extending their institutions federal grant money. How would MIT feel, for example, if Johnson were to do something authentically populist like leading a general strike? And can you imagine Quack on a picket line dodging police billyclubs? Now that’s populism.

  55. Kliment Voroshilov

    “… not the class war envisioned in the 19th century …”

    Not that envisioned in the nineteenth century, precisely, but an evolved iteration of the very same phenomenon brought forward into the twenty-first. Hudson is terrific. And the article of his you cite is a splendid example of first class historical analysis.

  56. It’s a testament to how far off-track a government Of the People, By the People, and For the People has gotten that, these days, ‘populism’ meaning “A political philosophy supporting the rights and power of the people in their struggle against the privileged elite” has become a bad word. ?!

  57. Bradygate, I would make a terrible dictator!

    I just don’t look good in red or purple. Besides, one of the most famous guys who declared himself dictator for life met a nasty fate. I really don’t want to terminate my friendship with my pal Brutus for the good of my health and national security.

    I agree with your (general statement), especially for the last 35 years or so, that the wealthiest and most powerful of America have been enjoying private gains and giving socialized losses.

    Sadly, I can not agree to let the peons off the hook who participated in the housing mess. Mortgage (or any other type of) lenders can not lend to those not willing to borrow. Period. Too many folks participated in this game and borrowing way beyond their means. They gambled, they lost.

    Yes, the wealthy also gambled (and when they were wrong some) got bailed out totally. That sucks. Irresponsible behavior from one group does not absolve others from doing the same. Two debits do not make a credit.

    When the U.S. (in some cases starts creating and) enforcing its laws equally to unequal people the country (and the rest of the world really), will be “Living on a Prayer.”

  58. The last paragraph should be:

    Until the U.S. (in some cases starts creating and) enforcing its laws equally to unequal people the country (and the rest of the world really), will be “Living on a Prayer.”

  59. Which definition of “elite” do you mean?
    (from Mirriam-Webster):
    1 a the choice part : cream
    1 b the best of a class
    1 c the socially superior part of society
    1 d : a group of persons who by virtue of position or education exercise much power or influence

    None of the above quite fit. I suspect you are thinking of the “liberal elite,” a term cooked up by conservative politicians to disparage educated opinion.