Streetwise Professor

May 23, 2017

A Bilious Harpy Gets Trump’s Riyadh Adventure Exactly Wrong

Filed under: Politics — The Professor @ 11:10 am

There are things to criticize about Trump’s recent extravaganza in Saudi Arabia. Most notably, the good vs. evil rhetoric regarding Iran was redolent of Bush’s Axis of Evil approach, and sits uneasily with the president’s claimed commitment to foreign policy realism. On that, in the end, I will judge more on the basis of actions than words, especially given the frequent disconnect between Trump’s words and deeds.

There’s criticism and skepticism, and then there is the drivel emanating from Anne Applebaum and her ilk. The bilious harpy could barely contain herself in attacking Trump’s trip in a WaPoop doped (pronounced “dope ed”). She shrieked out six criticisms.

First:

It was a very strange choice for a first trip abroad. The past four American presidents, two Republicans and two Democrats, made their first trips to either Mexico and Canada, countries that are close trading partners, close allies, compatible democracies and of course neighbors. Trump chose, instead, to make his first presidential visit to an oligarchic kleptocracy which forces women to hide their faces and forbids them to travel without a male guardian’s permission.

Annie, babe: this is your best shot? This is what you led off with? Seriously. For one thing, previous presidents could be criticized for timidity, not to say political cowardice, by making a safe, conventional first trip. Trump, conversely, scorned the training wheels and dove right into the US’s most vexing foreign policy challenge.

As for the unsavory nature of the Saudi regime, well the oil ticks are indeed repulsive in many ways, but enlightened states are rather in short supply in the region–which is exactly why it is the US’s most vexing foreign policy challenge. We have to deal with the present realities, rather than stand aloof and let oligarchic kleptocrats have free rein. As for Saudi culture, (a) it is quite beyond the capability of the US to change in the slightest, (b) any attempt to do so will only stir up trouble (and terrorism), and (c) it is not our place to do so even if we could or there wouldn’t be blowback. But perhaps Anne is making an argument for restricting Muslim immigration into the US.

Second:

It was a very strange place to speak out against Islamist extremism. Although Saudi Arabia is afraid of some forms of Islamist extremism, it supports others. Saudi Arabia sponsors extremist Wahabi mosques and imams all over the world; Osama bin Laden was a Saudi citizen, as were 15 of the 19 9/11 hijackers.

Bravo, Anne. 180 degrees from reality! No: Saudis are exactly who need to hear stern talk about terrorism, and the US commitment to fight it. Trump actually uttered the words “Islamist extremism” in his speech as delivered, and his prepared remarks included “Islamic extremism”: supposedly exhaustion accounts for the slightly different (though potentially crucial) distinction. This is about as close as one can imagine a president calling out the sponsors of terrorism on their home turf, and is a welcome change from Obama’s reluctance to utter anything similar even from the comfort of US soil. This is also an important signal that the bonhomie–and billions in arms sales–of the Riyadh meetings do not reflect a denial of important truths. There is an implicit conditionality here, which is important.

Third:

The sword dance. Every American president has met with his Saudi counterparts, and of course the stability of Saudi Arabia, as well as its oil, is an important U.S. security concern. But until now American presidents made it clear that, while we have to deal with Saudi leaders, we don’t endorse their culture. Trump, Secretary of State Rex Tillerson and others in the delegation did exactly that, by participating in this sinister all-male dance.

Ever heard the phrase “when in Rome,” Anne? Participating in a farcical (decidedly non-aquatic) ceremony involving strange men (no women!) distributing swords is hardly an endorsement of Saudi culture–or of the basis of their government. It’s a trivial indulgence which can grease the wheels in down-to-business bargaining. Note that Tillerson said this wasn’t his first sword dance: he knows that’s how it’s done. When Trump holds an all male cast sword dance in the Oval Office, wake me.

And by the way, doesn’t this cut against the narrative that Trump is an anti-Muslim hater?

Fourth:

Ivanka Trump’s “outreach” to women entrepreneuers. Saudi women must cover their heads and often their faces. They cannot drive cars, cannot (see above) travel without the permission of male guardians and are deprived of legal rights and education. In that context, Ivanka Trump’s promotion of female “entrepreneurs” looked like a cynical public relations gambit, which of course it was. The announcement that Saudi Arabia and the United Arab Emirates will donate money to her fund was a “pay to play” far more blatant than anything Hillary Clinton ever dreamed of.

Note that this isn’t “her fund”: this is a World Bank initiative. Further, and more importantly, would it be better that we completely ignore the issue of women in KSA? Yes, it is a small step, especially in light of the retrograde treatment of women not just in Saudi Arabia but the Muslim world generally. But it is something, and in particular it is something that contradicts Annie’s claims about endorsing Saudi culture. Again, we ain’t gonna change it, and it ain’t our place to change it.

Fifth:

Tillerson talking about human rights in Iran. Yes, Americans are often hypocritical about where and when they promote human rights. But to denounce human rights in Iran while standing in Saudi Arabia, a place where there is no political freedom and no religious freedom, brought hypocrisy to a whole new level. Better not to have said anything at all.

It’s called realpolitik. There are books about it. Read one, Anne. And yet again, it is futile, and indeed counterproductive, to make major strategic decisions on the basis of human rights in the ME. Because there ain’t any, anywhere. This should be about advancing American interests, and hold the iPhone, but hypocrisy is the essence of diplomacy, especially in the Middle East.

It’s also interesting that Anne and her ilk don’t point out how this flatly contradicts the Trump-is-Putin’s-bitch narrative. Russia and the Saudis are adversaries in the Middle East. Russia and Iran are allied in the Middle East. Trump taking a hard line against Iran and siding with the Saudis is diametrically opposed to Russian policy in the Middle East.

Sixth, my favorite:

Tillerson holding a news conference for foreign press only.The U.S. press corps was not invited. Presumably this was because the White House doesn’t want Americans to find out what the president was doing in Saudi Arabia?

Good! This is a welcome, and well-deserved “fuck you!” It never ceases to amaze me that the media engages in unrelentingly hostile coverage of the administration–coverage that ranges from the tendentious to the libelous–and yet expects to be indulged and pampered. Yes, Trump (and Tillerson) are breaking the Washington rules–great! The rules are stacked in favor of the sleep deprived, dehydrated, over-caffeinated, boozy, junk-food eating, low-brain function narcissists who call themselves “journalists,” and bore us with their conceit that they are the guardians of the republic. They deserve a good smacking, and their wails and laments are music to my ears. I hope they get another. And another.

And as for finding out what happened, um, if we were kept in the dark then how did Anne know about items 1-5 of her screed? Believe me, we lost nothing–and probably gained–by the inability of aforementioned sleep-deprived, dehydrated, etc., journalists to ask some snarky questions. They can fuck off presently, and kudos to Tillerson for telling them to do so in not so many words.

Anne Applebaum is the poster child for the elite whose serial failures and utter cluelessness made Trump president. What happened in November was first and foremost a reaction to that elite. And Anne shows daily that like the Bourbons, she has learned nothing and forgotten nothing. There are substantive grounds to criticize Trump on most things, including his Middle East policy but all Anne Applebaum has done is rant dishonestly about the least objectionable, and often praiseworthy, things that Trump did in Riyadh.

Figures.

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May 17, 2017

Another IC Kneecapping

Filed under: Politics — The Professor @ 3:31 pm

In signal processing, if the signal to noise ratio is small, one puts very little weight on a particular noisy signal. Similarly, in regression analysis, when the independent variable is very noisy, one reduces sharply the coefficient towards zero.

These things are worth keeping in mind in the current political environment. Alleged “bombshell” stories are so noisy that they shouldn’t be emphasized: they should be interpreted with great skepticism.

Case in point: the “Trump disclosed intelligence to the Russians story.” Regardless of what Trump told the Russians, one thing is sure: whatever ISIS would have learned had the allegation not been leaked, it learned vastly more as the result of the leaking of the details of the intelligence that (per McMaster) Trump discussed with Lavrov in fairly general terms. Indeed, this is one situation where US and Russian interests are fairly aligned: even if Trump said “an Israelis spy in an ISIS cell in Raqqa [or wherever] told us about a plot to put bombs in laptops” what incentive would the Russians have to pass along that information to ISIS? I also note that Russia and Israel have been in close communication for months now, making it not unreasonable to assume that Israel may have provided similar intelligence to Russia independently. So the odds that information that was contained in the WaPo would have made it to ISIS was about zero . . . until the WaPo ran the story. At which point the probability became 100 percent.

Regardless of whether Trump’s disclosure was prudent, it was almost certainly legal. The leak was both grotesquely imprudent and illegal.

This is another intelligence community kneecapping. No doubt about it. And it is sick and perverse that the supposed justification for leaking–that Trump endangered national security–resulted in far more damage to national security than whatever Trump revealed to Lavrov. But perhaps in the mind of some IC jackass, Trump is such a grave threat to national security that any means necessary are acceptable if he is driven from office. But that is not the call of the jackass to make.

Another case in point: the Comey memo. First, apropos my earlier post, there is no reason to believe that Comey is an a disinterested actor here. Since this is he said/he said, Comey’s alleged representation should be treated with skepticism. Second, and relatedly, context matters. A clip quote could have very different interpretations depending on the conversation that led up to it, and which followed. So a selective leak from one memo could give an impression that is 180 degrees from what actually happened.

Both stories–as well as many more–lead me to another conclusion. I will put virtually no weight on any story that relies on anonymous sources, and particularly on anonymous sources quoting selectively from documents. If these matters are so grave, and the allegations are so damning, the party in possession of the information should reveal it publicly. Particularly if s/he is a “public servant.” Fine–perform a public duty and make a public allegation on which you can be questioned.

Indeed, the very nature of anonymous leaks casts doubt on my initial analogy to signal processing. In that context, the noisy signal differs from the true one by noise that could be positive or negative. In the current situation, it is highly unlikely that the errors are random: they are chosen to distort. They are more likely deliberate, and strongly negatively correlated with the truth. So in the random noise case you believe the direction of the signal, but reduce your estimate of its magnitude: in the negative correlation case, you actually believe the opposite.

Maybe all this stuff about Trump is true. If so, I would like to know. If so, those in the possession of the information have nothing to lose by going public with it: indeed, they would likely be lionized as heroes and saviors of the Republic. The fact that they choose to backshoot from the bushes instead strongly suggests that what they are leaking cannot withstand a full and fair airing.

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May 14, 2017

Imperial Bureaucracy vs. Imperial Presidency

Filed under: Politics — The Professor @ 6:43 pm

For the non-partisan, an evaluation of the Comey firing depends crucially on one’s views of the independence, probity, and politicization of the FBI generally and Comey specifically, and of the intelligence bureaucracy. (Anti-Trump partisans, contrary to the previously stated views of many, adamantly say that the FBI is independent, upright, and apolitical in its search for justice. Those latter day conversions may be discounted.) There is sufficient reason to have doubts on all scores to make judgment difficult.

Watergate analogies, notably Nixon’s firing of Archibald Cox, are all the rage these last few days. This serves mainly to demonstrate the left’s impoverished historical palette. Other episodes from that era and somewhat before demonstrate clearly that the powers of the FBI, and individual FBI personnel, can be put to malign purposes, or misused. J. Edgar Hoover maintained confidential files on most important politicians, including the Kennedys, and is widely believed to have used this information to intimidate–blackmail–people into doing his bidding. Mark Felt, associate director of the FBI, was Deep Throat–leaking information to the Washington Post that culminated in Nixon’s resignation, for motives unknown.

So if one wants to appeal to historical precedents, there is plenty of reason to believe that the FBI is capable of dirty dealing in pursuit of the political or personal agendas of its leadership.

To which some might object that Comey is no J. Edgar Hoover, but is instead a straight shooter intent on seeing justice done. Well, that’s exactly how Hoover saw himself. Indeed, such a crusading mindset, and an excessive self-regard in the righteousness of one’s motives, are dangerous precisely because they make it quite easy to rationalize that violating procedures, norms, and even laws is acceptable, if done in pursuit of a higher cause.

The stream of leaks from the intelligence community of which the FBI is a part–which, interestingly, subsided to a trickle in the aftermath of Trump’s incendiary “wiretapping” tweets in March–also provides grounds for suspicion about whether the IC is pursuing its own agenda (or agendas).

Today’s appearance of the execrable James Clapper on Jake Tapper’s State of the Union provides yet further reason to be skeptical of the objectivity of the IC:

CLAPPER: Well, I will just say that the developments of the past week are very bothersome, very disturbing to me.

I think, in many ways, our institutions are under assault, both externally — and that’s the big news here, is the Russian interference in our election system. And I think as well our institutions are under assault internally.

TAPPER: Internally from the president?

CLAPPER: Exactly.

TAPPER: Because he’s firing the checks and balances?

CLAPPER: Well, I think, you know, the founding fathers, in their genius, created a system of three co-equal branches of government and a built-in system of checks and balances.

And I feel as though that’s under assault and is eroding.

Is Clapper that ignorant, or is he just mendacious? (“Both” is the likely answer.) For that answer is not just wrong, but outrageously so. This came up in the context of Comey’s firing. The FBI is part of the executive branch, and even Comey acknowledged that he served at the president’s pleasure. Meaning that Comey’s axing raises no separation of powers issues whatsoever: zero, zip, nada. Further, time and again in the hundred days plus of his administration, Trump has been checked and balanced by other branches of the government, as the “founding fathers, in their genius” intended. Indeed, if there has been a violation of separation of powers, it has come from federal district judges and the Ninth Circuit, in their rulings on the travel ban.

And before Clapper presumes to lecture about violations of the separation of powers, he should acknowledge that an executive branch officer lying to Congress (which he was, and did) is a pretty clearcut violation of the system of checks and balances. He has absolutely no standing to make judgments on this matter.

But perhaps Clapper believes that the bureaucracy is a co-equal branch of government, even though in their genius the founders never conceived of such a thing. And such a mindset is quite prevalent in the swamp, and which is why although there is reason to  have deep reservations about Trump–as there were reasons to have deep reservations about Obama, and Bush, and [insert some president’s name here]–we should be deeply suspicious about the motives (and the competence) of a largely unaccountable part of the government which is in near rebellion in part because the president held one of its leading lights accountable. It may be politically expedient to pretend that the FBI and the intelligence bureaucracies are beyond reproach when they are at odds with Trump: it is also a a historically idiotic belief. History shows that the FBI specifically, and the bureaucracy in general, is capable of abusing its powers. Indeed, an imperial bureaucracy is more to be feared than an imperial presidency.

 

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May 12, 2017

Trump Axes Comey, But Hillary (and Bill) Put His Head on the Block

Filed under: Politics — The Professor @ 9:37 am

Trump’s firing of FBI director James Comey has released yet another frenzy of hysteria in The Swamp. One has to take one’s amusement where one finds it these days, and in this episode that would be from watching Democrats and anti-Trumpers who only days ago were calling for Comey’s head in a basket, now shrieking laments and rending garments because . . . Comey’s head is in a basket. If I roll my eyes any more I am going to detach a retina.

One other source of amusement is that Hillary, who couldn’t shut up about Comey since the election, has been silent since he got it in the neck.

The reigning narrative is that Trump is attempting to subvert justice by impeding the investigation of his ties with Russia. If this is what he was thinking, he is sadly deluded. Congressional investigations continue, and if anything, firing Comey will galvanize them. Further, the FBI personnel actually doing the investigation are likely to continue to do so, and if they are indeed onto something the firing will only make them more suspicious and motivated.

Trump being Trump, I think the truth is probably very different. Two things stand out to me. First, Trump stated in his letter that Comey had personally absolved him of the Russian accusations on three separate occasions. (Today Trump doubled down on that, saying Comey better hope there are no “tapes” of their conversations if he was thinking of leaking a denial.) Second, Trump is/was reportedly furious at the way Comey absolved Hillary last summer. Putting those pieces together, my guess is that it went down something like the following. Comey tells Trump that he is not under investigation and/or that there is no evidence of Russo-Trump collusion. Trump demands that Comey state that publicly. Comey demurs, saying that would be a violation of procedure. Trump loses it, and says “you did it for Hillary!” Comey mumbles something about how that was different, and then goes in front of Congress and refuses to admit that he erred in his handling of Hillary’s email. Trump figures that the guy is an untrustworthy political hack, and goes into Apprentice mode.

Truth be told, regardless of the political advisability of the firing, Comey had justly earned his termination. Comey’s investigation of Clinton was very irregular from the first: he violated standard procedures at every turn, which in addition to being wrong in itself, would make a mockery of any appeal to the need to be scrupulous in following them now. Further, he had arrogated to himself the responsibilities of the Attorney General by deciding not to prosecute Clinton. He sucked up to the Lynch (and Obama and Clinton) by taking her off the hook of making the prosecutorial call. When that unleashed a political storm from the right, he tacked and released his eve-of-the-election letter. Then he crowned this series of misadventures by mis-stating the basis for the renewed investigation in testimony before Congress: Huma shared only a handful of emails with Anthony Wiener, not the hundreds or thousands Comey claimed in his testimony.

Richard Epstein, hardly a Trumpophile summarizes well:

But, if anything, he [AAG Rod Rosenstein] understated the case against Comey. First, he treated the initial investigation of Hillary Clinton back in March 2015 with kid gloves. There were the inexcusable decisions to grant immunities to key Clinton backers without first serving them with a subpoena that would have allowed the FBI to extract a quid pro quo for any immunity that thereafter might be granted. Second, the FBI allowed Clinton’s key aide Cheryl Mills, Clinton’s former chief of staff, to act as her legal counsel, even though she herself was a legitimate target of investigation who could have faced charges. And they did not conduct any of the ambush interviews that are commonly given in cases where criminal prosecution is warranted. The obvious inference is that Comey was kowtowing to his superiors in the Obama White House.

Next, of course, was his public statement on July 5, 2016, in which he gave a thoroughly unsatisfactory explanation as to why he chose not to prosecute Clinton for her use of an unauthorized server that, in a case involving lesser persons, would have resulted in serious criminal charges, wholly without regard as to whether unauthorized persons hacked into the site (which they surely did).

Once Attorney General Loretta Lynch, as Judge Laurence Silberman wrote, “sort of half-recused herself” from the case, any charging decision should have been made by or at the direction of Sally Yates, the deputy attorney general. As Rosenstein rightly said in his memo, no experienced law enforcement figure thought that Comey acted correctly in issuing a public statement that explained his point of view.

Finally, his late October surprise, rightly castigated by none other than the New Yorker’s Cassidy, that he was conducting another investigation of Clinton, one that went nowhere, was likewise a breach of his duties.

The common response to this line of attack is that criticisms of Comey’s conduct in the Clinton investigation had nothing to do with the president’s decision, which was made, we are confidently told (on the basis of no firm evidence), because Comey was hot on the trail of information about possible ties between Trump, his supporters, and the Russians during the campaign. But it is also the case that Comey has made no effort to distance himself from this earlier conduct, and indeed affirmed in his Senate testimony of May 3, 2017, that with respect to his October 28 letter on Clinton, even though the episode had made him “mildly nauseous,” he would do it all over again.

The past events thus are linked closely to the future events. If the mistakes Comey made could have justified his firing in either 2015 or 2016, the passage of time does not cure those improper decisions.

Comey played the part of political weasel throughout, and his fate was the one the like usually suffer.

As for this being a “Constitutional crisis” or a “coup” (as David Frum and others hyperventilated), puh-lease. Trump is Chief Executive, and the FBI is in the executive branch. QED. Even Comey acknowledged that he serves at the president’s pleasure. As for a coup. Er, it would be a coup if the FBI Director removed the president, not the other way around.

Although Comey wove the basket in which his head now lies, ultimately  Hillary Clinton is the one who put his head on the block. Her grotesque misjudgment and malfeasance in using private email and lying about it repeatedly set in train the events that culminated in Comey’s firing. But this is nothing new, is it? Recall what Jim McDougall said, years ago: “I think the Clintons are really sort of like tornadoes moving through people’s lives. I’m just one of the people left in the wake of their passing by, but I have no whining or complaining to do, because I have lots of company.” Though departed from this  vale of tears, Mr. McDougall has yet more company, in the form of one James Comey.

Update: I should add that Bill Clinton is culpable as well. His meeting with Lynch on the tarmac in Phoenix “forced” her sort-of-half-recusal (to paraphrase Lawrence Silberman). I put “forced” in quotes because that may have been Lynch’s intention in meeting Clinton. Regardless of whether it was a blunder, or planned, the meeting with Clinton is what prompted the self-perceived Dudley Do-Right Comey to determine that he had to do Lynch’s job for her in order to maintain the public’s faith in the justice system. (Ha!) He shouldn’t have given her the out. (Calling him Dudley Do-Right gives him the benefit of the doubt, by the way. There are other more cynical interpretations that are observationally equivalent.) Regardless, Bill played a role in Comey’s decision to assume responsibilities that were not his, which was a legitimate reason to fire him. And note that McDougall referred to the Clintons plural: they usually are both involved in wrecking lives.

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May 8, 2017

Whatever Igor Wants, Igor Gets: Primitive Capital Accumulation, a la Sechin

Filed under: Economics,Energy,Politics,Russia — The Professor @ 7:34 pm

Apparently winning the “auction” for Bashneft (after it was widely claimed by Putin, and others, that a sale of the company to Rosneft would be a sham privatization) wasn’t enough for Igor Sechin. Igor is now after MOAR, and is using the “legal” process to get it. Rosneft has filed suit against the former owner of Bashneft, Vladimir Evtushenkov’s holding company Sistema, and is asking for a cool $1.9 billion. News of the suit knocked almost 40 percent off of Sistema’s stock price.

The grounds of the lawsuit are unclear.

In the past Sechin has complained about a sale of a Bashneft asset, oil services company Targin, to Sistema at an allegedly knock-down price. He has also criticized contracts between Targin and Bashneft entered into after the sale as unduly favorable to Sistema.

Both of these allegations are plausible. This is Russia, after all, and related-party transactions and Credit Mobilier-like contracting scams are classic ways of tunneling assets.

Recently Rosneft has had to spend $100 million to address safety problems at Bashneft refineries. Rosneft claims that it has found “irregularities.”

If commercial and legal logic mattered (a big if, I know), the alleged shenanigans involving Targin would not be grounds for a suit, and it would be hard to imagine how Rosneft would have standing. Recall that Bashneft was seized by the state in 2014, and Rosneft bought it from the government. So any uneconomic transactions in 2014 or earlier would not harm Rosneft: it would have known that Targin was not included, and what the contracts were. So Rosneft was not harmed by what happened before the company was nationalized.

Failure to detect “irregularities” at the refineries would suggest a lack of due diligence if these were not discovered prior to buying from the state, or if they were known, they would have been reflected in the price. Again, it is hard to see how Rosneft could have been defrauded. Further, there’s a big difference between a $100 million repair bill and a $1.9 billion legal claim.

But does it matter, really? Any legal claim is almost surely a pretext to expropriate a politically vulnerable oligarch who is, shall we say, Без крыши. And this strategy is in Rosneft’s DNA. After all, the company was built primarily on the assets seized from Yukos, and another big asset–TNK-BP–was obtained only after a campaign of pressure against BP (although the Russian AAR consortium held their own and were paid in cash). Put differently, Rosneft was built by  what Marxists called primitive capital accumulation–force and fraud, sometimes operating under the color of legal authority.

But there is a price to be paid for this. It shows that Russia remains a fraught place for investors with assets that come under the covetous eyes of Sechin, or others like him. This depresses valuations for Russian companies, and is a serious drag on investment. No wonder year in and year out Russia is notable for the small share of investment, which runs about 18 percent of GDP, very low for a country in its stage of development. (The world rate is about 24 percent.)

But whatever Igor wants, Igor gets, evidently. Even though what’s good for Igor isn’t good for Russia.

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May 6, 2017

Son of Glass-Steagall: A Nostrum, Prescribed by Trump

Filed under: Economics,Financial crisis,History,Politics,Regulation — The Professor @ 7:30 pm

Apologies for the posting hiatus. I was cleaning out my mother’s house in preparation for her forthcoming move, a task that vies with the Labors of Hercules. I intended to post, but I was just too damn tired at the end of each day.

I’ll ease back into things by giving a heads up on my latest piece in The Hill, in which I argue that reviving Glass-Steagall’s separation of commercial and investment banking is a solution in search of a problem. One thing that I find telling is that the problem the original was intended to address in the 1930s was totally different than the one that is intended to address today. Further, the circumstances in the 1930s were wildly different from present conditions.

In the 1930s, the separation was intended to prevent banks from fobbing off bad commercial and sovereign loans to unwitting investors through securities underwriting. This problem in fact did not exist: extensive empirical evidence has shown that debt securities underwritten by universal banks (like J.P. Morgan) were of higher quality and performed better ex post than debt underwritten by stand alone investment banks. Further, the  most acute problem of the US banking system was not too big to fail, but too small to succeed. The banking crisis of the 1930s was directly attributable to the fragmented nature of the US banking system, and the proliferation of thousands of small, poorly diversified, thinly capitalized banks. The bigger national banks, and in particular the universal ones, were not the problem in 1932-33. Further, as Friedman-Schwartz showed long ago, a blundering Fed implemented policies that were fatal to such a rickety system.

In contrast, today’s issue is TBTF. But, as I note in The Hill piece, and have written here on occasion, Glass-Steagall separation would not have prevented the financial crisis. The institutions that failed were either standalone investment banks, GSE’s, insurance companies involved in non-traditional insurance activities, or S&Ls. Universal banks that were shaky (Citi, Wachovia) were undermined by traditional lending activities. Wachovia, for instance, was heavily exposed to mortgage lending through its acquisition of a big S&L (Golden West Financial). There was no vector of contagion between the investment banking activities and the stability of any large universal bank.

As I say in The Hill, whenever the same prescription is given for wildly different diseases, it’s almost certainly a nostrum, rather than a cure.

Which puts me at odds with Donald Trump, for he is prescribing this nostrum. Perhaps in an effort to bring more clicks to my oped, the Monday after it appeared Trump endorsed a Glass-Steagall revival. This was vintage Trump. You can see his classic MO. He has a vague idea about a problem–TBTF. Not having thought deeply about it, he seizes upon a policy served up by one of his advisors (in this case, Gary Cohn, ex-Goldman–which would benefit from a GS revival), and throws it out there without much consideration.

The main bright spot in the Trump presidency has been his regulatory rollback, in part because this is one area in which he has some unilateral authority. Although I agree generally with this policy, I am under no illusions that it rests on deep intellectual foundations. His support of Son of Glass-Steagall shows this, and illustrates that no one (including Putin!) should expect an intellectually consistent (or even coherent) policy approach. His is, and will be, an instinctual presidency. Sometimes his instincts will be good. Sometimes they will be bad. Sometimes his instincts will be completely contradictory–and the call for a return to a very old school regulation in the midst of a largely deregulatory presidency shows that quite clearly.

 

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April 29, 2017

Carter Page Doesn’t Prove the Existence of a Trump-Putin Nexus: He Proves Its Non-Existence

Filed under: Politics,Russia — The Professor @ 2:48 pm

The linchpin of the supposed Trump-Russia connection is one Carter Page. Rather than demonstrating the existence of some deep, dark conspiracy, this fact demonstrates just how farcical the entire idea of such a conspiracy is.

Carter Page was a fringe figure on the make in Russia. He tried assiduously to cultivate business contacts there, with vague–if any–success. He also tried to forge political connections in the US, which apparently brought him to the attention of some Tea Party guy from Iowa named Sam Clovis. Clovis worked on the Trump campaign (and has since been rewarded with the august position of White House representative to the USDA). Clovis put Page’s name on a list of potential policy advisers, and when Trump was asked about his foreign policy advisers in March, 2016, Trump apparently pulled that name off the list.

Working from the other direction, as a guy trying to make connections in Russia, Page obviously came to the attention of the SVR, Russia’s foreign intelligence service. In 2013 he met with Russian diplomats & a businessman, who were subsequently identified as Russian agents. Page was lecturing about energy policy at NYU (in the kind of position that one sometimes obtains by advertising “will teach for food”) at the time, and claims he gave his Russian interlocutors some teaching notes. Page later gave a speech at the New Economics School in Moscow. After the election he met with Sechin.

And that’s about it.

In brief: Page came to Trump’s attention precisely because he had no advisors with connections to Russia, and was under continuous attack for the thinness of his foreign policy expertise and the absence of any eminent foreign policy advisers. Page’s connections were gossamer thin–he was a wannabe playa in Russia, not a real one. But he’s the best Trump could come up with on the spur of the moment. Similarly, if the SVR (or FSB or GRU) had strong connections with anyone actually close to Trump, they wouldn’t have needed Carter Page.

Thus, the fact that everything rests on Page shows just how tenuous the Trump-Russia connections were. Trump had nobody with real ties to Russia, so he reached out for a nobody who at least had some involvement there; The Russians had nobody, so they courted the same nobody (e.g., rewarding him with a meeting with Sechin in December). If there was a strong Trump-Russia nexus, Carter Page wouldn’t have warranted the time of day by either Trump or the Russians.

The lecture Page gave at the New Economics School is often raised to illustrate Page’s Russian connections. Pardon my French, but what a fucking joke, and one that illustrates that the people who opine on the Trump-Russia connection don’t know squat. The New School was originally, and remains to some degree, aligned with the liberal elements in Russia. It is hardly a siloviki front, and was established with the specific intent of becoming a western-style academic institution favorable to liberal, western ideas. Many of the faculty had degrees from western (mainly US and UK) universities. One of its initial supporters was George Soros, for crissakes.

One salient story says it all. The New School’s former rector, my friend Sergei Guriev, criticized the Russian government’s prosecution of Khodorkovsky, and the loss of freedom in Russia generally, and soon came under such pressure that he was forced to go into exile in France. If anything, a connection with the New School is likely to raise suspicions among the FSB et al, and hardly indicates influence among the Putinists.

Page’s academic connections also illustrate his irrelevance. The people around Putin aren’t known for their scholarly depth, or their commitment to rigorous academic research. Indeed, the deepest connection of them to academia is to get fraudulent academic credentials–including PhDs–to burnish their résumés. Serious academics exert very little real influence in Putin’s Russia.

But Carter Page was very, very useful–to the FBI. They used his connections with Trump and Russia, tentative as they were, (along with the ridiculous dossier, in which Page was mentioned) as a pretext to get a FISA warrant to put him under surveillance. This, in turn, potentially gave them some justification and legal authority to intercept other communications involving Trump people, presumably on the knee-bone-connected-to-the-thigh-bone theory: Page talked to X, X talked to Y, Y talked to Z who talked to Trump, so investigate X, Y, and Z and maybe Trump. Give the FBI a micrometer, they’ll take a million miles.

This also means that Page’s importance has to be hyped by leakers and those in politics and the media intent on creating Russiagate. But viewed more objectively, the fact that that the story apparently begins and ends with first-class nobody Carter Page shows that Trump had no real connections in Russia–especially with the siloviki or Putinists–and the Russians had no influential connections in the Trump camp.

This is a self-inflicted wound for Trump, and an inevitable consequence of his untraditional, helter-skelter, and extemporized insurgent campaign. A more traditional and organized campaign wouldn’t have had to pull a nobody’s name off a list prepared by a nobody. This created a vulnerability that his enemies are flogging for all they are worth.

That said, it is also very telling that the FBI seized on this sad sack to justify an investigation. It is pretty clear that they were desperate to a pretext to investigate the Trump campaign, quite likely due to political pressure emanating from the Obama administration, and as a way of compensating for the damage that the email investigation (and Comey’s to-ing and fro-ing about it) was doing to the Clinton campaign. The centrality of Page in this investigation also reveals that the FBI has nothing substantive, and never really did. But it soldiered on nonetheless. Appalling, but again, the FBI seized on an opportunity that Trump gave them.

So as with most of the Acela Corridor conventional wisdom, the obsession with Carter Page inverts reality. Rather than indicating the existence of a deep connection between Putin and Trump, Carter Page shows that such connections were completely non-existent.

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April 23, 2017

European Elites: Vicious in Victory, Bitter in Defeat

Filed under: Politics — The Professor @ 7:17 pm

The first round of the French presidential election occurred today, with Marine Le Pen winning by about two points, with Emmanuel Macron coming in second. These two will face off in a few weeks, with Macron universally considered to be the inevitable winner, and by a large margin.

It is hard to imagine a more vapid political figure than Macron. His eventual win will therefore be quite gratifying to the Germans, and to the EU, who will have the empty vessel that they desire as French president.

The relief of elite France, and elite Europe, is palpable. Although Le Pen made the final round, the belief that she will be defeated has convinced the elites that the scourge of populism–which they all too often characterize as the second coming of Nazism (thereby gravely insulting their own fellow citizens and trivializing the evils of the Nazis)–has been defeated, and that the European project can continue to sail along, with no correction in course necessary.

A more reflective elite would ask why populism has been so resurgent, and why they have to keep beating it back in country after country–sometimes just barely, and sometimes not at all (e.g., Brexit). A more reflective elite would recognize that their triumphalism, and their insulting of those they have defeated–in this election–will only stoke resentments. A more reflective elite would recognize that populism is flashing a warning that a course correction is desperately in order.

But modern elites in Europe (and in the US too) are anything but reflective. They are smug, arrogant, and dismissive. The ideal is to be magnanimous in victory, gracious in defeat. Modern elites invert that. They are scornful and dismissive and even vicious in victory, and bitter and angry in defeat.

Which is why they may triumph in France in a few weeks, but risk a crushing loss in the longer run. Failing to respond to the rumblings of populism today greatly increases the risk that the EU will fail in the future.

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Cultural Appropriation: The Left’s Latest Power Through Balkanization Play

Filed under: Politics — The Professor @ 6:47 pm

The left’s newest (or one of the newest–it’s hard to keep up) Trojan Horse of tribalism is “cultural appropriation,” e.g., a white person wearing dreadlocks. To illustrate how absurd it has become, consider this article in Teen Vogue–the fact that it is in Teen Vogue also illustrates the thoroughness with which the left attempts to penetrate impressionable minds.

Silly me, but I thought that imitation was the sincerest form of flattery. That one did not want to dress like or eat like or act like or listen to the music of those one despised or detested–quite the opposite.

But no. Apparently “cultural appropriation” is an existential threat. Literally existential. It is increasingly common for college students in particular to say that witnessing an act of cultural appropriation (or hearing a contrary opinion) threatens to annihilate their existence. Annihilate.

Like all things left, this is another mechanism of social control, and a very intrusive one. About as intrusive as possible. Other people are literally telling you what you can wear, how you can style your hair, what entertainment you can enjoy. Based on their claims about the entirely subjective impact of your behavior on them.

The control mechanism works in a variety of ways. One is by creating a cultural Tower of Babel that facilitates divide and conquer.

It is also part of the weakness-is-power strategy, the left’s current preferred MO. A group claims victim status, and alleges its powerlessness at the hands of a group that it hates. Emphasizing their weakness, the aggrieved appeal to the authorities for help. The authorities, who often detest the same group, swoop in to protect the self-proclaimed defenseless victims.

This is a symbiotic relationship between the self-proclaimed marginalized and authorities in certain organizations (academia, surely, and often in government and corporations) that allows them to exercise control over a common enemy.

This helps explain the hyperbolic and hysterical nature of the complaints. “I don’t like that,” or “that hurts my feelings” are hardly grounds for exercising control over what others do or say, right down to their hairstyles. But metaphorical murder–“annihilation of existence”–warrants strenuous action by the authorities.

This trend–and sadly, it is a trend–is profoundly un-American and anti-American. For America has always been a syncretic society. Music is perhaps the best example: American popular music is a veritable Gordian Knot of intricately woven cultural strands. No, the process of amalgamation has never been smooth or easy, but the ideal that there was an American identity that integrated multiple national and cultural identities, and transcended them, made the process work better here than it has worked anywhere else ever.

If it gains traction, the idea that “cultural appropriation” is tantamount to genocide will make not only integration and amalgamation impossible, but it will even make impossible mere peaceful coexistence between disparate groups: live and let live is the antithesis of this movement. It is a recipe for conflict along national, ethnic, cultural, and racial lines. So many borders to be defended. So many existential threats. A war of all against all is the inevitable result.

But that plays right into the hands of progressives who occupy the commanding heights of our institutions, doesn’t it? After all, they must intervene in order to keep the peace. Funny how that works out, isn’t it?

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April 21, 2017

The Left Loses Its Mind (Again!) Over Citgo and Trump

Filed under: Commodities,Economics,Energy,Politics,Russia — The Professor @ 5:23 pm

Donald Trump is the left’s Theory of Everything. To be more precise, it is the left’s Theory of Everything Bad.

Latest (nut) case in point: Rachel Maddow is blaming Trump for the riots in Venezuela. No-really!

The theory: the Federal Election Commission revealed that Citgo, a US subsidiary of Venezuela’s national oil company/basketcase PDVSA had donated $500,000 to Trump’s inauguration. According to Maddow, this sent Venezuela’s citizenry, which is reeling under an economic catastrophe wrought by Chavez, Maduro, and “Bolivarian Socialism”–a cause that the left from Bernie Sanders to Danny Glover to many others has swooned over for years–into paroxysms of rage at the thought that their national patrimony was paying to honor the evil Trump.

To start with, there have been violent protests in Venezuela for years. The country is facing economic collapse. PDVSA has been looted by the Chavistas for going on 15 years now, and is a complete wreck. $500K is chump change compared to what the leftist darlings have stolen from the company, or destroyed through their grotesque mismanagement–would that the left shown equal concern over THAT. The country is on the verge of hyperinflation. There are food lines. There is no toilet paper–unless you count the currency the Venezuelan central bank is cranking out like nobody’s business. I could go on and on.

So no, Rachel. The Citgo contribution to the inaugural fund–which represents less than .5 percent of the total raised–is not even a piece of dust on the straw on the camels back: the camel’s back was broken long ago, by the vanguard of socialism that Rachel Maddow and her crowd lionized for years. The rage of the Venezuelan people is directed precisely where it should be: at Maduro, the Bolivarian revolution, and the dirt-napping Chavez.

Maddow’s attempt to lay Venezuela’s social explosion at Trump’s feet is very revealing. She and her ilk think that everything is about us–the US that is. Everything. And now in the minds of her and her ilk, everything in the US is all about Trump. So everything everywhere is all about Trump, and supposedly everyone in the world is as obsessed with Trump as they are, and blame him for all that is bad in the world, like they do.

This is clinical solipsism, broadcast live on MSNBC and CNN daily.

And in fact, Rachel should be ecstatic at Citgo’s donation. The company wasn’t spending the money of the Venezuelan people–it was spending Igor Sechin’s money! Rosneft brilliantly–brilliantly I say!–lent PDVSA $5 billion, and negotiated a 50 percent stake in Citgo as partial security. (Rosneft’s brilliance is only surpassed by the Chinese, who lent Venezuela $55 billion. Hahahaha. Good luck collecting on that one Xi! Well played.) Given PDVSA’s parlous condition, it is highly likely that Rosneft will get control of Citgo, meaning that every dollar it spends now is a dollar less in Igor’s pocket.

So the left should be happy! Trump has picked Russia’s pocket!

But no, they are also obsessing about the possibility that Rosneft will get control of Citgo’s US refineries (which represent a whopping ~2.5 percent of US refining capacity) and its gas stations (who cares?). The refineries ain’t going anywhere, so the impact on the US market will be nil. Anything Rosneft would do in operating these refineries that could hurt the US would hurt Rosneft even more. So don’t count on it happening, and if it does, it would be another own goal that weakens Russia.

Again, the left should be experiencing schadenfreude, not panic. Rosneft lent large money to a deadbeat. It’s not going to get paid back so it is seizing assets, and will end up losing money. Playing repo man is hardly the road to riches. It just mitigates the losses from making a bad loan, and it is the bad loan that is the real story here.

But to figure that out would require actual thinking, which is not exactly the strong point of Rachel, et al. Because they have everything figured out. Trump did it! And if Trump is connected, it’s bad!

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