Streetwise Professor

In early-May, 1863, Confederate General Nathan Bedford Forrest brought to bay a Union raiding force led by Colonel Abel Streight. Streight’s men, though exhausted by their rapid march across Alabama with Forrest snapping at their heels, substantially outnumbered Forrest’s. Forrest met with Streight to parlay, and in order to gull the Yankee into capitulating (despite his numerical superiority), the rebel resorted to a ruse. One section (two guns) of Forrest’s artillery had kept up, and prior to meeting Streight, Forrest ordered the gunners to drive their guns up a road in Streight’s line of sight, turn into the woods and disappear from view, and then circle their pieces around a hill and drive them up the road again.

Streight watched the trundling artillery with growing alarm: “My God sir, how many guns do you have? I’ve counted twelve pieces already.” Forrest: “I reckon that’s all that’s kept up.” Streight surrendered forthwith.

When Forrest’s small number of men emerged from cover to take the surrender, Streight learned that he had been fooled, and demanded his weapons be returned. Forrest replied: “Aw, hell, colonel. All is fair in love and war.”

This story came to mind when reading accounts of LTC Alexander Vindman’s testimony before Adam Schiff’s Darkness at Noon impeachment inquiry. Like other witnesses before him, Vindman repeated the same story: Trump brought up Biden in a phone call, and his hair spontaneously combusted as a result.

In other words, just circling the same gun around the same hill and making it seem like some additional bombshell-hurling revelation.

Vindman is obviously one of the sources in the “whistleblower’s” complaint, so what he said before Schiff’s committee represents no new information, other than perhaps that the “whistleblower” didn’t make up everything.

How do we know Vindman is a source? First, he had the opportunity: he listened on the Trump-Zelensky call. Second, he had motive: Ukrainian born, he vehemently disagreed with Trump’s (temporary) delaying of military aid. Third, Schiff said he corroborates what the whistleblower said. Fourth, and most importantly, Schiff refused to allow committee Republicans to ask whom Vindman had spoken to, certainly because that would help identify the “whistleblower.”

So why expose Vindman, while keeping the “whistleblower” under wraps? Almost certainly because the latter has some serious issues (truthfulness, partisan connections and motives, etc.). And perhaps most importantly, because Schiff is covering his own ass. He collaborated with the “whistleblower” before the filing of the formal complaint, directed the “whistleblower” to attorneys that helped him write it, and then lied about his role.

Further, given his monitoring of the call, and his affinity for the Ukrainians, the White House has no doubt fingered him as one of the “whistleblower’s” sources. Already being burned, Schiff used him to regurgitate the narrative.

As to Vindman’s ipse dixits regarding the appropriateness of Trump’s interaction with Zelensky, to say that such judgments are above the O-5 pay grade is an understatement. Besides, the world has already seen the transcript, and can draw its own conclusions: the alleged flaws in the transcript that Vindman identified are immaterial, and hence are irrelevant to such conclusions.

Today’s witnesses include an aide to defenestrated National Security Advisor John Bolton, who will testify that Bolton was disturbed by the influence of Rudy Giuliani on Ukraine policy. John Bolton in a turf war! This surprised no one, ever.

Other witnesses include two “State Department Ukraine experts,” who, according to the emetic Lawfare blog (AKA, The Mouthpiece for the Deep State, AKA a polyp on Jim Comey’s colon):

Two State Department foreign service officers, Catherine M. Croft and Christopher J. Anderson, will appear before the House impeachment inquiry on Wednesday. They will report that President Trump held a pessimistic view of Ukraine that did not match their own assessments. 

How dare the President of the United States disagree with the mandarinate? That’s obviously impeachable!

But that’s what this is really all about. That’s what it has been about from the beginning. Trump is an anathema to the GS nomenklatura, who have been waging a war against him from before his nomination. Hell, since before his election.

In other words, this is about criminalizing policy differences.

All of Adam Schiff’s ruses and reruns can’t conceal that fact. Indeed, the ruses confirm the fact.

Yesterday President Trump announced that ISIS leader Bakr al Baghdadi had blown (himself) up real good. His death was the culmination of a Delta Force raid, and al Baghdadi self-detonated when he was cornered by running American dogs. No, not “American running dogs” in the way that old Chicom and Nork propaganda used the term, but actual German shepherds. Trump (and Delta) literally released the hounds, and let slip the dogs of war on Baghdadi.

Beyond the satisfaction of a seeing a bad man come to a bad end, what is the benefit of such actions? Are they worth the risks they entail?

On one level, this just presents a promotion opportunity with the ISIS organization. (Although the heir apparent, ISIS propaganda chief–Baghdadi Bob?–also apparently met his doom yesterday.) If the dispatched leader is some sort of exceptional genius, his demise may degrade the organization as he would replaced by someone less capable. But you never know . . . maybe this could result in the terrorist equivalent of Lou Gehrig replacing Wally Pipp.

At a more substantive level, the role of such decapitation strikes is not so much the killing itself, or the capability of the target, but the chase. Threatening the leadership of a terrorist organization can deprive it of the initiative, and creates Clauswitzian frictions that reduce its lethality. The leadership spends disproportionate time and resources playing defense instead of playing offense. It has to utilize less effective means of communication, command, and control to avoid being detected. The constant threat of betrayal ramps paranoia to 11, which also limits communication, and can lead to paralyzing internal strife. All of these things degrade operational effectiveness.

In order for these things to happen, the terrorists’ opponents must make the threat credible. This requires them to devote the resources necessary to track down the leadership, and to execute strikes with sufficient frequency pour encourager les autres.

Since hardcore types like ISIS are unlikely to give up altogether, one cannot execute a raid like this and ride off into the sunset. The Lone Ranger’s job is never done here. It must be repeated over and over in order to keep the threat real, and thereby impair the effectiveness of its terrorist opponent.

Not willing to give Trump a single accolade, the media has utterly beclowned itself in the aftermath. I’m sure you’re surprised, right?

The first two clowns out of the car were the WaPo and Bloomberg, whose obituaries of Baghdadi portrayed him as an “austere cleric,” and student and teacher of the Koran.

Careful there folks, because pushing that line demolishes another one of your narratives: a clear implication is that deep study of the Koran encourages sectarian mass murder.

These dead-on-arrival obituaries unleashed a torrent of hilarity on Twitter, with mock obituary headlines containing benign descriptions of historical monsters from Hitler to Jeffrey Dahmer.

Most of the post-‘splosion coverage was a carnival of mass murder of straw men. A repeated theme has been that Baghdadi’s death will not be the end of ISIS, let alone terrorism.

Of course not.

Most “analysts” at best gave grudging compliments to Trump, but then unleashed a barrage of cavils and caveats. I have a dare for the media: write a column about the raid, and Trump’s role in it, without using the word “but.” Go ahead. I dare you.

And those who chided the media for not giving Trump even one day of credit–like lefty Nate Silver–were assailed relentlessly for their heresy. Die, Deviationist! Die!

Then there are jewels like this:

ISIS could attack the US as revenge for Baghdadi’s death, security experts say

Security analysts are idiots, people with actual brains say. We went after ISIS and Baghdadi because they were already attacking us. This cause and effect thing is apparently quite confusing to some people.

The Derp State weighed in too. A former ambassador to Qatar hacked up this hairball:

This gruesome, vivid and probably exaggerated description of dogs chasing down Baghdadi will endanger our personnel in the region.

— Dana Shell Smith (@AmbDana) October 27, 2019

Yeah. As if ISIS people weren’t already panting to kill Americans. A far more important message in Trump’s very Jacksonian statement was that we will hunt you down–literally with haram dogs–in whatever hole you crawl into. Attempting to instill terror into terrorists is far more important than any infinitesimal increment to their desire to kill Americans.

Bloomberg panted to give credit to some mysterious international coalition:

Baghdadi, who was killed in a U.S. military operation in northern Syria, led a terrorist group that slaughtered thousands during a fearsome rise to power stopped only after an international military coalition was formed to bring it down https://t.co/4OOJ5JIZsm pic.twitter.com/wXgZAeJARn

— Bloomberg Politics (@bpolitics) October 27, 2019

What military coalition would that be? The early airstrikes on ISIS included a few UAE and Jordanian planes (one of which was shot down, resulting in the gruesome immolation of the pilot). The Europeans contributed their usual window dressing. But this was a US-Kurdish (and Iraqi) show.

Speaking of the Kurds, they provided vital intelligence that contributed to tracking down Baghdadi, and did so after Trump announced that the US would not oppose the Turkish border clearing operation.

This reinforces a point I made in an earlier post. The Kurds have a very strong incentive to fight ISIS, because ISIS wants to slaughter them. They aren’t so stupid as to withhold cooperation with the US in the fight against ISIS, because they would be cutting their own throats–literally. An autonomous zone in Syria and cooperating in fighting ISIS are not linked, at least not as inextricably as the Dunning-Kruger commentariat apparently thinks.

In sum, killing Baghdadi is a good thing, even though it is only another battle in a long war against Islamic terrorism. It has also given another demonstration of the utter stupidity and ill-will of America’s alleged elite, which has shown yet again that it is mean spirited, obsessed with Trump, and incapable of rising above banalities and trite analyses.

The media dogs bark, but the Trump caravan moves on. American dogs of war barked, and an evil man moved on to hell.

The weekend before last I traveled to northern Georgia to visit the Chickamauga and Chattanooga battlefields. They are among my favorites. Chickamauga was the first battlefield preserved by the federal government (in 1890). This early action, plus the fact that the area was economically marginal, meant that virtually the entire field is preserved. It is well-marked. I quibble with some of the market placements (especially at Snodgrass Hill and Horseshoe Ridge, where I agree with Archibald Gracie rather than the original Battlefield Commission), but the battle was incredibly complex and confusing so no definitive interpretation is possible.

There are family connections here. My GGGF, George Immel, fought with the 92nd Ohio at Chickamauga and the assault on Missionary Ridge. (The 92nd was in Turchin’s brigade, which along with Harker’s, Croxton’s and Vandeveer’s turned in the best performance of any Union brigades in the battle.) My GGM’s brothers fought in the 46th Ohio in the assault on Tunnel Hill at Chattanooga. Here’s yours truly at the Napoleons placed to market the position of Key’s Arkansas Battery, which the 46th and the other regiments of Corse’s brigade, Ewing’s division, Sherman’s corps, attacked on 25 November, 1863:

I hit most of the major important points at Chickamauga, but having been there on the order of a dozen times, I expanded my horizons a bit this trip. I followed the route of Thomas’ 14th Corps over Lookout Mountain, into McClemore’s Cove, and then to Crawfish Spring.

Crawfish Spring is currently the site of the town of Chickamauga. The Spring (pictured below) was the site of a Union hospital during the battle, and also a vital source of water:

Across from the Spring is the massive Gordon Mansion, which was a Union headquarters prior to the battle:

The mansion is particularly impressive, when compared to the hardscrabble cabins (like the Brotherton, Kelly, and Snodgrass houses) that most local folk lived in. Talk about your inequality of wealth!

Walking around the spring and the mansion, I learned some interesting facts. One is that a slave of the Gordon family who buried the dead at Chickamauga (I get the image of Morgan Freeman in Glory), Mark Thrash, remained in the area until his death, reputedly at the age of 122 years, 357 days (making him the oldest man in the world at the time, reputedly).

The other story is even more fascinating. I went to the monument of the 88th Illinois, “The Second Board of Trade Regiment”

but didn’t expect another Chicago Board of Trade connection;

Specifically, the area around Crawfish Springs was a training camp (Camp Lytle, later renamed Camp Thomas) during the Spanish-American War. (Ironically, the 88th Illinois was in Lytle’s brigade, and the monument is on the lower slope of Lytle Hill). Sanitation was horrible, and recruits were dropping like flies from typhoid and dysentery. A Chicago philanthropist, Mary T. Leiter, heard of the disaster, and paid $10,000 to buy the Park Hotel near the springs and convert it to a hospital.

Mary Leiter was the wife of Levi Leiter, the financial/business brain behind Marshall Fields. Her son, Joseph, became a notorious speculator on the CBOT. His massive failed attempt to corner the wheat market in 1897-1898 was the inspiration for Frank Norris’ novel, The Pit: A Story of Chicago. Hence the CBOT connection.

Levi had to pay $5 million to bail out his son after the corner collapsed–and that’s when $5 mil was a helluva lot of money. This would have been a few months before Joe’s mom popped a mere $10k for a hotel/hospital.

One of Leiter’s daughters (Mary Victoria) was famous in her own right, marrying Lord Curzon and becoming the Vicereine of India before her premature death at age 36.

Quite a fascinating story, and an unexpected place to find it.

All in all, a trip filled with connections, personal and professional.

I linked on Twitter to this StrategyPage article on Syria a few weeks back. It is well-done, and quite detailed, so it’s worth linking here.

I repeat my Twitter challenge: I dare anyone to read that article, and identify a plausible strategy for the US to bring about a positive outcome in Syria (either for Syrians, or for US interests). Especially in light of serial US failures in Afghanistan, Iraq, and Libya.

One thing of particular interest is that at one time or another, the US has supported virtually every anti-Assad group in Syria, including people who are indistinguishable from those we have been killing for decades in Afghanistan and Iraq (and Yemen and the Philippines and . . . ). What’s more, at times American-supported groups have fought one another. So it’s hardly as if (a) we’ve shown good taste in allies, and (b) we can actually get those allies to do what we want.

Yet the shrieks about the impending disaster that will attend getting out of Syria get louder by the day. Perhaps someone could tell me how the impending disaster would be at all distinguishable from the disaster that has been ongoing for 8 years.

Day after day we are bombarded by opeds and talking heads decrying Trump’s policy. (It is his policy, not his administration’s, for most of his administration has been trying to undermine it 24/7.) Just what record of achievement can these people point to that warrants paying attention to them for a nanosecond? They appear to be convinced of their own strategic genius, evidently based on the fact that they were awesome at Risk while doing tequila shots in their college dorms, rather than by any accomplishment in the real world (especially the Middle East).

They tell us that the truly horrible aspect of Trump’s policy is betraying the Kurds, whom fought alongside the US in defeating ISIS. This allegedly gives them some moral claim on the US.

Not to gainsay the Kurd’s contribution, or their bravery, but here’s the reality. Fighting ISIS in Syria was a war of choice for the US: for the Kurds in Syria and Iraq, it was an not. It was an existential clash. The US saved the Kurds, primarily through airpower. This video of a US smart bomb ruining an ISIS flag bearer’s day in Kobani (where the Kurds were fighting a vicious battle against ISIS) is emblematic:

So who has a moral claim upon whom?

As vital and courageous as it was, the Kurds’ fighting against ISIS clearly does NOT obligate the United States to advance their ambitions to carve out an independent state in Syria (let alone in Turkey, or Iraq). Especially inasmuch as this would complicate an already fraught relationship with a difficult ally, but one which is far more important to American interests than the Kurds. It was perfectly reasonable for the US to say to the Kurds: “We appreciate your contribution to the war against ISIS. But without us, you would have been massacred. You have to back off the border with Turkey, and not expect us to protect you if you decide to do otherwise.”

The Kurds decided to do otherwise. So be it. Instead of saying “how with good conscience can we repay the Kurds for what they have done for us in such a fashion?” with justice the US can say “how with good conscience can the Kurds repay the US for what we have done for them in such a fashion?”

The Kurds are reputedly the largest ethnic group in the world without their own state. Their actions in Syria provide a pretty good explanation of why that’s so.

The Syrian Kurds made their choice. Defending their choice would not advance the interests of the US, and the balance of obligations is hardly as one sided as the Syria-obsessed portray. Indeed, the balance quite plausibly goes quite the opposite direction.

So my original hypothesis that the mysterious nuclear incident in Russia last summer was due to a malfunction in the nuclear-powered cruise missile has been confirmed, at least to the satisfaction of the US government. I was wrong in surmising, however, that the failure occurred at launch.

Instead, apparently the missile made an unplanned hole in the ocean during a test flight over a year ago, and has been killing time (and probably fish!) sitting on the bottom since. When the Russians attempted to raise it, the reactor went critical, and kablooie!

Sounds like they have a few bugs to work out.

Actually, it sounds like the entire idea is harebrained, and extremely dangerous to boot. It doesn’t work, and when it doesn’t work there is the risk of a nuclear incident.

Putin’s fascination with wacko weapons like this is a far, far greater concern than hobgoblins like Russian bots and Facebook ads that haunt Hillary’s dreams–and those of most of the left and the mainstream media. But the reporting on this has been scant, while we hear non-stop about fantastical theories of Russian election influence.

It’s seriously concerning that Vova is playing with crackpot nukes. But our establishment is utterly lacking in serious people to address these concerns. Instead, they are too preoccupied with riding their hobby horses and foaming at the mouth over Trump.

I’m sure it will all turn out swell, don’t you?

The conventional wisdom in the US is that Turkey’s president Erdogan totally pwned Trump over Syria. The most extreme example of this is a Tweet by NBC’s Ken Dalanian, aka the Howdy Doody to the CIA’s Buffalo Bob Smith:

Fact check: Experts are already saying the US just granted Ergogan everything he wanted, all along, including exclusive rights to patrol the safe zone by air. They are calling this a total capitulation.

— Ken Dilanian (@KenDilanianNBC) October 17, 2019

You wouldn’t know it from the US media, especially from reporters like Dilanian who are nothing but conduits for what the anti-Trump elements in the intelligence community (i.e., pretty much the entire intelligence community) wants you to hear, but the view from Turkey is somewhat different.

A Turkish friend tells me that the boastful Erdogan’s mien changed notably after Vice President Pence’s visit last weak. Whereas Erdo was at his chest thumping best (or worst) prior to that, he has been restrained and sheepish since. Moreover, there are many in Turkey who claim that Erodgan is (in the words of my friend) “Trump’s dog” and that Trump is the actual president of Turkey.

Now, there may be some sample selection bias here. My friend’s father was a leader of the May 27, 1960 coup against the proto-Erodgan (Menderes) and was on the tribunal that sentenced Menderes to hang. My friend is an ardent Kemalist and has a social network that is rooted in Rumelian Turkey and in the CHP. So what he sees (on Facebook, for instance) or hears (from friends and colleagues) is not necessarily representative of Turkish opinion.

It is interesting to note, however, that things look very different to many Turks than they do to American journalists. So don’t take the vaporings of the likes of Ken Dilanian at face value, and keep in mind that he (and most of the rest of the media claiming to report on views of those in the defense and intelligence communities) is essentially the ventriloquist’s dummy–and the ventriloquists are carrying out guerilla warfare against Trump.

Another Howdy Doody report illustrates how intense this war is:

A review launched by Attorney General William Barr into the origins of the Russia investigation has expanded significantly amid concerns about whether the probe has any legal or factual basis, multiple current and former officials told NBC News.

. . . .

Durham has also requested to talk to CIA analysts involved in the intelligence assessment of Russia’s activities, prompting some of them to hire lawyers, according to three former CIA officials familiar with the matter. And there is tension between the CIA and the Justice Department over what classified documents Durham can examine, two people familiar with the matter said.

In other words, Barr and Durham have many in the intelligence community shitting themselves.

Well it’s about ‘effing time.

“Concerns about whether the probe has any legal or factual basis.” LOL. Just who is concerned, Howdy? Your IC buddies? Good!

How many times during the Mueller probe did we hear “if Trump has nothing to hide, why should he fear an investigation?”

What’s the expression? Oh yeah. Turnabout is fair play. And payback is a bitch.

As if Barr or Durham (amazing isn’t it how their like are characterized as “career federal prosecutors” when investigating Trump or other Republicans, but not when they are investigating Democrats or deep staters?) would engage in baseless probes.

So things are heating up. And this means that the stream of leaks to the likes of Ken Howdy Doody Dilanian will build into a torrent in the coming weeks. Ignore their content, and take them as a positive signal that some people are afraid, very afraid.

The shrieking and rending of garments du jour emanates from Trump’s decision to withdraw US troops from the path of a Turkish-backed invasion of northeastern Syria.

What, pray tell, is the US supposed to do? Resist a vastly superior force armed with heavy weapons, artillery, and air support with 1,000 light infantry and support troops? Did these people attend the George Armstrong Custer School of Warfare?

Oh, I forgot. Custer didn’t have air support at Little Bighorn. The US has the most powerful air force in the world. Maybe if we ask really nice the Turks will allow us to use the Incirlik airbase to launch bombing strikes against them.

Or is the US supposed to go large, and bulk up its forces sufficiently to fight Turkey in northern Syria? Riddle me this, military geniuses: just how would they get there?

Putting aside their tactical and logistical inanity for now, the critics of Trump’s move focus on two issues: the betrayal of the Kurds who fought ISIS in Syria, and the supposed surrender of American strategic interests in Syria.

As for the first issue, with respect to ISIS, the interests of the US and the Kurds of the YPG were aligned: both were enemies of ISIS. Yes, the YPG assisted in the US in its fight against ISIS, but it is equally fair to say that the US assisted the Kurds in their fight against ISIS. It was an alliance of convenience, and completely transactional.

That alignment of interests does not extend to supporting the Kurds in their conflict with Turkey. Yes, Erdogan’s Turkey is a colossal pain in the ass, and is at best a frenemy to the US, but it is not in US interests to engage in an outright war with Turkey, either directly, or by proxy, to advance the interests of the Kurds in their generations-long conflict with Turkey.

Along these lines, the key thing to keep in mind in the Middle East generally, and Syria in particular is: everyone sucks. Everyone. Everyone is awful. Sometimes the interests of awful group X align with the US, and we work with them (often to our regret). But that doesn’t change the fact that they are awful. This dew-eyed romanticism about the Kurds ignores this cardinal rule.

With respect to the second issue, I read drivel like: “Now that Trump made the US a bystander in Syria, Turkey and Russia are in the driver’s seat.” Or “US allied Kurds strike deal to bring Assad’s troops into Kurdish areas, dimming prospect for further US presence in Syria.”

They say this like these are bad things! Bystander sounds good to me, given the alternative of wading in. Syria is a dystopian hellhole that makes Westeros (after Daenerys’ flyover!) look like Mr. Rogers’ Neighborhood. I want to stand as far away from that as possible. Who in their right mind thinks otherwise?

Seriously: I want someone to make a coherent case that lays out the American national interest in Syria, and what is the price of achieving it. The first principle of war is “the objective.” So, just what is the American objective in Syria?

Destroying ISIS was arguably a legitimate interest. The current chaos may work to ISIS’s advantage, but is addressing that issue even possible given the potential for force-on-force conflict between Turkey and Syria, and thus potentially between Turkey and Syria’s patron, Russia? Who are we going to fight? Turkey? Russia? Syria? All of the above?

Are you people using a single brain cell?

This crowd is also freaking out that Putin and Erdogan may benefit from the US withdrawal. I seriously find it hard to imagine how both would benefit, precisely because they are on the opposite side of what is going on at this moment, with Syrian army forces moving to confront Turkish-backed forces. If they succeed, what will Erdogan do? Most likely, by reinforcing his proxy forces with Turkish formations. If they fail, what will Putin do? Probably reinforce Syrian forces with Russian ones, and provide heavy air support. Which will certainly kill Turks. Thus, the most likely outcome will be conflict between Russia and Turkey.

So how are Erdogan and Putin both going to come out on top? How are both going to be in the driver’s seat?

Apropos Henry Kissinger and the Iran-Iraq War: it’s a shame they both can’t lose. But maybe Kissinger is wrong, and they both will!

And we really shouldn’t care who “wins.” For here, to the victors will go the spoiled. Syria is a wrecked country with few prospects of seeing peace, let alone prosperity, in the foreseeable future. Or forever.

I laughed out loud when I read some idiot write that Putin desires eastern Syria’s oil riches. Some riches. Before the recent unpleasantness, in 2010, Syria produced a grand total of 385,000 barrels per day. Compared to Russia’s ~10 million. Syria has always been an oil pygmy. And the meager resources it had before the civil war have been wrecked, and will take billions of dollars to restore.

Yet it is this kind of “analysis” that we hear repeatedly.

If Putin and Erdogan and Assad want to fight over this rotted corpse, why should we care?

Let’s say the US magically vanquishes Assad, Russia, and Turkey. Then what?

Anybody taken a look at Iraq lately? Yeah, that’s gone and is going so great we can surely magically heal Syria. There is no upside for the US in Syria. It is a distraction, and a potentially costly one, from the potential for peer conflicts with China, and yes, Russia. We’ve already pissed away trillions in Iraq and Afghanistan, and wasted tens of thousands of American lives in those places. The last thing we should do is add to the butcher’s bill and the financial cost.

The problem with Trump’s critics on this–and other things, especially in foreign policy–is that they don’t evaluate the real choices, the real trade offs. They engage in nothing but magical thinking that bears no relationship to the ugly reality on the ground. They apparently have some ideal outcome in mind (the US vanquishes Putin and Assad and makes Syria a beacon of hope in the Middle East) but have no clue on how to achieve that outcome.

The fact is that Syria is a place where angels fear to tread. But we surely have a surfeit of fools who are willing to rush in regardless.

In the ongoing evaluation of what has been happening in the repo market, market participants have identified post-crisis regulations as a potential source of the problem. In particular, these regulations (including the Liquidity Coverage Ratio) require behemoth banks like JP Morgan and Citi to hold large amounts of reserves, and makes them reluctant to lend them out even when repo rates spike.

Having long said that the various liquidity regulations intended to prevent a recurrence of the last crisis could be the cause of a new one, I am certainly quite sympathetic to this view. However, information that is coming out now suggests another potentially complementary and aggravating factor.

In particular, reserve holdings are very concentrated:

Fed data show large banks are keeping a disproportionate amount in reserves, relative to their assets. The 25 largest US banks held an average of 8 per cent of their total assets in reserves at the end of the second quarter, versus 6 per cent for all other banks. 

Meanwhile, the four largest US banks — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — together held $377bn in cash reserves at the end of the second quarter this year, far more than the remaining 21 banks in the top 25

Moreover, the big banks have been reducing their reserves:

Analysts and bank rivals said big changes JPMorgan made in its balance sheet played a role in the spike in the repo market, which is an important adjunct to the Fed Funds market and used by the Fed to influence interest rates.
Without reliable sources of loans through the repo market, the financial system risks losing a valuable source of liquidity. Hedge funds, for example, use it to finance investments in U.S. Treasury securities and banks turn to it as option for raising suddenly-needed cash for clients.
Publicly-filed data shows JPMorgan reduced the cash it has on deposit at the Federal Reserve, from which it might have lent, by $158 billion in the year through June, a 57% decline.

Although JPMorgan’s moves appear to have been logical responses to interest rate trends and post-crisis banking regulations, which have limited it more than other banks, the data shows its switch accounted for about a third of the drop in all banking reserves at the Fed during the period.
“It was a very big move,” said one person who watches bank positions at the Fed but did not want to be named. An executive at a competing bank called the shift “massive”.
Other banks brought down their cash, too, but by only half the percentage, on average.
For example, Bank of America Corp (BAC.N), the second-biggest U.S. bank by assets, with a $2.4 trillion balance sheet, took down 30% of its deposits, a $29 billion reduction.

So . . . substantial concentrations of reserves, and declining levels of reserves. Yes, these are all potential consequences of Frankendodd. But they also are potentially symptomatic of market power and the exercise thereof.

This triggered a synapse, which led me to recall a 1993 article from the Journal of Monetary Economics by R. Glen Donaldson. Donaldson’s article was motivated by a study of the Panic of 1907, when a “cash syndicate” (led by . . . J.P. Morgan, in person and through his eponymous bank) lent to cash strapped trust companies facing depositor runs at very high rates.

Donaldson presents a model in which a spike in the need for cash by a set of market participants (trust companies facing depositor outflow, in his model) makes the funds held by a group of other institutions pivotal: these institutions face a downward sloping demand curve for their funds because of constraints on competitive suppliers of funds. The pivotal institutions supply funds (through a repo-like transaction in which they buy securities from the trusts) at a supercompetitive price (by buying the trusts’ securities at subcompetitive prices). In his model, collusion between the pivotal institutions exacerbates the rate spike.

The main implication of the model is that spikes in the demand for funds lead to spikes in interest rates that are bigger than would prevail in competitive conditions.

There is an element of non-linearity in the model, because the big suppliers’ funds are not pivotal in normal conditions, but become so when the demand becomes sufficiently large. This leads to a switch from competitive to monopoly pricing, which in turn causes a spike in rates.

I should note that the regulatory and market power stories are not mutually exclusive, and are indeed complementary. Regulatory constraints can increase the demand for funds (making it more likely that the big suppliers will be pivotal) and can reduce the supply of funds from the smaller suppliers (which lowers the threshold for the switch from competitive to monopoly pricing, and makes the demand curves for the big suppliers funds steeper, leading to a higher monopoly rate).

I therefore consider it a plausible hypothesis that market power contributed to the repo market spike, and that one channel by which regulations contributed to the spike was through its effect on market power.

How can this hypothesis be tested? Conceptually, if regulatory constraints alone caused the spike, then those in possession of large quantities of reserves (e.g., Morgan) were absolutely constrained in their ability to lend additional reserves: the difference between the repo rate and the Fed Funds rate would represent the shadow price on this regulatory constraint.

If a big bank or banks exercised market power, this constraint would not be binding.

Operationalizing this test is likely to be complex, however. Big holders of reserves will inevitably make all sorts of arguments to say that they couldn’t have lent more.

This brings to mind the California electricity crisis in 1999-2000, when generators operated below various capacity measures, but pleaded that constraints (by unplanned outages, or NOX regulations, etc.) reduced their effective capacity below these nominal capacity measures. Given the complexity of operating a power plant, it was very difficult to determine whether the generators were withholding capacity, or in fact offered as much as they were capable of doing.

Despite the difficulty of operationalizing the test, I think it is something for regulators to attempt. There is a colorable case that the repo rate rise was exacerbated by market power, and given the importance of this market, this possibility should be investigated rigorously.

As an aside, the Donaldson model appeared only a few months before my Journal of Business article on market power manipulation. The two articles have a lot in common, despite the fact that they were developed totally independently, and seemingly involve completely unrelated markets (money vs. physical commodities). However, the core arguments are similar: economic frictions can periodically create market power in markets that are usually competitive.

Hannah Arendt once wrote that “one of the greatest advantages of the totalitarian elite in the twenties and thirties was to turn any statement of fact into a question of motive.” This quote came to mind when reading Matt Stoller’s hit piece on Aaron Director on the Stigler Center’s Pro-Market blog.

Director was one of the major moving forces behind the Chicago revolution in antitrust scholarship in the 1950s and 1960s. Although he published little himself, through his teaching, and his interactions with other faculty in economics, law, and business at Chicago, Director challenged the consensus on antitrust, especially in areas like vertical restraints. The challenge that he inspired pretty much overturned this consensus, and it is fair to say that the Chicago became the replacement paradigm. A good portion of the industrial organization and antitrust scholarship of the past 50 years has been aimed at challenging the Chicago view, but nonetheless, many of its key insights remain regnant.

Stoller does not mount a serious attempt to critique Director’s actual contributions, or to explain them, as Sam Peltzman does in his two posts on Director. Rather than challenging Director and his followers on the facts, or on the analysis, Stoller instead questions Director’s motives. It is attack by ad hominem.

In Stoller’s telling, for much of his life, Director was a good progressive, and a devotee of Henry Simons. As such, he was an antimonopolist who favored aggressive antitrust enforcement. But then Simons died, and Director “suddenly” converted to a right-wing pro-business fanatic in order to appease a major funder who according to Stoller was an “extreme right-wing[er]” and quasi-fascist:

Director suddenly decided that conservative ideas were compatible with corporatism after all. Monopolies, apparently, were always created by government. At this moment, Director broke with the conservative tradition and birthed neoliberalism, the anti-government, pro-monopoly philosophy that now dominates policymaking globally. Director convinced George Stigler and Milton Friedman of the new creed. Both had opposed corporate monopolies, but flipped to support Director’s new movement. The Chicago School was born.

Thus, Director was nothing but an intellectual Judas, who sold out his firm convictions for a few pieces of silver.

This begs so many questions it isn’t funny. Take Stoller’s premise as fact. How, pray tell, did Director convince such notoriously strong minded people like Stigler and Friedman? Did he pay them off? No really–how did he persuade them?

And how did he persuade others, such as Bork, who was a major force in reshaping antitrust law? And how did the Chicago school antitrust/industrial organization ideas midwifed by Director have such a profound effect on the economics and legal academy outside of Hyde Park, and then the courts? Especially since they were initially so contrary to the professional consensus, and indeed attracted substantial (and often hysterical) opposition?

There must have been something to the ideas, eh? But not in Stoller’s telling. Instead, according to him, Harold Luhnow got his money’s worth by getting Director to turn from anti-monopolist to pro-monopolist, and somehow (mesmerism?) Director convinced myriad intellectuals (and judges) to go along.

The closest that Stoller comes to addressing any of the scholarship that Director inspired is a drive by shooting on John McGee’s Journal of Law and Economics (1958) paper that contended that, contrary to the overwhelming conventional wisdom, Rockefeller’s Standard Oil did NOT engage in predatory pricing.

Stoller refers to a paper which disputes McGee’s findings. Fine. But he is presented with the problem that, as shown by Joshua Wright, McGee’s article had far less of an impact on academic and legal thinking on predatory pricing than the 1975 Areeda-Turner article. But no problem! Just turn this question of fact into one of motive: “It didn’t hurt [Areeda-Turner’s] motivations, of course, that they were both on the payroll of IBM, which was at that moment in a bitter series of antitrust lawsuits which included, you guessed it, predatory pricing claims.”

Disgusting.

Stoller writes: “With support on the right and the left, courts soon accepted Director’s ideas, laundered through McGee, Turner, and Areeda.” Again: through what powers of mind control did Director get “liberal Democrats” from Harvard to launder his dirty ideas? Inquiring minds want to know!

But Stoller’s distortion of history doesn’t end here. His explanation for the rationality of predatory pricing goes like this:

Contra Director’s logic, predatory pricing is quite rational. A competitor to a corporate goliath can’t borrow an infinite amount of money to lose until prices come back, nor can a competitor just shut down until prices go back up. No bank would lend to a competitor of Standard Oil, just as no one today will lend to a retailer competing to lose money against Amazon. 

Wow. That logic sounds familiar! Yes, I remember now: in 1966 one of my thesis advisors, Lester Telser (a contemporary of McGee’s in the PhD program at Chicago), published an article titled “Cutthroat Competition and the Long Purse” which explored that very same logic.

It gets better.

Lester’s article was published in what Stoller portrays as the main vehicle for Director’s malign influence: the Journal of Law and Economics. Better yet, Telser thanks Director for his input. Better yet: Telser’s article was published in an issue honoring Director, on the occasion of his retirement from Chicago and editorship of the JLE.

Of course, you would never know this, if you read Stoller. Stoller also fails to mention that Sam Peltzman told an anecdote regarding Director and predatory pricing in a JLE article on “Aaron Director’s Influence on Antitrust Policy,” published as a sort of obituary at the time of Director’s death in 2004. In Sam’s telling, Director, in his typical Socratic style, led his students through an analysis of predatory pricing . . . in which he concluded that the defendant in a predatory pricing case “most likely was guilty as charged.”

It is particularly astounding that Stoller should overlook this anecdote, given that it was republished on the very same Pro-Market website. So it’s not like Stoller had to, I dunno, get onto JStor and do some real research on whom he was supposedly analyzing.

Stoller also fails to acknowledge that Director’s alleged ability to mesmerize did not even extend to nearby offices at the University of Chicago Law School: Richard Posner, for example, acknowledged that predation could occur.

Stoller also evidently has no clue as to how academia works. Provocative articles like McGee’s inevitably spur others to challenge it. And indeed, there have been numerous articles over the years that identify conditions in which predation can work. As it turns out, however, the conditions are much more fragile than Stoller lets on.

In sum, Stoller’s post on Director is an appalling piece of work. It fails to join Director’s actual work, and relies on vicious ad hominem to discredit the work which he does not like by attempting to discredit the motives of the person.

I don’t really give a damn about Matt Stoller. What I do find especially disgusting is that the Stigler Center at the Booth School of Business would lend its imprimatur to a piece that violates the fundamental norms and ethics of scholarship. If Pro-Market wanted to provide a critical view of Director, the Chicago School of antitrust has a lot of serious critics who could analyze his work and the work that he inspired. Instead, Pro-Market provides a platform for an intellectually disreputable attack on alleged motives, and one that provides no substantial evidence for its central claim, and which begs so many questions as to be self-refuting.

Appalling, and an affront to the long tradition of economics and law at Chicago.

On my flight back from Geneva, I watched Argo, the Ben Affleck film about the rescue of 6 Americans who escaped the embassy in Tehran when it was taken over by Iranian “students” in 1979, and who hid out in the Canadian embassy.

The hero of the movie is Tony Mendez, a CIA exfiltration expert. Yay! CIA! CIA!

The only problem is that the only reason that Mendez was needed to pull off the miracle escape was that the CIA failed utterly in its primary mission: intelligence. The agency was completely blindsided by the Iranian revolution, and had indeed specifically told President Carter that Iran was NOT in a pre-revolutionary situation. Right before the actual revolution toppled the Shah.

If the CIA had done its job, Tony Mendez wouldn’t have been needed to do his. The abject failure of his organization to perform its primary function competently was the predicate for his heroism.

This is only one of the CIA’s colossal failures. Off the top of my head, I can think of: the massive overestimate of the size of the Soviet economy, the (not unrelated) failure to foresee either Gorbachev or the collapse of the USSR, the Soviet invasion of Afghanistan, being gobsmacked by India’s atomic test, 911, the various Iraq War fiascos, and the failure to predict Saddam’s incursion into Kuwait.

Mendez was awarded the Intelligence Star, the highest honor that a US intelligence agency person can receive. And justly so.

But what about all of those whose failures paved the way for his medal? Did they pay any professional price at all for their failures?

I seriously doubt it. They all probably just worked their way down the belly of the bureaucratic snake, getting advancement on schedule before retiring with full benefits.

The primary source of bureaucratic dysfunction–and as the record shows, the CIA has been dysfunctional since its founding–is a lack of accountability. There is little price for failure, no matter how egregious that failure might be.

There is an even more sinister aspect to that lack of accountability, an aspect that is particularly important for intelligence agencies, and which has also been demonstrated time and again.

An intelligence service like the CIA must operate in secrecy, but that secrecy makes accountability almost impossible. That, in turn, allows agency personnel–especially at the highest levels, where secrecy is greatest, and who have powerful political connections–to engage in crimes, and political machinations, with little risk of being detected, and even less of being held to account.

But it gets worse. Access to vast amounts of very sensitive information gives intelligence agency personnel incredible power through blackmail, or the threat of blackmail. I am reminded of this story about German Chancellor Conrad Adenauer, from Paul Johnson’s Modern Times:

He had little affection beyond his own family circle and his closest associate was Hans Globke, co-author of the Nuremberg Laws, who ran the Chancellery and Adenauer’s private intelligence service. ‘And who knows’, Adenauer would smirk, ‘what Herr Globke may have in his safe?’

Before our eyes we are witnessing the consequences of the unaccountability of the CIA (and the FBI), and its vicious response to anyone who dares attempt to hold it accountable. Trump, and latterly his Attorney General, William Barr, are currently under relentless assault from leakers in the “intelligence community,” aided and abetted by their house organs, notably the Washington Post and New York Times, for their temerity in investigating the events that culminated in the Mueller probe. (I’m old enough to remember when the WaPo and NYT were in high dudgeon about the misdeeds of the CIA and FBI. Good times!)

Funny, isn’t it? I’m also old enough to remember being told that attempts to subvert American elections were a crime of the first order, and that no stone should go unturned and no lead unfollowed in the attempt to investigate and punish such actions.

But that apparently only applies to things that might implicate Trump.

I’m also old enough to remember that attacking an investigation was an admission of guilt, cuz “if you have done nothing wrong and have nothing to hide, you have nothing to fear from an investigation.”

That is so 2018! Now the “intelligence community” and its schooling pilot fish are utterly freaking out over Barr’s diligent efforts to delve into the machinations that surrounded the 2016 elections. Hey, if you have nothing to hide, dudes . . .

When someone screams: “DON’T DIG BEHIND THE GARAGE! WHY ARE YOU DIGGING BEHIND THE GARAGE?” it’s a good bet that there’s something buried behind the garage.

Barr currently has not just a shovel, but a power shovel behind the garage in Langley, and other places around the world, where the US intelligence agencies skulked in the shadows in 2016. And it has them completely freaking out, and fighting back with every weapon at their disposal.

So keep digging Bill. And the louder they scream, bring in more heavy equipment.

Maybe Barr’s attempt to bring the intelligence agencies to account is a Quixotic task. I hope not. It is impossible to exaggerate how much is at stake here.