Other links.

* Inevitable endpoint of historical trends: Administrators in the Undergraduate Studies (US) office [at UC Davis] have asked if freshmen seminar instructors would voluntarily opt out of their quarterly stipend for teaching the one-to-two-unit courses for freshmen.

* The Italian magazine Wired has your map of the future.

* Bootleg DVD covers.

* Dick Armey: "The largest empirical problem we have in health care today is too many people are too overinsured." Of course! That's the problem.

* Someone really didn't think this one through.

* How American politics works, part 1: [The Boxer] bill will be a dead letter. Already there’s an undercurrent of anxiety in Washington that a bill can never pass as long as it’s associated with an unpopular lady senator who runs one of the body’s most liberal committees. The Senate isn’t like the House. There is no party discipline among Democrats; in fact, Democratic senators are fond of explicitly disclaiming party discipline. It’s a chamber full of large, jostling egos and not a little old-boy sexism. They’re not about to let a combative liberal woman run the show.

* How American politics works, part 2: What not to spend your empire's money on.

* Who is running for president in 2012? Only the new mayor of Manchester, N.H., knows for sure. Matt Yglesias has your chart showing no Republican can win in 2012, while Hendrik Hertzberg has something you can't get in your fancy East Coast universities: his gut.

* And Pandagon considers Betty Draper.

Tuesday night.

* First on the Threatdown: coyotes!

* Winooski, Vermont: Great Domed City of the North.

* "How Health Care Reform Won."

* Is Metroid Prime the Citizen Kane of video games? Hard to pick Metroid Prime over, say, Ocarina of Time, just in the GameCube category alone.

* CNN, always three weeks behind the story, asks whether Obama has lost his mojo in the very moment it becomes apparent that his polls numbers are again rising.

* Also in poll news: contrary to Nate Silver's recent NJ-GOV analysis it does seem clear that Corzine is moving sharply upward in the polls.



* "Wall Street’s Near-Death Experience."

* And Life celebrates dumb inventions of the 1950s and '60s.

Wall Street has apparently learned nothing from nearly toppling the global economy last year.

The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

Awesome. See you in a few years for the next crash.

I guess I'm doing some AIG blogging today. A few more links for people looking for background and commentary on this.

* Good background on the collapse of Wall Street and the shady and/or illegal practices that have characterized the behavior of these large firms over the last few years can be found in Michael Lewis's piece for Vanity Fair from December.

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

Here's an interview with Lewis.

* Eliot Spitzer, hilarious national joke though he may be, says the real scandal is "that AIG's counterparties are getting paid back in full."

But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed?

The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

(Via Vu.) Spitzer also speaks about the (misdirected) "populist rage that is metastasizing very quickly," which is a topic I just finished writing an email about. My interlocutor had a good line I'll just go ahead and quote:

Every problem we have is met with demands for a kind of vengeful series of recriminations instead of a focus on what public policy should focus on - the institutional framework that allows/encourages people to behave in a certain way and that leads to disastrous results.

Obama needs to channel this rage into a movement for systemic reform of capitalism, not just pump capital into institutions that have been broken for not years but decades. Otherwise, he and we will find ourselves in this same place soon enough, with all same players crying "Oops!" again.

* Dan Hind has a somewhat similar take, via Lenin's Tomb, though it must be said that both links are instructive examples of how difficult it can be to divide justice from vengeance in times like these. What I like about Hind in particular is the way he traces the crisis to what I agree is a major point of origin, the explosion of public and consumer debt beginning in the early 1970s, which didn't "just happen" but which was, again, the result of a system of incentives instituted by those in power. The credit crisis is a symptom of a much larger disease; Obama needs to think much bigger than he seems to be.

* Dr. Bluman has some thoughts about legality and fraudulent conveyance in the comments to a post I keep pushing down the page.

The company claims any failure by the government to [back all of AIG's obligations] would have catastrophic consequences. This claim is exaggerated. Serious consideration should be given to forcing AIG's partners in derivative transactions -- which are mainly buyers of credit default swaps from the company -- to take a substantial haircut.

More on AIG: "AIG Still Isn't Too Big to Fail," by Harvard Law's Lucian Bebchuck. Via Josh Marshall, who provocatively writes:

These are derivatives, in many cases high-stakes bets on underlying assets the purchasers did not themselves own. So, you insure your house for fire damage. And I insure it too, even though it's not my house. Your house burns down and you get the policy payout to rebuild your house. But I just want my money because a deal's a deal. I have no problem with old-fashioned gambling. And if people want to play with their money this way, I've got no problem with that. But if the casino itself goes bust, don't come to me and talk about having moral claim on your winnings that I need to cover.

Let's start off with xkcd's lesson in how numbers lie.

As I've been saying both up top and in the comments the significance of this AIG bonus outrage is being badly overblown. The bonuses are a nice red-meat issue for the media circus but they're basically a rounding error with regard to the scale of the bailout as a whole. Nate Silver is basically right here precisely because, as the cliche goes, "hard facts make bad law"—though his comparison to the Terry Schaivo case flounders at the fact that this silly thing the Congress is doing has wide popular support. (Nate and Josh Marshall both have more on the possible unintended consequences of this poorly thought-out new tax.)

As I've been trying to argue, the only relevant consideration regarding the bonuses is whether they were legal contracts, negotiated in the proper way and not predicated on fraudulent accounting or other illegal activity. Andrew Cuomo and Eric Holder should be investigating the bonuses, in other words, not Barney Frank. If they were legal, and their terms were met, pay them out; if they were fraudulent or predicated on fraud, arrest people.

What angers me about this situation is the widespread assumption that of course the bonuses are legal (just ill-advised), just like of course everything AIG did was legal but ill-advised. See, for instance, Ezra Klein on Madoff:

Madoff knew his investment scheme was a fraud. Wall Street should have known their investment schemes were a fraud.

Give me a break. Plenty of people on Wall Street knew their investment schemes were fraudulent. Those people are crooks, not dupes, and criminal prosecutions are the way we find out who they are.

(EDITED TO ADD: You can draw a distinction between AIG and Madoff, but it's the distinction between two separate categories of crime, not between the guilty and the innocent.)

Repeating what I wrote in answer to Shankar's question "Criminal Prosecution for what?" last night:

Well, that's the job of state and federal prosecutors to determine. But there's plenty of reason to think that (say) underwriting billions trillions of dollars in insurance obligations you know you have no capacity to pay out on is an abrogation of your fiduciary obligations -- just for starters. Fraud and dishonest account methods were rampant in the banking industry, which has strict rules about this sort of thing that plainly weren't followed. It's not *just* stupid -- in many cases it was stupid and illegal. Or so it seems to me.

...To add the obvious disclaimer, I'm not a lawyer, much less a prosecutor. But the treatment of the issue in the media tends to frustrate me on this point. Generally speaking the operative assumption seems to be "Oops, and they all got away with it" -- that what they did was obviously legal, just slimy, and so we're all just going to have to swallow our anger and move on. I don't know that it *was* legal in all cases, and if CEOs and CFOs broke the law in chasing these bogus returns then DOJ and state AGs absolutely need to get involved. It's a much higher priority for me than retributive taxation of contracts that are obscene (but probably legal) in an industry where the payment of obscene salaries is already (and still) an unchallenged norm. The bonuses are peanuts compared to the amount of money that's already vanished.

Who could have predicted that putting the people who caused the problem in charge of fixing the problem would go so wrong? Say goodnight, Timothy.

Meanwhile, the situation at AIG may be much, much worse than anyone is admitting, while Kos and Josh Marshall are making sense: the real issues remain immediate triage of the economy, long-term systemic reform, and criminal prosecution of the widespread malfeasance throughout the financial sector. The bonuses suck, but they're really secondary. Let's not lose focus.

Sunday, Sunday.

* The New Yorker has fiction from the late great David Foster Wallace as well as discussion of his unfinished final novel. (There's also a profile of Rahmbo.) Discussion at MeFi.

* Even more six-word science fiction. More at MetaFilter.

* The twenty-first century: an FAQ from Charlie Stross.

* Hypothesis: Sufficiently usable read/write platforms will attract porn and activists. If there's no porn, the tool doesn't work. If there's no activists, it doesn't work well. (via)

* Maybe Dollhouse shouldn't have been as series: io9 clues into the central problem facing American television production, open-ended perpetual serialization. Discussion at Whedonesque.

* Sebelius to HHS.

* The formula that killed Wall Street. Some talk at MetaFilter.

* Anime Peanuts. More along these lines at MeFi.

* Reverse-plot movies. Reverse-plot games.

* Aside from their nihilism and incompetence, the biggest problem facing Republicans is that their mythology has become too difficult for the average person to follow. It’s like a comic book “universe” where the writers have been straining to maintain continuity for decades — all the ever-more-fine-grained details are really satisfying for the hardcore fans, but intimidating for potential new readers, who are left asking, “Trickle-what? Chappaquid-who? What’s that about Obama’s birth certificate? Obama’s European now? I thought he was a Muslim! Darn it, I’ll never catch up!”

I suggest, therefore, that the Republicans use their current time of wandering in the wilderness to do their own version of Crisis on Infinite Earths. They wouldn’t have to ditch their favorite heroes, of course — we could also be treated to limited series like Rush Limbaugh: Year One, Newt Gingrich: Year One, etc. They can reboot all the plotlines, free the beloved characters of the chains of continuity, and then do it again, and yet again — until finally they find success in some genre other than politics, much as comic book superheroes have moved on to the movies. GOP: Year One.

* See also: the GOP's voice and intellectual force, Rush Limbaugh.

* Forget Switzerland: Is Ireland the next Iceland? Don't forget your recession tourism.

* Slowly but surely, here comes marijuana decriminalization/legalization. Don't forget your revenue stream.

* Imprisoned fifteen-year-old beaten by police officer. On tape.

* And put aside that old question of "justifying" the humanities: the real problem is that for much of the past decade, the culture isn't listening to what the humanities have to teach.

Potpourri.

* Incoming Energy Secretary Steven Chu hates coal. I sort of love this guy.

* The Battlestar Galactica webisodes have started up again.

* "Would you rather be a novel or a poem?" Answer wisely and you could go to Oxford. Via Bookninja.

* Every so often the veil of ideology drops.

* Classic albums get LEGOized.

* 'Whedon: Dollhouse Problems Are My Fault.'

* Ron Moore's promising-sounding Virtuality may never see the light of day.

* The natural history of mythical creatures.

Krugman in the New York Review of Books explains what we need to do.

The end of libertarianism? "The financial collapse proves that its ideology makes no sense."

I could have told you that before the financial collapse.

The cake bailout is a lie.

Given the way, that is, that Treasury Secretary Henry M. Paulson Jr. had decided to use the first installment of the $700 billion bailout money to recapitalize banks instead of buying up their toxic securities, which he had then sold to Congress and the American people as the best and fastest way to get the banks to start making loans again, and help prevent this recession from getting much, much worse.

In point of fact, the dirty little secret of the banking industry is that it has no intention of using the money to make new loans. But this executive was the first insider who’s been indiscreet enough to say it within earshot of a journalist.

January 21 can't come fast enough. Via TPM.

Sign of the times: Fox has announced plans for a Wall Street sequel.

Uh, it's not working.



(At Superpoop—thanks, Kate!)

Other ways to restore confidence: 'To Raise Confidence in the Market, Bush & Cheney Should Announce They Will Resign As of November 14, 2008.' You had me at "resign."

Bailout v. 2.0: The Treasury looks to be changing its bailout strategy after its initial actions failed to significantly loosen the credit markets: it's now planning on taking an ownership stake in U.S. banks. Will it work? Only my IRA knows for sure.

The Daily Show on the bailout. I say "this is the best thing The Daily Show has ever done" a little too regularly for comfort, but the montage work they do here is really top-notch—not just the John McCain section, which is classic, but also the Senate and the senatorial self-congratulation sections, which are also classic.

The House has approved the bailout, 263-171. We're saved!

The economy can't buy a break: Schwarzenegger says California needs an emergency $7 billion loan.

The Senate is now voting on their version of the bailout bill.

UPDATE: Looks to pass, 74-25. Like most facing tough races, NC's Dole votes against it.

UPDATE 2: The Politico details some of the almost $100B in "sweeteners" in the Senate version of the bill.

To calm voters fearful of bank failures, the $100,000 cap on federal insurance for deposits would also be raised to $250,000—a concession backed by both parties but also aimed at community banks who can be helpful in building small town support for the larger bill.

With each permutation, the bill has steadily grown in size. Treasury’s initial plan was about three pages long. The House version, which failed, stretched to 110. The Senate substitute now runs over 450 pages. And tucked away in the tax provisions is a landmark health care provision demanding that insurance companies provide coverage for mental health treatment—such as hospitalization—on parity with physical illnesses.

...The biggest single piece in the package is an extension of protections for millions of middle class families who would otherwise find themselves exposed to the higher levy under the alternative minimum tax. This alone accounts for about three quarters of the cost or $78.8 billion in 2009. Almost $14 billion more can be attributed to a variety of tax break extensions important to business, including the R&E credit worth about $8.4 billion in 2009.

The rural school aid is smaller —about $3.3 billion over the next five years— but has great importance for many Western communities and could be important then in the House.

The languishing solar energy provision I was unhappy about earlier was tucked in as well.