Miscellaneous Felix Salmon Review

MISCELLANEOUS FELIX SALMON REVIEW....Felix Salmon:

I've now reached the point at which I simply don't believe people when they say that lower pay for bankers will result in worse performance — especially since it looks very much as though it was higher pay for bankers which was at least partly responsible for much of the present crisis. Let's bring down pay, a lot, and see whether performance really falls.

The financial system went for decades, quite happily, without monster paydays: why can't we go back to those days? No one thinks we need to pay the Treasury secretary lots of money to make sure he's "working hard"; why are bank CEOs any different? And insofar as lower bank salaries would drive America's best and brightest into other sectors of the economy, that would surely be a good thing.

Hear hear — and not just for banks. Our economy worked just great back when CEOs were paid 50x the median salary, and I don't see why it can't do so again. The most efficient way to make that happen, of course, is not to directly cut CEO pay but to pay line workers more. Not only would they spend that extra money on actual stuff (as opposed to idiotic investment scams), thus helping drive the economy upward, but it would automatically reduce the pot of money available for all the suits. It's a twofer.

In other Felix Salmon news, he says I got a couple of things wrong in my super-senior tranche post yesterday. First, he says that the synthetic CDO market is smaller than the cash CDO market, not bigger, and also that banks mostly didn't keep synthetic CDOs on their books at all. Rather, they kept the real CDOs and sold off the synthetics. Noted.

Elsewhere, Felix points to a post by Sam Jones that explains super-senior tranches in yet another way, and it's worth reading on the off chance that you have a obsessive interest in this stuff. If you don't, though, here's the conclusion:

The risk is with the noteholders of the synthetic CDOs. And just as with [asset-backed] CDOs, those noteholders are likely to see some very severe losses. Synthetic CDOs are only now about to experience the same kind of dramatic collapse that plagued ABS CDOs way back in late 2007 and early 2008.

The trigger will be the growing number of corporate defaults, which just like assumptions on subprime mortgage defaults, was, in many synthetic structures, underestimated. Barclays analysts see a “rising tide” of synthetic CDO downgrades on the horizon. Downgrades which could well have huge regulatory capital requirements on the super-senior positions banks have on their books.

Oh goody. And for what it's worth, this is why I'm interested in all the gory details of this stuff. Ezra is right that the housing bubble underlies everything (though it might not next time....), but the financial rocket science really did kick everything into another gear. Understanding it is not only interesting for its own sake, but also provides some insight into how everything unfolded and what's going to happen next. Though, at this point, I admit that I'm not even sure I want to know.

Making Iraq Fertile

Iraq is flushing salinity out of millions of acres of land. The process should breathe new life into dirty rivers and dying soils. The idea is to restore "fertile" to the Fertile Crescent. You remember: the swath of once-fecund land arching from the Mediterranean across Iraq and down to the Persian Gulf—aka, the Garden of Eden.

But centuries of irrigation and overuse have turned the farmlands of southern and central Iraq saline—aka, the Garden of Apocalypse. The problem derives from salt collecting in soil when farmers irrigate it with salty water or don't drain it properly. The end result is that Iraq is now so fallow the country imports virtually all its food, paying with oil profits. Much of the government's current budget is spent on food rations, reports Reuters. Making Iraq fertile suggests there might actually be a post-oil future for that nation.

The plan is to pump out subterranean groundwater. The process—which has already worked in Australia—will take years. The work begins with a pumping station in Nassiriya sidelined for decades by the war with Iran, UN sanctions, and the war with the US. The project is further challenged by an ongoing severe drought and by 55,000 miles of crumbling drainage and irrigation channels. . . Suggestion: run the pumps on solar or tidal power and minimize that other problem too. And while we're at it, why not donate the sweat equity of those short-sighted Detroit CEOs? They've been part of the problem for long enough. They could toil in the desert and meditate on their manifold sins.

Julia Whitty is Mother Jones' environmental correspondent, lecturer, and 2008 winner of the PEN USA Literary Award, the Kiriyama Prize and the John Burroughs Medal.

Remembrance of Houses Future

REMEMBRANCE OF HOUSES FUTURE....If, like me, you adored the House of the Future at Disneyland when you were seven years old, you might enjoy P.J. O'Rourke's account of his visit to the HP/Microsoft revival version this summer. Unsurprisingly, considering the designers, it was closed down at the time due to "technical difficulties," but he was at least able to view it from above:

According to Disney, the shape of things to come can be found at Pottery Barn, with a quick stop in Restoration Hardware for “classic future” touches and a trip to Target to get throw rugs and cheap Japanese paper lanterns. HoF II was designed by the Taylor Morrison company, a home builder specializing in anodyne subdevelopmental housing in the Southwest.

....Any random dull normal person (we have one in our family) could come up with snappier ideas for the future than HoF II seems to contain. How about self-washing windows? Automobiles have had them since the 1930s. And have you watched the clever manner in which convertible car tops operate? What keeps that technology from being applied to self-making beds?....I didn’t even see one of those robot vacuum cleaners that trundles around hoovering on its own agenda, never mind, say, a helium balloon with a propeller and a mop of feathers that flies about dusting things (it might not do a very good job dusting, but at our house neither do we).

More here on the original HoF if you want a trip down memory lane. More here on the new one.

Note To Shelby Steele: Stop, Honey. Just Stop.

Poor Shelby Steele, writing the same book over and over again. The same utterly irrelevant and embarrassingly misguided book.

This time, he called it A Bound Man, but it's still just his one-hit wonder with a new cover.

The Shootout in Mumbai

THE SHOOTOUT IN MUMBAI....After a photographer at the Mumbai Mirror expressed his dismay that police on the scene didn't immediately open a gun battle against the terrorists behind last week's attacks, it became a trope in the right blogosphere that many lives could have been saved if only the Mumbai police had been more ballsy. "This whole unwillingness to shoot business is becoming a problem," sighed Instapundit.

Today, however, Israeli defense officials had a different take in the Jerusalem Post:

"In hostage situations, the first thing the forces are supposed to do is assemble at the scene and begin collecting intelligence," said a former official in the Shin Bet's security unit. "In this case, it appears that the forces showed up at the scene and immediately began exchanging fire with the terrorists instead of first taking control of the area."

I report, you decide. But if it were me, I'd probably listen to the Shin Bet folks. Via Robert Farley.

Cell Phone Lawsuit Follows Mojo Investigation

On the heels of a recent Mother Jones investigation into the mortal dangers of driving while gabbing on a cell phone, the nonprofit Center for Auto Safety has sued the National Highway Traffic Safety Administration, accusing it of illegally withholding information related to the risks.

The lawsuit, filed yesterday in US District Court in Washington, DC, claims that the federal agency violated the Freedom of Information Act (FOIA) by refusing to release documents—including the first-ever government estimate of auto fatalities related to cell phone use: 955 deaths in 2002. NHTSA is a branch of the Department of Transportation that regulates the auto industry and aims to reduce injuries and deaths on the nation's highways. Contacted today, agency spokesman Rae Tyson declined to comment on the suit.

Obama's First Policy Retreat?

Did Barack Obama just break his first campaign promise?

On the campaign trail, Obama railed against big oil companies. He often criticized John McCain for backing tax cuts that would reward ExxonMobil and other top oil manufacturers. But now Obama's proposal to apply a windfall tax on big oil has vanished... at least from his transition website. The President-elect's transition team hasn't explicitly announced it will drop the windfall tax plan, but a transition aide, commenting on the condition he not be identified, backed off the promise in an email. "President-elect Obama announced the [windfall profits tax] policy during the campaign because oil prices were above $80 per barrel," he said. "They are currently below that now and expected to stay below that."

The windfall profits proposal was deleted from the transition website almost three weeks before the eagle-eyed American Small Business League (ASBL), an advocacy group for small businesses, noticed the change and protested in a press release Tuesday. The plan was mentioned in a version (PDF) of the site that existed after Obama's election win. But when the transition website relaunched on November 8, references to a excess profits tax on the oil and gas industry were gone.

Fairness Doctrine Update

FAIRNESS DOCTRINE UPDATE....The conservative Media Research Center, not content with the current state of the art in wacko conspiracy theorizing about the imminent return of the Fairness Doctrine, has decided to create a whole movement to oppose it. The newly created Free Speech Alliance is, they say, "a gathering of a multitude of organizations and hundreds of thousands of individual citizens" designed to prevent the revival of something that no one is working to revive. Alex Knapp explains what's up:

Given the current political climate, conservative wins in the next two years are going to be few and far between. So conservative lobbying organizations are going to need a lot of funds to get anything accomplished. But it’s hard to raise money when it looks like you’re losing all the time. The solution? Raise money by fighting a policy that nobody supports! The continued lack of a Fairness Doctrine is the MRC’s ticket to “proving” that their being effective with their donations. All they have to do is harp in their fundraising letters that they’re being “successful” in fighting the Fairness Doctrine, and voila! Instant comparative advantage!

That's pretty much the NRA strategy these days too, and it seems to work pretty well. Maybe it'll work out for the MRC too.

Should Blacks Gain From Obama's Win?

So the New York Times thinks more TV stars will be black, but The Root doesn't think black political reporters will see any advancement. I think both got it right.

Hard as it is to land a TV role, it's not so hard to make a lead character black. At least, not as hard as landing the plum job of White House reporter. The Root points out that many black reporters made their names covering Jesse Jackson's presidential run. But that run was never more than symbolic; basically, you send black reporters to cover the civil rights movement, which is the best way to characterize Jackson's play. But the White House? The press corps there won't be darkening any time soon. And it shouldn't. The White House beat should, by rights, go to those who've earned it. Which black reporters can, and will do.

Democrats at the Pentagon

DEMOCRATS AT THE PENTAGON....With Republican Bob Gates staying on as Secretary of Defense, does that mean that all his Republican deputies will be staying on too? Matt Yglesias says no:

To provide some background and context, you need to understand that a lot of these guys were never Gates’ people anyway. Gates and Donald Rumsfeld had some pretty different ideas about a lot of stuff, but when Gates joined the Bush administration he wasn’t given the opportunity to clean house, fire everyone, and bring his own people on board. Since he’s been in office for a couple of years there’s been some turnover since that time, but still a guy like [Eric] Edelman has always been a Cheney/Rumsfeld guy who happens to be serving as one of Gates’ top deputies, not a Gates guy who Gates is desperate to hang on to. In fact, I think we can be fairly certain that Gates’ views are closer to those of a moderate Democrat like [Michèle] Flournoy than to Edelman. So whether or not to get rid of people probably wasn’t a bone of contention between Gates and the transition. What needs to be negotiated isn’t whether or not some of these folks need to go, it’s who to replace them with.

I doubt that Obama has asked for a complete purge of the upper ranks of the Pentagon, but at the same time it's almost inconceivable that his conversations with Gates didn't make clear that a whole bunch of Democrats ought to move into senior positions pretty quickly. Gates, not being an idiot, surely understands this as the way the world works, and is OK with it.

Auto Execs Starting to Get It?

Bad PR works wonders, apparently. Just two weeks after incurring public wrath for flying private jets to Washington in order to beg for bailout money, Detroit's top dogs are returning this week (driving hybrid cars to get here) with a plan to make amends:

Ford Motor Co. Chief Executive Alan Mulally plans to tell Congress he is accelerating his company's development of hybrid and electric vehicles and is willing to cut his salary to $1 a year if Ford uses any federal funds.

General Motors Corp. is expected to focus on efforts to lighten the company's heavy debt load and consolidate or sell at least one of its eight automotive brands, most likely Saab, people familiar with the matter said. GM CEO Rick Wagoner also will take a $1 salary, those people said....

In a phone interview Monday, Mr. Mulally said Ford will explain to Congress it is rushing to launch new hybrids and electric vehicles by 2011, including a battery-powered commercial van and compact sedan. A plug-in electric vehicle that can be recharged from a standard electrical outlet should follow in 2012, he said.

In a separate interview, Ford Chairman William Ford Jr. said the company is looking beyond survival to opportunity. "We want to come blasting out as a global, green, high-tech company that's exactly where the country and the Obama administration want us to head," he said.

There is serious reason to doubt Bill Ford on this issue — he has long talked a good game on environmental matters while his company continued to mass produce gas-guzzling over-sized vehicles. At this point, though, reality appears to have finally penetrated the auto executives' thick skulls. No more private jets, no more massive salaries, no more ignoring the market for hybrids, and hopefully, no more business plans that produce SUVs and little else.

XLR8R's Top Albums of 2008 List Speeds Out In Front

San Francisco- and New York-based mostly-electronic music magazine XLR8R has just released its Best Albums of 2008 list, and while they wimped out and didn't rank their 25 titles (come on, hippies!) their choices are so much better than the last magazine's list I'll give them a pass. Noted Party Ben faves Flying Lotus, Beach House, Portishead, M83 and Tobacco are in the mix, as well as intriguing choices from Atlas Sound, Daedelus, The Notwist and Spiritualized. Interestingly, they've rejected Lil Wayne (with hip-hop represented by Bun-B and Dizzee Rascal) as well as TV on the Radio (gasp, swoon). And of course there's the requisite super-obscure ridiculousness from Syclops, whose MySpace page announces huffily, "We are sorry, we don't do interviews or tour." But you have an awesome MySpace page! The magazine's inclusion of Yelle is a little iffy, since Pop Up came out in France in September, 2007 (remember me talking about Tecktonik last year?) but my own list archive has a few inaccuracies as well so, you know, glass houses.

Anyway, props to the '8R, and check out their full (and alphabetical—sigh) list after the jump.

Counterinsurgency

COUNTERINSURGENCY....Over at the Washington Independent, Spencer Ackerman referees an argument between Jason Brownlee and Andrew Exum about whether the Army's new focus on counterinsurgency is inherently imperialistic. Long story short, Brownlee says it is, Exum says COIN is just a tool and it's only imperialistic if Congress and the president use it for imperialistic ends, and Ackerman agrees with Exum. It's worth a quick read if you're interested in this kind of thing.

But as long as we're on the subject, I'll bring up a different concern, one that I'm just going to throw on the table since I don't really have the chops to write anything definitive about it. It's this: even now, after years of hearing from experts about how hard counterinsurgency is, do we really understand how hard it is? Imperialistic or not, my fear is that the success of the surge in Iraq, which was in large part coincidental, and the growing influence of David Petraeus and his proteges, has convinced policymakers that counterinsurgency is rapidly becoming a standard part of our military kit bag, one that we can count on in the future.

But I doubt that. It's still the case that in the entire history of the world since WWII, big power counterinsurgency has virtually no success stories. Malaysia is the famous exception, but the circumstances there were unusual, it took a very long time anyway, and it's almost certainly not repeatable. Likewise, although Petraeus's success in Iraq is unquestionably due partly to his adoption of superior tactics during the surge, that was only one of the Five S's that allowed his counterinsurgency doctrine to work. Without taking anything away from him, this just isn't an indication that COIN is any easier to pull off than it ever has been. It certainly doesn't seem to be making much headway in Afghanistan.

So that's that. Maybe some milbloggers want to weigh in on this. Are we becoming a little too excited about the future possibilities of counterinsurgency? Even if we take it seriously and get a lot better at it than we are now, is it ever something that's likely to be successful more than very, very occasionally? Comments?

"Black Friday" Not So Great for Music Industry

Is that still an "industry," even? Billboard is pointing out that while many retail sectors are breathing a sigh of relief after post-Thanksgiving weekend sales rose slightly, the world of music you pay for didn't do so well. First up, high profile album releases from Guns N' Roses and Kanye West both underperformed expectations, with G N' R's Chinese Democracy selling around 250,000 copies (compared to expectations of 300-700K), and Kanye's 808s and Heartbreak moving 425,000-450,000 units (while many expected double that). Maybe people just don't like those albums? Unfortunately, it looks like music sales in general suffered as well: stores like Barnes & Noble and Wal-Mart showed declines of up to 40% compared to last year.

Eric Holder

ERIC HOLDER...Richard Cohen is unhappy with Eric Holder's role in the Marc Rich pardon, and Ezra Klein agrees with him:

This stuff was no great secret. The Obama camp weighed these qualms and dismissed them. Which suggests that Holder's tendency to be a company man was not considered a negative. I'm not one who thinks the attorney general should be some sort of lone renegade within the administration, but he should feel empowered to aggressively push back against abuses of presidential power. Holder's history offers little evidence of that sort of temperament.

I don't have any special brief for Holder one way or the other, but I guess I'd look at this differently. Holder's role in the Rich pardon is obviously disturbing, as he himself has admitted, and there's no doubt it will get raised in his confirmation hearings. But the real question is whether this was an isolated mistake or evidence of a pattern, and so far I've seen no evidence to suggest the latter. If you think his error in the Rich case was so egregious that it ought to disqualify him forever from government service, I guess that's defensible, but it's hard for me to read things that way. If we barred from high office every person who failed even once to stand up to his boss, we'd have a pretty small pool of candidates to choose from.

In fact, not to get too contrarian here, but if Holder learned a lesson from the Rich pardon — and his own response to it suggests he did — it might push him in the direction of being more independent than he otherwise might be. It could end up being a blessing in disguise.

Mumbai Update

MUMBAI UPDATE....India ups the ante in its relationship with Pakistan:

With tensions high between Islamabad and New Delhi after the terrorist attacks in Mumbai, the Indian foreign minister said Tuesday his country had demanded that Pakistan arrest and hand over about 20 people wanted under Indian law as fugitives.

....The demand was made when India summoned Pakistan’s ambassador on Monday evening and told him that Pakistanis were responsible for the terrorist attacks here last week and must be punished.

This isn't surprising, I guess, since (so far) the evidence suggests that Pakistani terrorists were indeed behind the Mumbai attacks. Offhand, though, I'd say it's unlikely that Pakistan agrees to India's demands, which means tensions over Kashmir will continue to mount. However, considering that both nations are now nuclear powers and that the United States has obvious interests in terrorism in the region, perhaps that means they might both be a little more amenable to some outside diplomacy? Time reports on Hillary Clinton's transition into the State Department:

A key player to watch in the transition is Richard Holbrooke, one of Clinton's closest foreign policy advisers during the primaries and a potential top player in Obama's diplomacy now that Clinton is headed for State. Holbrooke is a career diplomat, known for being smart and effective but also hard to control and outspoken, qualities that haven't always endeared him to certain peers in the party....Holbrooke has been talked about for top troubleshooting jobs like special envoy to the Middle East or South Asia.

This is just a flyer, but it's hard not to wonder if Holbrooke might be able to do some good here. Stay tuned.

WMD Terrorist Attack "More Likely Than Not" by 2013, Says Report

On the heels of President-elect Barack Obama's announcement of his national security team, a new report wastes no time in outlining one of the more serious and immediate challenges facing the new administration: how to combat the spread of weapons of mass destruction (WMD). According to the Commission on the Prevention of WMD Proliferation and Terrorism, a congressionally mandated, bipartisan panel of experts led by former senators Bob Graham and Jim Talent, the outlook is not good. The panel's final report, due out tomorrow, shows proliferation to be on the rise and concludes that "unless the world community acts decisively and with great urgency, it is more likely than not that a weapon of mass destruction will be used in a terrorist attack somewhere in the world by the end of 2013."

The last administration famously began its ill-fated foreign adventure in Iraq out of fear that "a smoking gun could come in the form of a mushroom cloud." But the Commission sees biological rather than nuclear weapons as a more pressing concern, describing the United States as "very exposed" to biological attack. The US has taken the lead in securing fissile materials used in nuclear weapons (although serious problems remain), but comparatively little effort has been spent in preventing biological attacks. The nuclear age began with the use of nuclear weapons, which gave urgency to fighting their spread. "The life sciences community," says the Commission, "has never experienced a comparable iconic event. As a result, security awareness has grown slowly, lagging behind the emergence of biological risks and threats." One possible exception, of course, was the 2001 anthrax attacks. But the vulnerabilities in the system has been "only partly addressed" and the Commission notes that "if only 15 grams of dry anthrax spores delivered by mail could produce such an enormous effect [an estimated $6 billion in damages, not to mention lives lost], the consequences of a large-scale aerosol release would be almost unimaginable."

Obama Takes Initial Open Government Step

Who here is interested in the copyright standards of the Obama transition's web-based information, documents, and videos? Everybody, right? Excellent.

Open government advocates are cheering the fact that the Obama transition team has changed the copyright restriction on Change.gov to a Creative Commons Attribution 3.0 License, which allows users to grab content off Change.gov, copy it, remix it, and distribute it without limitation. All users have to do is attribute the content to Change.gov. It is the freest possible version of a copyright and a step in the right direction.

But there's more to be done, of course. The open government community is pushing for a couple more concessions from the Obama people, the primary one being that content needs to be practically accessible in addition to legally accessible. That is to say, it matters little if content on Change.gov can be remixed and modified and disseminated, if the coding of the content doesn't allow it to be copied in the first place. Here's an explanation from open-government.us, where you can find more ideas for a truly open transition:

South Texas Indictments of Cheney, Gonzales Dismissed

Happened yesterday. And it wasn't surprising.

The Great Recession

Who will we be after the economic meltdown? This is something I've been pondering a lot lately.

Maybe I'm overreacting, but if we don't all become our parents and grandparents—the ones who survived the Great Depression and used every tea bag thrice—the Visigoths are on the horizon.

Personally, I'm planning a major downsizing, even though I've been living far from large since having two kids. My parents were sharecroppers born in the 1920s Deep South, so I grew up wearing patched hand-me-downs, saving aluminum foil, and scraping the last dregs from every pot to have for lunch the next day. The amount of food my kids waste has always horrified me (all those bananas and PB&J's they were dying for, then took one bite of); since my oldest's birth, my diet has consisted mostly of scarfing down their leavings. Once upon a time, I knew this was laughable. Now I'm telling the whole world: For dinner last night, I had partially eaten raviolis and pre-gnawed garlic bread scraped from both their plates, plus their leftover apple juice (son) and milk (daughter). Pre-Bush, it was just a habit my schmancy friends chuckled at indulgently. Post-Bush, it's a civic duty, a matter of house and home.

So, I'm waiting, hoping, to find that we all become like my tight-fisted Great Aunt Pearl who grew up five to a bed, downwind of the outhouse, but owned four mortgage-free houses by the time I was born. She made an apple last for three days. If you asked her for a Christmas present, she'd glare and say, "You got the day off didn't you?"

HuffPo has inagurated a new column to suss out how, if, we're all adapting to this brave new world of utter insecurity. Maybe now America will become the place where we brag about how many we fit into how little space and not how big our flat screens are. Or maybe this is just a history we'