Jeff and that guy who write the thing have captured some of the most important reasons not to prosecute, but may I add another? The Old 97s once sang, "telephones make strangers out of lovers," and that dynamic would also go to work here.
As far as I can tell, we made real advances on torture when John McCain and that excitable sidekick of his Lindsay Graham took up the fight. So now that Congress is investigating the lawyers, not contractors, CIA agents or soldiers, but just the lawyers, who is trying to make hay by fighting the anti-torture side? Lindsay Graham.
My favorite presentation of this debate would be the Democratic congressional leaders to play possum on this and let the Republicans like Graham and Hagel go on TV to argue with Dick Cheney. I understand why the dynamics of Congress don't really allow this to happen, but where we might have developed a national consensus that would keep this kind of thing from happening again because the collective conscience of the country understands that it's either ineffective and thus immoral (my position) or immoral a priori.
Instead, now all we have is an argument.
Saturday, May 16, 2009
Friday, May 15, 2009
Global warming forces Island to evacuate
From Matt Yglesias:
The Carteret Islands, a somewhat outlying atoll off the coast of Papua New Guinea, don’t normally attract much attention. But it’s a shame more people weren’t paying attention in late April when a lone blogger, Dan Box, was on hand to witness the beginning of the islands’ evacuation. It’s a small atoll, you see, and relatively low-lying. Sea levels are rising. Flooding is increasing. And even though the island is still there, it’s no longer habitable: “King tides have washed away their crops and rising sea levels poisoned those that remain with salt,”wrote Box. These days, in other words, sometimes the high tide gets so high it buries the farmland, and even when it doesn’t, the salt permeates the soil. So 2,600 people need to move.
Still, it’s hard to miss the fact that the elite conversation in Washington, D.C., has a distinct air of frivolity about it that attention to events abroad might dispel. If it were announced that the United States of America was planning on dumping a load of poison on the Carteret Islands rendering them uninhabitable, I think even Sen. James Inhof of Oklahoma would be spurred to action. Certainly I doubt that you’d see a Blue Dog member of the House whining that since the poison factory is located in his district, he doesn’t see how we can possibly afford to stop producing the poison. Libertarians wouldn’t be arguing that the pristine logic of the free market grants companies the right to poison other people’s islands.
The Carteret Islands, a somewhat outlying atoll off the coast of Papua New Guinea, don’t normally attract much attention. But it’s a shame more people weren’t paying attention in late April when a lone blogger, Dan Box, was on hand to witness the beginning of the islands’ evacuation. It’s a small atoll, you see, and relatively low-lying. Sea levels are rising. Flooding is increasing. And even though the island is still there, it’s no longer habitable: “King tides have washed away their crops and rising sea levels poisoned those that remain with salt,”wrote Box. These days, in other words, sometimes the high tide gets so high it buries the farmland, and even when it doesn’t, the salt permeates the soil. So 2,600 people need to move.
Still, it’s hard to miss the fact that the elite conversation in Washington, D.C., has a distinct air of frivolity about it that attention to events abroad might dispel. If it were announced that the United States of America was planning on dumping a load of poison on the Carteret Islands rendering them uninhabitable, I think even Sen. James Inhof of Oklahoma would be spurred to action. Certainly I doubt that you’d see a Blue Dog member of the House whining that since the poison factory is located in his district, he doesn’t see how we can possibly afford to stop producing the poison. Libertarians wouldn’t be arguing that the pristine logic of the free market grants companies the right to poison other people’s islands.
Thursday, May 14, 2009
Clear-eyed on the costs of prosecuting the torturers
A reader writes into Andrew Sullivan with a theory on Obama's real position on prosecuting torture:
I’m sorry, but President Obama is going to break your heart on this one. He is not playing some long game, rope-a-dope, clever strategy which will allow him to ultimately expose Bush’s war crimes and prosecute them. In fact, he is going to do everything he can to squash all of this.
Imagine what such prosecutions would entail: years of courtroom drama, depositions, lawsuits and counter-suits; the long parade of powerful and high ranking ex- and current members of government, including a goodly number of Democrats, being called on the carpet and having to testify against one another; the enormous rancor and bitterness. This would be Watergate on steroids. And imagine the shot in the arm this would give the zombified Limbaugh Right.
The prosecutions you are asking for would simply swallow the Obama presidency whole. It is the kind of energy draining, oxygen consuming drama that is the nightmare of every president. It would come to define his presidency in the same way the Hostage Crisis defined Carter’s and there is zero chance he will opt for this.
President Obama is making a realistic, cold, clear-eyed cost-benefit analysis. This is the choice: Does he fix the economy, fix healthcare, get a handle on the two wars he’s dealing with, or does he prosecute Bush era war crimes? He has chosen his agenda and is asking us to choose that to.
I pretty much agree with this. Politics comes down to choosing- allocating resources. The main resource a President has is time and public attention. Obama can spend it on his agenda, or on prosecuting the torturers. I'd like to see these guys get their comeuppance too, but not at the cost of flushing Obama's agenda. It's easy and noble-sounding to pipe up about the paramount importance of the rule of law- and for the most part I agree with that. However, right now- nobody's torturing- because the good guys won the last election, and last I checked the dead-enders in the GOP who are supporting torture are polling at about 20%. They may be loud, but their strategy is being discredited as we speak.
The surest way to bring torture policies back to the US? An epic fail of Obama's programs that brings Sarah Palin to power in 2012.
I’m sorry, but President Obama is going to break your heart on this one. He is not playing some long game, rope-a-dope, clever strategy which will allow him to ultimately expose Bush’s war crimes and prosecute them. In fact, he is going to do everything he can to squash all of this.
Imagine what such prosecutions would entail: years of courtroom drama, depositions, lawsuits and counter-suits; the long parade of powerful and high ranking ex- and current members of government, including a goodly number of Democrats, being called on the carpet and having to testify against one another; the enormous rancor and bitterness. This would be Watergate on steroids. And imagine the shot in the arm this would give the zombified Limbaugh Right.
The prosecutions you are asking for would simply swallow the Obama presidency whole. It is the kind of energy draining, oxygen consuming drama that is the nightmare of every president. It would come to define his presidency in the same way the Hostage Crisis defined Carter’s and there is zero chance he will opt for this.
President Obama is making a realistic, cold, clear-eyed cost-benefit analysis. This is the choice: Does he fix the economy, fix healthcare, get a handle on the two wars he’s dealing with, or does he prosecute Bush era war crimes? He has chosen his agenda and is asking us to choose that to.
I pretty much agree with this. Politics comes down to choosing- allocating resources. The main resource a President has is time and public attention. Obama can spend it on his agenda, or on prosecuting the torturers. I'd like to see these guys get their comeuppance too, but not at the cost of flushing Obama's agenda. It's easy and noble-sounding to pipe up about the paramount importance of the rule of law- and for the most part I agree with that. However, right now- nobody's torturing- because the good guys won the last election, and last I checked the dead-enders in the GOP who are supporting torture are polling at about 20%. They may be loud, but their strategy is being discredited as we speak.
The surest way to bring torture policies back to the US? An epic fail of Obama's programs that brings Sarah Palin to power in 2012.
Tuesday, May 12, 2009
Traffic Rules
Megan McArdle clarifies a point I've been thinking about a lot lately when dealing with the Administration's push to cram down the bondholders in the Chrysler bankruptcy:
The seniority rules have no particular moral priority; like traffic rules, they matter because they are the rules. People make decisions based on what the rules are, and if you change the rules without warning, you get nasty accidents.
Right now, senior debt is cheaper than junior debt; secured debt cheaper than unsecured. If you declare that there are no priority rules, because the government will step in and arrange things so its friends get to cut in line, then everyone will have to pay something close to what the most junior unsecured creditors get now. Not only will interest rates go up, but terms will shorten--no one wants to lend into a period when default risk can't be calculated. And companies that are particularly likely to have administration "friends"--union shops, when Democrats are in office; maybe oil companies or defense contractors for Republicans--are going to find it harder to do debt financing at all.
Most people underestimate just how economically valuable the rule of law is. A roughly stable investment environment that doesn't maximize social justice is undoubtedly better than an unpredictible one that tries to--just as the billions of poor people who live in states that have tried to exchange the former for the latter. The winners were not the dispossessed.
The seniority rules have no particular moral priority; like traffic rules, they matter because they are the rules. People make decisions based on what the rules are, and if you change the rules without warning, you get nasty accidents.
Right now, senior debt is cheaper than junior debt; secured debt cheaper than unsecured. If you declare that there are no priority rules, because the government will step in and arrange things so its friends get to cut in line, then everyone will have to pay something close to what the most junior unsecured creditors get now. Not only will interest rates go up, but terms will shorten--no one wants to lend into a period when default risk can't be calculated. And companies that are particularly likely to have administration "friends"--union shops, when Democrats are in office; maybe oil companies or defense contractors for Republicans--are going to find it harder to do debt financing at all.
Most people underestimate just how economically valuable the rule of law is. A roughly stable investment environment that doesn't maximize social justice is undoubtedly better than an unpredictible one that tries to--just as the billions of poor people who live in states that have tried to exchange the former for the latter. The winners were not the dispossessed.
Well, I think it's about trade...
This graph, representing the responses to the question "What is Cap and Trade," leads me to believe that perhaps Obama should do a better job selling the program...
Sunday, May 10, 2009
Mis-reporting on the Chrysler Bankruptcy?
Quite out of the ordinary that the administration has gotten so involved in the Chrysler bankruptcy, and that deserves to be a story line in the news reports, but I think articles such as this one, U.S. Played Rough with Chrylser Creditors, WSJ 5/11/09, kind of confuse the issues in the minds of most readers. Based on reading the excerpts below, what do you think the Creditors with whom rough was played by the U.S. ended up getting?
The results of these hardball tactics were on display Friday, as the last resisters of a deal to slash the value of Chrysler debt abandoned their effort to fight it in bankruptcy court. That raised the chances for a relatively swift transit through Chapter 11, producing a new Chrysler 55%-owned by a trust for union retirees, 35% by Fiat SpA -- which hasn't even been a Chrysler creditor -- and not at all by the senior secured lenders.That conclusion would upend a longstanding tradition concerning rights in a bankruptcy: Senior secured lenders get paid in full before lower-priority creditors get anything. Not this time.
[...]
When the issue of the $6.9 billion in debt came up, Mr. Rattner looked at the lending group and said, "We have in mind for you a much lower number." He silenced the room by proposing they get just $1 billion.
While that wasn't the administration's bottom line, the task force had determined what was: the amount lenders would get in a liquidation of Chrysler assets. A Chrysler analysis in January estimated that at $2 billion. The UAW and Fiat knew about this figure, and also knew that the task force was first going to offer lenders just $1 billion. But the lenders, having waited so long to engage with the Treasury, were in the dark.
[...]
After receiving one more bank counteroffer, the Treasury on April 28 offered what it had planned all along, to buy out the lenders for $2 billion. The only sweetener was that it would be in cash, meaning the lenders didn't have to wait for a reorganized Chrysler-Fiat to pay it.
Mr. Rattner called Mr. Lee: "It's $2 billion, take it or leave it."
The big banks quickly agreed to the deal -- equal to 29 cents on the dollar. Though that offered a profit to a few firms that bought debt as low as 15 cents on the dollar, most of the lenders had paid 50 cents to 70 cents, and the banks 100 cents. News that the big banks were accepting the offer leaked before they had told the smaller lenders. "To say the least, we were floored," says one.
So what's the significance of 29 cents on the dollar, and how did that play in to the negotiations? That's the amount that the government estimated the secured lenders could get if the lenders liquidated the Chrysler assets. Maybe that number is a little low, but work with me here: if you lent 100 million dollars to build a Chrylser factory last year, Chrysler owes you 100 Mil, but what's the value of that factory now if you had to foreclose on it and sell it? There might not be a Chrysler company who plans to keep using it, all the competitors have their own plants, no one else is going to needs a plant in order to like... start a car company right now, and even if they did, what are the odds they want one in Michigan? 29 cents on the dollar sounds pretty reasonable, huh?
The rule in Chapter 11 cases is that to reorganize a company, you can force a creditor to take something other than full payment for his claim as long as he gets at least what he would in a liquidation. OK, now we've met that part of the test.
The fight then, was that some, but not all, of the lenders thought they could get more. What else did they want? The venture funds were looking for stock in a reorganized Chrysler. That new Chrysler stock has a lot of really cool built in features. First of all, the owners of the new stock wipe out the owners of the old stock, so they're already ahead of lots of people. Second, the new company benefits from cabining off a lot of the previously open-ended liability of the old company, which could be a really big deal with liabilities for things like retiree health care. Third, a lot of the other liabilities of the company get paid off out of a really good type of loan available in bankruptcy (debtor in possession financing) that really isn't available to businesses outside of bankruptcy. Fourth, the new company can emerge lean and mean by shedding a lot of unprofitable business units or product lines that would have been tough to drop outside of bankruptcy. All in all, this means that the new stock is a product of the bankruptcy process, it can be really valuable, and a lot of the lenders were planning on getting some.
So what did the lenders lose? Their entire investments? Not even close. They got paid that same 29 cents on the dollar they would see in liquidation, but they got none of the upside of participating in a reorganization. This is pretty unusual, because in all but very large cases, the lenders are the only ones with the money or legal position to keep fighting. It's unusual, but it's not illegal, it's not the result of bullying and intimidation, it's not the result of Putin/Chavez-style crony-capitalism, it's just unusual.
My point here isn't that the Obama effort on Chrysler was divinely conceived and should be beyond scrutiny; my point is that just focusing on the Obama administration role and ignoring the underlying legal and business dynamics only gives you a slightly misleading part of the picture. It's not that the lenders were denied something they had a right to, it's more like they were denied instead something they had a chance at. Some would be-Madame DeFarge figure is certainly weaving the Chrysler episode in to the long memory of the right wing, and I don't expect this explanation to influence any of those, but here's hoping that maybe the other 88% of the country can get a better handle on these issues by seeing the shape of the whole Chrysler bankruptcy forest and not just silhouette of the Obama tree.
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