Postmodern Economics and Physics?

Mark ThomaMark Thoma highlighted a recent article, A Crisis at the Edge of Physics. You might wonder why an economist would be interested in a crisis going on in the physics world. For those who don’t follow economics, his explanation is probably not too helpful, “Seems like much the same can be said about modern macroeconomics (except perhaps the ‘given the field its credibility’ part)…” Let me discuss this for a moment, because it is really quite interesting.

As I’ve long speculated, certain kinds of physics are pushing up against the limits of knowledge. High energy physics is destroying particles with more and more energy, leading to ever more bizarre theories of the cosmos. Dark matter and dark energy are showing the cosmos to be mostly “things” we only know don’t seem to exist the way regular matter and energy does, but still interacts with it in unusual ways. Could it be that there is nothing else to know and that theoretical constructs about the universe will not be verifiable through experiment? Some physicists think so, “They criticized a newfound willingness among some scientists to explicitly set aside the need for experimental confirmation of today’s most ambitious cosmic theories — so long as those theories are ‘sufficiently elegant and explanatory.'”

This is shocking because for decades now, scientists have been beating up on postmodern literary theorists who claim that there is no objective truth. And now we have physicists (Of all scientists!) claiming that their theories don’t need to be right but instead just “elegant” and “explanatory.” This has long been the basis for supersymmetry theory. But I have to say, I’m not sure this is the wrong approach. Maybe at the extreme edges of science, experimentation will be useless. Clearly, we should still be doing it — or trying to. But it is possible that we can probe only so far when it comes to the creation of the universe.

This is really interesting, however, in how it relates to economics. Far from looking at things that call into question the universal limits of knowledge, economics deals with pedestrian issues. Economies may be very complicated, but there are no fundamental constraints on understanding them. However, many economists on the right have in fact given up worrying about real world data. They have their Real Business Cycle (RBC) models that are “sufficiently elegant and explanatory” that it doesn’t matter if they have no relationship to the real world.

In the past, I’ve written about my own experience with large scale environmental models. There is a strong urge to get lost in those models — to see them as more real the the world they supposedly model. A good example of this kind of thing in economics is the use of Dynamic Stochastic General Equilibrium (DSGE) models, of which RBC models are part. The idea with these models is to derive macroeconomic outcomes based upon microeconomics. I’m not an economist. But I can tell you that in environmental models, it is usually best to not use micro-scale models in macro-scale models. For example, it is best to model carbon respiration with one big leaf rather than with a detailed forest model. Clearly, there are times when you want a detailed forest model. But in general, macro-scale models are best when they are based on simple empirical models.

And why is that? To me, the biggest issue is that the more elements you add to a model, the more degrees of freedom you add. So you end up with a model that is entirely dependent upon calibration. And the model loses its meaning because its results are swamped by exactly how the calibration is done. What has happened in the RBC models is that economists have given up on modeling the real world and use it just to look for elegance and explanatory power. But it doesn’t matter if the person doing this calls herself a physicist or an economist. She is really just a mathematician — but a particularly useless one.

As I indicated before, this is somewhat defensible with regards to high energy physics and cosmology. These fields are already largely mystical. But in economics — a subject that is supposed to be above all useful — this is just madness.

Kissinger on Revolutionary Power

Henry KissingerFor powers long accustomed to tranquility and without experience with disaster, this is a hard lesson to come by. Lulled by a period of stability which had seemed permanent, they find it nearly impossible to take at face value the assertions of the revolutionary power that it means to smash the existing framework. The defenders of the status quo therefore tend to begin by treating the revolutionary power as if its protestations were merely tactical; as if it really accepted the existing legitimacy but overstated its case for bargaining purposes; as if it were motivated by specific grievances to be assuaged by limited concessions. Those who warn against the danger in time are considered alarmists; those who counsel adaptation to circumstance are considered balanced and sane, for they have all the good “reasons” on their side: the arguments accepted as valid in the existing framework. “Appeasement,” where it is not a device to gain time, is the result of an inability to come to grips with a policy of unlimited objectives.

But it is the essence of revolutionary power that it possesses the courage of its convictions, that it is willing, indeed eager, to push its principles to their ultimate conclusion. Whatever else a revolutionary power may achieve therefore, it tends to erode, if not the legitimacy of the international order, at least the restraint with which such an order operates. The characteristic of a stable order is its spontaneity; the essence of a revolutionary situation is its self-consciousness.

—Henry Kissinger
A World Restored


See also: Neville Chamberlain Was Right.

H/T: The Great Unraveling.

Real and Mythic Heroism and Caitlyn Jenner

Toy SoldiersThis is a picture of soldiers represented in an almost a Homeric vision of bravery — a wounded man being carried to safety as he fires at the enemy. So it shouldn’t be a surprise that it is an artistic construction made with toys. But it became a very big deal last week when a Facebook user posted it along with the caption, “As I see post after post about Bruce Jenner’s transition to a woman, and I hear words like, bravery, heroism, and courage, just thought I’d remind all of us what real American courage, heroism, and bravery looks like!” Ah yes, the fetishization of the military strikes again.

Let’s start with the fact that this is a totally cliched and limited idea of bravery. I don’t doubt that it takes great bravery to fight in a war. But for the people who fight the war, the alternative is prison and in some cases death. In many ways, standing up against the simple choice of going along and instead resisting a draft is more brave. But forget wars. There are lots of ways to be brave, and they usually involve going against the default behavior. It usually isn’t a question of doing what people will reward you for.

On the issue of Caitlyn Jenner, however, I don’t think we are talking about bravery. She is a public figure who is pimping a reality show. She has all the support that money and fame can buy. What she is doing is good for society and for the transgender community. But brave? I’m not convinced. For non-famous, non-rich people, coming out as transgender is incredibly brave. For Caitlyn Jenner — it’s at best less so.

But okay, people in the military do at times display amazing examples of bravery. But why of all the images that the poster could have picked, did he selected this one? After the post got nearly a million shares, he looked into the source of the photo. He found that it came from the documentary Marwencol. It is about Mark Hogancamp, a cross-dressing man who was beaten outside a bar — almost to death. Afterward, he got into building a model of a Belgian town during World War II. The fact that the poster had picked the work of a member of the transgender community made him rethink the whole thing. Now he thinks it was God working in mysterious ways to teach him about the importance of inclusion and love. Good for him!

But I don’t think that’s why he picked the photo. I think he picked it because it is a highly romanticize image of reality. When people talk about things like heroism, they are dealing with abstractions. What “real American courage, heroism, and bravery looks like” is dolls designed by a wounded outcast. In other words, what makes real America “real” is that it isn’t real.

This is something I’ve written about a lot in other contexts. The conservative image of “real America” is a place that never existed. And this, I think, explains why modern American conservatism is so nutty. It presents a false choice. The real choice is always between competing imperfect Americas. But in the conservative mind, it is between these imperfect choices and their idealized, perfect choice. It is no wonder that they are against compromise.

But it fills me with hope that the Facebook poster changed from slighting Jenner and defining “real” American heroism to writing, “Hate helps nothing. Love wounds no one.” It bothers me that all those people who shared the original sentiment will not land where the original poster did. But we take baby steps. And that’s good.

State Republicans Do Nothing in Preparation for Potential Obamacare Disaster

We Heart ObamacareIf you were a decent politician — one who cared about your constituents — you would plan ahead. If there was a tsunami coming, you would evacuate the coast and get clean-up crews ready for the resulting damage. But it seems that on the right in American politics, such basic actions don’t make sense. I think this is all part of the Republican Party exchanging competence for ideology. Because there are Republican governments all over the nation that are facing a major — and largely predictable — catastrophe: the ending of federal subsidies for people buying health insurance on the federal exchanges. And these governments are doing nothing to prepare.

The issue at hand is the case King v Burwell in front of the Supreme Court. If it finds for the defendants, then nothing happens. But if it finds for the plaintiffs, it’s going to be really bad — not just for the individuals who will lose their insurance, but also for the insurance companies and for the healthcare providers. So a group of healthcare researchers led by David K Jones decided to look at what is going on in five of the states that will be effected by the ruling: Florida, Michigan, New Hampshire, North Carolina, and Utah. And it looks pretty bad, What Are The States Doing To Prepare For King v Burwell?

This article is just the first of three. But it provides the overall conclusions. And there are three of them. First, none of the states have a clear plan as to what they are going to do if the Supreme Court finds for the plaintiffs. Second, the governors seem to be open to some kind of a deal, but the legislators are not. And third, the timing is bad; only Michigan will have a legislature still in session after the ruling comes. Of course, even if that weren’t the case, there still wouldn’t be time to set up a state exchange for next year.

These observations are all annoying in their own way. The fact that the states have no plan is not surprising. If the worst comes to pass, they probably figure they might do something. But as long as they don’t have to do anything — they won’t. They are, in other words, hypocrites. I’m sure that the vast majority of these Republican legislators and governors are secretly hoping that the Supreme Court finds for the defendants. And they are thinking this privately even while publicly saying it is a great and just cause.

The Republican Party is out of control. It isn’t so much that Republican politicians can’t tell the truth to their base. Rather, it is that Republican politicians know that if they act reasonably about this (or pretty much anything else), another Republican politicians will come in and demagogue the issue. They know others will do this to them because they know they would do the same thing to others if they needed to. Forget the Eleventh Commandment, the Republican Party is now at the point of snake eating its own tail. They just can’t stop themselves from destroying themselves.

Clearly, the best thing for everyone is for the Supreme Court to find for the defendants in King v Burwell. But clearly, if that doesn’t happen, the problem is the Republicans’. And that’s another thing that was found in the Jones et al analysis. The Republicans believe they are going to be blamed for this. Yet even then, they can’t manage to do anything. If they use their power for the common good, they will likely lose that power at the next election. If they don’t use their power for the common good, what is the purpose of having that kind of “power”? The choice they will make is clear.

Anniversary Post: Plessy v Ferguson

Homer PlessyOn this day in 1892, Homer Plessy refused to relinquish his seat in a “whites only” train car. This led to Plessy v Ferguson — one of the most infamous Supreme Court cases ever that enshrined “separate but equal” in law for the next 58 years. It used to annoy me that Sarah Palin couldn’t even name this one case when asked to name a Supreme Court case she disagreed with other than Roe v Wade. It is a case I first learned of in high school. But I later realized that Palin probably doesn’t disagree with Plessy v Ferguson — except in the sense that it is a case that is now universally vilified. The reasoning in the case is fully consistent with modern conservative thinking.

In my previous educational encounters with this case, I never read about the specifics of it. And they are quite interesting. To start with, this was not a case of a man just happening to be in the “wrong” place and causing a ruckus. Rather it was just like it would later be with Rosa Parks. The African American civil rights group Comité des Citoyens (French: Citizens Committee) was looking for a way to challenge the recently passed Louisiana Separate Car Act, which mandated separate but equal train cars. So the Comité chose Homer Plessy.

One of the reasons that Plessy was chosen was that he was 7/8ths white — an “octoroon.” So he could “pass.” This allowed him to purchase a ticket on a “whites only” train car. When the conductor came by, Plessy told him that he was 7/8ths white that that he refused to move to the “blacks only” train car. And the rest, as they say, is literally history. According to Wikipedia, “Everything that the committee had organized occurred as planned, except for the decision of the Supreme Court in 1896.” Of course, the Comité knew it was likely to lose.

The problem was the Supreme Court as an institution is dedicated to preserving the power of the powerful. For people of my age, that sounds wrong. We saw a lot of good work by the Court over the last 60 years. But really, that was the exception. What the Court is now is more in keeping with what it has traditionally been. Even if the court were filled with Elena Kagans, it would hardly be liberal; it would be more for the status quote. As it was, the Supreme Court found against Plessy by a vote of 7-1. In Ian Millhiser’s list of The Five Worst Supreme Court Justices In American History, two of them found with the majority on Plessy v Ferguson: Stephen J Field (#1) and Melville Fuller (#4).

The lone dissenter was John Marshall Harlan who said — correctly — that Plessy v Ferguson would be remembered as infamously as Dred Scott v Sandford. But lest you think that we should consider Plessy v Ferguson as typical of the time, remember that Harlan’s argument (apart from his own ethnocentrism) is remarkably modern:

We boast of the freedom enjoyed by our people above all other peoples. But it is difficult to reconcile that boast with a state of the law which, practically, puts the brand of servitude and degradation upon a large class of our fellow-citizens, our equals before the law. The thin disguise of “equal” accommodations for passengers in railroad coaches will not mislead any one, nor atone for the wrong this day done.

What’s sad is that three current justices certainly, four probably, and five possibly would find against Plessy if this kind of explicit segregation were still an issue. That’s what’s so dangerous about this court. The conservatives are loons, but they are extremely smart and creative loons.

We mark this day when the African American community organized to protect their civil rights, but lost — to our nation’s great shame.

Dennis Hastert and the Destruction of Congress

Norm OrnsteinBut no speaker did more to relegate the regular order to the sidelines than Hastert. As Tom Mann and I describe in detail in our 2006 book “The Broken Branch,” Hastert presided over one of the worst moments for a deliberative body in modern times, the nearly three-hour vote in the dead of night to pass the Medicare prescription-drug bill — a vote that under the rules was supposed to last 15 minutes. The arm-twisting on the floor turned to something close to outright extortion, resulting in yet more admonitions for Tom DeLay. Under Hastert, amendments from Democrats and Republicans alike were squelched by a strikingly pliant Rules Committee; conferences were rarely held, and if they were, it was late at night and they were closed to input from all except loyal lieutenants; and provisions were sometimes added to conference reports that had never been in either House or Senate bills without notice to other lawmakers, among other indignities. And, of course, Hastert presided over the informal “Hastert rule,” doing whatever he could to avoid input from Democrats, trying to pass bills with Republicans alone. The House is a very partisan institution, with rules structured to give even tiny majorities enormous leverage. But Hastert took those realities to a new and more tribalized, partisan plane.

—Norm Ornstein
This Isn’t Dennis Hastert’s First Scandal

The Real Threat to Academic Freedom

Amanda TaubLast weekend, I wrote, Public Shaming and the Power of Employers. In it, I argued that public shaming did great harm primarily because it leads to job loss. The issue is not so much that people are just awful to each other, but rather that workers in modern America have little control of their work lives. In the example that I used from So You’ve Been Publicly Shamed, a white man ended up with very little harm done because he immediately got another job. The black woman, however, was still unemployed years after her public shaming. As usual, our society refuses to engage with the injustice of the economic system itself.

A couple of days ago, a guy writing under the pseudonym Edward Schlosser wrote an article at Vox, I’m a Liberal Professor, and My Liberal Students Terrify Me. The article quickly became a big deal. Jonathan Chait was right on top of it with yet another of this articles, “See, I was right!” And conservatives everywhere just love this because they want to claim that the real intolerant ones are not people who want to deny rights to others, but rather liberals who informally police speech. To be honest, I find the whole thing exhausting.

Let’s start with the fact that young people yelling at old people is a rite of passage. For my entire life there have been college students making grand statements about how their college professors are offensive and just don’t get it. Even Jonathan Chait admits that the political correctness that he talks about is just a “wave.” The exact same complaints date back at least to the 1960s, but apparently Chait doesn’t know anything before his time. As far as I can tell, there have been student rebellions for as long as there have been colleges. I don’t see any reason to think this “wave” is any worse or even different from earlier “waves.”

Amanda Taub wrote a great response to Professor Schlosser’s article, I Was a Liberal Adjunct Professor. My Liberal Students Didn’t Scare Me at All. She gets at what I was talking about regarding shame. The issue isn’t that the students are particularly horrible. And it most certainly isn’t that the students have more power. It is that the professors have far less power than they used to — relative to the administration. She quoted an amazing statistic from the American Association of University Professors: only 24% of professors are tenure or tenure track. The rest are adjuncts, which are generally temporary positions that pay poorly and have no benefits — the minimum wage job of the PhD crowd. And that means that tenured professors are afraid because “there’s a mile-long line of applicants eager to take their place.”

Taub summed up the issue well:

The problem isn’t the substance of student complaints — the problem is that university lecturers are so terrified of the effect student complaints could have. That’s a problem to be solved by universities having faculty members’ backs, not by somehow silencing the debate over identity politics.

She then went on to discuss the way the whole issue gets distorted. It strikes me as very American. People in most nations look at the world very much in terms of class. But we have a bias against that. We want to see everything as individual against individual — or at least one group against another group with roughly equal power. As a result, we have ended up with the ridiculous system we have where those with actual power are never held to account or, as in this case, even blamed.

Students are as they ever were. After the power elite spent decades attacking teachers at all levels, it isn’t surprising that teachers at all levels would find they have greatly reduced power. What is outrageous, however, is that people like Jonathan Chait and Edward Schlosser would focus on an irrelevance and ignore the real power that is hurting professors and academic freedom.

Conservative Response to Automatic Voter Reg

Daniel FosterJonathan Chait is right about this, Hillary Clinton Calls the Republican Bluff on Voting Rights. It’s about Clinton’s call last week for automatic voter registration. The summary of the article is, “A new idea to make voting easy that Republicans will have to come up with a reason to oppose.” Because that really is the issue. Republicans have come out big in recent years for making voting as hard as possible. It is always posed as fighting against “voter fraud.” But in fact, it is just a way to get as few people voting as possible because the more people who vote the better liberal politicians and ideas do.

At the end of his article, Chait highlights Daniel Foster in National Review, who wrote, Don’t Make Democracy More Like The Internet. He claimed that automatic voter registration would be “a terrible idea” and “not just because it would certainly be devastating to the electoral prospects of conservatives.” And then he goes on to explain why democracy is a bad thing and it should be limited to those who care enough to jump through all the hoops. He claimed that sure, “dolts” (his word) ought to have the right to vote if they are willing to do everything that Republicans do to stop them, but “that doesn’t mean we have to encourage” them.

This is a standard argument that I have heard from conservatives for decades. But it is fundamentally wrong. Older people are more likely to vote than younger people, but that doesn’t mean that they care more about voting. Older people have — on average — huge advantages that make voting easy for them: they don’t have children to care for; they don’t have jobs to go to; they don’t move often. So arguments like those of Foster are not about who cares the most about politics; they are about which demographics are seen as better because they are more likely to vote for conservatives.

In general, when people complain to me about voters who don’t understand the issues, it turns out that the complainer is extremely ignorant about the issues. The argument really only ever means, “These people don’t agree with me!” Of course, Fox News has made this infinitely worse by allowing its addicts to think that they are being well informed when they are actually being well disinformed. The people who just watch the nightly news are usually better informed that Fox News viewers — except when it comes to Solyndra and Jade Helm.

Democracy is an extremely humble form of government. It is dependent upon the idea that none of us has a monopoly on the truth and so we are better off getting everyone’s input. Conservatives have never much liked this idea. They see democracy as mob rule. And indeed, it can be. But not having democracy leads inexorably to tyranny. The alternative to democracy isn’t some perfect as yet undisclosed system. But conservatives continue to push against democracy because they ultimately believe in monarchy — just one that they are in control of.

At the same time that conservatives are pushing for less democracy, they are undermining the very idea of absolute truth. This is what is behind their war science. So they aren’t even making the argument that the masses get certain issues wrong on a factual basis. Conservatives don’t even care about the factual basis of their claims. They just want the world to work a certain way, and if that isn’t true, they don’t care. They are the ones who define reality. That’s why Sam Brownback claimed that cutting corporate and other taxes on the rich would increase revenue for the state, and after the opposite happened, he continues to stay the course.

The question is whether the conservatives will come up with a better argument than Daniel Foster did to counter Hillary Clinton’s idea to make voter registration automatic. My guess is that they won’t. They will just bluster their way through it. They will never say that democracy is bad, but they will make their “only people who care” argument. They will throw in a little “voter fraud” and how we can’t do a thing until there is not a single fraudulent vote in the nation. And they will just move on. Don’t expect the media establishment to question them.

Media as Stenographers for Official Power

Glenn GreenwaldIn the Boston area yesterday, the FBI and Boston Police Department (BPD) shot and killed a 26-year-old black Muslim man, Usaamah Abdullah Rahim, after they stopped him at a bus stop at 7:00 am in front of a CVS drug store in order to question him…

NBC Nightly News led its broadcast with this story, and the video featuring a hysterical Lester Holt and Pete Williams has to be seen to be believed. “Good evening,” said the anchor. “We start here tonight with a deadly confrontation outside Boston between law enforcement and a man they feared might be preparing to launch an ISIS-inspired attack.” Even after killing the “terror suspect,” Holt intoned that agents are “still on the move in the Boston area, trying to piece together what he may have been involved with, and whether others might be connected to it.”

The story then narrated by Williams is told from the perspective of the FBI and the BPD. We learn that unnamed officials told NBC News they “were concerned Rahim had become radicalized by ISIS-inspired social media, and was actively considering an attack on police officers in Boston within the next few days, in a city still traumatized by the terrorist bombing of the 2013 Boston Marathon.” The agents approached him “fearing he was preparing to take action soon.” Police are now investigating others Rahim was “in touch with who might also have been radicalized by ISIS-inspired propaganda.” Officials, Williams announced at the end of his report, “believe they disrupted a potential terror plot, but now they’re detaining other people for questioning… to see whether anyone else was involved in his plot, or whether attacks are planned.”

So just like that, major American media outlets converted someone about whom they knew nothing into a dangerous terrorist in the middle of executing an ISIS-related terror plot. And the heroic law enforcement officials didn’t just kill an ISIS Terrorist on the loose in America, but likely disrupted a vicious sleeper cell. All of that was achieved without a shred of evidence or investigation: just mindlessly repeating the self-justifying claims of the police agents who had just killed him.

—Glenn Greenwald
In Boston, Media Again Trash a Police Shooting Victim by Uncritically “Reporting” Police Accusations

Social Security Lockbox Scare Tactic

LockboxMy father has been watch The Roosevelts. And in relationship to it, he told me, “Roosevelt wanted there to be a lockbox on Social Security.” I sighed heavily. Suddenly, I was transported back into the 2000s and 1990s — the last two periods when everyone was talking about the Social Security lockbox. The problem with it is that it is meaningless. Actually, it is worse than meaningless. The idea of a lockbox is put forward to scare people into thinking that the federal government is stealing money out of the Social Security trust fund in order to pay for Cadillacs for welfare queens.

You probably remember George W Bush, in 2005 after his re-election, going around telling people that there was no money in the trust fund. It was just paper — IOUs! Of course, that’s all cash is. But more to the point, that’s all that bank accounts are. I don’t have money in the bank. I have a number on a ledger. In effect, I have an IOU from the bank. And if the bank goes out of business, I would lose that money except for the fact that that the government guarantees it. So what exactly did Bush think would be in the trust fund? Piles of cash?

It turns out that the Social Security Trust fund is currently worth over $2.5 trillion. There is only about half that much in total cash in the United States. So what are we to do with this money? It needs to be invested one way or another. So the Social Security Administration (SSA) does what everyone the world over does with money they need safely stored: they invest it in US government securities. The fact that one government program is loaning its money to another part of the government does not mean that the money is being stolen.

Think about it with regard to individual investors. They generally have a mix of stocks and bonds. Those bonds generally include a lot of US government bonds. No one — Really: no one — says that these investors are just being ripped off by the federal government because it spends the money that it borrows. Rather, everyone agrees that US government debt is about the safest investment in the world. How safe? Right now, US 10 Year Treasury bonds have a yield of 2.31%. That’s with an average inflation rate last year of 1.6%. (Note: inflation has basically been zero thus far this year.)

So what exactly is the lockbox supposed to do? It is a “solution” to a nonexistent problem. Suppose we hired Donald Trump to administer the Social Security program. All the money coming in would go to him. He would then have to do something with that money. I don’t know what he would do with it, and given my low opinion of him, I would expect the worst. But even aggressive investors would take a large fraction of that money and put it into US government securities. This is exactly what the SSA does. Money isn’t being stolen from Social Security. There is no need for a lockbox and people who talk about it are just trying to scare you.

Mary Jo White Is Doing Obama’s Will: Nothing

Mary Jo WhiteIt seems like only yesterday that I was warning that Mary Jo White would be a disaster as head of the SEC. But it was actually two and half years ago. I warned that she was just another finance apologist who only went after small banks. I quoted Matt Taibbi then, “Obama is not going to clean up financial corruption by pinning a sheriff’s badge on Wall Street’s protector-in-chief.” But I responded, “Obama would only pin a sheriff’s badge on Wall Street’s protector-in-chief.” But the fact that Obama has only ever been willing to deal with Wall Street with kid gloves will not stop me from pointing out that it’s wrong.

Thankfully, we have Elizabeth Warren. Michael Hiltzik reported Wednesday, Elizabeth Warren Declares War on Mary Jo White’s SEC — and It’s About Time. He noted that she “excoriated White with a 13-page letter that accused the SEC chair of slow-walking desperately needed rules and regulations, reneging on her commitments to ride herd on criminal activity by corporations, and even lying to Warren about the status of upcoming regulations.” Just as we expected. After the fight between Warren and Obama over the Trans-Pacific Partnership, I wonder if Obama will come out and say the truth, “She’s doing exactly what I want: nothing.”

The letter is quite a read. It seems personal. In particular, I was stuck by the following comment. After saying she was disappointed that White hadn’t lived up to here promises at her confirmation hearing, Warren wrote, “We have continued to talk, and you and I met personally on Wednesday, May 21, 2015, to discuss these issues. At that meeting, however, you said little that indicated that you would be changing your practices at the SEC.” I’m sure she didn’t! It is some big bank that is going to give White a job after she leaves the SEC — not the American people and certainly not Elizabeth Warren. Sadly, this was all predicted.

Warren is concerned about a lot of different stuff. What I’m most familiar with is the fact that still, except in the most extreme cases, the SEC is allowing banks to get away with a fine and no admission of wrongdoing. That was specifically something White had claimed she would clamp down on. In addition to this, White doesn’t seem that eager to implement Dodd-Frank. That’s not surprising, because of who also isn’t interested in implementing Dodd-Frank: the people White is supposed to be policing, also know as: her future employers.

One aspect that I was totally unaware of was this thing WKSI: Well Known Security Issuer. WKSIs get to take shortcuts through SEC processes. But they are supposed to only be available to banks who behave. You may remember an article I wrote last week, Prison for Soccer Villains, Fines for Bank Villains. In it, I discussed five banks that had recently admitted to criminal activity rather similar to organized crime. Well, that great team player Mary Jo White provided those banks with waivers so that they could maintain their WKSI status. You know, someone convicted of possessing a joint five years ago, can’t get a job, but banks responsible for billions of dollars in malfeasance can’t be held accountable. That would be unfair! It might also get in the way of Mary Jo White’s future employment.

What’s really interesting about these WKSI waivers for criminal misconduct is that they are a knew thing — the first one was issued in 2013. What it looks like is that the moment that the SEC had to start finding some (big) banks guilty of criminal misconduct, then the SEC figured out a way to make it meaningless. By this kind of reasoning, we could sentence bad bankers to life in prison, and Mary Jo White would be there to waive the penalty.

White has responded. Basically, she says that the SEC is doing great work and Warren is mischaracterizing it. But as Hiltzik pointed out, Warren is hardly the only banking watchdog who is unhappy with White. In fact, he quoted Yves Smith at Naked Capitalism, “White… specialized in empty promises, foot dragging, and financial services cronyism.” Which, as I said, is what Obama wanted all along. Mary Jo White didn’t become head of the SEC by accident; she got the post because Obama knew she would do what he wanted. And that is as little as possible. In that regard, she’s been fantastic.

Anniversary Post: Uncle Tom’s Cabin

Uncle Tom's CabinOn this day in 1851, the first part of Harriet Beecher Stowe’s Uncle Tom’s Cabin was published in the abolitionist newspaper, National Era. Today, the novel has kind of a bad reputation because of the stereotype of an “Uncle Tom” — the “dutiful, long-suffering servant faithful to his white master.” But this and other stereotypes of African Americans are a reflection of the enormous influence that the novel had. It was an extremely important novel that galvanized northern thought against slavery.

What I never knew was the extremely negative reaction that the novel got in the south. In fact, it started a whole genre of novels called Anti-Tom literature. According to Wikipedia, during the ten years after the novel’s publication “between twenty and thirty anti-Tom books were published.” What’s shocking about these books is that Stowe actually went pretty lightly on the institution of slavery. Most of the slave owners are presented as decent people who are reluctant. There’s really only one slave owner who is clearly evil and I don’t think even he is indicative of just how bad slavery actually was.

I can understand why the African American community turned against the novel. And even today, no one mistakes it for good writing. But it does have to be seen in its historical context. Of course, there’s always a chicken and egg aspect to these kinds of things. Was the novel hugely successful because the north was finally done with slavery, or was it the novel that moved public opinion? I suspect that it was both. And that at least makes Uncle Tom’s Cabin a hugely important novel.

Happy anniversary Uncle Tom’s Cabin!