Streetwise Professor

Today is the 146th anniversary of Lee’s surrender at Appomattox Court House.  Which reminds me that the Civil War Sesquicentennial is about to commence in earnest.  This coming week, April 12-13, marks the 150th anniversary of the bombardment of Fort Sumter, which was the start of the shooting war.

I don’t remember the Centennial, but have read some about it.  That was truly a national event, with many official commemorations.  The Sesquicentennial appears certain to be much more low key.  Moreover, the Centennial was more politically fraught, because it occurred at the height of the Civil Rights movement, during a period in which the real political consequences of the Civil War were still unresolved.  As a result, there was a rather unreal atmosphere surrounding the Centennial.   There’s a very funny Fawlty Towers bit where Basil constantly reminds his hotel employees not to talk about WWII in front of some German guests.  In contrast, during the Centennial, there was a concerted effort to do nothing but talk about the war qua war, and to remain silent about its politics and social dimension because those were still live, painful, and controversial issues.

IMO things have swung too far the other way in museums, especially National Park Service museums, related to the Civil War, where a tedious and pedantic political correctness aimed at influencing current attitudes hangs over virtually every exhibit.   I hope–probably in vain–that the Sesquicentennial will be marked by a more objective, and less politicized, discussion of this seminal period in American history.

For those who thought my judgment regarding Arab military culture and performance was unduly harsh, or those who are interested in a more detailed take, I recommend this article from 1999 in the Middle East Quarterly.  There’s a bonus Russian/Soviet connection in the conclusions section:

When they had an influence on certain Arab military establishments, the Soviets reinforced their clients’ cultural traits far more than, in more recent years, Americans were able to. Like the Arabs’, the Soviets’ military culture was driven by political fears bordering on paranoia. The steps taken to control the sources (real or imagined) of these fears, such as a rigidly centralized command structure, were readily understood by Arab political and military elites. The Arabs, too, felt an affinity for the Soviet officer class’s contempt for ordinary soldiers and the Soviet military hierarchy’s distrust of a well-developed, well-appreciated, well-rewarded NCO corps.

Arab political culture is based on a high degree of social stratification, very much like that of the defunct Soviet Union and very much unlike the upwardly mobile, meritocratic, democratic United States. Arab officers do not see any value in sharing information among themselves, let alone with their men. In this they follow the example of their political leaders, who not only withhold information from their own allies, but routinely deceive them. Training in Arab armies reflects this: rather than prepare as much as possible for the multitude of improvised responsibilities that are thrown up in the chaos of battle, Arab soldiers, and their officers, are bound in the narrow functions assigned them by their hierarchy. That this renders them less effective on the battlefield, let alone places their lives at greater risk, is scarcely of concern, whereas, of course, these two issues are dominant in the American military culture, and are reflected in American military training.

Change is unlikely to come until it occurs in the larger Arab political culture, although the experience of other societies (including our own) suggests that the military can have a democratizing influence on the larger political culture, as officers bring the lessons of their training first into their professional environment, then into the larger society. It obviously makes a big difference, however, when the surrounding political culture is not only avowedly democratic (as are many Middle Eastern states), but functionally so. Until Arab politics begin to change at fundamental levels, Arab armies, whatever the courage or proficiency of individual officers and men, are unlikely to acquire the range of qualities which modern fighting forces require for success on the battlefield. For these qualities depend on inculcating respect, trust, and openness among the members of the armed forces at all levels, and this is the marching music of modern warfare that Arab armies, no matter how much they emulate the corresponding steps, do not want to hear.

Although a dozen years old, this appraisal of Soviet military-political habits resonates given the ongoing travails over reforming the Russian military.  These efforts are bordering on crisis, with the Chief of the Russian General Staff, Nikolai Makarov making a stinging attack on Russian military education and research, and on the President of the Academy of Military Sciences, Makhmut Gareev.  Compare, for instance, the foregoing statement about the gulf between officers and soldiers in the Soviet military with this anecdote:

In Russia’s traditional peasant army soldiers and sergeants were considered the scum of the earth and only the promotion to officer level brought privileges and the rank of a human being. In the early 1990’s together with a high-ranking Russian military delegation in Germany, I listened to a top German general’s banquet address that began with: “We as soldiers….” As the translation continued, an angry Russian lieutenant-general whispered in my ear: “Why is he insulting us? We are not soldiers – we are generals.”

The linked article provides more details about the ongoing implosion in Russian military manpower and the tragi-comic flailing attempts to address it.  I say again: what sense is there spending on the order of $700 billion in new weapons if there aren’t enough trained men to use them?  Other than being a way to line the pockets of those who command such a Potemkin force, and those who receive the contracts to do so, it makes no sense at all.

Update: Lest there be any confusion, I definitely do not believe that Arabs and Russians are all that similar in terms of their martial attributes.  The paranoia and the obsession with hierarchy are among the few commonalities.  For instance, Russian soldiers through history have been anything but runners.  Indeed, they’re notable for their mulish willingness to hold a futile position and die in their thousands, as at Borodino, or innumerable combats in WWII.

It is now widely–and officially–acknowledged that there is a stalemate on the battlefield in Libya.  Who could have possibly predicted such a thing?  That was a completely rhetorical question.

So we are now apparently contemplating committing ground troops to Libya as part of a NATO force to help the rebels in their battle to oust Khaddafy.  According to General Ham of Africom, this isn’t ideal.  Not because the rebels are completely inept.  Not because the US has no real vital interests there.  But because the optics wouldn’t be good.  Seriously.

How inept are the rebels?  Former Marine C. J. Chivers describes them thus:

But by almost all measures by which a military might be assessed, they are a hapless bunch. They have almost no communication equipment. There is no visible officer or noncommissioned officer corps. Their weapons are a mishmash of hastily acquired arms, which few of them know how to use.

With only weeks of fighting experience, they lack an understanding of the fundamentals of offensive and defensive combat, or how to organize fire support. They fire recklessly and sometimes accidentally. Most of them have yet to learn how to hold seized ground, or to protect themselves from their battlefield’s persistent rocket and mortar fire, which might be done by simply digging in.

Prone to panic, they often answer to little more than their mood, which changes in a flash. When their morale spikes upward, their attacks tend to be painfully and bloodily frontal — little more than racing columns down the highway, through a gantlet of the Qaddafi forces’ rocket and mortar fire, face forward into the loyalists’ machine guns.

Actually, anyone with a passing familiarity of military history would have known this already.  John Keegan’s book A History of Warfare discusses different military cultures.  He notes that the Arabs have been raiders since time immemorial; running has always been an integral part of their way of war, standing and fighting not.  “Flash changes in mood” are characteristic.  In WWI, Lawrence quickly realized that it was hopeless to try to make regular soldiers of the Arab tribesmen: their genius was for guerrilla warfare, for hit and run.  Someone who has read Seven Pillars would recognize Chivers’ description immediately; I wonder if he patterned it on Lawrence.  Even Faisal understood the limitations of his tribal warriors in a conventional fight.  Every Arab army in the world, with the possible exception of parts of the Jordanian which was well-trained by Britain in the 1940s and 1950s, is notorious for lax discipline, poor maintenance, a vast gulf between officers and men, and corruption.

To put it as provocatively as possible, recall Moshe Dyan’s response when he was asked what was the secret for his military success: “Fighting Arabs.”  When it comes to conventional war, that’s a tendentious appraisal–but an accurate one.

More recently, we have been working assiduously to train Iraqi troops for eight years.  The progress is slow and uneven.   Very slow.  Very uneven.  Old cultural habits die hard.

So we are supposed to go in and try to train an Arab tribal rabble while it is under assault?  And expect it to achieve anything?  Granted, they will be–are–fighting an army that is atrocious even by the standards of Arab nations, but their prospects for doing anything but perpetuating a stalemate are virtually nil.  Even if the focus is on making them effective irregulars in line with cultural tradition a la Lawrence, the result would not be decisive: such a force at best prevails by wearing down its opponent over a long period.  Not an option for us here.

Using US and NATO forces to support the rebels would be doomed to failure.  Then what?  What is the next escalation, the next we’ll-try-this-and-hope-it-works?  What will win out, Obama’s pacifism or his ego?

On Monday, Fed Chairman Ben Bernanke gave a speech on clearinghouses to the Atlanta Fed’s annual conference.  Ironically, Bernanke echoed the theme of my talk at that conference in May, 2009: central counterparties (CCPs, i.e., clearinghouses) could fail, and are a potential source of systemic risk:

Overall, the historical record shows that clearinghouse arrangements have generally withstood even severe crises. This solid performance reflects good planning and sound institutional structures but also some degree of good luck, as crises have also revealed important vulnerabilities, vulnerabilities which prompted subsequent reforms by both the private and public sectors. Clearly, if we do not want to put all our trust in continued good fortune, we will have to continue to be proactive in identifying and remedying weaknesses in these critical infrastructures.

. . . .

Clearinghouses around the world generally performed well in the highly stressed financial environment of the recent crisis. However, we should not take for granted that we will be as lucky in the future. Past crises, including the financial panic of 1907 and the 1987 stock market crash, led to significant reforms and improvements in clearing and settlement that paid off in subsequent periods of financial stress. Given the growing interdependencies among clearinghouses, along with the new mandates for central clearing, now is a good time to reflect on the lessons of the recent crisis and consider whether further improvements are possible. For more than a century, financial stability has depended on the resilience under stress of clearinghouses and other parts of the financial infrastructure.

As we rely even more heavily on these institutions in the United States and around the world, we must do all that we can to ensure their resilience, even as our financial system continues to evolve rapidly and in ways that we cannot fully predict. In short, I think Pudd’nhead Wilson would agree that that is one important basket.

Bernanke discusses some historical episodes in which CCPs teetered on the brink, notably the Panic of 1907 and the Crash of 1987.  He notes, quite rightly, that the expanded role of clearing under Dodd-Frank (and likely in Europe under EMIR) means that CCPs are even more systemically important, and that it is therefore essential to ensure their safety and soundness.

Although Bernanke has taken up a theme that I’ve been flogging for going on 2.5 years now, please don’t get the impression that he got the idea from me.  Bernanke wrote an important paper on clearing and the Crash (RFS, 1990) that was instrumental in helping me understand the “plumbing” of the market and where it can go wrong.  I lived through the Crash, and witnessed first-hand of the near implosion of the clearing system in Chicago, but Bernanke’s article helped me understand some of the issues on a deeper level.   Indeed, I think that one salutary effect of my speaking and writing on the subject has been to make more people in industry and government aware of what Bernanke wrote 20+ years ago.  Credit where credit is due.

I agree with what Bernanke says in this speech, but I think it’s essential to go further.  Bernanke focuses on the potential for CCP failure, and how that can be prevented.  That’s no doubt important, but that’s not the only systemic risk arising from clearing mandates.

Most importantly, the imposition of these mandates will alter the entire financial system.  They will alter the way firms contract, how they borrow, their capital structures, etc.  These changes will have systemic effects and affect the way the system operates in a crisis.

Moreover, I am concerned that a focus on protecting CCPs can lead to the adoption of policies that are destabilizing.  For instance, conventional means of strengthening CCPs can increase their vulnerability to wrong way risk.

As another example, CCP margining can have destabilizing effects.  Although the regulatory tendency to protect CCPs may lead them to agitate for more collateral, and tighter collateralization mechanisms, this can have destabilizing effects during a crisis.  Similarly, having immense amounts of liquid assets tied up in collateral at CCPs can make the system more vulnerable to liquidity shocks.  Put differently, it increases the burden on central banks to respond to liquidity shocks.

Consider the following scenario.  There is a spike in the demand for liquidity.  Vast amounts of liquid assets are tied up in derivatives collateral at CCPs.  One likely response to the liquidity shock is to liquidate derivatives positions to free up the liquid assets–“dead liquidity”–held at CCPs.  This can lead to big price movements that can be destabilizing.  Central banks may need to be especially aggressive in supplying liquidity to avoid these problems.  Perhaps this would require extending credit to CCPs, or to their members, in a way that would effectively permit rehypothecation of margin monies to the Fed.

Again, clearing mandates are a major change to the financial system.  There will be far reaching effects on all aspects of financial contracting.  Most of these are unpredictable and will be dynamic.  But regulators have to be aware of those ripple effects, and understand that those effects will depend on how CCPs operate and how they are regulated.  A microprudential focus on CCPs (which is the default tendency of financial regulators) could have perverse macroprudential effects.

I’m sure Bernanke is aware of that, but a conventional reading of this “watch that basket” speech could lead regulators to focus on the microprudential, and overlook the potentially perverse unintended macro implications of that focus.

I liked Bernanke’s historical discussion.  The Panic of 1907 case is particularly interesting, and I will discuss it in some detail in my forthcoming book.  One thing that is of particular interest, that Bernanke does not discuss, has implications for one current regulatory debate.

Specifically, as shown by Elmer Wicker in his book Banking Panics in the Gilded Age, the New York Clearing Association often failed to deal effectively with panics by mutualizing risk because of heterogeneities among its membership.  Although mutualizing risk would have mitigated adverse selection problems (because there was less uncertainty about the condition of the banking system as a whole than individual banks), it also would have transferred wealth from the healthy banks to the unhealthy ones.  The disagreements among heterogeneous banks undermined coordinated action during several crises–including especially the Panic of 1907.

That is worth keeping in mind today when evaluating proposed rules regarding CCP membership policies.  Encouraging open access through low capital requirements, or aggregate ownership restrictions, as proposed by the CFTC, will lead to more heterogeneous memberships at CCPs.  This will have many perverse consequences, including the real potential for the same kind of problems that undermined the effectiveness of the NYCH in the Gilded Age.

I’m pleased that Bernanke brought this episode into the public eye.  I’m also pleased that he has brought the potential vulnerabilities of the clearing system into the public debate.  His speech is a welcome antidote to the superficial happy talk of Geithner and Gensler and the cheerleaders for Frank-n-Dodd.  Without a sober recognition of the vulnerabilities that a greater reliance on clearing can create, the cure may actually kill us in the next crisis.

And now on two fronts, as it were.

The battle over the “vertical silo” (i.e., vertically integrated in econspeak as opposed to bizspeak) approach to execution and clearing remains under assault in Europe:

European Union states want to extend a draft law curbing risk in privately negotiated derivatives to the whole sector, which could ultimately dent profitability of the world’s first mega bourse merger.

. . . .

But banks say the merged group should be opened up to clearing competition. Extending the law’s scope to regulating listed as well as OTC derivatives would achieve this goal.

It would make it easier for users to clear listed contracts transacted on Deutsche Boerse or Euronext’s LIFFE derivatives platform elsewhere and not be locked into the group’s clearers.

“The inclination among OTC derivatives fans like us is ‘why differentiate between one derivative and another?’,” said David Clark, chairman of the Wholesale Markets Brokers’ Association.

“The big deal in all this is the competition element with Deutsche Boerse. This move to extend the scope of the draft law has got politics written all over it,” Clark said.  [Politics?  Whoda thunk?]

. . . .

Exchanges sense integrated business models are under threat.

“Some are trying to weaken vertical structures by creating clearing links with other structures. That creates systemic risk and shifts focus away from the real issue of dealing with OTC derivatives,” an exchanges industry official said on condition of anonymity due to the sensitivity of the issue.

The battle between the “verticalists” and “horizontalists” in clearing is a decade old and has never resolved, with the same two countries pitted against each other today as back then.

“Verticalists” and “horizontalists”?  Sounds like something out of Swift.  Count me as a verticalist–or more accurately, a marketalist.  That is, that this is something best left to market processes rather than legislation and regulation.

Now a battle on vertical integration is evidently brewing in the US too.  At least in the eyes of some market analysts, ICE’s CEO Jeffrey Sprecher is worried that a horizontalist, non-marketalist US Department of Justice may condition acceptance of a NASDAQ-ICE-NYSE-EuronextLIFFE merger on opening up of the derivatives clearinghouse (from Bloomberg: no link yet):

IntercontinentalExchange Inc. may drop out of its joint bid for  NYSE Euronext if the U.S. Department of Justice raises concerns about the deal’s combined futures business, Sanford C. Bernstein & Co.’s Brad Hintz said.  ICE, the second-largest U.S. futures market, and Nasdaq OMX Group Inc. made an unsolicited offer for NYSE Euronext last week, valued at $11.3 billion, countering Deutsche Boerse AG’s February offer for $9.53 billion. In the proposal, Atlanta-based ICE would take NYSE’s Liffe futures-trading markets, expanding in Europe. New York-based Nasdaq OMX would take NYSE Euronext’s listings, equity and options units.

ICE and CME Group Inc., the world’s largest futures market, own their own clearinghouses, which may create barriers to entry and be anti-competitive, the U.S. Department of Justice said in 2008. Equity and options exchanges –such as those owned by NYSE Euronext and Nasdaq OMX–use centralized  clearinghouses like OCC that aren’t owned by any one market.

“The most important issue facing these competing offers is the possibility that the ICE/NYSE Liffe merger will resurrect DOJ concerns with vertical integration of futures execution and clearing,” Hintz, an analyst at Sanford C. Bernstein in New York, wrote in a e-mailed note today. “If this issue arises ICE will likely drop out of the bidding and the Deutsche Boerse deal moves  forward.”

Yes, be afraid.  Be very afraid.  I have the sense that the DOJ’s Antitrust Division is itching to attack vertical integration in derivatives, the economics be damned.

* This perhaps corny (perhaps?) title was inspired by my recollection that today is the 149th anniversary of the first day of the Battle of Shiloh.  Two of my great-grandmother’s brothers fought in the battle: Eli and John, who served in the 46th Ohio Volunteer Infantry.

Eli was something of what is called a “Jonah” in the Navy–a hardluck guy.  He was captured at Shiloh, and held in a prison camp in Montgomery, AL for a couple of months.  Exchanged, he returned to Ohio.  He claimed he was unable to return to his regiment because of dysentery contracted during his imprisonment.  His military record includes a note from his family doctor, believe it or not.

His efforts to stay home were unavailing, and he was ordered to report to his unit.  He returned to the 46th shortly before the Battle of Chattanooga.  He proceeded to lose his belt and cartridge box, for which he was dunned $10 pay.  He was then assigned duty as a wagon driver–probably not an endorsement of his soldierly qualities.

Maybe he straightened out, or the need for infantrymen was pressing, for he was in the ranks again for the Atlanta Campaign.  Unfortunately for him.  He was shot in the left arm close to the shoulder joint at the Battle of Dallas, GA, 28 May, 1864.  The surgical record indicates that the regimental doctor performed a resection of his left arm, removing the bone from the shoulder to the elbow.  This surgery was required because the ball struck too close to the joint to amputate.

My great-grandmother told my grandfather that “Uncle Eli had a dead arm.”  His arm dangled uselessly at his side, and my great-grandmother remembers him using his right hand to lift up his left to rest it on the dinner table.

John, on the other hand, served without incident or injury from October, 1861 to the muster out of the regiment in July, 1865.  Pretty amazing, given that the regiment fought at Shiloh, the Siege of Vicksburg, Chattanooga (the storming of Tunnel Hill, the bloodiest part of the battle), the Atlanta Campaign (including the Battle of Atlanta on 22 July, 1864), the March to the Sea, and the Battle of Bentonville.  One lucky brother, one unlucky.

In Walther Bagehot’s famous formulation, central banks should lend during crisis situations “against good collateral at penalty rates.” Apparently, during the maelstrom of the crisis in September, 2008, the Fed considered pretty much anything “good collateral,” except perhaps Lloyd Blankfein’s baseball card collection and a ’72 Buick up on blocks in front of an old doublewide somewhere in Alabama. As revealed in documents pried out of the Fed as result of a FOIA request, the US central bank lent massive amounts against very dodgy collateral:

At the height of the financial crisis, the Federal Reserve allowed the world’s largest banks to turn more than $118 billion in junk bonds, defaulted debt, securities of unknown ratings and stocks into cash.

Collateral of those asset types made up 72 percent of the total $164.3 billion in market-rate securities pledged to the Fed on Sept. 29, 2008, two weeks after the bankruptcy of Lehman Brothers Holdings Inc., according to documents released yesterday. The collateral backed $155.7 billion in loans on the largest day of borrowing from the Primary Dealer Credit Facility, which was created in March 2008 to provide loans to brokers as Bear Stearns Cos. collapsed.

. . . .

The Fed loans on Sept. 29, 2008, represented a 5.49 percent “collateral cushion,” the amount by which the pledged assets exceeded the loan value, according to the Fed data. Equities comprised $71.7 billion, or 43.6 percent of the total. High- yield debt, including the defaulted issues, accounted for $18.4 billion, or 11.2 percent. Collateral of unknown rating was $28 billion, or 17 percent.

High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.

The haircut–the percentage by which the collateral value exceeded the amount of money lent–was amazingly small, given the quality (or lack thereof) of the collateral, and prevailing market conditions.  The 5.5 percent haircut was far smaller than the 40 percent number that was prevalent during these days (as estimated by Gary Gorton).  Moreover, it was a pitifully small number for the equity that made up the largest single component of the collateral accepted by the Fed.  On the 29th, the VIX equity volatility index closed at a record of 46.72.  Thus, there was a very high likelihood of an adverse price move that would have put the equity collateral under water.

It’s also an open question of whether the marks on the collateral reflected true market values.  I pretty much doubt it.  It’s not outside of the realm of possibility that the real haircut was negative.

Note too that very few Treasuries were posted as collateral: presumably all this was out on repo, and the desperate need for liquidity forced banks to pawn everything else in the safe at Uncle Ben’s Cash America.

These eye opening data reveal just how extreme the situation was post-Lehman.  Or at least how extreme the Fed considered the situation to be.  Given those extraordinary circumstances, it is understandable why the Fed acted in a truly extraordinary way, and honored Bagehot more in the breach than the observance.

The real issue that still remains unresolved is how this in extremis situation came to be.  Did the Fed’s and Treasury’s handling of Lehman, and before that Bear, create the panic?  The Fed’s version of Pawn Stars on steroids is but a symptom of what had transpired in the days, months, and years leading up to 29 September.  That’s what we need to understand better–far better–than we do now.

Jennifer Rubin says that SecDef Robert Gates should resign for his statement that ground troops will not be committed to Libya while “I’m in this job.”  Rubin interprets Gates’s remark as a threat to the president.

That is a very plausible interpretation.  What should we make of it then?

The first thing to note is that Gates is not in the habit of making threats.  He is not a grandstander.  He is not a prima donna. He has a long record of service as a loyal servant in several administrations.  His remarks are an exception.  There must be an exceptional reason for him to make them.

Recent events provide clues for Gates’s outburst–which his remarks were, compared to his very low key norm.  In particular, the let-the-rebels-do-it “strategy” has proved to be utterly fantastic and farcical.  As a Patton, not a Gates, would have put it, these rebels couldn’t fight their way out of a p*ss-soaked paper bag. Testimony by Gates and Admiral Mullen revealed that there are perhaps 1000 with any military training.  They have no heavy weapons.  No discipline.  They are prone to indiscriminate killing–so much so that NATO has threatened to bomb these ostensible “allies” in the fight against Khaddafy unless they knock it off. Good luck with that.

Recognition of this is predictably leading to a serious potential for mission creep.  For instance, since the effectiveness of air power is sharply limited in supporting offensive operations by the lack of targeting assets on the ground, a proposal is afoot to have US troops train rebels as forward observers.

Please.  FO is a very demanding job that takes intensive training.  The US has acute difficulties in finding, training and keeping enough Joint Terminal Attack Controllers of its own.  It’s going to train some yo-yos whose main military qualification is shooting AKs into the air?  If these guys make mistakes, things go very wrong and people get killed.  In Libya, many of those killed would be civilians–the very people we are intervening to protect.

That this “solution” is even being considered is a confession of desperation.  To quote another famous military mind, Oliver Hardy: “Another nice mess you’ve gotten us into.”

Gates–unlike some other people I could name–is apparently thinking several steps ahead. He can foresee the dynamic of escalation and deepening involvement–he doesn’t want the mess to get worse.  Tentative measures fail.  A president has put his credibility on the line.  So the level of US involvement will creep up.  But not enough to achieve anything decisive.  So it will creep up some more.

Anybody seen this movie before?  Gates has, apparently, and is doing something that for him is exceptional in order to re-write the ending–or to stop filming altogether.

Checking an incompetent commander is always an extremely difficult endeavor.  In the US, Congress is supposed to check the executive.  That poses its own difficulties, because leadership by committee is always messy and erratic, and because politics and personality bedevil the process.  But messy oversight is often far superior to no oversight at all.  But in the case of this administration and Libya,  it has made it perfectly clear that it will not accept any Congressional control at all, going so far as to make the completely outrageous claim that it is actually in compliance with the War Powers Act.  You can argue that the WPA is unconstitutional, but you can’t argue that what Obama is doing adheres to it: but Hillary has done just that.  What’s more, so far Congress has acquiesced to this action and attitude, which had the president been of a different party it would have likely considered a usurpation of Congressional authority.

Checking a commander from inside the chain of command is even more fraught.  For dramatic depictions of the dilemmas involved, read (or watch) Mutiny on the Bounty or the Caine Mutiny or even Mr. Roberts.  Obedience is necessary in a military organization, but like anything, the obligation to obey cannot be unconditional.

That’s easy to say.  What’s far harder is to identify where the obligation ends, and how to limit insubordination to what is necessary to avoid catastrophe without destroying the military organization in the bargain.*

In this context, it is worth reading H. R. McMasters’ Dereliction of Duty.  McMasters is a Gulf War I hero who commanded a troop of the 2d Armored Cavalry that rolled over an Iraqi armored force at the Battle of 73 Easting (an event portrayed well in an episode of Greatest Tank Battles.)  He is now a brigadier general.  Dereliction of Duty is based on his PhD dissertation.  It argues that the Joint Chiefs of Staff were derelict because they acquiesced in McNamara’s gradual escalation strategy in Viet Nam even though they realized that it was a recipe for disaster.  McMasters argues the Chiefs should have made their objections to McNamara’s strategy known to the president, and failing to persuade him that way, to resign publicly.

That, of course, would have posed its own dangers.  But I think in the present circumstances Gates recognizes that it may come to that.  The handling of this military adventure is so appalling that there has to be deep discontent in the Pentagon, and in the ranks.  I strongly suspect that Gates is firing this warning shot now in the hope that he can stop the escalation process before it gets fully underway.  It’s a rather desperate measure, and given Obama’s narcissism and stubbornness, it’s unlikely to have an effect.  Arguably the best hope we have is that Obama really doesn’t have his heart in any military adventure, least of all this one: hopefully these sentiments will prevail over his desire not to be seen to retreat from the unnecessary confrontation with Khaddafy that he so thoughtlessly entered into.

So yes, maybe Gates should resign–but to make the point, not, as Rubin would have it, to atone for having made it through his threat to resign.

It should not have to come to that.  It would be far better for Congress to live up to its Constitutional duties.  But with Harry Reid adjourning the Senate in order to avoid forcing his caucus to have to vote on an amendment quoting Barack Obama v.2007 (“The President does not have power under the Constitution to unilaterally authorize a military attack in a situation that does not involve stopping an actual or imminent threat to the nation”) that doesn’t look likely any time soon.  So Gates, the archetypal loyal bureaucrat, is stepping up instead.

I doubt that it will be enough.  I shudder to think what will be enough.  May is only a month away.

* In my leadership class at Navy I wrote a paper on the necessity of disobedience in certain circumstances.  The prof was not amused.  Especially when I quoted Jackie Fisher: “In war the first principle is to disobey orders.  Any fool can obey orders!”

A couple of days ago there was optimism when Libyan rebels raced across the desert chasing Khaddafy’s forces out of several towns.   Today there is pessimism as the rebels raced back the other way, chased by government troops.

People need to get a grip; this is likely to be the way things will go, absent a major shift in tactics by the US and NATO.  Those with a passing familiarity to the campaigns in Libya in 1941-1942 will recognize the pattern.  Then British and Commonwealth forces would race west chasing fleeing Germans and Italians, only to race east, chased by the Afrika Korps.  Back and forth they went, repeatedly.

The desert offered no dominating topographical features that could be defended easily.  There was always an open flank (except when the British dug in at El Alamein, with the Med on their right and the Qattara Depression (an impassible morass of quicksand) on their left.  Given the open flank and the lack of defensible terrain, it was nigh on to impossible for a retreating force to make a stand; the attacking force would simply outflank any defending troops, and away they would go. But the advancing force would soon outrun its logistics, and the defenders would fall back on their bases; the attack would stall; and soon back they would go the other way.

Things aren’t exactly the same today.  The rebels are nothing like the Eighth Army, and the Libyan government troops are certainly nothing like the Afrika Korps, or even the hapless Italians.  US (and NATO) air forces are light years beyond anything seen under Ritchie or Cunningham or Montgomery or Rommel.  But the fundamentals aren’t all that different.  Which means that unless a serious ground force with serious logistical support goes into Libya, the stalemate is almost certain to continue.  NATO/US airpower can prevent Khaddafy from overrunning the rebels: when his armor is in the open, it is very vulnerable, and when advancing, his logistical tail is one big target.  But when Khaddafy falls back on his strongpoints, even with the support of airpower, the rebels cannot dislodge him.  A far more violent and sustained air campaign couldn’t pry Saddam out of Kuwait in 1991; it took heavy forces (VII Corps and the 1st Marine Division) to bash him out after his troops had been pummeled from the air.  The rebels have nothing close to that capacity.

The prospect for such a stalemate is leading the allied leaders to scramble for solutions.  Such as covert actions against Khaddafy, and arming the rebels.  But the likelihood that covert actions against Khaddafy will result in his death and ouster are close to zero.  It’s been tried many, many times before–and failed almost every time.  Self-protection is what dictators excel at.  How many times did the CIA try to kill Castro?  Saddam?

Insofar as arming the rebels is concerned–please.  There is no way to provide them with the combat power and training to make them a credible offensive force.  At best, arming them would just guarantee a protracted standoff.  And since when did arming combatants in a civil war constitute a humanitarian intervention?  Just look at all the wars in Africa which descended into horrific, indecisive bloodlettings when the opposing sides were supplied with arms by outsiders.

These plans are a confession of strategic bankruptcy.  The only decisive alternative–a robust ground intervention–has been ruled out.  The current operation can prevent a rebel defeat, but cannot a secure a rebel victory.  So the allies are casting about for anything that could possibly work.  But possible is not anything close to probable.  The most likely outcome is a grueling and indecisive civil war.  Again–that’s humanitarian?

Not to mention the possibility for blowback–given that many of those who may receive arms are dyed-in-the-wool jihadis.  Not foreseeing the possibility that Islamic radicals could turn on the US after we supported them in Afghanistan in the 1980s is understandable, and perhaps even excusable given the stakes in the conflict.  But since the stakes here are much lower, and since we have learned by hard experience the dangers of arming those who are ideologically opposed to us in order to achieve a tactical gain, arming the Libyan rebels is hard to understand and far harder to excuse.

I’ve heard for 30+ years how the US should avoid another Viet Nam, even when the analogy was completely inapt.  Well, incrementalism driven by a judgment that the only approach that is likely to be decisive is unacceptable was exactly the fatal error in Viet Nam.  So the latter day incarnation of the best and the brightest seem hell bent on doing it again; the analogy seems far more relevant now than in ’91, for instance, when it was heard ad nauseum.

One last thing.  Obama is reported to have signed an intelligence finding authorizing CIA support of the rebels with the possible objective of overthrowing Khaddafy.  As I just noted, this is unlikely to lead to anything more than a standoff in the desert.  But the cynicism is rather breathtaking.  Obama denies that regime change is an objective.  He genuflects to the UN, and claims that the US and its allies are acting subject to its authority–but the UN did not authorize regime change.  The gap between word and deed is vast.

If the man who ran for president on a platform of peace and transparency and deference to international bodies is capable of such a cynical betrayal of all of these, what that he says can be believed?

Wretchard has it right:

The entire theme of the administration’s Libyan policy is “we don’t need no steenkin’ badges”. Not from the Congress, not even from the UN Security Council. For authority they can just write a little secret finding and as long as Washington insiders let him get away with it, it’s a done deal. Hillary can reinterpret the UN arms embargo to whatever she wants it to mean. Things are infinitely elastic, which is to say, they can do anything they want. It marks the final emergence of an incipient aristocracy from the cocoon of a Republic. It has no obligations to anyone. Not even to tell the truth to itself.

Those who believe themselves to be morally transcendent can rationalize any means to achieve the ends they have chosen–because they have chosen them.  The rules don’t apply to them.  Such hubris brings nemesis.

I remember reading a story (which I can’t track down with things at hand) in which an anxious aide went to Napoleon with the news that another nation had joined a coalition against France.  Rather than being dismayed, Napoleon said (I’m quoting from memory): “Excellent.  My success is now assured.”

To put it differently, although diplomats and many politicians swoon over alliances and coalitions, the attitude of military commanders is far more ambivalent–and often dubious and dismissive.  That’s because although coalitions may bring numbers, and sometimes signal that the war is not intended to advance a particular nation’s interests, they are often antithetical to military success.

Coalition action is often contrary to the principles of war.  Most notably, it is often devastating to unity of command.  Sometimes, through great effort in the face of an existential, total struggle, as with the UK and US in WWII, these problems can be managed and overcome.

That is definitely not the case today.  The current coalition attacking Libya is a catastrophe.  An absolute catastrophe.  Nobody wants to lead; the natural leader of the coalition, the US, is most anxious not to.  It is an insult to Alphonse and Gaston to compare these efforts to the cartoon Frenchmen’s mutual deference.  Everybody has different ideas regarding objective.  Everybody is saying something different.  Differences in opinion are fracturing one of the most successful and enduring alliances in history (NATO).

What’s more, this incoherence and lack of leadership is having corrosive effects on other crucial military principles.  Most notably–the objective.  Who knows what that is?  And with no well-defined objective, military force is being employed in a diffuse and scattered way–contrary to the principle of mass.  Moreover, the least-common-denominator tendencies inherent in a coalition mean that the most timorous tend to exert disproportionate influence–contrary to the principle of the offensive.

The most likely outcome of this exercise in how-not-to-run-a-military campaign is a protracted stalemate between a weak but intensely focused dictator fighting for survival and a gaggle of rag-tag militias backed up by squabbling powers with a bad case of the Jupiter Complex.  And it is difficult to see how a stalemate will alleviate a humanitarian catastrophe, which is the ostensible purpose of this operation.  Indeed, as Wretchard writes, it is more likely to create or exacerbate such a disaster.

Some other Napoleonic advice is apropos here: “If you start to take Vienna, take Vienna.”  Dithering about with no leadership, no direction, no objective, and no decisive use of military power makes things worse, not better.  You don’t get points for high-minded intentions if your actions wreak havoc.  Obscuring intentions and actions in a fog of asinine euphemisms doesn’t change the realities.  If you start to take down Khaddafy, take down Khaddafy.  Otherwise, shut the hell up and stay the hell home.  Half-assed half measures get people killed for no good purpose, and all the Nobel Peace Prizes in the world do not change that brutal fact.

Another piece of Napoleonic wisdom was also ignored: “The reason I beat the Austrians is that they did not know the value of five minutes.”  Obama et al wasted five weeks, not a mere five minutes.  What’s being done now might have been decisive five weeks ago–but no longer.

Obama and his people yammer about shaping the conditions.  They are shaping conditions, all right–for a debacle.

The names of military operations can give a glimpse into the mindset of those in charge. For instance, Overlord, Dragoon, Husky, Torch, all from WWII.  These names connote strength, power, dominance.  In Viet Nam, Rolling Thunder was evocative of the administration strategy of threatened escalation; its successor operations, Linebacker I and Linebacker II, connoted something far different, a determination to hit the enemy hard.  (This was the era of Dick Butkus and Ray Nitschke; people knew that linebackers inflicted pain and knocked people out.)  More recently, Desert Storm and Iraqi Freedom were quite descriptive of American intentions.  My favorite operational name is Ripper, the sobriquet given by Matthew Ridgeway to the offensive to push Chinese forces back to the 38th parallel and to retake Seoul.  That name oozed aggressiveness and violence.

And today, the Obama administration brings us . . . Operation Odyssey Dawn?  That sounds like the name of some kid born at a California commune, circa 1970.  Operation Odyssey Dawn?  Really?  What does that mean, exactly?

The best explanation I can come up with is that the Pentagon is trying to warn the country that we’re at the beginning of a long, strange trip.  And they may be right.

The Pentagon has been signaling furiously since unrest began in Libya that it wanted no part of it.  SecDef Gates made it sound like operations against Libya would be as daunting as invading Festung Europa.

My hypothesis to explain the defense establishment’s obvious reluctance to get involved with Libya is that it was–is–petrified at the prospect of getting involved in a civil war under the command of an obviously reluctant, diffident, unenthusiastic, uncommitted, and distracted commander in chief who has articulated no coherent policy.  The military doesn’t want to get left hanging when things get tough–and they will, in a messy situation like Libya.  They sense that Obama’s commitment to the endeavor is extremely shallow, and that he is likely to bail at the first sign of trouble.  I am also convinced that they are deeply troubled by his lack of any military experience and strategic sense, and indeed, his complete disinterest not to say disdain in the subject.

These concerns are legitimate, and the actions of the last month only substantiate them.  The most opportune time to have struck passed weeks ago, when Khaddafy was reeling and the rebels were surging.  Now the reverse is true: the rebels are reeling and Khadaffy is surging.  Now, it is likely that the best outcome is stalemate, perhaps like in Iraqi Kurdistan between Desert Storm and Iraqi Freedom.  The rebels’ offensive capability is nil.  An air campaign can eliminate Libya’s air force and, depending upon how aggressively it is waged, Khaddafy’s ability to use armor and massed infantry to reassert control over the rest of the country.

But as Saddam showed in 1991 when brutally suppressing the Shia revolt in the south, after his forces were routed in Kuwait and southern Iraq, a dictator bent on restoring control can often do so.  And as it was with Saddam in 1991, this is an existential conflict for Khaddafy.  He loses, he dies, most likely.  He may be denied some means of prevailing by an allied air campaign, but he has numerous asymmetric tools at his disposal that are not as vulnerable to air attack that he can–and will–employ to survive and prevail.

It doesn’t seem that Obama, Sarkozy, and Cameron have fully appreciated the capacity for ruthlessness, and the endurance, of people like Khaddafy when they are against the wall.  Indeed, Obama’s perfunctory speech, delivered before jetting off to the Copacabana–literally–betrays considerable confusion.  On the one hand, he presented a damning portrait of Khaddafy as a murderous psychopath who “must go.”  (Is it news that Khaddafy is a murderous psychopath?  Who didn’t know this, in say, 1985, or particularly, 1988?  Or even in late-February, when the opportunity to strike was far more promising?  Is it a surprise that Khaddafy has reacted brutally?  To whom?  Other than Louis Farrakhan, of course.)

On the other hand, he committed the US to extremely–extremely–limited military objectives: safeguarding civilians.  He has indicated publicly, and apparently to Congress, that he will employ extremely limited means to the task: evidently, American aircraft are not committed to the campaign, only British and French (and perhaps later some Arab forces).  Americans will “shape the conditions”: can you imagine Churchill saying “we will shape the conditions on the beaches.  We will shape the conditions on the landing grounds.  We will shape the conditions on the hillsides . . . ?”

What’s more, the message is apparently a mixed one, because some sources, including but not limited to Stratfor, claim that regime change is the true objective.  Given the predicate (Khaddafy is a murderous psychopath and numerous civilian lives are at risk) this makes sense: how do you really protect the civilians from said murderous psychopath when he is still in charge?

But if regime change is the true goal, then why is Obama so insistent on the limited nature of the objectives, and on the extremely limited nature of the American resources committed?  If regime change is the real goal, why won’t he come out and say it?  Is it that he cannot admit to Bushian impulses?  Waging war under false pretenses is always a bad idea, and usually inflicts huge political damage on the president that attempts to do so.

Make no mistake, as was demonstrated in both 1991 and 2003, even extremely intensive, comprehensive air campaigns far more powerful than those contemplated in Libya today provide few assurances of achieving decapitation, let alone regime change.  “Shock and awe” didn’t deprive Saddam of his means of political control or prevent him from brutally repressing civilians.

So I think that the military is having LBJ flashbacks.  Only worse.