Monday, May 28, 2012

The heart of the American dream still lives

I just came back from a trip to our nation's capitol, Washington D.C., where I spent some wonderful, inspiring, and thought provoking time with dear friends. It is quite a stunning experience to go as deeply into the heart of the monuments and memorials of our country as I could and try to feel the essence of the United States.  And it seems fitting on this Memorial Day to try to summarize my notions of what the essence of our country is.

I believe at the heart of America is the overthrow of rule by aristocracy.  

When George Washington and the founding fathers of our country rose up and created our nation, it wasn't just the rule of England that they said "no" to, it was the rule by an aristocracy that they said "no" to.  It was an amazing revolution because it was the elite of the American colonies who led the revolution rather than the masses.  One of its wonderful characteristics, it seems to me, was that it was so deeply rooted in deep understandings of political history and philosophy.  They understood the virtues and failings of previous democracies and set out to establish system where the people would rule themselves rather than be ruled by an aristocracy.

So, what happened in next couple of centuries?  We have done a pretty good job, I believe, in doing just that - ruling ourselves in a country "of the people, by the people, and for the people" to quote President Lincoln.  But to fend off newly forming aristocracies has always been the challenge of our country.  Teddy Roosevelt struck a blow against the over-control of the oligarchies and monopolies of his era and became the trust buster.  Reagan struck a blow against the impersonal bureaucracies of overly controlling governments in the state and federal governments.

So, in an odd way, it seems to me that the Tea Party and the Occupy movements, one on the right and one on the left, at their heart, in their essence, are extraordinarily similar.  

The Tea Party extremists of the right wing see the liberal government headed by President Obama as becoming tyrannically controlling more and more of people's lives and rebel against it.  They are impervious to arguments that the government is taking over more and more of society for our own good, and reject the righteous puritanical tyranny of the "do-gooders" as meddling tyrants.  They see the left wing as a new "aristocracy" of the highly educated by the elite schools trained to become the philosopher kings dreamed of by Plato.  And they reject them as puritanical scolds who force the country to conform to more and more trendy intellectual fads that the intelligentsia become enamored with. They see the aristocracy of the intelligentsia as being impractical, idealistic, hopelessly out of touch with reality, and dictatorial.  

The Occupy Wall Street movement extremists of the left wing see the financial industry and industry in general becoming more and more tyrannical as they control more and more of the electoral and governing processes with their enormous wealth for the purposes of feeding their own greed for huge wealth and political power.  They are impervious to arguments that Wall Street and industry are the gooses the lay the golden eggs for all, and see wealth creation as a function of the greedy at the top with no concern for the rest of us.  

In other words, the extremes on both the right and the left are wanting a new revolution, patterned on the original American Revolution - they want to overthrow the tyranny of the ruling aristocracy.  But for the right, the ruling aristocracy are the intelligentsia who dominate the government and the media, and for the left, the ruling aristocracy are the business leaders of Wall Street and industry.

The both have a pretty good point, it seems to me.  

The biggest problem with both extremes is that they see their opponents as devils who must be destroyed.  Kind of strange that they don't see themselves as allies united in rebirthing a new version of the America dream, a dream where the people are able to rule themselves, and create a government "of the people, by the people, and for the people" - the original dream of America - and of the world.

Tuesday, May 15, 2012

Even the right is calling for the breakup of the too big to fail banks

I have read two articles now by conservatives calling for the break up of the too big to fail banks - Charlie Gasparino of the New York Post, and Arnold Kling of the National Review.  In the past, almost all of the calls to break them up have come from the left side of the isle, so this is interesting to me that the right is joining in as a result of the massive losses of Jamie Dimon's JPMorgan Chase.

I think the most persuasive argument for breaking up these behemoth banks is that if even Jamie Dimon can't catch his own company in the act of taking excessive risks in the derivatives markets, then there is no chance of regulators catching them - they aren't as smart as Dimon and don't have his resources. 

The point is that these organizations are way too big to regulate, but beyond that they are even too big to manage.  If the much admired Dimon can't do it, it can't be done.  

And, we all know what happens if one of these Titanic financial institutions go down, they are too big to fail and have to be bailed out by our taxpayer dollars.

Regulation will be inadequate to the task of protecting the financial industry and our tax dollars.  They won't be able to see what these labyrinthine giants  don't want them to see.  For goodness sake, the very management of these institutions aren't able to see what others in the organization don't want to be seen.  

Maybe the time has finally come to actually do it - break up the too big to fail financial institutions.  

Saturday, May 12, 2012

JPMorgan Chase looses $2 billion on excessively risky derivatives trading

The giants of Wall Street continue in their pattern of pushing their risks to the edge and beyond, or so it appears to me.  Jamie Dimon of JPMorgan Chase was considered the golden boy of Wall Street after the terrible crash of 2008 since he and his institution escaped some of the more dire consequences of that crisis.  Unfortunately for him, his firm, and America Mr Dimon apparently led the charge to carve out a loophole in the "Volker Rule" of the Dodd-Frank financial regulation bill that was passed as a result of the crisis.  

As I understand it, the Volker Rule forbade the financial institutions from trading in their own money in the derivatives market.  But there was an exception that was granted as a result of the intense lobbying led by Dimon - hedging was allowed.  But the hedging was to be a hedge against a specific, individual trading position.  JPMorgan Chase's hedging looks like it was a violation of the law, as it was a "portfolio hedge" rather than a targeted hedge.  

Edward Wyatt of the New York Times explains:

The loophole is known as portfolio hedging, a strategy that essentially allows banks to view an investment portfolio as a whole and take actions to offset the risks of the entire portfolio. That contrasts with the traditional definition of hedging, which matches an individual security or trading position with an inversely related investment — so when one goes up, the other goes down.

The way the loophole was justified was that it was supposed to mitigate risk by hedging against failure.  But once the hedging was expanded to the entire portfolio it became a risk again rather than a conservative insurance type position.

I hope that these trades were a violation of law.  I hope that JPMorgan Chase and its management, including Dimon, are found guilty of violation of that law and that they pay real consequences for those violations.  

As far as I can tell, the overall zeitgeist of Wall Street has not really changed.  It looks to me like they are still in the grip of their traders' mentality, which seems to be bet the farm on riskier and riskier investment schemes, and if they win they make huge fortunes for themselves (without any substantial benefit to the economy as these derivatives are zero sum gambling games rather than investments in the economy or businesses), and if they lose they don't pay much of a price, and if they lose big enough they can count on Uncle Sam to bail them out with our taxpayer money.

I am not enough of a financial expert to know the details; I am just reading and trying to figure it out, but this event looks like it is more of the same greedy overly risky behavior that is still the guiding principle of Wall Street.  

Tuesday, May 8, 2012

Can you see the goodness of your political opponents, or do you see them as demons to be destroyed?

New York Times writer Paul Krugman wrote an editorial declaring that the problem in the country and the world is the Republicans.  Not a surprise for him to think that, of course, as he is a cheerleader for the Left wing of the Democratic Party.  I often read him, but I usually find him to be part of the problem in our politics rather than part of the solution.  By that I mean that he is firmly in the camp that sees the political world as split between the good people and the bad people.  He seems to me to have a very limited sense of imagination when it comes to putting himself in the shoes of his political opponents, and can only see them as enemies that must be destroyed, or at least defeated very very soundly.  

I am sure that there are millions and millions of conservatives who would take angry exception to Krugman's notion that their political beliefs are a result of being bought by the .01%.  Somehow, in Mr Krugman's world, Republicans are dim-witted pawns of the super-humanly persuasive .01% who apparently can buy the opinions of scores of millions of people with their supernaturally powerful lobbying.  That notion says that conservatives are stupid, naive, sheep, unable to reason for themselves.  

Needless to say, Krugman will have no chance of ever persuading any of them to see the light that he is so certain of.  Of course, those who see the world the same way that Krugman sees it will think that he has once again made a brilliant analysis showing how those who agree with Krugman are smart and good, and those who disagree are dumb and/or bad.

And of course, the same situation is on the other side of the political spectrum.  Conservatives are always thrilled by the partisan arguments of George Will and Rush Limbaugh, and are convinced that if they could just get the other side to pay attention to the great wisdoms that they utter, everyone would eventually agree with them.

What is missing, I think, is understanding.  It seems to be so very difficult to use our imaginations when it comes to political debates.  That is to say, it seems almost impossible to imagine the goodness of our political opponents.  To get our minds inside the mindsets and moral values of those we oppose.

To one of Krugman's points, it is certainly true that greed and almost pathological indifference to the suffering that many on Wall Street caused is there.  But there are very positive effects of the financial and corporate world as well.  And just seeing those who support conservative ideas as pawns of the greedy enemy is a lack of imagination, it seems to me. If we aren't at least a little confused and uncertain, I think that may be a sign that we are trying to calm ourselves with the certainly of ideology as the world swirls scarily around us.  

If we can see our political opponents as human, respectable, and good, then  from there politics can actually happen, that is, negotiation, compromise, solutions that are free from the iron grips of the True Believers on both the Right and the Left.  And politics can stop being about doing anything and everything necessary to keep from losing to the evil demons on the other side of the isle.

Guess what?  Our political opponents are not going to go away.  Both extremes seem to think that finally in this, this, this election they are going to vanquish the opposition to the point where they disappear.  Never happens.  They always come back.  

It seems to me that there is a simple test to tell if you are able to see both sides of an issue.  If you can't argue persuasively, intelligently, and emotionally for both sides of a issue, you don't really have an opinion about it, you aren't at choice about it, you are just reacting. If you can't see and feel the emotions underneath the positions of your political opponents, I don't think you can really make any claim to making a real choice rather than just being a knee-jerk liberal or knee-jerk conservative.  I have been on both sides of the political spectrum, with passion and study in both cases, and I know that there are good people on both sides, and of course there are scoundrels as well.  

I guess my main point is that you can't persuade someone to change their minds if you think that they are evil or stupid.  You have to start with respect and understanding.  And I don't mean the kind of understanding that psychoanalyzes them and concludes that the reason they believe what they believe is because there is something wrong with them.

All that being said, I think the Republicans are more intolerant and divisive than the Democrats now, but the Dems are completely entrenched in the protection of their patiently built up entitlement systems and social agendas, every bit as much as the Republicans are entrenched in trying to dismantle the entitlement mentality of the nation and their own conservative social agendas. 

 Result?  Demonizations all around.  Which I regret.