Taking wrong lessons from the banking crisis.

Reading Joe Nocera's marvelous NYT piece on the legacy of the FDR-era Glass-Steagall Act - more than six decades of U.S. banking stability until Glass-Steagall was revoked in 1999, followed by the biggest, most disastrous housing bubble in U.S. history - inspires popular U.S. economics blogger Barry Ritholtz to scorn the

enormous series of errors from newly elected President Obama, from appointing the status quo duo (Geithner and Summers) to letting the guilty parties off the hook. He should have been hammering away at the miscreants who caused the crisis, instead of continuing George W. Bush’s socialist bailouts of the banks.

Just a few results of his team’s inability to confront the causal forces?

1. A generational opportunity to restore accountability and prudence to banking

2. The trashing of zombie bad ideas that refuse to die

3. The misdirected fury of the Tea Party.

The missed opportunity to restore Glass-Steagall, repeal the CFMA [the Commodities Futures Modernization Act of 2000, which deregulated over-the-counter derivatives], and create a more honest framework for Wall Street and Banking will always be for me, the greatest tragedy of the Obama administration.

 
Richard Fuld, ex-CEO of Lehman Brothers; Stan O'Neal, ex-CEO of Merrill Lynch; Lloyd Blankfein, CEO of Goldman Sachs. (Fuld and O'Neil, Bloomberg; Blankfein, Getty Images)

This view of Obama falling short of FDR is widely held by economists I highly respect, including Ritholtz, Joe Stiglitz, Robert Reich and Paul Krugman. But it misses the point. The point being that a deeply embedded sense of entitlement among America's monied class caused the crash, not the absence of Glass-Steagall or anything Bush and Obama did or didn't do. There's never been a law to prevent those willing to risk crashing the system from doing so while in pursuit of stupendous short-term gain. I don't imagine there ever will be one.  

* Glass-Steagall divorced investment from traditional banking. Canada's Big Six banks, which came through the Great Recession with flying colors, absorbed the country's investment banking sector more than two decades ago without incident, save that raising capital in Canada became more efficient and the combined institutions were more soundly capitalized. Lesson: There's nothing inherently dangerous about the co-existence of investment and traditional banking under the same roof.

* America's top six banks now control about 53% of the nation's total banking assets, a worrisome outcome of the forced mergers of weak institutions into bigger ones during the credit meltdown of 2008-09. (Among the former giants merged out of existence: Merrill Lynch Inc., Bear Stearns Cos., Wachovia Corp., Countrywide Financial Inc. and Washington Mutual Inc..) Those U.S. banks deemed "too big to fail" are even bigger post-crisis, worsening the threat of moral hazard. Canada's Big Five banks, all too big to fail, and accounting for more like 80%-plus of Canadian banking and investment banking assets, have been that way since the last of the mergers that created them, in 1961. In the five decades since, none of these banks have required anything remotely like a government bailout, or come close to invsolvency. Instead, the banks and trust companies (a sector also since absorbed by the Big Five banks) that failed during that time were small, or wholesale banks, or regional startups which had to be forcibly merged by government into the Big Five. Many had controlling shareholders, who also happened to be real estate developers. By contrast, by law no one can own more than 10% of a "Schedule A" Canadian bank, which covers the Big Five and Quebec-based National Bank of Canada. Lesson: Banks that are too big to fail are not necessarily an invitation to moral hazard. Actually, an oligopoly is easier to regulate than, say, the fragmented residential construction business. Canadian bank regulators have about half a dozen phone calls to make in order to get every major bank to rein in lending when there's a bubble on the horizon. The U.S. still has more than 7,000 federally insured banks alone. To be sure, big, diversified, bureaucratic banks can be be a lousy investment. The average annual decline in stock-market value of America's five biggest megabanks over the past decade is 2.3%. The average annual gain in the value of stock in Canada's Big Five banks during that time is 11.6%.

* As Roger Lowenstein argues persuasively in a Bloomberg BusinessWeek cover story, the avarice, undue haste, shoddy assessment of risk (when it was assessed at all), willful ignorance and rank incompetence of the bankers who caused the crash was not and is not illegal. In 1929, Senator Carter Glass said of Charles (Sunshine Charlie) Mitchell, head of Citigroup Inc. predecessor National City Bank, that "Mitchell more than any 50 men is responsible for this stock crash." But just as Mitchell was acquitted in 1933 on criminal charges, so were the two Bear Stearns miscreants in one of the earliest high-profile cases brought by the Justice Department after the latest meltdown. Greed is anti-social, profoundly so. But it is not illegal.

* I wouldn't want Tim Geithner and Larry Summers on my economic team either. But for the record, Summers agonized about nationalizing one or two of the "miscreants" (most likely Citigroup and Bank of America) in order to set an example. Summers was 60/40 in favor of the drastic step of seizing private property, following the example of Britain, which partially nationalized the insolvent Royal Bank of Scotland, biggest British bank and second-largest in Europe. It was Geithner alone who ruled that out, with an argument Obama found persuasive: that such a move would roil world financial markets all over again, that government doesn't belong in the banking business, that the young Obama administration would never live down that act of "socialism", and the bankers who caused the mess knew best where the remaining land mines were on the troubled banks' books. I would just have preferred to hear that argument from someone other than Geithner, who as head of the New York Fed had overseen the rampant, reckless greed on Wall Street that caused the meltdown and did practiclly nothing about it. As it is, the feds did place Fannie Mae and Freddie Mac into government "conservatorship," and took effective control of AIG, world's biggest insurer, whose role in this sick drama was to guarantee everyone else's potential sour loans and thus was the ultimate "too big to fail" player.

* Summers may exaggerate in his insistence that failing to continue "George W. Bush's socialist bailout of the banks" would have escalated the Great Recession into a full-blown Great Depression, with unemployment of 25% to 30% rather than the zenith of 10.1% reached in 2010. But that's not a chance I'd want to take. When Penn Square Bank, located in a suburban Oklahoma City strip mall, went down in the 1980s, it took Chicago's mighty Continental Illinois down with it, along with Michigan National and Seattle's SeaFirst. I'm guessing the elapsed time between Citi or B of A being allowed to fail and the power being cut from America's tens of thousands of ATMs would have been about 48 hours. The Main Street and farm economies would have ground to a halt in tandem with the total and utter collapse of Wall Street, which in turn would have had a tsunami impact on global banking. I wouldn't want to be living on this planet for that outcome.

What ails U.S. financial services and Corporate America generally is lack of a sense of personal responsibility, prudence and patriotism on the part of top management and the directors charged with supervising CEOs. Period. I would argue that lax regulation played a huge role, but there would be no need of regulatory second-guessing if the personal responsibility, prudence and patriotism were in place among captains of industry.

And yes, I did say patriotism. To jeopardize your own "too big to fail" institution and thereby put at risk the entire American financial system, knowing that fellow Americans stood to lose their jobs, homes, businesses and farms if the dice came up snake eyes on a bet designed to fatten your bonus, is surely more unpatriotic than setting Old Glory ablaze on your driveway.

If we look hard at what most reformers from Paul Volcker to Barry Ritholtz have called for, what the reforms amount to is still more laws and rules that businesspeople bent on a quick buck always have found a way to stay clear of while trousering money that isn't or shouldn't be theirs. It amounts to yet more laws and rules for regulators to fail to enforce. And we know all regulators eventually succumb to "regulatory capture" by the regulated. Perforce, the Upper Big Branch mine and Deepwater Horizon tragedies of 2010, each heavily abetted by regulators feeling themselves more accountable to the regulated than the People.

A hard look at the crisis, its causes, and the proposed reforms suggests to me only one solution - a culture change. And that's just too big an ask of Obama or of any terrestial being. 

 

Terminology Fails.

A routine Apple stock story in today's Globe "The Street" column:

Commentators spouting off about the beleaguered American consumer should take a gander at Apple. Its recent move to sell the iPhone through Verizon is providing a nice tailwind as its iPad 2 cannibalizes PC sales from the likes of Hewlett-Packard. The one unit receiving little attention, despite outstanding growth, is the Mac business, which is stealing market share at a steady clip. Two other positives: Apple’s stock is extremely cheap, on a peer and historical basis, and it carries nearly $66-billion of net cash (cash minus debt). Morningstar’s thesis: Apple is a safe, cheap growth stock, likely to outperform.

Morningstar has a fair-value target of $475 on the stock, suggesting a return of close to 50 per cent. Unlike the sell-side, Morningstar doesn’t link its targets to a specific time frame.

cannibalize, v. When a new product steals market share from the same company's existing product(s). Not when a new product steals market share from another company - that is, Apple taking market share from rival H-P.

return, n. Net gain or loss on an investment, including dividends and trading and other fees. Not the increase or decrease in the value of an investment during the entire time it is held. In the statement above, the author means a 50% jump in the Apple stock price, but is saying a 50% return on investment (ROI), two entirely different things.  

Also, when an analyst puts a "target" on a stock, careful to see if he or she has specified a target date. That is a common analyst ruse. He or she can bravely say Apple will jump 50%. But by failing to say in what period of time the rise will occur, the prediction will be meaningless unless you're prepared to wait 5 or 17 years for the stock to make that 50% increase.

The rough equivalent to this are the elderly Florida drivers whom, Jerry Seinfeld observes, have their left-turn signal blinking for seven miles. That would be your "eventual left" signal, says Seinfeld.

 

A couple of liberal dissents.

1. I caught a blog commentor yesterday, on Warren Jason Street, responding to another commentor on the disgrace of the Dred Scott decision, described by the first commentor as the absolute low point in Supremes history. No, the respondent said with emphatic clarity: "The worst decision in the history of the U.S. Supreme Court was Gore v. Bush."

   
Dred Scott and Gore v. Bush: A toss-up as worst Supreme Court decisions ever. In the image at right are show the five G.O.P.-appointed Court justices who found for Bush, loser of the 2000 election.

Not sure I agree. Dred Scott condemned an entire race. Then again, Gore v. Bush did not condemn Al Gore alone. It overturned the principle of democracy in the U.S.: the loser of the 2000 presidential contest was installed as president by five members of the Court, a bare majority of the nine justices. It betrayed the baldly partisan nature of a Court that remains GOP-controlled), in which politics triumphed over jurisprudence. And the decision was profoundly hypocritical; the case should not have been heard.

Prior to and following Gore v. Bush, the GOP Court - and it's a sad reflection on a great country to have to describe Courts as GOP or Dem, but that's the reality in America - was an upholder of states rights. In Gore v. Bush, the Supremes trampled all over the rights of Florida, specifically in overturning a Florida Supreme Court ruling that the vote re-counting should continue until completed.

In the segregation era, "states rights" was a polite way of saying that Alabama and Georgia could go their own way in discriminating with impunity against African Americans, and by logical extension, people with blue eyes and anyone else a state chose to regard as subhuman.

That odious tradition continues today, with, among other things, "right to work" laws in U.S. South states that effectively prohibit workers from organizing. That's a violation of the national principle of collective bargaining rights, entrenched with the FDR-era Wagner Act. And that has sucked industrial jobs out of the Midwest. When you hear the term "off-shoring" or "outsourcing," don't think China or Vietnam. Think Kentucky, Tennessee, the Carolinas, Georgia, Mississippi, Alabama and Louisiana. 

The Detroit Three for the most part haven't deserted the Midwest. There simply is too much talent and too many long-established suppliers in Michigan, Ohio, Indiana and Illinois. GM, Ford and Chrysler have long had plants in New York, California, Texas and so on, to be closer to customers. Also Mexico, in Chrysler-Fiat's case. When Dems insist on upgraded labor conditions in exchange for free-trade pacts with Mexico and other countries, somehow they never mention abysmal labor conditions at home.

It's a different story with the "transplants," the auto factories operated by foreign-owned carmakers that have sprung up in U.S. in the past generation to avoid a tariff wall threatened by Reagan. They started out in Ohio and elsewhere in the Midwest. But in the past two decades the U.S. South's "right to work" laws have drawn the bulk of transplants operated by Nissan, Daimler, BMW and the like to the low-wage U.S. South. "Right to work" is a polite way of informing workers that "You have no say in your workplace conditions, starting with what you're paid."

2. The message below has gone viral among progressive websites. In identifying the "real" culprits of the economic meltdown - actually, the targets of Paul Ryan's looney austerity budget, which was D.O.A. in the Dem-controlled Senate - they left out Medicare recipients, also targeted by a ruthless right.

 

H/T: EB contributor MLC.

 

Correcting the many faults of the NDP.

Layton & Co. will be getting lots of advice from armchair political strategists over the next few months. An early offering from the Globe's Jeffrey Simpson upbraids the NDP's for a supposed preoccupation with spreading the wealth rather than creating it, and its disdain for Big Business:

The federal NDP has always been better at talking about redistributing wealth than creating it. Mostly, the federal NDP sees job-creation coming from subsidies. It longs for some kind of industrial strategy, deeply dislikes free-trade agreements, and harbors a suspicion of corporate size. Very few of its MPs have ever been prominent in the private sector.

Corner stores, family farms, co-ops and small businesses are fine, but the federal party has this thing about corporate size. Big oil. Big banks. Big telcos. Big agribusiness. Big mining. Corporate big is bad; labour big is good.

 
NDP Leader Jack Layton at last weekend's annual party policy convention in Vancouver. (CP) 

At least under Layton, each election platform has showcased entrepreneurial and job-creation schemes based on green tech - a multi-trillion dollar industry this century - medical research, manufacturing prowess and more exporting initiatives, especially beyond the tried-and-true U.S. market.

As to subsdizing such businesses, well, that's how both Harper and Obama have been trying to get the ethanoll business off the ground - a dubious effort, that, given how it takes more energy to produce most forms of ethanol than it gives off, a diverts corn production from food and livestock feed, driving up food costs. (Corn derivatives are in everything.)

Conservatives scorn national industrial policies. Yet every nation has one. It's just not labelled as such. When a non-French company tied to take over French drug giant Sanofi, it arranged for a reverse takeover with the French managers and investors coming out on top. Phamaceutical research is, for the French, a keystone industry with indelible links to a network of French universities. So, was that protectionism (Simpson) or sound industrial policy.

There's only one reason Canada has one of the world's few centres of excellence in aerospace, in Montreal. And that's lavish federal and provincial subsidies to Bombardier, world leader in commuter aircraft, and Pratt & Whitney, a rare U.S. branch plant that actually makes things (jet engines) in the Great White North. Each of those firms, in turn, relies on scores of suppliers, many of which have growun up around their operations in Montreal and, in Bombardier's case, Downsview and Thunder Bay as well.

The U.S. Congress subsidizes the military-industrial complex and the oil industry, and I'd be surprised if there's single Fortune 500 company that didn't receive tax breaks, grants or subsidies from federal, state and local governments last year. Boeing is America's biggest single exporter; Illinois, Kansas and Nebraska are grain exporters to the world. Each is subsidized to the hilt by Uncle Sam - as Airbus incessantly complains about, even after the corporate welfare it receives from Paris and Berlin is drawn to its attention.

These folks who favour letting the private sector go it alone have my assent. Gosh, I'd love to see GE, which paid not a dime in taxes on its U.S. operations last year, so adept was this colossus at manipulating the tax code, truly go it alone. Especially since that's what so many of us think everyday people who've fallen on hard times believe they should do. Pull themselves up by their bootstraps!

Very few Tory MPs have been prominent in the private sector, either. The closest the PM himself came was heading up a far-far-right pro-business think tank. As for disdain with Big Business, I'm a fan of honest, strategically gift and community minded big businesses. And rumour has it there are a few out there. But Enron, Exxon, WorldCom, Bank of America, Citigroup, Livent, the oligopoly of Canada's Big Five banks whose proliferating fees will soon have them charging admission to their branches...well, I think suspicion of the big things - including Big Labour - comes naturally to most of us. (Big Labour is by now an oxymoron, of course, since union membership in Canada's workforce is down to 30% and in the U.S. it's a mere 12%.)

The story I want to read is how Canadian progressives - 60% of the electorate - for the first time in history decided to put all their chips on the NDP, relegating the Grits and BQ to observer status. That would take some legwork, a lot of interviews with riding presidents and kids who were drawn into putting up NDP lawn signs. With scant help from Big Labour, ever since Buzz Hargrove counseled his members to vote strategically for the Grits. (A gambit that failed, of course, to the Tories' benefit.)

Instead of that story about how Canadian politics works I'm to endure a few months of gratuitous advice for the NDP and the Tories as well, I'm sure. Sound and fury signifying not much.

   

Enjoy your day.

 
"Say again?" (AP)

 

Watch carefully the Arab Spring. It may soon be our turn.

The grassroots anti-government protests in "rich" European nations have begun. That upheaval may spread to the U.S.

These disruptions will not be different in kind. Neither nationalism nor religion is back of the Arab Spring. The protest movement that so far has toppled governments in Tunisia, Egypt (the most populous country in the region) and has Gaddafi under seige have been driven entirely by economics - chronic high unemployment and soaring living costs, notably for food - and pent-up resentment at the extreme comfort of a tiny affluent ruling class. I'm not sure if you ran that description of conditions past a native of Wheeling, West Virginia you'd get an argument about the similarites between the economic adversity in Cairo and Appalachia. Or South Central LA and East St. Louis.   

 
 
Anti-austerity protests in Madrid (top) and Syntagma Square, Athens. (AFP, Reuters)

Rejection of the status quo among rich nations traces back to Iceland in the past two years, where the general population vociferously opposed bailing out the country's feckless banks, and also balked at making whole British depositors in the failed Icelandic lenders. Who could blame them? The failed banks' lossses amounted to 1,000% of the country's GDP.

You would not want to be a Greek parliamentarian today, Athens having just plaintively announced it needs a second huge bailout - roughly equal to the first one, last year - of 111 billion euros. So that's more than 200 billion euros to bail out one of the eurozone's smallest economies. That amount is more than one-fifth the total 1.1. trillion euros the EU and IMF set aside for eurozone bailout candidates.

The harsh austerity measures that accompanied that first Greek bailout triggered the same kind of populist street rioting we've seen this year in Tunis, Cairo and Alexandria, Tripoli, the de facto Saudi protectorate of Bahrain, and Damascus as only the most promient of Syrian cities beset by social unpheaval.

Now multiply by five. Greece and Ireland have eaten into the bailout fund, and negotiations on a Portuguese bailout have long been underway. Cassandras fret that Spain may be next - and Spain is vastly larger than the bailout recipients preceding it. I shouldn't tag the fretful "Cassandras" because what worries them is very real: Spain experienced the very same disastrous housing bubble as the U.S.

So, of course, did Britain, which is imposing austerity measures more severe than anything since the Second World War. Foreign Policy describes these nations, fittingly I think, "the undeveloping world" and describes the contagion effect that fiscal woes and resulting political upheaval in one country are having on their neighbors:

[Among the Greek public, there is] a general lack of confidence in the government's ability to handle the crisis. In a recent poll, 77 percent of Greek respondents said they did not trust the prime minister to solve the problem; 80 percent said they did not trust the finance minister. Massive protests have at times turned violent. In one incident, several people were killed in clashes with police, during which protesters set fire to a bank in Athens. In Portugal, Prime Minister Jose Socrates resigned in the midst of the crisis there.

Yet what is perhaps most alarming about the eurozone crises is that they have spread like wildfire, a contagion that also shows up in the Failed States Index. Spain, for example, which has not yet received a bailout, shows serious signals of decline. Its indicators for state legitimacy -- that is, the degree to which the population views the government as acting in its interest -- and economic performance have deteriorated since 2006, by 0.5 and 1.1 points, respectively. Unemployment has soared to 20 percent, and approval ratings of Prime Minister José Luis Rodríguez Zapatero have plummeted.

The weekend brought out about 100,000 protesters against unemployment and social-service cuts in Madrid and other Spanish cities. And that's ahead of any Spanish bailout and accompanying bailout measures. Recall that the Arab Spring began with just one Tunisian dissident setting himself ablaze earlier this year.

Be assured that as these austerity campaigns sweep the Continent and Britain and Ireland, there will be social upheaval and topping of governments. The only question is whether the underlying issue of decades-long income inequality will be transformed from a rallying cry to a sustainable movement that destroys the underpinnings of the political establishment.

This is a worry for America, where similar austerity will soon kick in. The austerity measures - the cutbacks - will be comparatively mild, since the U.S. reactionary forces lack the will to go as far as David Cameron and the besieged PM of Greece. They will take the form of stalled efforts to begin closing the yawning gap between rich and poor, a crisis Candidate Obama identified and pledged himself to remedy as early as 2007. And that would begin with a second stimulus package that has zero chance of passage in the now-GOP-controlled Congress, even though every credible economist says further massive stimulus is required to jump-start consumer demand at a time when 55 million Americans face foreclosure on their homes or are underwater on their mortgages.

The context, of course, is the flat-lining of U.S. middle-class incomes over the past three decades, while average CEO pay has leapt. And the fiscally ruinous Bush tax cuts that make the new austerity necessary were skewed almost entirely to those CEOs, to the top 1% of American income earners. What exactly is the contribution to U.S. society of these folks, compared with that of the legions of beneficiaries of the post-war G.I. Bill? What do the Walton heirs do for their $84 billion in net worth, apart from being spared each year from billions of dollars in foregone tax revenues? (No one named "Walton" has run Wal-Mart since the death of founder Sam Walton.) At least the Koch brothers, worth a combined $40 billion or so, run a diversified industrial empire and do yeomen service financing right-wing causes that have as common purpose shrinking government - especially an IRS that taxes Koch Industries and imposes "death taxes" (GOPspeak for estate taxes) on the likes of David and Charles Koch.

America is quite de-sensitized to the crisis of making ends meet by a MSM media with above-average incomes, and a Congress and Senate overstocked with millionaires. Even the president is a millionaire, thanks to his book royalties ($4 million in one year alone). The mayor of New York has a net worth of $18 billion. Is it reasonable to conceive an FDR-style "spreading of the wealth," a rope-line response Candidate Obama gave "Joe the Plumber" as a remedy to that fraud's stated grievances?

Tracy Chapman had a hit with a song warning that someday people left out of the American Dream "will rise up, take their share." This is the current nightmare for European politicians. Remember that the Tea Party movement began as outrage over bailouts of fat-cat bankers on Wall Street, and only later morphed into anger about Obamacare, once the movement was co-opted by the GOP.

From Shay's Rebellion in 1786 to New York industrial riots during World War II to the sitdown strikes in Detroit to the California tax revolt in 1978 led by Howard Jarvis, Americans haven't been shy about taking matters into their own hands. I would describe socio-economic conditions in America today as a powder keg. Not since the Gilded Age has so much national wealth been concentrated in the hands of so few. That imbalance is untenable. That's not an observation on morality. It is a fear, well-ground I think, that Americans will rise up in a series of violent upheavals between now and decade's end. The vast majority left out of the American Dream, and an MSM that rubs the wealth of the richies in their faces every day, a tipping point will come.

Dispatched to northern Massachusetts to assay the causes of Daniel Shay's rebellion, Henry Knox, a confident of George Washington, summed up the insurrection as class warfare. "[The rebels] feel at once their own poverty, compared with the opulent." Washington himself adduced that "Commotions of this sort, like snowballs, gather strength as they roll, if there is no opposition in the way to divide and crumble them." 

Thus Washington's preference for a stronger central government than many of his co-Founding Fathers wished was realized with the adoption of the Constitution in 1787. A stronger central authority than that originally contemplated by many of the state delegations seemed necessary in the wake of Shay's Rebellion.

One would not today look to Washington to redress such grievances, being so obviously en thrall to special interests. A revolt is coming, and a latter-day Washington would warn of its unpredictable consequences given the lack of a credible authority to crumble the "snowball."  

 

Enjoy your weekend.

 
(AP)

 

Dude, I'm from Detroit.

With thanks to Jonathan Cohn of New Republic, a brief reminder of how small the world is getting:

What ails America in a nutshell. What Obama can do about it.

New Republic's Jonathan Cohn, whose focus includes U.S. healthcare reform, thinks Time's Michael Grunwald says all that needs saying about "our political insanity," as Cohn calls it, in just two paragraphs. I agree:

The Republican Party, after converting huge surpluses into huge deficits during the Bush era, after opposing deficit-reducing health reforms, student loan reforms and big-bank taxes during the Obama era, after continuing to clamor for trillions of dollars in deficit-expanding tax cuts while gutting House pay-as-you-go rules to make it easier to expand the deficit, has somehow managed to re-brand itself as the party of fiscal responsibility. It's a remarkable political achievement...

It's not Obama's fault that Republicans are irresponsible. But he's not powerless. He's not voiceless. It was no coincidence that when he laid out a strong case against GOP fiscal insanity in his George Washington speech in April, Republicans hated it, screeching that he was the meanest, nastiest, most partisan President in the history of Kenyan sharia socialism. Apparently, he touched a nerve. But it hasn't touched it again. Ultimately, if he can't create a political atmosphere where irresponsibility is punished, the irresponsibility will continue. And he'll be held accountable for the consequences.

At this stage in the election cycle, it's typical for incumbent presidents hoping for re-election to duck and cover or go AWOL. At this point in the cycle culminating in Clinton's re-election, that president was talking about school uniforms and V-chips to help parents protect their kids from seeing graphic images on television. Apple pie initiatives, if they even rose to that description, that no one could disagree with.

So Grunwald is asking a lot. But you know, these days almost everything that a Republican notable says is a flat-out lie. (I'm leaving out the GOP grassroots and especially GOP voters.) And it does take your breath away, the stinking hypocrisy of it. And indeed it's seldom that anyone calls them out on it, as a Michigan friend reminded me in citing a recent too-friendly chat between David Gregory and lesser wannabe presidential candidate Rick Santorum, who, before he was defeated as a U.S. senator, voted for all the fiscally parlous measures Grunwald notes and then some (Bush's unfunded Iraq war and prescription drug benefit for seniors, for instance, the blew giant holes through America's fiscal strength long before most Americans had heard of Barack Obama).

Obama has said often enough, starting with his contests with first Hillary Clinton and then John McCain, that you can hardly expect a different outcome if you keep voting for the folks who gave you the bad stuff you now want to be rid of, or have cured. (Clinton and McCain had, of course, each voted for the unfunded Iraq war, the biggest U.S. foreign policy blunder since Vietnam.)

If the President and I and you and everyone who worships truth for its own sake hope to see an end to the routine mendacity that is a cancer on democracy everywhere, Obama has the bully pulpit to call out the liars. He also has surrogates on Capitol Hill and statehouses for the task, though he's been poorly served in that regard compared with previous presidents - notably GOP chief executives.

For instance, not a day goes by that a GOP leader or Faux News commentator asserts, falsely, that Obamacare will drive up healthcare costs by bringing some 40 million Americans out of the cold of being uninsured. That's a lie. The Affordable Health Act of 2010 is packed with measures to make the world's most costly healthcare system less so, while guaranteeing higher quality care to more Americans than ever in history. Fiscal prudence was one of Obama's few (three) requirements of the five congressional committees developing their own versions of Obamacare, which eventually were combined and signed into law by the President early last year. Namely, that whatever the legislators came up with, it would have to include access to all, stopping the turning away of those with pre-existing conditions, and measures to end the spiraling increase in healthcare costs.

The debt-ceiling debate gives Obama and his surrogates an opportunity for a nationally televised speech - once again not carried by Faux News, which is unapologetic in its lack of civic responsibility - in which the President details five specific lies with which enemies of all that's fair and good are trying to hoodwink their fellow Americans.

It would be a good trial run for next year's stump speeches, if nothing else. A Dem war room preoccupied this week with Romney's assertion to an audience of unemployed folks that he too is between jobs is a sideshow. (Romney's audience laughed, they got the joke.) No, the real targets are Romney, Eric Cantor, Bachmann, Palin, Rush and so on, including obscure federal and state legislators, who should have an anvil fall on their heads every single time they utter a falsehood. Pretty soon they'd get tired of having to crane their necks, and would learn how to debate with facts and engage in a honest argument of goodwill with their adversaries on given policies.

I am proud that in our May 2 federal election contest, Harper and his fellow leaders uttered a few "stretchers," as Mark Twain called them, but for the most part stuck to assertions that were truthful, while disagreeing on likely consequences - which properly became the focus of the debate. The attack ads with which the well-financed Tories destroyed Iggy long before the next election call were a low point in Canadian politics. But then, the Grits' failure to respond to them spoke volumes of how clueless they had become - and this after Grits had the example of Kerry's fate at the hands of the Swift Boaters as a long-ago heads-up.   

EB readers will note without effort countless howlers on the campaign trail pre-May 2, and of course they're right. Those who were first-hand witnesses to the contest between David Cameron and Gordon Brown would say the same. But the U.S., of late, has reached a new apex of free-form mendacity and what I believe the Economist recent editorialized is an apparent "desire by the Americans to destroy themselves" - a bald assessment that shocked even me.

That's not so surprising when viewed in the context of U.S. history. It was Twain who said words to the effect that the truth is still tying its shoelaces while the lie has made it half-way around the world.  There's nothing new here in cut-throat U.S. political culture. And as a student of it, Obama should be lacing up now.

Related

Here's Grunwald's column at Time's Swampland in full.

 

Resign.

Philip Baker, dean of medical faculty at University of Alberta, has apologized for plagiarizing from a 2010 Stanford commencement address by Dr. Atul Gawande.

Baker should resign. (See update below.)

 
Philip Baker, dean of the faculty of medicine, University of Alberta. (Edmonton Journal photo)

I would be fired, and feel I deserved to be, for quoting another's words without attribution. We expect more of high-ranking academics, held in much higher regard by the public than journalists.

As it happens, N.A. newspapers have in the past decade "grown up" and now show zero tolerance for plagiarism and fabulism. (That is, stories made up from whole cloth; see Jayson Blair, which turned the entire NYT upside down).

University of Alberta is one of the finest schools in Canada. That there be no question of about the sterling quality of its faculty, much less administrators, Baker should quit immediately.

Not that it should make a difference, but Baker plagiarized the words and stirring insights and anecdotes of Atul Gawande, one of the world's leading heathcare reformers. His remarkable books and New Yorker investigative articles are must-reads in the Obama White House.

Dr. Baker would know that, or should. It's one thing for parish priests to routinely use off-the-shelf sermons pulled from the Internet. To know the words you're stealing have been widely read and held in high regard in high places is stupidity enough to disqualify Baker from continuing to hold his post.

How widely read? At least one student in Baker's audience last Friday recognized previously-read words, called up Gawande's poignant commencement address on his cell, and commenced listening and reading the same text. When your above-average students are up on their Gawande, as any med student and medical practitioner on the planet should be, stealing from that source - without attribution - takes some kind of vacant-mindedness that's obviously unacceptable in the administrator of a distinguished faculty of a distingished school. (Or any school or institution, come to that.)

Then, predictably, we have Baker's non-apology apology, from which I excerpt:

Dear Class of 2011

I have heard from you following the graduation banquet when the theme (and much of the content) of my speech was similar to that of one given by Dr Atul Gawande. When I was researching for the speech, I came across text which inspired me and resonated with my experiences. The personal medical traumas which I detailed were wholly genuine and did indeed engender the sense of inadequacy I highlighted. I also used a medical case of Dr. Gawande’s to further make my point. I offered a sincere written apology to Dr. Gawande and subsequently spoke with him; he was flattered by my use of his text, took no offence and readily accepted my apology.

Most of all, the basic theme of the talk – that of humility, has been overwhelmingly reinforced. I hope you accept my heartfelt apology and although you may not be proud of me as the dean of your school, please know that I am very proud of all of you. [Emphasis added.]

Throughout my professional career and private life I have I have held myself to the highest ethical standards possible. The talk was intended for a private audience, nevertheless, my failure to attribute the source of my inspiration is a matter of the utmost regret.

"Regret" doesn't cut it.

If Gawande was indeed forgiving - and that certainly sounds like the surgeon at Boston's Brigham and Women's Hospital - the only reason to believe it is that this is in what we know of Gawande's character. Otherwise, Baker's credibility is shot, and I have no compelling reason to trust him in the directions he offers to locating the cafeteria.

It's always the way in these "apologies" that the offender has never done such a thing before. First-time offender. A defense that doesn't hold water in bank-heist cases, nor should it here. That Baker doesn't "get it" is evident in his (likely inadvertent) chutpah in asserting that is theft actually "overwhelmingly reinforced" the virtue of humility, which indeed is a hallmark of Gawande's insights. (As it was of the great Sir William Osler, and Einstein, for that matter.) To put oneself in the same company as such giants having just plundered their work with due acknowledgement is beyond the pale. (Gawande is shown, left, courtesy The New Yorker.) 

We condemn plagiarism because it is a hoax perpetrated on the reader or listener. It cheats those who hear the engaging insights, the wisdom, the memorable turn of phrase of which the thief is either incapable or too lazy to conceive himself.

Of course we all stand on the shoulders of giants, as Einstein put it. One only hopes the likes of Baker, holding the post he does, would have the wit to be inspired by an Atul Gawande. Quoting him with attribution is not only acceptable but to be encouraged.

But passing off Gawande's hard work - the fruit of years of traveling the world in search of best practices - as one's own, no, never.

There is a merry chase to hound Andrew Weiner from office. The congressman indeed is guilty of bad judgment, and his character in all things is in question.

Baker's offence is worse, I'm afraid, a trifecta of deception, theft, and dubious character. He's not worthy of his students or school, and should take his leave immediately. It would help if he left behind on his former desk a genuine apology for his successor.

Update

Baker resigns his U of A post.