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Economy

If Not Nationalization, Then What?

geith.jpgThe question that everyone seems to be asking about the Obama administration’s plan for the financial system is: “Should the United States nationalize some banks?”

There’s been a chorus of calls for nationalization — from Paul Krugman and Nouriel Roubini to Alan Greenspan and Lindsey Graham — which thus far the Obama administration has resisted. As Roubini noted, however, the “stress test” that Treasury Secretary Timothy Geithner proposed in his financial stability plan naturally leads to nationalization:

[T]he reality is that Mr. Geithner is going to confirm the insolvency of the financial system. Once we face this truth, there really isn’t much left to do but nationalize. We are not talking about the government operating the banks for the long-term. But, as was done in Scandinavia in the early 1990s, we are talking about orderly clean up, then reselling the banks to private investors.

Of course, there is the question of the political viability of nationalization. Obama has argued that “America’s different,” and won’t stand for nationalization. And as The Hill noted, federal ownership of troubled banks would play into false claims that Obama is a socialist.

But if not nationalization, then what? Geithner’s public-private investment fund may get toxic assets off the banks’ books, but nationalization is a more straightforward process, and doesn’t depend on Wall St. being willing to buy the junk currently clogging up the banks. And the longer nationalization is delayed, the longer the solvency of the entire banking system will be in question. Thus, more good banks will get dragged down into the mud with the bad.

As Michael Hitzik wrote of the banks, “We bought them. We own them. The only problem is that we’ve failed to exercise our right to control them.” Indeed, another benefit of nationalizing is the opportunity to wipe the bank’s management slates clean. But if nationalization occurs, it needs to be done in a quick manner. There’s danger in allowing the banks to sit on the government’s hands for too long; “prolonged government intervention in the Indian and Chinese banking systems led to major inefficiencies, which stymied economic growth.”

The administration is currently reassuring banks that nationalization isn’t coming. As Matthew Yglesias wrote, “If I were Tim Geithner, I would keep offering these reassurances to executives at large banks right up until the minute I nationalized the first one.” But if the administration is committed to a plan that doesn’t involve nationalization, then it should lay that plan out, because it’s beginning to look like nationalization is where all roads lead and the public needs to be educated about the alternative.

Cross-posted on ThinkProgress.

Yglesias

James Fallows vs The F-22

James Fallows is one of the nicest guys you’ll ever have occasion to interact with, and he’s got all that niceness on display in this post brushing back on his colleague Mark Bowden’s F-22 boosterism in the pages of the Atlantic.

f_22_raptor_1_1.jpg

Fallows’ 2002 article “Uncle Sam Buys an Airplane” is a must-read tale of defense aviation follies.

Security

Will Bunch: ‘I Can’t Imagine’ Torture ‘Would Have Been Condoned’ By Reagan

During the Bush administration, conservatives heralded Ronald Reagan’s own struggle against terrorism as the ideal model for George W. Bush. Frank Gaffney hoped Bush “not only memorializes Ronald Reagan’s moral compass and strategic vision but emulates them,” while Rich Lowry cited Reagan to boost Bush’s 2004 relection chances: “History does move, especially when determined men give it a push.”

ThinkProgress sat down with Will Bunch, author of “Tear Down This Myth: How the Reagan Legacy Has Distorted Our Politics and Haunts Our Future” (and renowned blogger), to ask him whether he, too, saw a straight line from the Gipper to Bush’s war on terror. Bunch asserted that “Reagan’s words have been totally bastardized” by conservatives, and said that Reagan never would have condoned some of Bush’s techniques, especially torture:

BUNCH: I do think that some of the swaggering rhetoric that Reagan used…have been I think misinterpreted by Republicans that this was his actual policy, when actually his policies didn’t have the same kind of cowboy attitude that some of his rhetoric did. I can’t imagine, particularly torture, I just doubt that would have been something that would have been condoned during the Reagan administration.

He actually was kind of a — in fact this was used in a headline in the Washington Post — he was actually kind of a pussycat so to speak when it came to the job of killing people through various acts of war.

Watch it:

Indeed, in 1988 Reagan signed the U.N. convention against torture — which the Bush administration later called “quaint.” Bush’s departure from Reagan wasn’t confined to torture. According to Lou Cannon of the Washington Post, Reagan said that any retaliation that killed innocent civilians is “itself a terrorist act.” Bunch observed at TPM Cafe this week, “As relates to Iraq, Reagan would have been appalled at the military strategy underpinning the March 2003 assault, the heavy bombing tactic known as ‘shock and awe.’”

Transcript: Read more

Yglesias

Out of the Insane Asylum, and Into the Prison

Kevin Drum commented on this yesterday, but this really is a striking data point about institutionalization in the United States:

incarceration.png

Basically, the prison boom of the past 25 years seems to not so much have launched from zero as served as a substitute for a previous high rate of institutionalization in mental hospitals. Throughout the 1960s, we started emptying the mental hospitals. Then when crime went up, we started building tons and tons of prisons. Now it’s worth being clear that the striking visual doesn’t really prove anything. There are probably other statistics you could track that would show a similar time-series just by coincidence. But this is the kind of thing where it’s plausible to say it’s not a coincidence. I don’t personally know much about how mental hospitals were used in the 40s and 50s or have much knowledge of what they were like, but it would be interesting to try to learn more about that and see how much they acted as a kind of ersatz prison system.

Climate Progress

Canada’s Forests: Another tool to use against climate change

This is a guest post from David Childs with the Boreal Songbird Initiative.

Oscarlake

Global warming has proven to be a difficult issue to grasp. New findings about the way increasing temperatures affect our lives and environment seem to be coming out on a near daily basis. Just in the past few weeks new information linking global warming with increased tree death rates in the Western United States and Canada has come out, raising many alarms about the health and safety of our forests.

While solutions to this worsening crisis continue to be debated, Andrew Weaver, a lead scientist for the UN Intergovernmental Panel on Climate Change (IPCC), points out one minimally disputed way to mitigate climate change: protect Canada’s Boreal forest. While many Americans pay little attention to our northern neighbor, Canadian forests play an integral role in the fight against climate change. Here is his op-ed, which was printed in the Ottawa Citizen and the Victoria Times Colonist:

Read more

Yglesias

McDonald’s Or Starbucks

starbuckssurvey.png

A new survey from the Pew center offers up some excellent stereotype-enforcing research indicating that most Americans would rather live near a McDonald’s than a Starbucks, but highlighting some substantial demographic disagreements. And they’re not just stereotype-confirming along a few dimensions. It’s everywhere you go. The more money you earn, the more likely you are to want a Starbucks. The more education you have, the more likely you are to want a Starbucks. The more liberal you are, the more likely you are to want a Starbucks. The younger you are, the more likely you are to want a Starbucks. White people live Starbucks more than black people.

Kay Steiger remarks that this “oughta get the next round of political analysts going.” Indeed, I expect David Brooks to get an entire book out of this.

But as someone who fits firmly into the Starbucks demographic, I can’t help but wonder what people are thinking. At the end of the day, if you want some coffee and there’s a McDonald’s nearby but no Starbucks, you can go to the McDonald’s and get some coffee. It’s not the same range of selection, and I do like Starbucks coffee more, but McDonald’s is a reasonably close substitute. By contrast, there’s no french fries at Starbucks. There’s no burger at Starbucks. No nuggets. No ice cream. And nothing that even vaguely resembles any of that stuff. It’s an assymetrical relationship where McDonald’s can imperfectly substitute for Starbucks but Starbucks can’t substitute for McDonald’s at all. And these days they both have WiFi. But McDonald’s has delicious Diet Coke and other sodas.

Long story short, the yuppies of America need to get real.

Politics

At Least 22 Lawmakers Have Touted The Money From The Recovery Package They Voted Against

shuler.jpgOn Wednesday, ThinkProgress pointed out that several Republican lawmakers who voted against President Obama’s economic recovery package are now touting its benefits to their constituents. The New York Times picked up on the phenomena yesterday, writing that “the temptation to take credit for at least a few of those billions” has proved “irresistible” to the anti-stimulus lawmakers.

For instance, Rep. John Mica (R-FL) gushed after the passage of the bill he voted against, releasing a statement that applauded Obama’s “recognition that high-speed rail should be part of America’s future.” Mica’s chief of staff, Rusty Roberts, defended his boss to the Times, saying that “it’s possible to oppose the entire bill on principle and favor certain sections of it.”

Roberts isn’t alone in this rationalization. Thus far, ThinkProgress has found at least 22 lawmakers who voted against the bill, but have spoken positively about what the money will do for their constituents. Here are a few examples that the New York Times missed:

— Sen. Mike Crapo (R-ID) bragged to Idaho lawmakers that “Approximately $400 million plus, maybe as much as $465 million will come to INL right here in Idaho for hundreds of new jobs and a significantly expedited clean up activity.”

– Rep. Heath Shuler (D-NC) defended his vote against the bill on Thursday, but added that he was “prepared to fight” for “Western North Carolina getting its fair share” of the stimulus money.

ThinkProgress will continue to add to our list and follow members of Congress who tout the benefits of the recovery package that they voted again.

Security

Bolton: Obama Should Try What Didn’t Work Already

Our guest blogger is Peter Juul, Research Associate at the Center for American Progress Action Fund.

john_bolton_01.jpgFormer UN ambassador and assistant secretary of state John Bolton has taken to the pages of the Los Angeles Times to publish a churlish missive denouncing the “naivete” of President Obama’s incipient North Korea policy. It’s ironic that one of the main advocates of the failed conservative approach to national security — epitomized by former Vice President Dick Cheney’s statement “We don’t negotiate with evil; we defeat it” — is blasting the Obama administration’s early efforts to clean up after conservatives’ international mess. Refusing to engage “evil” regimes in Tehran and Pyongyang over the last eight years hasn’t led to their defeat – it’s led to their empowerment. Bolton presided over a policy of appeasement — these regimes got what they wanted.

Consider:

– The Bush administration purposefully disparaged the Clinton administration’s efforts to engage North Korea on its nuclear program. President Bush embarrassed then-Secretary of State Colin Powell, forcing him to retract a statement to the effect that the new administration would pick up where Clinton left off. He then dissed South Korea’s then-President Kim Dae-Jung, repudiating the leader’s “sunshine policy” of détente with the North. Bush would not negotiate with Kim Jong-il, whom he personally “loathed,” and instead hoped the North would crumble due to isolation. What crumbled instead was the Agree Framework controlling North Korea’s plutonium, and in October 2006 Pyongyang conducted a crude nuclear test. Bush was then forced to enter serious negotiations that eventually led to a tenuous deal to shut down North Korea’s Yongbyon reactor in exchange for a normalization of relations with the United States, including removal from the state sponsors of terrorism list. Unfortunately, the deal is unstable and Bush’s policy has left Pyongyang with enough fissile material for at least six nuclear weapons.

– The Bush administration refused to engage with Iran on a number of issues, including direct talks over its nuclear program. Even when the United States appeared to be riding high in the region following the fall of Baghdad in 2003, the administration didn’t explore overtures made by the reformist president, Muhammad Khatami. When Iraq went south and Iran’s nuclear program became a more pressing issue, the United States refused to hold direct talks with Tehran and outsourced diplomacy to the European Union. Bush only reversed course last July, sending Undersecretary of State William Burns to talks in Geneva. The sum result of refusing to directly engage Iran: Tehran is currently led by a hardline president, ascendant in the region, and now has enough low-enriched uranium to further process into fissile material for a bomb.

The arrogant naivete of Bolton’s approach –- which assumes that the United States is powerful enough to go it alone and can make other nations bend through sheer willpower –- is breathtaking. This “Green Lantern theory” of foreign policy has little to no bearing on the realities the United States confronts in the 21st century. Simply expecting unfriendly regimes to do as we ask because we have “moral clarity” and declare them evil is delusional bordering on psychotic.

Negotiating with regimes that abuse human rights on a massive scale and engage in disruptive international behavior is certainly distasteful in the extreme. Talking with leaders with blood on their hands isn’t pleasant, and it’s not supposed to be. But a great power like the United States has to do it in order to achieve its overriding foreign policy priorities, such as nuclear nonproliferation. Waiting for regimes engaged in bad foreign policy behavior to change their ways or collapse is simply a strategy for failure. The United States has to drive hard bargains to make regimes like Pyongyang and Tehran change their destructive behavior.

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