By James Kwak
If you live in Massachusetts, early voting has begun. You can ask for an early ballot by mail, or just find a polling place here. This is what my town hall looks like today:
Not surprisingly, I voted for Hillary Clinton (more about why here). If you don’t live in Amherst, Massachusetts, you may want to stop reading. If you do live in Amherst, I’d like you to consider voting no on Question 5.
By James Kwak
Updated based on feedback from Matt Stoller. See bottom.
Mike Konczal wrote an article a few days back arguing that various progressive policies aimed at helping poor people would not be able to pry the “white working class” away from Donald Trump and Trumpism. I think the article was insightful and intelligently argued. This was my quick response:
In other words, it’s the long term that matters. We need policies that create broadly shared prosperity not because they will peel away Trump supporters in the short term, but because they are the right thing to do. And in the long term, if progressives prove that they can deliver the goods—a society with less inequality and less economic insecurity—that will change the political landscape.
Dani Rodrik wrote a longer, better response to Konczal. Rodrik’s perspective, which he’s presented in greater depth in the Journal of Economic Perspectives and a recent paper with Sharun Mukand, is that political outcomes result from the interaction of interests and ideas. As he writes in his recent post, “The politics of ideas is about activating identities that may otherwise remain silent, altering perceptions about how the world works, and enlarging the space of what is politically feasible.” Politicians appeal in part to voters’ interests, but also attempt to make salient identities that they share (or pretend to share) with particular segments of the electorate.
By James Kwak
[Updated: see bottom of post.]
There is an ongoing battle among the liberal intelligentsia over “economic anxiety.” The basic question is whether economic factors—loss of manufacturing jobs, decline in living standards, increase in insecurity—are a valid explanation for the rise of Trump. To simplify, one side claims that economic anxiety is one reason, along with racism (and sexism, and anti-Semitism, and …), for Trump’s popularity; the other side claims that the economic argument is wrong, and the Trump phenomenon is all about racism (and sexism, and anti-Semitism, and …).
This debate has reached its cultural apogee with the genre of the economic anxiety tweet, which features a racist, sexist, anti-Semitic, or otherwise reprehensible Trump supporter, accompanied by a sarcastic comment about the supporter’s “economic anxiety.” Here are some recent examples (screenshots because WordPress doesn’t seem to display the second-level embedded tweet properly):
Why this particular debate has become so bitter has been lost to history. Probably the economic anxiety deniers think that explaining Trump in (partially) economic terms amounts to excusing or ignoring racism, while the economic anxiety believers think that the racism-only story ignores the erosion of the middle class over the past thirty years. This is why—since we’re all well-meaning liberals here—when not confined to 140 characters, the deniers take pains to say that we should help poor people, while the believers take equal pains to say that racism is bad.
The people thinking of the clever economic anxiety tweets are just doing it to annoy the other side; they know that one anecdote, or several dozen, doesn’t prove anything. But periodically there are attempts to disprove the economic anxiety hypothesis—with data! Dylan Matthews of Vox is the latest to take up the challenge, with a long, heavily documented, and very heated argument that the Trump phenomenon is about race, not economics. But it fails, for a simple reason: You just can’t prove what he wants to prove with the data we’ve got.
By James Kwak
Judging from my Twitter feed, there is one thing that we all agree on after the first two debates (including Kaine-Pence): the moderators are useless. They ask dumb questions, they don’t ask important questions, they can’t get the candidates to answer the questions anyway, they don’t call out the candidates when they lie (OK, this mainly applies to one of the candidates), etc.
So … let’s get rid of the moderators!
By James Kwak
Imagine that while George W. Bush was governor of Texas and president of the United States, various people and companies decided to write him checks for hundreds of thousands of dollars, just because they thought he was a great guy. Those people and companies, just coincidentally, happened to have interests that were affected by the policies of Texas and the United States. But when he thanked them for their money, Bush never promised to do anything in particular for them. You would be suspicious, right?
Now, that’s roughly what has been happening with the Clinton Foundation. Various people and companies have been writing checks for millions of dollars to the Foundation during the same time that Hillary Clinton was secretary of state and, following that, the most likely next president of the United States—a title she has held since the day Barack Obama’s second term began. (The Clintons finally decided to scale back the Foundation earlier this week.)
… goes to Chain of Title, by David Dayen (with apologies to Jennifer Taub, Alyssa Katz, Michael Lewis, and many others, including my co-author, Simon Johnson).
Chain of Title isn’t primarily about the grand narrative of the financial crisis: subprime lending, mortgage-backed securities, collateralized debt obligations, credit default swaps, synthetic CDOs, the collapse of the global financial system in 2008, and the frenzied bailout that followed. Instead, it’s about foreclosure fraud: how mortgage servicers, banks, and the law firms they hired systematically broke the law to force people out of their homes. At the same time, it’s about securitization fraud: the fact that an untold number of securitizations were not properly executed, meaning that they violated the terms of their underlying agreements, meaning that their investors should have been able to force rescission of the entire deal.
The substance of the argument has been well known for years, so I’ll try to pack it into one sentence: The banks creating mortgage-backed securities failed to properly transfer notes (the documents proving a borrower’s obligation) to the trusts that issued the MBS, so not only was the securitization itself faulty, but the trust did not have legal standing to foreclose on homeowners—so the banks paid third-party companies to forge the required paper trail, and lawyers knowingly submitted fraudulent evidence to courts, who usually accepted it.
This has been common knowledge on the Internet since 2009 or 2010. But Dayen does what good writers do: he tells the story of a few real human beings figuring out the workings of this vast fraudulent system on their own, fighting against it … and ultimately, for the most part, losing. The book makes you feel the anger, disbelief, hope, and disappointment of those days over again. Even though I knew how the story ended—in a whimper of liability-eliminating settlements and self-congratulatory back-patting by politicians—it was still painful to read. Continue reading
By James Kwak
Apparently, both parties have platform planks calling for the reinstatement of the Glass-Steagall Act of 1933, the law that separated investment banking from commercial banking until it was finally repealed in 1999 (after being watered down by the Federal Reserve beginning in the late 1980s). Bringing back Glass-Steagall in some form would force megabanks like JPMorgan Chase, Citigroup, and Bank of America to split up; it would also force Goldman Sachs to get rid of the retail banking operations it started in a bid to get access to cheap deposits.
In his article discussing this possibility, Andrew Ross Sorkin of the Times slips in this:
“Whether reinstating the law is good idea or not, the short-term implications are decidedly negative: It would most likely mean a loss of jobs as part of a slowdown in lending from the biggest banks.”
I looked down to the next paragraph for the explanation, but he had already moved on to another unsubstantiated claim (that the U.S. banking industry would be at a competitive disadvantage). So, I thought, maybe it’s so obvious that Glass-Steagall would reduce lending that Sorkin didn’t think it was worth explaining. I thought about that for a while. I couldn’t see it.