Via Krugman, a good description of how the Bush-McCain economic program resemples the Coolidge-Hoover program that caused the Great Depression:
The real cause [of the Depression] was the collapse of the banking system, which followed the crash in part because Hoover believed strong fundamentals would protect the economy from disaster.
For the likes of Hoover and McCain, asserting the strength of fundamentals is shorthand for saying that business leaders, with maybe a little cheerleading, can sort out the crisis and that Congress should not try to regulate their behavior. It's too soon to know if McCain will be proved right (I doubt it), but Hoover certainly turned out to be wrong.
At the time, Sen. Robert Wagner, a New York Democrat, characterized Hoover's response to the crisis as "the time-worn Republican policy: to do nothing and when the pressure becomes irresistible to do as little as possible." In fairness, Hoover didn't quite "do nothing," but he followed a script that may sound familiar to students of the modern Republican Party.
Why does the name "Santayana" keep popping up in my head? (Third quote from the bottom, perhaps?)
One of my oldest surviving friends says she's going as Sarah Palin for Hallowe'en. After all, what could be more frightening?
Krugman elaborates on the events that made me say yesterday was scary:
The new system was supposed to do a better job of spreading and reducing risk. But in the aftermath of the housing bust and the resulting mortgage crisis, it seems apparent that risk wasn’t so much reduced as hidden: all too many investors had no idea how exposed they were.
And as the unknown unknowns have turned into known unknowns, the system has been experiencing postmodern bank runs. These don’t look like the old-fashioned version: with few exceptions, we’re not talking about mobs of distraught depositors pounding on closed bank doors. Instead, we’re talking about frantic phone calls and mouse clicks, as financial players pull credit lines and try to unwind counterparty risk. But the economic effects — a freezing up of credit, a downward spiral in asset values — are the same as those of the great bank runs of the 1930s.
More details as events warrant.
AIG is about to die; Lehmann won't survive the night; and now, Bank of America has agreed to buy Merrill Lynch. Today has been one of the most frightening days on Wall Street since...well, you know:
Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry’s reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear.
The weekend's once unthinkable outcome came after a series of emergency meetings at the Federal Reserve building in downtown Manhattan in which the fate of Lehman hung in the balance. In the meeting Federal Reserve officials and the leaders of major financial institutions were trying to complete a plan to rescue the stricken investment bank.
Merrill's chief executive, John A. Thain, and Kenneth D. Lewis, Bank of America’s chief executive, initiated talks on Saturday, prompted by the reality that a Lehman bankruptcy would ripple through Wall Street and further cripple Merrill Lynch, people briefed on the negotiations said.
And who may we thank for the seven-year free-for-all that has brought our financial system to its knees? Who was in power? The Greedy Old Party, perhaps? Hmmm....
Via Calculated Risk, Lehman bankruptcy expected before midnight tonight, after Bank of America pulls out of its rescue:
Bank of America Corp. abandoned talks to buy Lehman Brothers Holdings Inc., according to a person with knowledge of the matter, less than three hours after Barclays Plc said it wouldn't buy the faltering investment bank.
The U.S. government is racing to find a solution for Lehman before markets open tomorrow, two people familiar with the situation said. Barclays walked away because it couldn't get guarantees from the government or agree on a private-sector deal to mitigate what it called Lehman's "open-ended" trading obligations.
Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight New York time.
Who said mortgage-backed securities weren't safe?
Update, 18:00 CDT: Yep.
Not the most fun day of my life—let's skip why—but arriving home and checking the blogs, I let out a guffaw at Calculated Risk's post this morning. Sadly, though, it means I'm a big nerd.
Sarah Palin is the prestige in McCain's campaign. I mean that literally: her job is to distract us from McCain's utter, complete, and frightening unsuitability for the presidency with her utter, complete, and even more frightening unsuitability for any national office whatsoever. I worried that the strategy was working for a while, but I think things might be changing.
That said, someone thinking we should go to war with Russia for any reason short of, I don't know, the imminent destruction of Western Europe, might need to re-examine her foreign policies (or get one in the first place). As Josh Marshall put it: "Palin...[drew] out the logical inference of McCain & Co.'s unhinged policy vis a vis Russia—not a huge surprise if you've just learned the policy in the last week. But McCain and those in his entourage at least have the seasoning to know not to traipse into throwaway hypotheticals about 'war' with the only other country in the world with a vast and eminently deliverable nuclear arsenal."
Fifty three days until the election...
The Chicago Public Schools are now bribing children to get higher grades:
Up to 5,000 freshmen at 20 Chicago public high schools will get cash for good—and even average—grades as part of a new, Harvard-designed test program that city education leaders are rolling out Thursday.
Students will be measured every five weeks in math, English, social sciences, science and physical education. An A nets $50, a B equals $35 and a C still brings in $20. Students will get half the money upfront, with the remainder paid upon graduation. A straight-A student could earn up to $4,000 by the end of his or her sophomore year.
"It's a terrible idea, because you're getting people to do things for the wrong reasons," said Barry Schwartz, a Swarthmore College psychology professor who has written on the issue. "They'll do well in school, maybe, but they won't take any of it out with them. Instead of trying to cultivate an interest in learning, curiosity . . . you are just turning this into another job."
It may not be obvious, but bribery is force—coersion—robbing the behavior of any intrinsic value. Not to mention, any metric can be gamed, and with money on the line, the opportunities for corruption increase by orders of magnitude. Arguing points on a test will now have a financial stake, which changes the stakes of arguing points on a test dramatically. Once coersion exists in the system, it will be applied in both directions. Teachers and students have a naturally adversarial relationship already; this will make it much, much worse.
This is, in short, the stupidest idea I've ever encountered in public education. Our city will get exactly what it pays for with this program. It's just a pity the CPS doesn't get what that means.
Canada's Conservative government has called a snap election:
Prolonged speculation over whether Canada’s minority Conservative government would call an early election has ended with Prime Minister Stephen Harper’s announcement that voters will go to the polls on October 14th. This is a full year ahead of the date Mr Harper proposed in legislation submitted after he assumed power in January.
This will be the third national election for Canada in just over four years, and highlights the difficulty recent governments have had in garnering majority support at the polls. Both the major parties had for months appeared wary of pushing for an early election until they had strong enough backing to win a majority. Until recently the Conservatives enjoyed a slim lead in opinion polls, allowing them to force the Liberals to back down in parliament. Some recent polls show both parties holding nearly equal popular support. The Tories have been damaged by a series of scandals that have tarnished their public image; the latest of these, a campaign-financing scandal, is currently being examined by a parliamentary committee. This has benefited the Liberals....
To some extent, I'm envious of the Canadian system. Last week no one knew they'd have an election this year, and before our third Presidential debate (and three weeks ahead of our own election), they'll either have an entirely new government or the Tories will have a mandate for five more years.
Do you think their campaign will be about patriotism, pigs, or POWs? No? Neither do I.
TPM Media gives you: the McCain-Palin Lipstick Pig:
(I mean, someone had to, right?)