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Clearly, any spe­cific assis­tance [to ail­ing finan­cial insti­tu­tions] will have to include penal­ties for those man­agers who have left their insti­tu­tions over­ex­posed. Central bank cred­i­bil­ity in enforc­ing these penal­ties will go a long way in lim­it­ing moral haz­ard. Raghuram Rajan in 2005, explain­ing how to pick up the pieces after the 2008 finan­cial col­lapse (via Paul Krugman)

The first half of the paper is about how invest­ment man­ager com­pen­sa­tion struc­tures work, and what sort of behav­iors they end up incen­tiviz­ing. After that it’s the con­se­quences (i.e. our present-day eco­nomic cri­sis) and what to do about it. Fortunately for us, the cooler and wiser heads pre­vailed, and we were able to sim­ply hand those same man­agers an addi­tional $500bn with no strings attached — which they promptly added to their cap­i­tal reserves rather than lend­ing out like it was tac­itly believed they would.

Cooler and wiser heads like present-day Obama economic-council direc­tor Larry Summers, who said (appar­ently between his pub­lic insult­ing of women in sci­ence and sup­port for glad­i­a­to­r­ial cap­i­tal­ism in Russia) that Rajan was “misguided.”

By select­ing Tim Geithner as his Treasury sec­re­tary, Barack Obama has opted for a fig­ure who plau­si­bly rep­re­sents change while also offer­ing a high degree of con­ti­nu­ity with both the Paulson Treasury and its Clinton admin­is­tra­tion pre-decessors. Krishna Guha, Geithner ready for top job as Treasury chief, Financial Times, 2009-11-23

How can you read that and not have visions of Homer Simpson doo-doo-dooing the cir­cus theme.

Bonus Funny: The cir­cus theme is actu­ally called “Entrance of the Gladiators” and is mil­i­tary march with a nod to the Roman Empire.

A rel­a­tive of mine once con­fided that he voted for Ronald Reagan barely more than a decade after he asked that copies of The Daily Worker be mailed to him in Vietnam. I asked him why he did so, and his answer was that he “was tired of feel­ing ashamed of being an American.”

28 years later, my gen­er­a­tion answered that same chal­lenge in a com­pletely dif­fer­ent way.

Some ran­dom thoughts from the debate:

• I’ve twit­tered about this before, but I hon­estly am glad that Obama got a new pro­jec­tor for the Adler Planetarium. The plan­e­tar­ium is a mon­u­ment in it’s own right, along­side the Museum of Science and Industry, the Shedd Aquarium, and the Field Museum; the longer it oper­ates the bet­ter. Also, it appears to have increased in price by $1m since the last time McCain men­tioned it, mak­ing it per­haps the safest invest­ment in the United States.
• Obama’s per­for­mance was pretty bad, but the fact that ACORN and Ayers are even being dis­cussed marks a return to the “flag lapel-pin” bull­shit of the Pennsylvania Democratic debate.
• I missed the first 20 min­utes, but in what I saw nei­ther one of them men­tioned the fact that we’re on the cusp of a sec­ond global depres­sion or appeared to have any clue what to do about it.
• Given how pre­car­i­ous our eco­nomic sit­u­a­tion is (and how bad the “real-world econ­omy” was before the credit cri­sis), a spend­ing freeze by the Federal Government would make the depres­sion longer, deeper, and more painful. The fact McCain is still push­ing that mad­ness after today’s events — and worse, fruit­cakes like that CBS News “unde­cided voter” are buy­ing it — makes him very dan­ger­ous in his own right.
• Neither can­di­date has the right answer for edu­ca­tion. It’s very sim­ply this: teach the sci­en­tific method, log­i­cal rea­son­ing, and intel­lec­tual rigor as soon as pos­si­ble. That is the fun­da­men­tal par­ti­cle of edu­ca­tion, and the fact that we don’t drill it into stu­dents’ minds as soon as pos­si­ble is why we suck. Period. Every other edu­ca­tion pro­gram we have — vouch­ers, Head Start, char­ter schools, NCLB — is only even worth con­sid­er­ing in rela­tion to how it helps or hurts the trans­mis­sion of the basic ideas of the Enlightenment. Since we’re not trans­mit­ting those ideas any­ways, talk­ing about those other pro­grams is a waste of time.
• McCain’s plan for more teach­ers (recruit vet­er­ans from the war and let them skip cer­ti­fi­ca­tion exams!) is 100% pure crazy.

[Disclosure: I live in Chicago, and have finan­cially sup­ported Obama already.]

The first note is about the orga­ni­za­tion that McCain cited at the begin­ning of his speech, Citizens Against Government Waste. The one he was using as his cita­tion for the 900-million-dollar fig­ure he was hang­ing around Obama’s neck. They’ve are a lob­by­ing orga­ni­za­tion, which has the fol­low­ing accu­sa­tions against it:

• Astroturfing for Microsoft, against the anti-trust actions in the late 90s.
• Astroturfing for Phillip-Morris, to label a pub­lic health cam­paign that was show­ing results in reduc­ing smok­ing “gov­ern­ment waste,” and for a tobacco-industry sup­ported anti-tobacco bill.
• Labelling the YMCA “gov­ern­ment waste” after tak­ing con­tri­bu­tions from pri­vate health clubs.

And per­haps most damning:

• Laundering money for Jack Abramoff

That’s who McCain was using as his source when he obliquely accused Obama of corruption.

Also worth not­ing was Obama’s descrip­tion of the prac­tice of sup­port­ing friendly dic­ta­tors the prod­uct of “a 20^th cen­tury mind­set.” A bril­liant state­ment, in no small part because Obama knows how to get your mind going in the direc­tion he wants it to go. The rest of the debate I had the recur­ring sen­sa­tion that McCain sounded like a throw­back to the late 1980s — great for ironic, trashy, brit­pop. For a U.S. President? Not so much.