I wonder how old this entry for “Target” is…

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.”

“I hope the best and the brightest who will be joining the new president will at least entertain the possibility that a lot of what they think they know is wrong,” [Serial Errorist William] Kristol added. Theresa Cook and Kate Barrett, An Economic Transition, A Political Dance, ABC News

My question: why is anyone pretending Bill Kristol has something to say worth listening to?

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.

Namely, I’d like to see a sovereign wealth fund ultimately responsible to the Treasury, under advisement of Commerce and Labor. The mandate for the organization would include:

1. Ensuring restored market liquidity by sheer force of gravity (if possible), or via the right of the stockholder (as necessary).
2. Providing venture capital to entrepreneurs, particularly in carbon-negative (e.g. clean energy, public transit, etc.), ecologically renewing (e.g. toxic waste cleanup/disposal, recycling, etc.), and high-tech (e.g. high-speed telecommunications) industries.
3. A lender of last resort for stable companies during dire times (e.g. right now).

I also had points about creating a federal credit rating agency, but I think the end goal would be better served by requiring outside audits of credit ratings. I also had a point in there about investing in existing businesses who add jobs in the U.S., but I think you’re guaranteed to have pretty severe corruption in such an investments program, to the point that it undercuts the profitability of the program.

It isn’t a particularly radical idea, most resource-rich countries already have SWFs, and Sarkosy was stumping for this in Beijing weeks ago. Further, it’s my understanding that much of this authority is already held by the U.S. government today. The primary change is reorganizing the disparate authorities into something resembling an investment bank—with the taxpayer as shareholder and a mandate for profitability.

Oversight must be absolutely airtight, perhaps a well-funded adversarial organization within the executive branch (a joint operation by Justice and the SEC which provides their investigators with a petri dish of what nonsense to look for in the private sector—perhaps they will then be able to keep up with changes in the market?) in addition to the more traditional oversight exercised by Congress.

I cannot stress enough that the success of such a program—rather than it’s devolution into a cookie jar of farcical proportions—requires that there be as many people as possible who’s feifdoms depend on rooting out corruption in such a program.

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

1. I live in Chicago
2. I contributed money to Obama’s campaign
3. Emanuel is the representative for my district

To be honest, the main reason I had for bothering to vote in the election before the bailout was to vote against Rep. Emanuel. Primarily for his efforts to oust Dean in favor of Harold Ford—in spite of the obvious “right time” for Dean’s 50-state strategy. However, after learning that he and Frank were the only ones in Congress who appeared to have any clue about what was going on, why those happenings were so dangerous, and why the national government had to step in, that choice became an ambivalent one.

Whatever your complaints against someone, you have to respect them when they know what they are doing, and what they are doing is directly related to the biggest crisis in two generations—as opposed to the rest of the House, which refused to pass an emergency bill until after they added another $300bn worth of absolutely pure bullshit.

• 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.

In the years of its rise, the movement little by little brought the community’s attitude toward the teacher around from respect and envy to resentment, from trust to fear and suspicion. […] By 1933 at least five of my ten [Nazi] friends (and I think six or seven) looked upon “intellectuals” as unreliable, and among these unreliables, upon academics as the most insidiously situated. They Thought They Were Free

Contrast:

It was only three words in his 20-minute speech announcing his candidacy—“taught constitutional law.” But his students and colleagues at the University of Chicago say those words would make Barack Obama a different kind of president.

“It certainly is an advantage that he really knows the Constitution of the United States,” said Professor Cass Sunstein. “I don’t know if we have had a president that knows as much about the founding document as he does.” Professor Obama was a listener, students say, Sun-Times 2007-02-17

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 20th 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.