Full Court Shuffle

Concern about federal court appointees has reached a crackling pitch.

In his recent op-ed, Stephen Calabresi warns against an Obama presidency that could, he says, shift federal courts dramatically to the left. But that's not the whole story.

He begins by noting that while Reagan appointed 8 judges to the D.C. Court of Appeals, George W. Bush was able to appoint only four. That's true. But it's no loss of conservative influence, given that Clinton appointed only two.

In the past 30 years, that court has received a dozen Republican appointees and only two Democratic ones, both older judges likely to retire soon. The existing two vacancies, plus replacement of at most four older Republican retirees, is hardly going to swing the conservative tilt of the past 30 years.

Calabresi also overlooks that of the 13 courts of appeal, only one has a majority of Democratic appointed judges. George W. Bush bragged about appointing more than

 a third of federal appeal judges now serving. When he began his time in office, a majority of federal judges were already Republican appointees.

Yes, I know the above the link is to the New York Times, which conservatives like to trash. But I'm citing it for factual reference, not opinion. If you feel the Times is wrong about the above facts - that George W. Bush actually did not speak with pride about his large number of appointments, or that most appellate courts actually have more Democratic appointees - feel free to speak up.

In truth, it's extremely rare for any of the major papers to have their facts wrong, whether the Wall Street Journal or the New York Times. What's common is to get only part of the story, and that's what the Calabresi offered in his op-ed.

He even went so far as to imply that Obama could tip the balance of the Supreme Court, noting the advanced age of several justices. But he doesn't cite them by name, a convenient oversight when you realize that by far the oldest justice is the most liberal, John Paul Stevens (age 88). If Obama replaces him with a liberal, the court balance changes not one bit.

The next oldest: liberal Ruth Ginsburg, age 75. The only other Democratic appointee on the court, Stephen Breyer, is 70. (The recent slew of 5-4 decisions include a fourth 'liberal' vote from David Souter, a Reagan appointee. He's 69.) Kennedy and Scalia are 72, though in such health that very few expect either of them to retire soon.

How old are the most recent Republican appointees? Clarence Thomas, 60; Samuel Alito, 58; and Chief Justice John Roberts, 53.

The plain truth is that a McCain win could dramatically alter the balance of the courts by pushing it to the right, while an Obama win can only check the swing, not reverse it.

Calabresi's colleague, David McIntosh, the other co-founder of the Federalist Society, is more complete in his assessment, saying that the nation's appeals courts were more conservative "than certainly any other time in my life."

So call a spade a spade: what an Obama win really risks is bringing the federal appeals courts a little closer to the Reagan era.

A Mighty Brief History of Bailouts

The forgotten bailout of my post of Sept 30th  is just the most recent in a long line of government interventions.

Here are the three largest bailouts of the past,  (financial figures from a related Wall Street Journal article), and it's easy to see a pattern: they work.

At least they do if done early, with substantial support. They don't seem to fail even when large - look at the incredible credit extended by the RTC - but they do need to happen quickly enough to restore confidence.

-       The S&L Crisis

It cost $124 billion, but an FDIC historian notes, “Perhaps a measure of the Resolution Trust Corporation’s success is that little more than a decade after it closed, this agency that provoked so much debate is now largely forgotten.” 

 

-       Mortgage defaults of the Great Depression

By 1933, a thousand Americans a day were losing their homes to the bank. Creation of the Home Owners’ Loan Corporation handled 1.9 million applicants, about half of whom had monthly incomes below $150.

 One in ten Americans eventually secured aid from the agency, and since there was no secondary market for securitized mortgages, the agency had to hold the loans for the full terms.

 When it closed in 1951, 80% of borrowers had paid off their loans on time or early, and it even earned a small profit.

 Economist Alan Blinder has cited it as a model to be considered today.

  

-       The Panic of 1792

When the federal government assumed obligations that states owed from the Revolutionary War, it added $18 million to a domestic debt of $65 million, held in debt securities attractive to speculators. 

One speculator in particular cornered the market on government 6% bonds, so-called Sixes, and then prompted a selling frenzy that led to a 25% drop in value. 

Working without a historical blueprint, Alexander Hamilton engineered an innovate response. The Treasury borrowed money from banks and used to buy the bonds, lifting the market price. He also told banks to accept the bonds as collateral for loans, with the government guaranteeing their worth.

 The financial system stabilized quickly, and not a single bank faired for fifteen years, a remarkable outcome for such an unproven strategy, says economic historian Robert Wright. He named his son Alexander Hamilton Was Wright.

 

San Francisco Gets Health Care Backwards

Who needs health care coverage?

People without it,  and preferably those least able to afford it. That's what makes San Francisco's recent moves on health care all the more perplexing.

When the city fought in court to charge businesses for employee health care coverage, it turned the whole program upside-down, placing the burden on those at the bottom of the economic ladder.

No, not businesses, who are only the most visible contributors. I'm talking about employees, especially the ones in need of health care.

They'll be hit hard by the foolish flat-rate payment to the city. The nearly $2/hr charge is minor only for those with large salaries. For the poorest employees, it's a significant portion, more than 20% of San Francisco's substantial ($9.36/hr) minimum wage.

 The employees at your nearest retail store, and the dishwasher at your favorite restaurant, the gal who stocks the shelves at the corner grocery and the guy who hangs your dry-cleaning -  they're all earning minimum wage, and now each of their employers sees labor costs leap 20 percent.

Guess what happens to the price of milk at the corner store.

And to the cost of your dry cleaning, and your meals out, and everything else you buy. Those price increases may not matter much to the wealthiest, who already have health care, but they will to the very people who need the new  coverage.

Yes, businesses with fewer than 20 employees are exempt, but that hardly helps. They often need health care options anyway - I do, at my own business - and companies just over the limit face a terrible set of choices. Any company with 30 employees that sees its labor costs leap has got to consider layoffs, and that's the worst kind of coverage of all.

Far better is the Massachusetts plan: spread the cost through all participants, subsidize for the poorest, and make sure the burden doesn't break the very people you're trying to help.

the Bailout Congress Forgot

The shameful failure of Congress to pass the bailout hurts an awful lot of Americans, not just wealthy bankers.

Have a retirement account? Own a home? Need a business loan? Whether or not you made any mistakes at all this year, you're getting pummeled by a fractured market and a government that is failing to help.

No one needs a handout - not even failing banks - but we do need restoration of confidence. It needs to be prompt, clear, and sufficient.

Remember the Mexican bailout under the Clinton administration? Maybe not, since it turned out so well. When Mexico was facing financial ruin in a deepening spiral, the Treasury stepped up to offer $40 billion in credit. The amount was considered huge, but that was intentional: it was meant to reassure the markets that more than enough was being done.

It worked. Creditors relaxed, and Mexico was able to get more loans from other sources. It needed little of the money offered by the Treasury and paid back all that it took.

But Congress voted against it, days after promising support. Dissenting Republicans said we couldn't spend our money helping an irresponsible nation, and they yanked their votes.

At that time, the Treasury exercised a little-known option to bypass Congress, and all went well. But Congress later passed a law to close that approach, so now we need their support.

And they've failed to give it.

This isn't about 'principle' or 'voting your conscience,' as  Rep. Jay Inslee (D-WA) claims. How did that kind of reasoning work in the 2000 election?

Whether or not you think we need protection for homeowners and tighter regulation of credit default swaps (as both Inslee and I do),  we need swift action, even if the bailout package is imperfect.

The longer we delay, the more it costs us. Look at the effects of  allowing Lehman to fail, which then hurt AIG, which then weakened Merrill Lynch, which led to a run on Washington Mutual, which increased worry about Wachovia.

Compare that to the swift and comprehensive protection during the Mexican bailout. By acting decisively, the crisis passed quickly and at less cost.

I know that some people feel banks deserve to fail - see my 'moral hazard' blog from last week, and several of the comments after the Inslee link above (and this  thoughtful response from blogger Ken Smith) -  but this is a market crisis that affects all of us.

I'm not out to punish any bank, or hedge fund, or C.E.O.  I don't care about them. I do care about my family, and my friends, and my neighbor, and the rest of Americans hurt by the crisis.

And we deserve a Congress that does, too.

the Hidden Vaccine Debate

If you're a parent of small children, you've heard the usual vaccine debate: one side claims vaccines have suspicious links to autism, while the other claims vaccines are safe. I've never met anyone in the middle.

But the middle is home of the real debate, one hidden from the current yelling about autism. The real question is, 'How much do parents know about the ingredients and effects of vaccines used for their children?'

The answer is: not much. We deserve a debate that asks whether we're adequately weighing risk vs reward, regardless of whether or not a given vaccine contains mercury.

Few childhood vaccines now contain mercury (a very few do, including flu shots), but they do contain other ingredients worth asking about.

The recommended course of childhood vaccines often include about 1875 micrograms of aluminum, for example - astounding in light of the the FDA recommendation that premature babies get no more than 10 to 25 micrograms a day.

Are non-premature babies at risk? We don't know, but we do know aluminum builds in the brain for neurologic damage.

Aluminum is just one ingredient with effects worthy of study. Formaldehyde in vaccines is common, as are odd animal derivatives (like the fetal cow's blood and monkey kidney cells in the rotavirus vaccine).

That doesn't mean vaccines are bad. My kids are vaccinated. Robert Sears recommends vaccines in his excellent Vaccine Book, the most informative and debate-neutral book I've found.

But we do deserve to know more about the ingredients of injectables for our children, and both parents and the medical community deserve a thoughtful debate.

Yelling, 'Vaccines are autism potions!' or shouting, 'Vaccines are perfectly safe!' reduces the discussion to mere bleating. Neither is quite true.

Vaccines offer terrific benefits to children, but they do carry some risks.

Shouldn't parents be well informed about both?

Goodbye, at Last, to David Foster Wallace

Though David Foster Wallace surely meant people to take notice last week, when he hanged himself where his wife would find him, the sentiment is nothing new.

He's always been the center of his writing, and perhaps that's reason enough to move on. Newspapers have been littered with paeans to the lost post-modernist, calling him not just 'brilliant' but 'the best mind of his generation.'

While Wallace was indeed smart,  he was always the center of his own spotlight, a light he held steady with obsessive focus. Instead of using his intellectual gifts to illuminate the outside world - and he wrote on many subjects, from lobsters to infomercials - he compulsively returned to himself, so that all of his books deserved not just the byline but the title 'David Foster Wallace.'

Fans rave about how smart he was, how facile and erudite. But they don't talk about what they as readers gain from him. The whole intellectual exercise, from start to finish, is about the maker of the puzzle. It's a game of see-how-smart-I-am hidden behind literary screens, ever protected by the ready response of 'you-don't-see-after-all?'

Let's look at the passage the New York Times selected as 'exemplary':

“3d. Narr intrusion, expo on Jeni Roberts [same flat & pedantic tone as ¶s 3, 4 of ‘A.W.(I)’ PT. 3]: While following F.L.’s teal/aqua Probe down xprswy, J. hadn’t ‘changed mind’ about having secret adulterous sex w/F.L., rather merely ‘...realized it was unnecessary.’ Understands that she has had life-changing epiphany, has ‘...bec[o]me a woman as well as a wife’ & c. & c."

At first glance, it's incomprehensible, a miniature display of literary fireworks that threaten to burn you if you come too close. Taken slowly, it's not so daunting.

Read as a writer's notepad entry, it gains its thickness through abbreviation, like an unfamiliar text messaging that gradually makes sense.  'Narrative intrusion: exposition on Jeni Roberts, in the same flat and pedantic tone as in paragraphs three and four.' 

Fans would tell you that the passage gets ironic heft from its content, since Wallace is writing about a life-changing realization, but one that is here reduced to a near-laundry list notation, giving as much weight to the color of her car as to the details of her epiphany. According to Wallace, stories are 'falsies': what you see is not what you get.

He's entitled to the view, as is Ezra Pound, T.S. Eliot, Barth, Pynchon, Borges, Nabokov, and a whole generation of English departments. It's not a new perspective.

What's different is its unrelenting focus on the writer, this particular writer, so that instead of musings on how our minds work, we get still more on how David Foster Wallace's mind works.

It's a sharp mind, and an observant one, but for all its acclaimed ability, it was rarely brave enough to venture far from its own home, its flesh-and-bone encasing of personal anxiety and guilty condescension.

It's time to give that, and him, a rest.

The Phantom Moral Hazard

There are a thousand theories about why American markets are in such turmoil, and ten times as many about what we need to do. Here's one of the craziest.

Some economists and many conservative pundits say we should let financial giants fail, because if we save them, future executives will feel safe with even more risky behavior.

This so-called 'moral hazard' is a principle of economics that applies in some cases, but it's awfully hard to see it here. Let's see what's happened to the wealth of these executives as their firms prepare for bailout.

Stock value for CEO's of rescued firms ($ millions)

CEO	Firm	2007 value	Last Friday
Greenberg	AIG	1,250	50
Fuld	Lehman	827	2
Cayne	Bear Stearns	1,060	61
Sullivan	AIG (ex-CEO)	3	0.1
O'Neal	Merrill (ex)	128	40
Mudd	Fannie Mae	26	0.4
Syron	Freddie Mac	11	0.1

Look at, say, James Cayne, former head of Bear Stearns. I'm not asking you to feel sorry for him - he's still got $61 million in stock there - but note that up until last year, he was worth nearly a billion dollars.

Can you imagine a CEO saying, after the bailout, "I know I should do more to manage risk, or I might lose 95% of my personal worth, my job, my title, control of the company, and the respect of my peers, but at least the government will keep things from getting too bad" ?

Sounds silly, doesn't it? So is the argument that the government is doing too much.

No one is removing the risk from the financial markets. We're just taking steps to ensure that when Wall Street stumbles, the rest of us lose less than, say, some CEO's.