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Were the Poor Responsible For the Financial Meltdown? (SPOILER: No.)

[ 91 ] January 28, 2015 |

The only possible value of Christopher Caldwell’s self-immolating attempt to define Obama’s legacy is the compendium of particularly witless winger talking points it offers to future historians.  One of these silly arguments was an assertion that the basis of the depression was “a multitrillion-dollar real-estate debauch that Clinton’s and Bush’s [no Barney Frank? — ed.] affordable-housing mandates had set in motion.”  Does this assertion have any empirical basis?  The answer will continue not to surprise you:

This theory has never had much empirical support behind it (just the opposite, really). But a new paper by Duke’s Manuel Adelino, MIT’s Antoinette Schoar, and Dartmouth’s Felipe Severino shreds it.

The study looks at who was actually taking out mortgages in the run-up to the crisis, and who defaulted once it hit. Their conclusion? The poor didn’t, in fact, start taking out more and bigger mortgages than everybody else. Borrowing rose, sure, but it rose for everybody. We all bought into the idea that housing prices would keep going up, and that faith doomed us — not loans made to the poor.


As the first chart indicated, there wasn’t a lot of change in which income groups were getting mortgages from 2002 to 2006. But this chart shows that the dollar value of delinquencies for 2005-2006 mortgages was concentrated more heavily than ever among the richest borrowers. “Of course,” the authors write, “the total dollar value of mortgages that are delinquent went up dramatically for mortgages originated in 2006 relative to those originated in 2002, but clearly this is not driven primarily by low income borrowers.”

Scapegoating the poor for the financial crisis was always a stretch. But especially given the data here, it’s long past time we put that dubious theory to bed.

But, in fairness, I’m pretty sure it was poor homeowners that ordered financial institutions to sell worthless mortgage securities while representing them as low-risk investments.

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[ 57 ] January 28, 2015 |

Roscoe Conkling was the sort of platonic ideal of the Gilded Age politician. Rich, incredibly powerful, corrupt. In 1888, New York was struck by a blizzard. It didn’t go well for Conkling:

Roscoe Conkling is looking out the window of his Wall Street law office on a Tuesday afternoon in March 1888. He sees mountains of snow on deserted streets and wind gusts yanking down telegraph wires. Conkling is arguably the most powerful man in the country: he controls a major faction of the Republican Party, which is ascendant, and has the ability to make or break presidential candidates. He’s a man of action who decides that he will plunge into the storm and catch a hansom cab to his lavish apartments on 25th Street near Madison Square.

Conkling and a young male colleague head out into the weather, flag down a horse-drawn cab, and tell the driver they need to be taken three miles uptown. The cabbie looks them over. He then attempts a primitive version of Uber surge pricing, telling the men the ride will cost $50 — or about $1,280 in today’s currency.

Conkling is outraged. Though he can afford it, he refuses to pay and tells the driver he’d rather walk.

Tough guy, eh? How does that go for him?

But now it’s March 12, 1888, and a blizzard is howling across Manhattan. Conkling is struggling up Broadway. He makes it as far as Union Square before he falls. A doorman rushes out and drags him in from the snow. It seems at first that Conkling will recover. But the walk has given him pneumonia. In two weeks, he’ll be dead.

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Post-Snow Day Links

[ 222 ] January 28, 2015 |
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[ 119 ] January 27, 2015 |

Last Tuesday, my daughter Miriam complained at breakfast of itchy skin. Miriam complains about a great many things (she’s generally quite insistent that most maladies, from stubbed toe to mild fever, require a trip to the emergency room), and so I didn’t initially take the complaint all that seriously. That afternoon, she complained to her mother, who noticed that a small rash had broken out on her arm. Miriam also had a couple of minor blisters on her legs, and so despite the lack of fever, we resolved to take her in the next morning.

On Wednesday, the doctor diagnosed Miriam with chicken pox. No fever, no nausea, few pox, but chicken pox nonetheless. We mentioned that Miriam had been vaccinated, and our pediatrician noted that she sees about one case a year of a kid who’s been vaccinated by nevertheless gets the disease. It apparently has a transmission rate of roughly 10%, and the cases are 10% as severe for a vaccinated kid as for an unvaccinated.

I got the chicken pox when I was 14. It was hell; constant itching, lethargy, deep unpleasantness all around. I missed two weeks of school. Miriam, the child who complains relentlessly (and eloquently, for a five year old) about every illness or injury, real and imagined, barely raised a peep about her rash, and missed only two days of school. Oh, and her twin sister Elisha has yet to develop the pox.

Dayenu, varicella vaccine. Dayenu.

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Jon Chait’s Political Correctness

[ 242 ] January 27, 2015 |

Unlike at least one commenter, I’m inclined to think that Erik’s reaction to the unfortunate Chait p.c. piece was pretty much appropriate.  But I suppose what’s wrong with it could be spelled out in more detail.  First, as Angus Johnston says, it has a serious “what’s true isn’t relevant and what’s relevant isn’t true” problem.  Obviously, vandalism as a response to speech is illiberal and indefensible, but these isolated cases aren’t representative or defended by liberals of any influence or significance.  His examples of behavior that’s more common, on the other hand, tend to be self-refuting calls for less or different speech. People expressing disagreement with who gets chosen to receive a hefty check to express platitudes before a captive audience, for example, are not actually attacking on free speech; they are engaging in it. (Citing events invoking Catharine MacKinnon from the first Bush administration to pad out the list of anecdotes is a tell here, like a conservative culture scold still basing arguments around “Piss Christ.”) As Amanda Marcotte puts it:

While the article purports to be a lambast of “the culture of taking offense” and censorious attitudes, it quickly becomes clear that the only speech that Chait is interested in protecting is conservative or contrarian. When it comes to people saying uncomfortable or provocative things from the left, Chait comes across as just as censorious and silencing as any of the leftist prigs he attempts to criticize.

To be clear, Chait has plenty of examples of what has become a genuinely serious problem of liberals who react to uncomfortable ideas by turning to censorship: Harassment campaigns against conservatives, cancelling plays or art shows because of political incorrectness, tearing down anti-choice posters.

But outside of those few examples, most of Chait’s article is not a defense of rowdy public discourse at all, but the opposite: Most of the piece is little more than demands that liberals silence certain forms of discourse that make Chait uncomfortable. For a piece that mocks the use of “trigger warnings” to alert people about disturbing content, it sure seems Chait has no problem trying to silence anyone who says something that might hurt his feelings.

As Marcotte and several other people have observed, this argument in the Chait essay is particularly problematic:

Two and a half years ago, Hanna Rosin, a liberal journalist and longtime friend, wrote a book called The End of Men, which argued that a confluence of social and economic changes left women in a better position going forward than men, who were struggling to adapt to a new postindustrial order. Rosin, a self-identified feminist, has found herself unexpectedly assailed by feminist critics, who found her message of long-term female empowerment complacent and insufficiently concerned with the continuing reality of sexism. One Twitter hashtag, “#RIPpatriarchy,” became a label for critics to lampoon her thesis. Every new continuing demonstration of gender discrimination — a survey showing Americans still prefer male bosses; a person noticing a man on the subway occupying a seat and a half — would be tweeted out along with a mocking #RIPpatriarchy.

Her response since then has been to avoid committing a provocation, especially on Twitter. “If you tweet something straight­forwardly feminist, you immediately get a wave of love and favorites, but if you tweet something in a cranky feminist mode then the opposite happens,” she told me. “The price is too high; you feel like there might be banishment waiting for you.” Social media, where swarms of jeering critics can materialize in an instant, paradoxically creates this feeling of isolation. “You do immediately get the sense that it’s one against millions, even though it’s not.” Subjects of these massed attacks often describe an impulse to withdraw.

Let me get this straight. Rosin wrote an article promoting her recent book in Slate with the title “The Patriarchy Is Dead.” Some people on Twitter disagreed with this rather obviously silly and overstated premise and even used — avert your eyes! — what the kids today call “hashtags” to express their disagreement. (There are cases where Twitter can be used to engage in outright harassment rather than just disagreement, but nobody seems to be claiming that this is one of them.) And apparently the principles of freewheeling liberal free discourse are that — these people should not have disagreed with Rosin’s piece? That using Twitter snark to express disagreement crosses some magical line? To the extent that “P.C.” means anything at this late date, it’s Chait who’s expressing the “P.C.” views here. I admire a lot of Rosin’s work, but we should also return once again to dsquared: using provocative contrarianism to attract attention and then whining when people take the bait is not very sympathetic behavior.

…I also recommend this from Jia Tolentino. 

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Air Forces All Over the Place!

[ 4 ] January 27, 2015 |

My latest at the National Interest takes a look at the three most effective air forces flown by Asian countries:

ut effective air forces need more than flashy fighters. They need transport aircraft that can provide strategic and tactical airlift, and Aerial Early Warning (AEW) planes that can maintain surveillance and control of the sky. They need a defense-industrial base that can keep the warplanes in the air. This article looks at the three most effective air forces in Asia, in the context of their ability to put planes in the sky, to make sure those planes are well flown, and maintain a reliable supply and procurement base.

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BREAKING! Spain Still Not Invaded By The Moops

[ 62 ] January 27, 2015 |

As I recently noted, Brian Beutler has an excellent piece pointing out that Republican members of Congress universally rejected the contention soon to be considered by the Supreme Court that Congress did not make subsidies available on the federally established exchanges: they assumed that the subsidies would be uniformly available even after it was abundantly clear that multiple states would not establish exchanges. Greg Sargent has followed up with state officials, and YOU’LL NEVER GUESS WHAT HE FOUND:

I can now add more: Several state officials who were directly involved at the highest levels in early deliberations over setting up state exchanges — all of them Republicans or appointees of GOP governors — have told me that at no point in the decision-making process during the key time-frame was the possible loss of subsidies even considered as a factor. None of these officials — who were deeply involved in figuring out what the law meant for their states — read the statute as the challengers do.

Cindi Jones was appointed in August of 2010, after passage of the ACA, by Republican governor Bob McDonnell to head his Virginia Health Reform Initiative panel. A key question it faced was whether the state should set up an exchange or default to the federal one. The question of whether the failure to set up an exchange would sacrifice subsidies was not a consideration throughout the discussions, she says.

“There was no discussion at any meeting that one of the reasons we would want to do a state based exchange was that it would be the only way we would get subsidies,” says Jones, who was held over from a previous Democratic administration and now works for Governor Terry McAuliffe. Referring to 2010 and the spring of 2011, Jones said: “The discussion of whether or not to set up a state-based exchange versus a federal exchange would have been different if one of the issues we had to consider was whether or not our citizens would get subsidies.”

Sargent gets the response of Jonathan Adler, who says it doesn’t matter that nobody read the statute as he now reads it. Michael Cannon has made similar arguments on Twitter, sometimes willfully distorting Nancy Pelosi because he’s a complete hack and doesn’t care who knows it. But it does matter, for two obvious reasons:

  • Climbing Mount Chevron.  For the troofers to win, it is insufficient for them to demonstrate that their nonsensical reading of the statute is plausible.  They have to show that it is unambiguously correct.  The fact that all the relevant parties at the time believed that the subsidies would be available on the federally established state exchanges makes it enormously difficult to show that Congress clearly established otherwise.
  • The Dr. Strangelove Problem.  Remember, Adler and Cannon aren’t “the card says Moops!” troofers, they’re “the Moops invaded Spain” troofers.  Their contention is that Congress established a federal backstop that was designed to fail because it wanted to coerce the states into establishing their own exchanges.  Leaving aside that this makes no sense on its face — if you wanted to do this you wouldn’t set up a federal backstop at all, rather than set up a Potemkin one nobody was even eligible to purchase insurance on — if you’re trying to coerce the states you obviously don’t keep the consequences of states failing to establishing an exchange a secret. The consequences of states not taking the Medicaid expansion before it was re-written by John Roberts were made clear and widely understood.  The fact that nobody thought that a state’s citizens would be ineligible for subsidies if the federal government established their state exchange makes it clear that the Adler/Cannon theory is transparently wrong.

Not that any of this will necessarily matter to a majority of the current Supreme Court, but in a rational universe the King cert petition would have been returned with “why are you wasting our time with this crap?” written over the top of it.

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Political Correctness

[ 195 ] January 27, 2015 |

Some essays are better left unwritten. Jonathan Chait’s essay bemoaning the “political correctness” supposedly defining and dominating modern American liberalism is one of those essays.

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New AV Club/Internet Film School column in which I argue that Divergent is worse than Saving Christmas

[ 75 ] January 27, 2015 |

So please feel free to … enjoy?

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Book Review: Marina Welker, Enacting the Corporation: An American Mining Firm in Post-Authoritarian Indonesia

[ 47 ] January 27, 2015 |

In Enacting the Corporation, the anthropologist Marina Welker seeks to humanize corporate behavior by examining how the Denver-based mining conglomerate Newmont attempts to enact the principles of Corporate Social Responsibility in its dealings at a mine site on the island of Sumbawa in Indonesia. Welker argues that rather than seeing corporations as monoliths concerned only about profit, it is far more useful to examine how different actors seek to “enact” the corporation to meet their own interests, whether as employees, activists, executives at the company’s Denver headquarters, consultants, etc. In doing so, Welker “humanizes” the corporation through understanding as a collective subject that remains unstable because of so many actors affecting it.

The Corporate Social Responsibility movement came out of the late twentieth century, urging corporations to take a more complex view of their relationship with the communities where they worked. Especially important in poor communities within the U.S. and overseas, it asked companies to think of social investment in communities as good for the bottom line because it would assuage dissent and provide good relationships with workers and community leaders. For Newmont in Indonesia, this means portraying the company as Islam-friendly, even if the minority Christian workers there are uncomfortable with it, a lot of charity work that some see as taking away from the prime mission of mining, and running educational programs for nearby farmers, among other activities.

Not surprisingly, corporate executives have widely disparate views on the CSR movement. They express a great deal of frustration because the locals don’t think like the capitalists they want to deal with; in fact, making capitalists is part of the mission. Some see it as a good economic move for the company, others wish they didn’t have to deal with people at all. The CSR workers themselves often see themselves as isolated within the larger company, the “hippies” getting in the way of getting out the color. Battles rage within the company between different models and methods of development, and Welker does an excellent job of delineating the complexities and struggles in implementing CSR.

In Indonesia, the response to the mine is even more complex. While Welker discusses local elites organizing violent opposition to Indonesian critics of Newmont, the people of Sumbawa also demand a lot from the company. People demand roads and bridges and donations. People resist development because they want their farms or jobs for themselves and their family members. The programs don’t always go as expected. Farmer training programs weaning locals off Green Revolution techniques make little difference to people who mostly want more pesticides, and cultural differences make the trainings themselves frustrating to pretty much everyone. Indonesians have different ways of judging the role of the mine. Welker emphasizes an Indonesian term that translates as “social jealousy” which is a sort of relationship-based way of judging your own place in the world that demands relative parity in economic advancement. The issue is important enough to convince Newmont to build a bunch of houses for people with no connection to the mine in order to smooth things over.

Where Newmont faces a lot of criticism is from environmentalists, both inside and outside Indonesia. The Newmont repsonse is pure contempt for green critics. They are seen as outright enemies, accused of lying and deceit for their claims. Managers attack NGOs and individual activists. Welker accesses documents showing how Newmont attacks NGOs, providing a useful window into corporate anti-environmentalist strategy. They provide anti-activist material to village elites, fomenting a response to defend their employer and their jobs that led to violence against a group of activist women.

Welker received significant corporate access to write this book, much more than one would expect from a modern corporation that has been so controversial over the years. It’s slightly unclear to me why a corporation would allow this level of access (maybe it was part of the larger CSR strategy) and while I’m sure Welker was not limited in what she could say, she certainly doesn’t portray Newmont as particularly objectionable. So on one hand, Welker has provided a nuanced understanding of the reality of corporate relationships with communities and the internal struggles over how to do this. On the other hand, Newmont is a tremendously awful corporation, and while Welker doesn’t deny this fact, she certainly doesn’t emphasize it either. Newmont has had to pay millions for cyanide dumping in Ghana, engaged in terrible mining practices in Peru, and was heavily invested in mines during the apartheid regime in South Africa. She mentions its frequent pollution at the mine site and all the toxic waste it is dumping in the ocean, but that plays a surprisingly small part in her story.

Plus, while Welker might not want to see corporations as profit-maximizing monoliths, they are profit-maximizing monoliths. All these CSR programs, charity, and corporate welfare exist for one reason–to create an atmosphere for Newmont to profit. There’s no social agenda here except to smooth over problems with relatively small expenditures in order to get the ore. That doesn’t mean her insights aren’t valuable–profit-maximizing monoliths can in fact be made up of a variety of different actors, but they all feed into the requirement of a corporation, which is to maximize profit. That there are employees within the company who have a social commitment or that the company invests a pittance into local investment does not mitigate the fact of why Newmont exists and why it is in Indonesia. It is there to maximize profit, pure and simple, even if the details can get a bit messy.

My greatest frustration with Enacting the Corporation however is not the somewhat squishy view of the morality of Newmont, but rather with the field of cultural anthropology. I recognize that this is a somewhat unfair critique since books should be evaluated on their own terms and I certainly would never begrudge a graduate student or assistant professor for adhering to the conventions of their field, but I definitely feel that the conventions of anthropology get in the way of telling powerful stories to a much wider audience. Rigor and good writing are not mutually exclusive. Welker pours on the theoretical constructs and literature discussions, and not only in the introduction. I’ve long felt that anthropologists would be better off thinking of themselves more like journalists—a bit like historians do—and focus on telling a story that would engage a broader public. There’s a lot of great and insightful material here for the general reader interested in these issues, but that narrative is so often interrupted by a discussion of this or that theory, that the general reader is going to give up on this pretty quickly. And that’s too bad because it’s a pretty useful book.

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Blizzard Prep

[ 84 ] January 26, 2015 |

If civilization is going to end with the approaching blizzard at least let the past help you prepare to go out the right way.


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The Silver Downside

[ 16 ] January 26, 2015 |

If this is true — and Sherrill is a very sharp analyst — here’s a reason not to break out the champagne after the arrest of Sheldon Silver:

Silver is the most powerful ally that unions and tenants-rights groups had “and the criminal charges will tilt the politics of state government inevitably to the right,” said Ken Sherrill, Hunter College political-science professor emeritus. “It will be a huge change because the next speaker will be more under the control of the governor, someone the governor thinks will not cause him any problems, not someone with an independent power base.”


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