A Blast from Reason’s Past….?

Nob Akimoto

Nob Akimoto

Nob Akimoto is a policy analyst and part-time dungeon master. When not talking endlessly about matters of public policy, he is a dungeon master on the NWN World of Avlis

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249 Responses

  1. Avatar Saul Degraw says:

    I’m with you.

    I think one of the biggest problems I have with some forms of libertarianism or libertarians is that it places property rights above all and nothing comes before property rights. Civil rights are much more important than property rights.Report

    • I’m just…well I’m having trouble thinking of a charitable way to read their “historical revisionism” special issue as anything other than playing to some very ugly fringes.Report

      • Avatar Saul Degraw in reply to Nob Akimoto says:

        There is a long history of the libertarian movement flirting with some very comfortable fringes including neo-Confederates and Holocaust deniers.

        Now many favorite libertarian economists and founders were Jewish like Ludwig von Mises and Murray Rothbard.

        Now the interesting thing about Murray Rothbard is that even though he was Jewish, he was also an outright crank and revisionist who championed and promoted Holocaust deniers because he wanted to free historical narrative from “court intellectuals”

        What this seems to me is that the importance of trolling the other side became more important than truth and libertarians were attracted to fringe idiots in the early day because it made them feel daring and that they were shocking the establishment.Report

      • Avatar Saul Degraw in reply to Nob Akimoto says:

        Also because libertarianism generally does favor property rights over government enforced civil rights, you can bet that this going to attract a lot of people who are really angry that they can’t say “No blacks, No Jews, No homosexuals”.Report

      • Avatar Jaybird in reply to Nob Akimoto says:

        well I’m having trouble thinking of a charitable way to read their “historical revisionism” special issue as anything other than playing to some very ugly fringes.

        From what I can tell from reading it quickly, the article on The Framing of Tokyo Rose is pretty accurate. That article was written in 1976. Gerald Ford pardoned Toguri in 1977.Report

      • Avatar Jaybird in reply to Nob Akimoto says:

        As for the other articles, there’s one on Pearl Harbor Trutherism (beyond the pale? I don’t know), the WWII Revisionism and Vietnam article has some ugly appeals to holocause denial stuffed in the end, but the article on US Interventionism abroad… here, let’s read the closing sentence to the closing paragraph and see how you feel about it:

        “In the final analysis, it is not communism to which we have opposed ourselves, but an Asian nationalism determined to oust Western domination from that area.”

        And it’s bedtime so I can’t read the “Non-Marxist Theories of Imperialism” article but it looks like a corker.

        All that to say, the historical revisionism contains some ugly, ugly crap and some other stuff entirely that turned out to be surprisingly accurate.

        At the very least, I think you should read the article on Tokyo Rose. It’s good.Report

      • Avatar Saul Degraw in reply to Nob Akimoto says:

        @jaybird

        “The lead feature article in Reason’s “special issue” turns out to be one of James Martin’s slyer works of historical revisionism: “The Framing of Tokyo Rose,” an outrage-fueled attack of the 1949 treason trial and conviction of a wartime Japan radio voice, American-born Iva Toguri, known as “Tokyo Rose.” For Martin, this was about as safe as his World War II historical revisionism got. By the time Martin wrote about her for Reason’s “special issue” in 1976, Toguri was already an Establishment cause-celebre, her unjust conviction profiled in 60 Minutes, and soon to be overturned by President Ford, who pardoned her upon leaving office.

        Martin’s purpose for taking up Toguri’s cause was to prepare Reason’s readers for a much broader political point: That World War II was as unjust as the trial of Iva Toguri, and the Allies who fought that war against the Japanese and Germany were as brutal and duplicitous as the prosecutors who sent Toguri to prison.”

        How does most of Europe and China feel about this kind of argumentation?Report

      • Avatar LeeEsq in reply to Nob Akimoto says:

        The most charitable reading possible is that many early libertarians felt a strong psychological need to distance themselves from what they saw as liberal orthodoxy. Playing around with crank ideologies like CSA revisionism or Holocaust denial was at best the libertarian equivalent of “shocking the bourgeoisie.” You still somewhat see this today but most younger libertarians move around in more diverse social structures so aren’t prone to this sort of pranking.

        The least charitable response is that the early libertarian movement attracted some very evil people for some reason that needs to be examined.

        A middle-ground explanation is that the embrace of Holocaust denial or CSA revisionism was away around a philosophical problem in early libertarianism. Certain libertarians on this site advocate for a very individualistic brand of libertarianism where there is nobody owes anybody anything, You could be the victim of one of the largest historical atrocities and its your job to build back your life alone without any help from government or society. Playing around with Holocaust denial is a way to ignore that shit happens.Report

      • Avatar LeeEsq in reply to Nob Akimoto says:

        @jaybird, did you read the same article that I did? The article on Tokyo Rose was used as a launching pad to explain why the Japanese Empire was on the side of righteousness.Report

      • Avatar Jaybird in reply to Nob Akimoto says:

        Gee, I think so… let’s go through page by page.

        Page one discusses the Anti-Japanese Propaganda used at the time, Page Two discusses the legend of Tokyo Rose the disc jockey and gives a bit of background on Iva Toguri. Page Three discusses how they were trying to find someone, anyone, who would fit and how they found Toguri and then starts with the trial. Pages Four, Five, Six, and Seven discuss the trial itself and its irregularities on the parts of both the prosecution and defense. Page Eight discusses the appeals… and Page Nine concludes that she was tried and convicted and found guilty not because she was a traitor but because she was a foreigner at a time when we were at war with people who looked like her.

        And, again, this article was written *BEFORE* she was pardoned. Not after.

        So… did you read it?Report

      • Avatar Saul Degraw in reply to Nob Akimoto says:

        @jaybird

        Did you read the Pando Daily article yet or are you just going to stick your fingers in your ears and close your eyes and la la la everything away that makes libertarians look bad? Did you read the quote I posted?Report

      • Avatar Jaybird in reply to Nob Akimoto says:

        Yes, I read the Pando article and went on to read the issue in question and I saw that the very, very bad article was in the middle of some other articles, at least one of which has since been demonstrated to have been accurate and others of which are… well… interesting examples of contrarian thinking.

        And, to be perfectly honest, I tend to think that an article from 1976 of a libertarian magazine makes post-9/11 libertarians look less bad than you probably think it does.

        For what it’s worth, I’ve said what I think Reason’s response should be to this.

        As for the quotation you posted, I think that his sentence about WWII being just like how “Tokyo Rose” was treated is obviously silly… but his reporting on how “Tokyo Rose” was treated was pretty danged good and worth reading.Report

      • I, for one, am perfectly on board with denouncing and boycotting 70’s-era Reason Magazine.Report

      • Avatar James Pearce in reply to Nob Akimoto says:

        How are “post-9/11 libertarianism” and “1976 libertarianism” different? Is there an intellectual tradition that connects them? If so, what has changed when it comes to the holocaust or apartheid?

        Related question: Will the libertarians of 2040 think the libertarians of 2014 got anything wrong? If so, what might that be?Report

      • Avatar Jaybird in reply to Nob Akimoto says:

        Well, I imagine that 1976 Libertarianism was primarily concerned with stuff like The Draft.

        I know that 2014 Libertarianism cares a lot more about the TSA than the 1976 Libertarians did and, on top of that, 2014 Libertarianism has stopped kvetching about the draft for the most part.

        I have high hopes that 2040 Libertarianism will have stopped whining about the war on drugs. I shudder to think what it will complain about, though.Report

      • Avatar James Pearce in reply to Nob Akimoto says:

        The issues have changed, sure. Something else must have changed, too, if libertarians are now embarrassed by the views of their forebears.

        I’m just wondering what that is.Report

      • Avatar Jaybird in reply to Nob Akimoto says:

        Are the Progressives proud of Prohibition? Eugenics?Report

      • Avatar Kim in reply to Nob Akimoto says:

        Jay,
        somewhat surprisingly (particularly considering where I’m writing from), I’m proud of Prohibition. It went horribly wrong (many things do), but I’m proud that we made the effort to try.

        Of course, I’m also quite proud of the beerstore that was set up directly outside the dry “portion of the city that seceeded so it could be dry” town, simply to tease them.
        I think that’s pretty damn cool (and funny) too.Report

      • Avatar James Pearce in reply to Nob Akimoto says:

        I dunno. Maybe we should ask one.

        (Although I do think we can acknowledge that the “progressive” movement has undergone some changes since promoting the temperance movement and/or eugenics. I’m happy to entertain the idea that libertarianism has, too. I’m just wondering how it has changed.)Report

      • Avatar James Pearce in reply to Nob Akimoto says:

        “somewhat surprisingly (particularly considering where I’m writing from), I’m proud of Prohibition.”

        This calls for a Picardesque face-palm…..

        First, you’re not helping. Second, why?Report

      • Avatar LWA in reply to Nob Akimoto says:

        @will-truman
        I notice your denunciation did not include Stalin.Report

      • Avatar Jaybird in reply to Nob Akimoto says:

        I’m just wondering how it has changed.

        I’m guessing that the Libertarians, like the Republicans or Democrats, are fighting what they see as the most important battle of their day. In 2004, that was probably the gay marriage battle (and, after taking it on the chin in 2004, things are looking up in 2014, on a good vector, and looking to stay on a good vector… hurray!).

        I imagine that the current most important battle of the day is, for some, the War On Drugs (waves) and, for others, Obamacare/PPACA.

        Where Libertarians see the government engaging in the greatest excesses is what is most likely to define it at the time… and, in 1976, it was still reeling from The Draft.

        The Draft is not something that Libertarians fight against anymore. Why should they? The greatest excesses of the government no longer involve it.

        I don’t think that the Libertarians should be ashamed of fighting against The Draft. Perhaps they ought to be ashamed of the people with whom they were willing to make common cause in service to fighting against it… but that’s a horse of a different color, isn’t it?

        (Note: I’ve got a fundamental assumption which is that WWII was used as justification for the importance of fighting in Vietnam. We fought against Nazis, didn’t we? We should fight against Communists! There are a lot of counter-arguments to this and some of them are pretty good and some of them are downright repulsive. If it turns out that WWII was not used as justification for the importance of fighting in Vietnam, I’m completely wrong in my argument… but I remember WWII being used as justification for fighting in Iraq so I’m guessing that that particular trick has been around a long time.)Report

      • Avatar Glyph in reply to Nob Akimoto says:

        @lwa “I notice your denunciation did not include Stalin.”

        Well, he said “70’s-era”. Blanket condemnation of pornstaches was implied.Report

      • Avatar James Pearce in reply to Nob Akimoto says:

        @jaybird

        “Where Libertarians see the government engaging in the greatest excesses is what is most likely to define it at the time”

        But that doesn’t explain the “holocaust-denialism” and “pro-apartheid” stuff.

        We know why progressives supported prohibition and eugenics. Their faith in the perfectibility of man(kind) is as strong as their faith in benevolent governments.

        What would make a libertarian support apartheid or deny the holocaust? Nowdays, probably nothing. But in 1976, there was something. What was it?

        Communism? The Sun City boycotts? If it’s not something internal to the libertarian philosophy, it must have been something external, right?

        (Also….we’re still talking about Reason magazine, right? They don’t reserve their ire solely for “the government engaging in the greatest excesses.” Have you read their stuff on energy efficient light-bulb standards?)Report

      • Avatar James Hanley in reply to Nob Akimoto says:

        @james-pearce

        Don’t worry, we all know Kim’s not representative of anything except the lightning storms inside her head.Report

      • Avatar Jaybird in reply to Nob Akimoto says:

        Well, I already posted Reason’s response to the pro-apartheid accusations (and I think Matt Welch didn’t do a bad job demonstrating that the claims were misrepresentations). As for the Holocaust denialism, I think that it’s not exactly fair to say that Reason denied the Holocaust as much as gave page space to someone to do so in an issue dedicated to historical revisionism at a time when Vietnam had very recently concluded after arguments explaining that we needed to fight it because it was so very much like WWII.

        Personally, I think that the arguments that Vietnam was not like WWII and thus we shouldn’t have fought in Vietnam were stronger arguments than the arguments that we shouldn’t have fought WWII and thus shouldn’t have fought in Vietnam.

        But I also know that WWII was used as justification for fighting in Iraq.

        I’ll bet you dollars to donuts that the next time sabers start rattling, comparisons to WWII will show up. The importance of preventing another this or that. Documented atrocities that only bring one other enemy from the past to mind. That sort of thing.

        I can understand (though do not support) the idea that says “if we make it so that WWII wasn’t worth fighting, they won’t be able to use it as an example for why we have to go to war (and draft sons (and daughters now?)) next time.” It would have short-circuited the Iraq arguments, anyway.Report

      • Avatar Jaybird in reply to Nob Akimoto says:

        The same issue posted a Pearl Harbor Truther article. I don’t (and wouldn’t) consider Reason a Pearl Harbor Truther vehicle. They had a themed issue and printed an article that they shouldn’t have… but, also, it was 40 years ago with entirely different existential worries, close to an entirely different culture, and an entirely different attitude towards such things as prior restraint on the part of publishers.Report

      • Avatar James Pearce in reply to Nob Akimoto says:

        @james-hanley

        I like Pantera, too, but “We’ll Grind That Axe For a Long Time” is not their best song.

        @jaybird

        “I can understand (though do not support) the idea that says “if we make it so that WWII wasn’t worth fighting, they won’t be able to use it as an example for why we have to go to war (and draft sons (and daughters now?)) next time.””

        I can understand that, too, but it makes about as much sense as Kim’s “I’m proud we tried this totally awful thing that didn’t work” thought.

        Indeed, I think it’s one of those situations when it’s smarter to ditch the ideology and let the brain do the thinking.Report

      • Avatar James Hanley in reply to Nob Akimoto says:

        @james-pearce

        whuh?Report

      • Avatar James Pearce in reply to Nob Akimoto says:

        It’s a joke. “We’ll Grind That Axe For a Long Time” is a song on Pantera’s final record. I think it’s about the undying appeal of heavy metal. (Ha!)

        But squint a little, and it could be about a pet point or two…Report

      • Avatar Kim in reply to Nob Akimoto says:

        James,
        I feel like there was absolutely a huge problem with drink back then. And that the idea of “ban it forever” deserved to be tried (if nothing else, because the public wanted it, badly.) That said, there’s plenty to criticize about the American gov’t’s lack of agility when it was pretty conclusively shown that this wasn’t working.Report

    • Avatar j r in reply to Saul Degraw says:

      You do realize that this is Mark Ames, right? If anyone in the world can be correctly described as an “anti-libertarian conspiracy theorist,” it is Ames.

      Here is a direct quote from the man:

      Anytime anyone says anything libertarian, spit on them. Libertarians are by definition enemies of the state: they are against promoting American citizens’ general welfare and against policies that create a perfect union. Like Communists before them, they are actively subverting the Constitution and the American Dream, and replacing it with a Kleptocratic Nightmare.

      Does that sound to you like the words of someone looking to have a meaningful or reasonable discourse? If Ames were a commenter on this blog, he’d likely be banned for violating the commenting policy.Report

      • Avatar Brandon Berg in reply to j r says:

        Pretty rich for someone who endorses disregarding Constitution to misappropriate it to smear libertarians.Report

      • Avatar Mike Schilling in reply to j r says:

        That is the sine qua non of the ad hominem fallacy.Report

      • Avatar Jaybird in reply to j r says:

        Do we really want to dig too deeply into the “we can’t trust this guy because of something else he said” fallacy with regards to this topic?

        It might lead us to some wacky places.Report

      • Avatar Mike Schilling in reply to j r says:

        You’re right; we only want to apply that kind of logic to discredit bad guys, not good guys.Report

      • Avatar Kim in reply to j r says:

        Ah, but brandon, he’s not smearing libertarians. He’s smearing the Kochs.
        Disclaimer: I know someone who used to work for them. I’m hardly unbiased.Report

      • Avatar j r in reply to j r says:

        That is the sine qua non of the ad hominem fallacy.

        Me being the pedant that I am, I like to go to the proverbial video tape whenever possible. Here is the Wikipedia description of the ad hominem fallacy.

        An ad hominem (Latin for “to the man” or “to the person”), short for argumentum ad hominem, is a general category of fallacies in which a claim or argument is rejected on the basis of some irrelevant fact about the author of or the person presenting the claim or argument.

        What makes something ad hominem is not that it addresses the author of the claim, it is that it raises “irrelevant fact”s about the author of the claim. Mark Ames has a history of making strange, exaggerated and outright false claims about libertarians. That is not irrelevant.

        Ames is so far out there with this stuff that one of his libertarian conspiracy articles actually got Katrina vanded Huevel to publish an apology in The Nation: http://www.thenation.com/blog/156700/apology-john-tyner#. Ames has a history of bad journalism, which matters when you are assessing his… journalism.

        If I brought up the fact that Ames is the guy who used to write about sleeping with fifteen-year old prostitutes and threatening to throw a girlfriend off of a balcony to get her to have an abortion, that would be an ad hominem attack.Report

      • Avatar LWA in reply to j r says:

        Just for the record, LWA is NOT the nom de blog of Mark Ames.

        Any similarity is purely coincidental.Report

      • Avatar Mike Schilling in reply to j r says:

        From the same Wikipedia article:

        Ad hominem circumstantial points out that someone is in circumstances such that they are disposed to take a particular position. Ad hominem circumstantial constitutes an attack on the bias of a source.

        E.g. “He hates libertarians, so anything he says about them is a lie.”Report

      • Avatar j r in reply to j r says:

        @mike-schilling

        Nice try, but here is a tip: when you use quotation marks, you should use them to bracket actual quotes. Don’t use quotations marks to offer your skewed interpretation of what someone else said. Lots of people hate libertarians; there is nothing special there. The problem with Ames is that he has a history of smearing people and organizations by reporting made up linkages and phony motivations. He is quite literally a conspiracy theorist.

        Read The Nation apology. And read his own reaction to the apology where he says:

        Based on reporting from the San Diego Union-Tribune, we speculated that Tyner may have set up his taped encounter with TSA agents—a claim that we also quote Tyner denying. We did not, however, claim that Tyner was affiliated with the Astroturf and/or Koch-funded groups mentioned later in the piece, and indeed we noted directly that Tyner denied any such associations in an interview with The Nation. In retrospect, our article was less than clear about Tyner’s lack of Astroturf affiliations, and we regret in particular including extraneous details from the Union-Tribune article about Tyner’s past—that he went to a private Christian school and lived in a Republican community near a Marine base…

        Notice the correct use of quotation marks. There you have Ames admitting that he reported on someone’s motivations based on a speculation and included unrelated details about a subject for the purpose of asserting a connection that did not exist. And this is not an isolated incident. There was another case where Playboy had to remove something that Ames had written and offer an apology to an anti-bailout blogger, because Ames published an unfounded accusation that he was affiliated with certain organizations. This is Ames modus operendi.

        Here is what I actually said about Ames.

        Mark Ames has a history of making strange, exaggerated and outright false claims about libertarians. That is not irrelevant.

        Are you really going to argue that a journalist’s past instanced of misreporting and making up connections between people and events is not relevant to that journalist’s present reporting on the same topic? That is a stretch. You know, though, if you want to take Ames seriously, go for it. That says a lot more about your credibility than it does about mine.Report

      • Avatar Mike Schilling in reply to j r says:

        Are you saying that the friendly Reason interview with the Holocaust denier that Ames printed screenshots of never occurred because Ames is a bad guy, or doesn’t matter because Ames is a bad guy?Report

      • Avatar Mark Thompson in reply to j r says:

        No, he’s saying that Ames’ attempts to hang a 40 year old article on the Kochs and Reason’s current regime and, really, every libertarian ever, lack credibility.Report

      • Avatar Mike Schilling in reply to j r says:

        That would be true regardless of who’s making that argument.

        Now, if instead of a 40-year-old issue of Reason, you were to use their current comments sections …Report

      • Avatar Mark Thompson in reply to j r says:

        The thing is, those claims (as well as characterizations of other articles in that issue) are the overwhelming majority of his piece.Report

    • Avatar j r in reply to Saul Degraw says:

      I mistakenly put the above comment under @saul-degraw’s comment instead of below in a new thread.

      What i meant to say to Saul is that this distinction between civil rights and property rights is artificial. You can’t have and exercise civil rights without meaningful property rights. What good is it to have a statutory right to free speech, if the government controls all of the printing presses and TV stations?

      Mohammed Bouazzizi, the Tunisian street vendor who set himself on fire and sparked the Arab Spring, did not do what he did for political rights. He was not trying to affect regime change or assert any overtly political rights. He wanted a permit to sell fruit in the hopes that he could buy a truck and build his business. Instead, he was forced to live in the shadow economy where the police could shake him down and he no hope of advancement.

      Property rights matter. Read Hernando de Soto, who has done a lot of work in this area.Report

      • Avatar LeeEsq in reply to j r says:

        Property rights are important but they are not paramount either. Holding property rights overall can lead to some really weird or bad situations that allow for the continuance of pervasive social ills like massive racism and substandard accommodations and status for various minorities.Report

      • Avatar j r in reply to j r says:

        Again, you are making an artificial distinction. If agents of the government can take your stuff at will and give it to someone they like better, if you are prevented from starting a business by arbitrary rules that leave large segments of the population disenfranchised, if you are prevented from entering into meaningful and enforceable commercial contracts, then it is almost impossible to have meaningful civil rights.

        In fact, if you look at any persecuted group now or throughout history, these are the very means by which they are persecuted. We have this bad habit of letting ideological divisions color how we see these things and we convince ourselves that the things that we value are somehow more important and more moral than the things that the other guy values. It is BS. Economic, political and social persecution are one overlapping same.Report

      • Avatar James Hanley in reply to j r says:

        Good to see someone else here has read De Soto. Highly recommended for everyone.Report

      • Avatar Robert Greer in reply to j r says:

        @j-r

        The problem is that “property rights” are not the discrete and uncontroversially-identifiable things you seem to think they are. What gets counted as public goods, and what don’t? If a large proportion of current wealth can be traced directly to theft or slavery in the recent past, where does the government draw the line? How does the government enforce the property rights it decides are valid, and how can this be expected to affect its exercise? How are conflicts between claimed rights resolved?

        I think you’ll find that once you devise a system that is complex enough to account for all these issues, you find yourself with highly complex institutions that are only really navigable by certain classes of people: namely, lawyers and the people who have enough privilege to regularly employ them. The decisions made by such a body may have a certain internal consistency, but will lack coherence from the point of view of most of the people whose actions are governed by them (as any small businessman will tell you). You hold up property rights as a talisman against arbitrary government action, but in fact these same rights are usually exactly what the government invokes when it picks favorites.Report

      • Avatar Saul Degraw in reply to j r says:

        @j-r

        Property rights do matter but that does not necessarily make them more important than civil rights. Sometimes they might be but not always. Sometimes they can bolster civil rights, other times not.

        But some of the big complaints against the Civil Rights Act of 1964 was that the act violated property rights and this might be true but it was also necessary. I am more concerned with the rights of minorities to fully participate in civil and economic life than I am by the right for a business owner to exclude because he is a bigot.Report

      • Avatar zic in reply to j r says:

        @j-r

        If agents of the government can take your stuff at will and give it to someone they like better, if you are prevented from starting a business by arbitrary rules that leave large segments of the population disenfranchised, if you are prevented from entering into meaningful and enforceable commercial contracts, then it is almost impossible to have meaningful civil rights.

        I think that you fail to recognize that this works in balance. Markets are not free without the rule of law to enforce those contracts, and actors within markets have a lot of perverse incentives to shuck their responsibility and hide bad actions through regulatory capture. This also results in theft of property, most particularly the commons, and it causes harm to many. Lost opportunity, too. My children, in their 20s are part of a generation of Americans with lost opportunity; the reasonable chance to live as well as their parents stolen from them through irresponsible actions that caused economic collapse.

        I’ll be the first to admit government can be part of the problem, we stole even more opportunity from the children of Iraq then we stole from my children.

        But civil rights are as easily violated by non-government actors as government actors; and property rights flow out of civil rights, they do not supersede them; your property right begins with your civil right to your own self.Report

      • Avatar James Hanley in reply to j r says:

        I’m trying to think of an example of a people who gained civil rights before they gained property rights. I can think of many examples of the reverse.Report

      • Avatar Mike Schilling in reply to j r says:

        Property rights are important but they are not paramount either. Holding property rights overall can lead to some really weird or bad situations

        Say, California water policy.Report

      • Avatar j r in reply to j r says:

        @robert-greer,

        If a large proportion of current wealth can be traced directly to theft or slavery in the recent past, where does the government draw the line?

        That is an odd sentence to me, because you are concerned about the provenance of wealth, but don’t seem particularly concerned with the provenance of government power. Why not? In any society where wealth and property can be traced back to theft or slavery or any other number of nefarious origins, I am pretty sure that you can say the same thing about the evolution of political power. How many governments or political power structures are there on this earth that cannot be traced back to the violent domination of one group of people over a bunch of others? Yet, that doesn’t stop you from accepting the present reality of political power.

        Anyway, that is a bit of an aside. What I really don’t understand is why you put the scare quotes around property rights. We are not talking about some nebulous, hard-to-define set of privileges. I purposely made mention of a number of very concrete economic and property rights that are fundamental to any individual’s ability to exercise civil rights. If you want to explain to me how you can have an equal and just society in which individuals do not have clearly defined and enforceable economic rights, I am all ears.

        @saul-degraw,

        I really cannot speak to your comment, because, as I keep saying, your distinction is artificial. Perhaps artificial is too strong, so I will instead say that the distinction is largely academic. You cannot fully exercise civil rights, if you don’t have an enforceable set of property rights. And likewise, you cannot fully exercise your economic rights if you don’t have a robust set of civil rights.

        I kind of get that you want to privilege one over the other, but your motivation seems to largely be a function of ideology. I come at this from the perspective of a practitioner in the area of economic development. In most areas of the world where people remain mired in poverty and injustice, it is, in part, because they remain trapped outside of the formal economy. Even in situations where those people do have some modicum of political representation, they prospects remain limited by the lack of economic opportunity.Report

      • Avatar Kim in reply to j r says:

        jr,
        in the last 10 years or so (less, really) the proportion of the American Economy that is underground has grown from 4% to 8%. Do you think we’ve got a problem? A new problem?
        😉Report

      • Avatar Saul Degraw in reply to j r says:

        @james-hanley

        Are we talking theoretical property rights or actual property rights? I suppose many Black Americans did have theoretical property rights before the Civil Rights Movement but not much actual property while the Civil Rights Movement was happening for various reasons.

        And it is uncontestable fact that property rights is one of the reasons that people used against the passage of the Civil Rights Act.Report

      • Avatar j r in reply to j r says:

        @zic,

        I think that you fail to recognize that this works in balance.

        Huh? Here is what I said in my first comment:

        What i meant to say to Saul is that this distinction between civil rights and property rights is artificial. You can’t have and exercise civil rights without meaningful property rights.

        And here is what I said in the next comment:

        Economic, political and social persecution are one overlapping same.

        And in the one after that:

        You cannot fully exercise civil rights, if you don’t have an enforceable set of property rights. And likewise, you cannot fully exercise your economic rights if you don’t have a robust set of civil rights.

        I think that you are reacting to what you think I believe as opposed to what I am actually saying.Report

      • Avatar LWA in reply to j r says:

        Are we trying to establish some chicken-egg scenario here, about property rights vs civil rights being primary? Primary to what? To all else, without exception?

        Isn’t there something that both are grounded in, that is, a recognition of the value of the human individual, and a recognized goal of sort of community we want to be in?

        It seems like a package deal, a suite of beliefs that need each other for support, before any one of them can begin to work.

        Otherwise it does seem to lead to weird places, where for instance you might enjoy property rights, but lack protection against torture, or where you enjoy civil rights, but not a civil society.Report

      • Avatar dhex in reply to j r says:

        the sports bar loooooves the concept of “rights”. it’s hard to argue against. i mean, they’re rights!

        checkmate!

        but they generally like only one half of the overall grouping, which has been artificially created because the concept of “rights” exists as an expression of desire (the rights one group likes) and one of contempt (the rights they don’t believe exist).

        so long as you remember rights are a rhetorical tactic – or if the judiciary is involved, something more like a magico-religious invocation of a protective spirit or demon – and not something that exists without group belief, it’s less painful to hear people yell at each other about it.Report

      • Avatar Mo in reply to j r says:

        @saul-degraw Jim Crow laws were government laws that limited the property rights of business owners to do as they wished with their property.Report

      • Avatar LWA in reply to j r says:

        @mo
        Which were immediately replaced with White People’s Councils, based on Freedom-of-Association.

        The lesson?

        Whether by government action or liberty, when bad actors want to act bad, no system can stop them, short of outside intervention by good actors.Report

      • Avatar LeeEsq in reply to j r says:

        @mo, I’m going to call bull on this. Most of the business owners actively supported Jim Crow laws because they were just as racist as other white people. If there was no formal legal segregation than you would see the informal type that existed in the North implemented in the South. If Southern business owners were against Jim Crow than they wouldn’t have opposed the 1964 Civil Rights act so viciously.Report

      • Avatar zic in reply to j r says:

        I just can’t get there without the rule of law to uphold contracts. And without somebody invested with enforcement authority, you don’t have a rule of law. It’s the snake, eating it’s own tail conundrum; inherently a symbol of discomfort.Report

      • Avatar j r in reply to j r says:

        @Saul DegrawJim Crow laws were government laws that limited the property rights of business owners to do as they wished with their property.

        To show where I am coming from on this issue, I want to push back on this idea. It is very common for libertarians to try and argue that something like Jim Crow is impossible under a libertarian system, because it is the government that enforces racist laws. This is somewhat true, but also rather hollow. A system like Jim Crow is an overlapping system of legal, social and economic norms, all working together to enforce that system.

        A society of libertarian racists will find a way to enforce racist norms in that society, most likely by relying on minimal government/right to be left alone grounds. Likewise a society of progressive racists will find a way to enforce racist norms in that society, most likely by relying on some form of technocratic/communitarian/we know best for you grounds.Report

      • Avatar j r in reply to j r says:

        I meant to add, that we have had both versions of this in the history of America.Report

      • Avatar Saul Degraw in reply to j r says:

        @mo

        I also consider your point to be incorrect revisionism. The business owners and property owners in the South were also supportive of Jim Crow. The two major court challenges to the Civil Rights Act (Heart of Atlanta and Ollie’s BBQ) were brought by business owners who did not want to serve black people.Report

      • Avatar James Hanley in reply to j r says:

        Saul,

        The Montgomery bus boycott succeeded where previous bus boycotts had failed because the black professional class let their automobiles be used to transport those who normally relied on public transit.

        Are cars property?Report

      • Avatar Gabriel Conroy in reply to j r says:

        Good to see someone else here has read De Soto. Highly recommended for everyone.

        I don’t know….what he did to the Incas was reprehensible.Report

      • Avatar Gabriel Conroy in reply to j r says:

        @leeesq

        ost of the business owners actively supported Jim Crow laws because they were just as racist as other white people. If there was no formal legal segregation than you would see the informal type that existed in the North implemented in the South. If Southern business owners were against Jim Crow than they wouldn’t have opposed the 1964 Civil Rights act so viciously.

        First, I agree with @j-r ‘s response to Saul above, which essentially agrees with your point, although with some qualifications. So that means I agree with you 90% of the way.

        Second, the other 10% has to do with the fact that under Jim Crow, it would have been much harder for that rare businessperson who wanted to expand his/her market to include integrated customers, or who may have been racist, but found providing separate accommodations–even vastly unequal ones–to be too expensive. Absent mandatory Jim Crow, the pro-integration business owner would have to face “only” the social pressure you mention.

        But again, I agree with you. The informal social pressure (and vigilante violence) counted for a lot and probably reflected something approaching a consensus view among whites. That’s one of the reasons I support the 1964 law.Report

      • Avatar Gabriel Conroy in reply to j r says:

        @zic

        I think if you parse your comments in this sub-thread, you’ll actually find yourself in pretty substantial agreement with J.R. and a few others here. Your invoking the rule of law and your criticism of regulatory capture are at least in spirit compatible with the points made by J.R. and James here and elsewhere.

        Here, particularly, I think you and they (and I) can find common ground:

        “your property right begins with your civil right to your own self.”

        To me, a symmetrical way of saying a very similar thing is to say that “your civil right to your own self begins with your property right.” JR’s main point, if I read him aright, is to say that the property right and the civil right aren’t fully distinct from each other, that maybe there’s some difference, but they go together.Report

      • Avatar zic in reply to j r says:

        @gabriel-conroy I agree; I’m trying to parse the logical flaw in @j-r ‘s argument; and the view that government is the problem, the violator of civil rights. This is certainly true in some cases, but not all cases; other actors violate civil rights, too. He speaks of the right to opportunity; my children, both in their 20s, are in a generation that had their opportunity decimated by the great recession; and that was the actions of the market and a lack of government oversight. (And anyone who wants to throw up irresponsible lending due to gov. regs can skip it; the problem was gambling (synthetic derivatives) that were not linked to those mortgages, just bets on them; and there were significant calls to regulate that market before it imploded, Greenspan, Summers, & Co. ignored them, and Greenspan admitted that was a mistake.) So opportunity to participate in the economy is as much subject to market actions as government actions; and the government has been the only way to restrain corporations from rent-seeking in the commons of air and water quality.

        Going further back, we can see that I would have not had the right to vote in 1900; rights are not automatic, which is the assumption built in. Sub groups — women, minorities, the disabled, the poor, are often castigated for vying for special treatment, instead of some simple recognition that they’re vying for equal treatment. JR didn’t need to have his rights to vote, own property, get an education, or control his reproductive organs; he always had them, and it’s easy for him to presume everyone always had them. I do not have that luxury; mine had to be iterated into law, and I would not have them without government to spell them out and protect them.

        So it’s not that we disagree on the basis of rights and opportunities, but that he sees government as the limiter, and I see both government and markets as equally culpable. I don’t see markets creating rights, however, for those who are left out of the original assumptions in place at any given time; it requires government and the rule of law. Resolving contract disputes requires the rule of law, and that’s government. His view isn’t so much wrong as it is incomplete; he’s blaming government for things markets do, and failing to see that government is the system that avails all people of the privileges he thinks natural. I needed to have those privileges iterated, they were not inalienable until government said they were inalienable.Report

      • Avatar James Hanley in reply to j r says:

        (And anyone who wants to throw up irresponsible lending due to gov. regs can skip it;

        Zic, you’ve made that point repeatedly, but repetition doesn’t make it true. Coyote blog recently had a good post on this.

        One of the factors in the financial crisis of 2007-2009 that is mentioned too infrequently is the role of banking capital sufficiency standards and exactly how they were written. Folks have said that capital requirements were somehow deregulated or reduced. But in fact the intention had been to tighten them with the Basil II standards and US equivalents. The problem was not some notional deregulation, but in exactly how the regulation was written.

        In effect, capital sufficiency standards declared that mortgage-backed securities and government bonds were “risk-free” in the sense that they were counted 100% of their book value in assessing capital sufficiency. Most other sorts of financial instruments and assets had to be discounted in making these calculations. This created a land rush by banks for mortgage-backed securities, since they tended to have better returns than government bonds and still counted as 100% safe.

        Without the regulation, one might imagine banks to have a risk-reward tradeoff in a portfolio of more and less risky assets. But the capital standards created a new decision rule: find the highest returning assets that could still count for 100%. They also helped create what in biology we might call a mono-culture. One might expect banks to have varied investment choices and favorites, such that a problem in one class of asset would affect some but not all banks. Regulations helped create a mono-culture where all banks had essentially the same portfolio stuffed with the same one or two types of assets. When just one class of asset sank, the whole industry went into the tank,

        Well, we found out that mortgage-backed securities were not in fact risk-free, and many banks and other financial institutions found they had a huge hole blown in their capital. So, not surprisingly, banks then rushed into government bonds as the last “risk-free” investment that counted 100% towards their capital sufficiency. But again the standard was flawed, since every government bond, whether from Crete or the US, were considered risk-free. So banks rushed into bonds of some of the more marginal countries, again since these paid a higher return than the bigger country bonds. And yet again we got a disaster, as Greek bonds imploded and the value of many other countries’ bonds (Spain, Portugal, Italy) were questioned.

        So now banking regulators may finally be coming to the conclusion that a) there is no such thing as a risk free asset and b) it is impossible to give a blanket risk grade to an entire class of assets. Regulators are pushing to discount at least some government securities in capital calculations.

        Should the investors have realized mortgage-backed securities weren’t really that safe? Sure. The investment banks are not remotely blameless. But did government regulations create perverse incentives (inadvertently) encouraging the banks to invest as they did? Yes, and there is no good justification for handwaving about that.Report

      • Avatar Gabriel Conroy in reply to j r says:

        @zic

        I actually don’t read JR as denying that private actors can violate people’s rights, except maybe in the technical sense that for a “right” to be “civil,” it is a claim against the state, while other violations of right need a different name (I’m making assumptions….I don’t think he’s said that). But in his response to Saul, he does acknowledge that Jim Crow was both a state project and a societal project, which I read as him acknowledging that private actors can violate others’ rights.

        As for the denial of opportunity, I simply don’t know enough about the 2008 recession. This may sound like denialism, but I’m not fully convinced that the financial collapse caused a recession that otherwise wouldn’t have happened. The collapse undoubtedly made things worse, but I’m just not clear on the causality. And on the collapse itself, there are at least two other points I don’t know: 1) I don’t know how much the gambling and bad investments and bundling bad mortgages among investors was the result of sheer greed and how much was a response to incentives offered by the market and/or government regulation. Perhaps either or both. 2) I don’t know what new opportunities the recession may have created.

        I will say that at the time it happened (ca. September 2008), I was laid off from my job as a loan processor, which I had just gotten a few months before, and the next 8 months were very precarious for me. (Also, when people talk about punishing “the banks” for allegedly unethical activities, they ought to realize that people making, say $9 an hour are going to be punished through layoffs, etc., as much as the head honchos, so I’m…ambivalent…about such accusations.) I eventually found other work, but I can’t generalize my own opportunity to others (I won’t go into detail, but I was “connected” in ways that others likely weren’t). I still have a hard time seeing it as someone denying me opportunity.

        Finally, I don’t necessarily see JR denying that not all people have had their rights or that some people might face greater challenges in their civil rights. As a white male, I presume we can say he (and I) have a certain privilege that perhaps leads him to focus on certain violations of right and opportunities and take for granted other rights and opportunities.Report

      • Avatar zic in reply to j r says:

        @james-hanley

        mortgages were about 1/50 of the capital shortage when the economy collapsed; it collapsed because insurers were unable to cover the bets based on those mortgages, most particularly AIG, who held 90% of the policies.

        There were all sorts of other problems, and they all matter. But banks could not have capitalized to cover the synthetic derivative losses and they were not actually dependent on the underlying securities; just as you can make a bet on a horse and not own part of the horse at the track.Report

      • Avatar Mike Schilling in reply to j r says:

        The usual (entirely false) claim is that the collapse was caused by the CRA, which forced banks to make bad loans to poor and/or dark-skinned people. The Coyote blog piece says something quite different: that government regulations allowed banks to act irresponsibly by overvaluing some classes of assets. The first assumes that the ideal is to deregulate banking, so they’re free to make only sensible investments. The second concludes that unless you can create loophole-free way regulations, they’ll find a way to act like lemmings.Report

      • Avatar Mike Schilling in reply to j r says:

        insurers were unable to cover the bets based on those mortgages, most particularly AIG

        Quibble: AIG was not an insurer and those weren’t insurance policies. Insurance is regulated, so an insurer would not have been able to write policies totalling that gigantic multiple of the assets it had available for repayment.Report

      • Avatar James Hanley in reply to j r says:

        @zic

        How does that rebut the point? All you’re doing is re-stating that they were over-invested in mortgage-backed securities, which wasn’t denied. In fact Coyote Blog’s post clearly agreed with that claim. In fact your comment about AIG’s 90% perfectly complements Coyote’s point about an investment mono-culture.

        The question is why investment banks did what they did. Coyote provides part of the explanation, a part you deny existed, but haven’t actually rebutted.Report

      • Avatar James Hanley in reply to j r says:

        The usual (entirely false) claim is that the collapse was caused by the CRA, which forced banks to make bad loans to poor and/or dark-skinned people.

        Most people actually claim that it was a part of the story, not the whole story. And it’s not entirely false. Banks traditionally did not give the types of subprime loans–particularly the ARMS, which were the bulk of the bad mortgages–but they were pressured by the federal government to give them, and the mortgage originators had the assurance that they would be bought (both by investment banks and by Fannie/Freddie, although to be fair, the latter two were actually a bit slow to get into the game, although they did end up getting in in a very very big way).

        The sad thing is that we have ideologues on both sides, who want to either blame only government or only the market, who want to believe that either the market can never go wrong by itself or who want to believe that only lack of regulation can cause such problems, and that well-intended regulations could never play a contributory role.

        The Coyote blog piece says something quite different: that government regulations allowed banks to act irresponsibly by overvaluing some classes of assets. The first assumes that the ideal is to deregulate banking, so they’re free to make only sensible investments. The second concludes that unless you can create loophole-free way regulations, they’ll find a way to act like lemmings.

        Both have a common core, I think, in believing–whether rightly or wrongly–that in a less regulated environment in which a) investors are not actively incentivized to make risky investments, and a) bear the cost of their own failures, we’ll get less of this kind of stuff. The arguments aren’t really opposed, but are just looking at difference facets of the same issue.Report

      • Avatar zic in reply to j r says:

        Both have a common core, I think, in believing–whether rightly or wrongly–that in a less regulated environment in which a) investors are not actively incentivized to make risky investments, and a) bear the cost of their own failures, we’ll get less of this kind of stuff. The arguments aren’t really opposed, but are just looking at difference facets of the same issue.

        There. That’s nice. It’s what I’ve been trying to get at all along. Government and markets can each be both good and bad actors; they can constrain and limit or empower. It’s the ongoing balance — the act of governing in a functional market — that’s important. We often focus on these issues as fixed, when we’d be better looking at them as in constant flux; it’s the trend lines that matter, trends in growth, empowerment, and individual liberties all.Report

      • Avatar zic in reply to j r says:

        @james-hanley

        First, I really dislike the term ‘mortgage backed,’ because it presumes there were actual mortgages as the basis for synthetic derivatives, and this is not the case. The derivatives were based on bets of portfolios of mortgages, and they were originally designed as hedges. But because the market was unregulated, it attracted money, and the bets were not hedges at some point, they simply became bets on portfolios of mortgages, no different then if they were horses at the track.

        As to why the market attracted the investments it did — there were no restraints on it. It was unregulated. I keep repeating this, too, but read about Brooksley Born. If Greenspan and Summers had listened to her in the mid-to-late 1980’s, this would not have happened.

        The bets were covered by AIG for the most part, and it is such a big player in the world economy that it is, most likely, the single company in this whole scenario that was really to big to fail; it is the one company that triggered the need for the TARP bailouts; I think individual banks could have failed without the kind of economic free-fall we would have seen had AIG failed; and that’s in part because AIG was dealing with other important economic problems, including insurance payouts for Katrina and the Asian tsunami at the time; it had a perfect storm of disasters and it could not meet it’s obligations.

        Schilling points out that insurance is regulated; but there’s no regulation on insurance that the markets they insure have to be regulated; and the synthetic derivative market was completely opaque.

        From an investment banking perspective, the bit problem was that far too many of the synthetic-derivative bets were based on stock margins; there was’t much real capital behind the market, I’d guess the money that was real was from pension funds. For anyone about to retire, this was the destruction of their life-savings. But it’s important to keep perspective here — for every $1 of mortgage money lent, there were $50 of synthetic-derivative bets on wether or not that dollar plus interest would be paid back. I don’t know if anyone’s hashed the numbers here, but it’s likely there was far more stock-backed loans in the market then there ever was actual mortgage money pumped into real-estate. That’s what happens when a market is unregulated. The collapse of real estate, the numbers of homes foreclosed and left to sit, suggests that this was a minor consideration to the overall problem, doesn’t it?

        My brother was a mortgage underwriter, and he quit because of the pressure on him from his company to approve loans he knew were risky; and that pressure was caused by the demand of ever more loans to bet upon in this unregulated market.

        So again, it’s not regulation that’s necessarily the problem, it’s poor regulation or no regulation.Report

      • Avatar Lem L. Emmus in reply to j r says:

        act like lemmings

        At first, I planned to argue against this offensive, untrue and frankly speciesist characterization.

        But then I realized, it’s probably fair, so I went along with it.Report

      • Avatar Mike Schilling in reply to j r says:

        bear the cost of their own failures

        Bear Stearns and Lehman Brothers did bear (no pun intended, for once) the cost of their own failures, and the world financial system was already on the brink of collapse when the bailouts were made. You can argue that the decreased moral hazard of letting it collapse would have been worth the consequences [1], but not that the game was played with the full knowledge that the losers would be made whole.

        1. The pain of the resulting depression would have largely been inflicted on innocent victims, of course, but omelets, eggs, etc.Report

      • Avatar James Hanley in reply to j r says:

        @zic
        There. That’s nice. It’s what I’ve been trying to get at all along.

        Really? Your repeated denials that extant regulations encouraged the behavior, and continued insistence that it was simply the lack of regulations really makes it sound like you’ve been saying something very different all along.

        And in the succeeding comment you return to “because the market was unregulated, it attracted money,” and “As to why the market attracted the investments it did — there were no restraints on it. It was unregulated.” Which is not the point I was making. So to me it doesn’t appear that you were saying what I was saying all along, because you’re still denying that there were actual regulations in play, not merely a lack of regulation, that incentivized the behavior.

        @mike-schilling,
        Bear Stearns and Lehman Brothers did bear (no pun intended, for once) the cost of their own failures, and the world financial system was already on the brink of collapse when the bailouts were made. You can argue that the decreased moral hazard of letting it collapse would have been worth the consequences [1], but not that the game was played with the full knowledge that the losers would be made whole.

        Bear Stearns and Lehman both collapsed in ’08. The game was being played before that, and there was every expectation that they would be bailed out if they ran into problems. And in fact we did end up with a big bailout, with more firms getting bailed out than were allowed to fail.

        1. The pain of the resulting depression would have largely been inflicted on innocent victims, of course, but omelets, eggs, etc.

        The unwillingness to bear the pain of letting big firms fail creates the expectation that we won’t bear it, which gives big firms more incentive to be risky, which makes the potential future pain that much greater, which makes us that much less willing to bear it, which gives the firms that much more incentive, and so on and so on.

        Essentially you’re arguing for continuing to socialize losses so that we don’t have to pay the price of not socializing losses. Or put another way, you’re looking at this in static terms and ignoring the dynamic you are–inadevertently, to be sure–promoting.Report

      • Avatar zic in reply to j r says:

        @james-hanley it was the unregulated market that imploded. If you’re arguing that there was incentive to seek out the unregulated market, that can only be because there was an unregulated market to seek out; the problem that Born identified in the 1980’s.Report

      • Avatar James Hanley in reply to j r says:

        Zic,

        Multiple responses from you, and all you do is keep reiterating that it was about lack of regulation, without ever once actually addressing the argument made by Coyote Blog, about how a specific regulation of accounting rules encouraged that type of investment. If you can’t actually address that critique of your point, I guess we’ve said all that’s actually going to be said at this point.Report

      • Avatar Stillwater in reply to j r says:

        James,

        I read the quote from Coyote Blog you provided, but I’m not seeing how citing a claim that a relaxing of regulation is inconsistent with zic’s claim that the problem was generated by a lack of regulation.

        Am I missing something? I mean, you seem to be saying that the regulation change cited in the Coyote Blog article required them to alter their business practices. But it didn’t. It merely permitted them to do so, and option which investment banks took advantage of for short term against long term gain. And I think in this case such a change constitutes a lack of regulation, no?

        If your point is to highlight to role gummint played in this, then that’s fine. Tho a permission seems to me a strange way of viewing regulation rather than absence of regulation.

        I guess the point here is that government’s allowing for certain types of accounting practices will effect business practices and the market only insofar as those practices appeal to the short or long term business incentives (ie., making money). And if that’s right, then gummint merely allowed what business’s would have been inclined to do anyway. Which, it seems to me, constitutes a lack of regulation and support for zic’s view here.Report

      • Avatar clawback in reply to j r says:

        … in a less regulated environment in which a) investors are not actively incentivized to make risky investments …

        How were they “actively incentivized” to invest in synthetic derivatives? They were permitted to. They were entirely free to invest only in genuinely safe investments.

        It would be legal for me to invest my retirement account entirely in risky investments. In no sense can it be said that the government not forbidding it incentivizes me to do it, much less “actively” so.Report

      • Avatar James Hanley in reply to j r says:

        @stillwater

        I read the quote from Coyote Blog you provided, but I’m not seeing how citing a claim that a relaxing of regulation is inconsistent with zic’s claim that the problem was generated by a lack of regulation.

        The issue is not that zic claims there was insufficient regulation. The issue is that she keeps implying that bad regulation played no role, that the sole regulatory problem was lack of regulation. Those aren’t the same thing. More importantly, she refuses to actually address the substance of what Coyote Blog said.

        you seem to be saying that the regulation change cited in the Coyote Blog article required them to alter their business practices.

        Not at all. The point is that it made the accounting of those investments very favorable, by allowing the full book value of the investments to be counted toward the firm’s assessed capital sufficiency. Other investments had to be discounted, so they dragged down assessed capital sufficiency, whereas MBSes didn’t (they only dragged down real capital sufficiency!). So that creates a strong incentive to invest in MBSes rather than investments with less favorable accounting rules. (That doesn’t mean they weren’t foolish in investing so heavily in MBSes, it’s not to let them off the hook for their actions, but just to point out that an actual regulation that did exist did in fact create an incentive that promoted overinvestment in MBS.)

        And I think in this case such a change constitutes a lack of regulation, no?
        No, because it was a regulation about how those investments would be counted. There may have been a lack of other regulations that ought to have been there, but we can’t say a regulation that promotes action X actually constitutes a lack of regulation. Unless we want to start defining “regulation” to mean only “constraint,” to which I would object.

        If your point is to highlight to role gummint played in this, then that’s fine. Tho a permission seems to me a strange way of viewing regulation rather than absence of regulation.
        Not simply a permission; an encouragement. Mere permission would have been not blocking such investments but having the same accounting rules for them as for other investments.

        I guess the point here is that government’s allowing for certain types of accounting practices will effect business practices and the market only insofar as those practices appeal to the short or long term business incentives (ie., making money).

        Uhmmm, yeah…what else could it affect?

        And if that’s right, then gummint merely allowed what business’s would have been inclined to do anyway. Which, it seems to me, constitutes a lack of regulation and support for zic’s view here.
        Do you think that if the accounting rules for MBSes and government securities had been the same as for other investments that businesses would have been just as inclined to invest in them? You don’t think that would have diminished their ardor for them at all? Because if so, that seems to me to be suggesting that creating incentives actually doesn’t matter, or else that having more favorable accounting rules doesn’t actually create any incentive.Report

      • Avatar James Hanley in reply to j r says:

        @clawback

        If the government made more favorable accounting rules for legal pension investment X than for legal pension investment Y, you don’t think that would create any incentive for people to invest in X over Y?Report

      • Avatar Stillwater in reply to j r says:

        James,

        The point is that it made the accounting of those investments very favorable, by allowing the full book value of the investments to be counted toward the firm’s assessed capital sufficiency. Other investments had to be discounted, so they dragged down assessed capital sufficiency, whereas MBSes didn’t (they only dragged down real capital sufficiency!).

        Which is consistent with zic’s claim of a lack of regulation.

        So that creates a strong incentive to invest in MBSes rather than investments with less favorable accounting rules

        Only because their was a lack of regulation, no?Report

      • Avatar James Hanley in reply to j r says:

        No, Stillwater, absolutely not. It was a regulation about MBS investments, and it created an incentive. That’s not a “lack” of regulation, it’s a regulation with a perverse incentive. Absent that particular regulation–change nothing else in the system except for that particular rule making for more favorable accounting for MBSes–and there’s less incentive to invest in them, so it’s likely that firms would actually respond to that incentive by investing less in them, and without adding any regulations, you have less problem.

        Not necessarily no problem, just less problem.

        I don’t see any way to define that as merely “lack” of regulation. It can coincide with lack of regulation, in the sense that perhaps there should have been some other regulations that weren’t there. But as it has its own independent effect on behavior, “lack of regulation” cannot be the whole explanation–lack of regulation is not the sole independent variable.Report

      • Avatar Stillwater in reply to j r says:

        James,

        Is it possible that you and zic have different conceptions of what “regulation” means? Seems to me that when zic uses the word she means “curtailing the negative effects of self-interest and profit maximization” or somesuch, whereas you mean “any policy that government introduces effecting the market”.

        I tend to agree with zic on what I’m calling zic’s meaning of the word, and less inclined to view the term along the alternative lines. And that’s prolly due to my disinclination to view social problems as (necessarily) resulting from the role government actively plays in fostering em. Not that you necessarily do that, but that bundled up in libertarianism is the view that if only gummint got outa the way, everything would be hunkydory.

        {Not a criticism! Just an observation/curiosity.}Report

      • Avatar clawback in reply to j r says:

        @james-hanley

        Not in any meaningful sense, no. They had a wide variety of investments X to choose from, most of them genuinely safe. The existence of some other discouraged investments in class Y cannot meaningfully be said to “incentivize” them to invest in the riskiest ones from X. Just pick the safe ones from X.Report

      • Avatar Mo in reply to j r says:

        @leeesq @saul-degraw Just because some were supportive of it does not mean all. You don’t need laws for things that people are going to do anyway. I don’t care about a law against fishing dogs because I don’t want to. The laws are there for people who want to do it. The business owners who supported the laws wanted to keep segregating without having the disadvantage of competing against businesses that did not segregate.

        It’s a protectionism racket, like how small liquor store owners want to keep laws against alcohol sales on Sunday because it gives them a “free” day off. Nothing stops them from closing on Sunday normally, except for the competitive disadvantage, so they support laws that prevents their competition from doing it.

        This is separate from the issue of whether the CRA was needed to break the back of systemic segregation and discrimination that was enhanced and encouraged by government policy. But let’s not revise history and ignore the fact that the state tied the hands of businesses that were perfectly willing to serve all comers.Report

      • Avatar zic in reply to j r says:

        The issue is not that zic claims there was insufficient regulation. The issue is that she keeps implying that bad regulation played no role, that the sole regulatory problem was lack of regulation. Those aren’t the same thing.

        I think I pretty clearly said bad regulation was a problem:
        I’ll be the first to admit government can be part of the problem, we stole even more opportunity from the children of Iraq then we stole from my children.

        and

        There were all sorts of other problems, and they all matter. But banks could not have capitalized to cover the synthetic derivative losses and they were not actually dependent on the underlying securities; just as you can make a bet on a horse and not own part of the horse at the track.

        That ‘all sorts of problems’ meant regulatory problems; and I hope that’s obvious from reading the content; I admit I was unclear there.

        Coyote and I are essentially saying the same thing — the reason banks could claim the loans at 100% of value is because that was the only way of valuing synthetic derivatives; the actual value of the derivatives being traded (they were bets — two sides, one that a given dollar loaned in mortgage would be paid, the other that it wouldn’t) was unknown because of lack of regulation. So the best analogy I can think of is the horse race; where the value of bets outstanding on a race is determined by the value of the horse and not the value actually being bet. That’s why, in part, it was an unregulated market. It was opaque; the information given about the market (loans) had very little to do with the financial transactions going on in the market (bets on those loans). At it’s peak, according to Nate Silver’s book, for every dollar lent, there was $50 bet.

        The economy fell apart because those bets were secured by AIG; and as I recall, this is in part because AIG stood behind the ratings companies; the very same ratings companies that were handing out AAA ratings to junk mortgages. AIG had it’s fingers in so many pies that letting it fail meant the global economy would potentially fail. Not just the US economy, the global economy.

        Please don’t attribute things to me that I didn’t say; I am not suggesting that bad regulation didn’t play a role, I’m saying lack of regulation gave bad regulation opportunity to show just how bad it was.Report

      • Avatar James Hanley in reply to j r says:

        Clawback,

        I think you and I have different understandings of the concept of incentives.Report

      • Avatar James Hanley in reply to j r says:

        Not obvious at all, zic. You spoke very vaguely and repeatedly did not address Coyote’s point specifically. But if you are now agreeing that the problem was nit just lack of regulation, but that in fact there was also a regulation that specifically functioned to encourage over-investment in MBSes, then at least I can hope we’ve moved past “anyone who wants to throw up irresponsible lending due to gov. regs can skip it” into the realm where we’re encouraging discussion instead of trying to preemptively shut it down.Report

      • Avatar Stillwater in reply to j r says:

        zic,

        I’m still of a mind that including permissions under the term “regulation” is incoherent, unless we view regulation as everything gummint does or doesn’t do. But at that point the term meaningless.Report

      • Avatar j r in reply to j r says:

        @Gabriel ConroyI agree; I’m trying to parse the logical flaw in@j r‘s argument; and the view that government is the problem, the violator of civil rights.

        Can you point out where exactly I said something that specifically points out this supposed logical flaw? Again, I think you are reacting to what you imagine my point of view to be as opposed to anything that I actually said.

        I am starting to feel a bit like Don Mattingly in that Simpsons episode where Mr. Burns keeps telling him to trim his non-existent sideburns.Report

      • Avatar zic in reply to j r says:

        @james-hanley

        If investment banks had been required to properly value synthetic derivatives, it is unlikely the real-estate bubble would have happened; people would have been making investment decisions on actual information (the money being bet) instead of the misleading information about the money being lent.

        This is where the rule of law and contracts is essential; it is the only way to compel full disclosure of essential market information, or so it seems to me. It is part and parcel of Still’s point that regulation is important in protecting investors in the marketplace from unscrupulous practice and rent seeking, most particularly rent seeking in the commons.

        Regulation itself can be good or bad; actors will always try to subvert it to their benefit, and regulation that worked yesterday may not work tomorrow as originally intended. For regulation to work, it has to be a process. It’s troublesome when the discussion is binary good/bad and not ‘how’s it working?’ If you want an example of rent seeking, go look at the legal spew coming for Justice Scalia’s spawn; who’s sole intent seems to be to grind the system to a halt, to make governing so expensive that people give up governing. But government is the administrative body we set up to govern, and govern is a verb; it’s active.

        It’s exhausting to always discuss if we should govern instead of how to govern, because without government, there’s no rule of law at all. I freely grant we can govern poorly; it takes effort and intent to actually push against one’s biases enough to govern well. The question isn’t “should we govern,” it’s “how can we govern better?”

        Let’s consider environmental regulation for a moment; and an example I’ve frequently given — Deep Water Horizon. This was supposed to be a highly regulated activity, and that regulation actually protects investors. When you our your pension plan purchases stock in a company like BP, they are trusting that the company is in compliance with regulation that will prevent disasters of this scale. Without regulation on these activities, investing in these companies would be much more risky; the regulation restrains the company so that doesn’t create problems. We see the lack of regulation in the West Virginia water pollution.

        Financial regulation doesn’t protect the environment, I grant; but it does create proper valuation so that people can make informed decisions. With mortgage-backed derivatives, there was no piece of the actual mortgage at the back of the financial instrument; there was a rated security value of a separate transaction — clumps of mortgages. The ‘mortgage backed’ bit is the S&P or Moody’s rating of the mortgage, not the actual mortgage, and the important information here was the overall sizes of the bets, they provided incentive for shoddy ratings.Report

      • Avatar James Hanley in reply to j r says:

        @zic, a fine flow of words that does nothing to rebut my point, to which you have asserted you agree. All we’re quibbling about now, it seems to me, is the degree of emphasis, which I am profoundly uninterested in debating.

        @stillwater
        I’m still of a mind that including permissions under the term “regulation” is incoherent, unless we view regulation as everything gummint does or doesn’t do. But at that point the term meaningless.

        Respectfully, you are quite in error. If there is no rule specifying whether one may or may not, then there is no regulation. If there is an actual rule saying one can, there is a regulation. This is even much more so the case when the rule is of the form, “normally you must do X, but in this particular case you may do Y.”

        These rules often appear as discretely numbered items in our Code of Federal Regulations. They are, as a matter of law, regulations.

        That they are regulations as a matter of law might not satisfy your objections (and reasonably so). So we can also look at Crawford and Ostrom’s A Grammar of Institutions (in social science speak, “institution” means a rule, including regulations).

        The Deontic component [of institutions] draws on the modal operations in deontic logic to distinguish prescriptive from non-prescriptive statements (cites omitted). The complete set of deontic operators (D) consists of permitted (P)/i>), obliged (O), and forbidden (F). Institutional statements use the operative phrases may, must and must not to assign these operators to actions and outcomes.

        You can take the seemingly common-sense position that regulations cannot be of the “may” or “allow” variety, but this position will put you at odds with the community that encompasses institutional and policy scholars, as well as policy practitioners. I don’t mean that dismissively. I understand where you’re coming from (I think), and I think it is probably the popular conception of “regulation.” But it ultimately is not how the policy community understands the term, and it artificially sets “may” statements in a different realm than “must” and “must not” comments, rather than seeing them as a complete set, as Crawford and Ostrom explain them.Report

      • Avatar clawback in reply to j r says:

        @james-hanley

        No, more likely we have a different understanding of the concept of honest discussion. In any case, we don’t have to agree on what an incentive is. The banks had an obligation to their investors to choose safe investments. Whether or not the government incentivized them to do so is irrelevant to that obligation.Report

      • Avatar James Hanley in reply to j r says:

        No, more likely we have a different understanding of the concept of honest discussion.

        That’s just silly.

        The banks had an obligation to their investors to choose safe investments.

        It’s not that simple. While that mau be true of my credit union, investment banks also have an obligation to seek high returns on investment. Safety and high returns are inversely correlated, so there’s a balancing act. We all agree they got out of balance, and it’s the causes that we’re debating.Report

      • Avatar clawback in reply to j r says:

        It’s not that simple.

        Yes, one cannot exhaustively enumerate a corporation’s obligations in one sentence. I know it, you know it, and you know perfectly well that I know it. In an honest discussion, you would not have suggested otherwise in a pathetic attempt to discredit me.

        You now admit that the banks failed in their obligations; or rather in your strange passive construction, “they got out of balance.” You’ve yet to show what government action prevented them from maintaining the correct balance.Report

      • Avatar zic in reply to j r says:

        There’s always Greenspan:

        Report

      • Avatar James Hanley in reply to j r says:

        Clawback,

        So you jump in the conversation late, and immediately procede to twice accuse me of arguing dishonestly. That’s a yawner. Have a good night.Report

      • Avatar Stillwater in reply to j r says:

        James,

        That’s a fair take to me. I thought there was a semantic issue in play here.

        Personally, tho, I’m still on zic’s and clawback’s side of things. 🙂Report

      • Avatar Mike Schilling in reply to j r says:

        Bear Stearns and Lehman both collapsed in ’08. The game was being played before that, and there was every expectation that they would be bailed out if they ran into problems.

        Cite? Because those two, which were the first big ones to fail, didn’t get bailed out, and I honestly don’t recall anyone suggesting at the time that they should. If they were expecting bailouts and the government showed unusual courage in denying them, you’d think that would have made the news.

        The bailout talk didn’t start until it became clear that the rot was endemic and the risk of not having bailouts was complete financial havoc, i.e. something resembling the Great Depression. I would certainly prefer a system in which financial power was far less concentrated, so that a relatively small, homogenous group didn’t hold the rest of us hostage, but so long as we insist that inequality isn’t a problem and antitrust legislation is pointless, we lack even the tools to discuss possible solutions for that.Report

      • Avatar James Hanley in reply to j r says:

        @mike-schilling

        You don’t have that quite right. The Fed didn’t just let Bear Stearns fail, but facilitated their “merger” with J P Morgan Chase by means of a $29 billion loan. It’s true they didn’t prop up Bear Stearns as Bear Stearns, but this was widely understood as intervention to prevent the company from collapsing completely. That was in March 2008.

        And that’s part of why it was such a shock to everyone when they didn’t bail out Lehmann Brothers in September. But according to this former treasury official the Treasury had “worked around the clock” to avoid it. And then two days after Lehmann filed bankrupcy they bailed out AIG.Report

      • Avatar Mike Schilling in reply to j r says:

        Bear Stearns’s “merger” with JPMorgan valued Bear Stearns stock, which had been trading at more than $90 earlier in the year, at $10. (Up from $2 to avoid shareholder lawsuits, which is unfortunate.) I can’t picture management saying to themselves “It’s OK for us to be reckless, because we’ll get bailed out and the shareholders will only lose about 90% of their equity.”Report

      • Avatar James Hanley in reply to j r says:

        Sure, Mike, I agree. The concept of socialization of losses either didn’t exist prior to 2008 or else it can’t possibly have any incentive effects.

        Because either of those makes perfect sense to me.Report

      • Avatar Mike Schilling in reply to j r says:

        Sure, Mike, I agree. The concept of socialization of losses either didn’t exist prior to 2008 or else it can’t possibly have any incentive effects.

        If Lehman expected to be bailed out, they were wrong. If Bear Stearns did, they were 90% wrong. I can’t prove they didn’t have those expectations, but they’re not great examples. Actually, the Bear Stearns thing reminds me of what happens when the FDIC finds a new owner for a failed bank, except that the situation was so toxic it required far more intervention.

        One of the things about libertarian reasoning that irritates the hell out of me is that if there are 10 factors and one of them involves the government, that’s the one that matters. You could say:

        1. Bankers are incented to maximize short-term profits, not long-term stability.
        2. Before a bubble bursts, it’s the thing where there’s the most money to be made.
        3. People standing in the way of idiocies like NINJA loans got fired or demoted, because points 1 and 2.
        4. CDOs had no track record, so people were free to over-value them by thinking of them as mortgages, which are traditionally very safe.
        5. There was lots of fancy math “proving” that CDOs + CDSs = safety.
        6. The financial industry is a monoculture, so they tend to behave in similar ways.
        7. No one understood how much fraud took place in rating the different tranches.
        8. There was, as usual, no appreciation of sorites. Houses do tend to appreciate over time, but if that much money is going into the housing market, it becomes a bubbles that’s going to blow up real good.
        9. And, of course, if the regulators had said “We know nothing about what’ll happen with these CDO thingies. You get to value them at 50% now, and then we’ll see. ” they would have been called know-nothing bureaucrats standing in the way of free-enterprise innovation.

        But places like Coyote blog immediately leap to “The government accounting rules that allowed the banks to be stupid actually forced them to be stupid.” End of story.Report

      • Avatar Kim in reply to j r says:

        James,
        yeah, our government caving to blackmail is nothing new.
        It’s only terrorists that we won’t negotiate with, after all.
        Goldmann Sachs doesn’t count.Report

      • Avatar James Hanley in reply to j r says:

        @mike-schilling
        But places like Coyote blog immediately leap to “The government accounting rules that allowed the banks to be stupid actually forced them to be stupid.”

        Of course Coyote never said “forced.” Kudos for your dishonesty, though.Report

  2. Avatar Jaybird says:

    Are you willing to take what they have to say about it as worth reading?

    http://reason.com/blog/2014/07/19/reason-spuriously-accused-by-conspiracy

    It’s not easily excerpted so I’d suggest reading the whole thing, but it does seem to address the biggest criticisms made by Ames.Report

  3. Avatar trizzlor says:

    This is certainly the first time I’ve ever seen someone save evidence of holocaust denial for the response to the rebuttal.Report

  4. Avatar Road Scholar says:

    Still absorbing it, but… wow. Just wow.

    Can we just quit pretending that the Koch brothers are anything other than world-class assholes now? If not, what would it take?Report

    • Avatar j r in reply to Road Scholar says:

      To what exactly is that comment a reference?

      The Ames article contains thirty-three instances of the word “Koch” and all of them don’t say anything meaningful about where the Kochs stand on historical revisionism or South Africa. Rather, they are all attempts to tie together some grand libertarian conspiracy by mentioning that certain people and certain institutions received funding from the Kochs.

      Maybe it’s that picture of the Koch brothers gleefully reading the Hogan and Nutters books, but you do realize that those are drawings and not actual photographs right?Report

      • Avatar Kim in reply to j r says:

        I really wish that people would stop calling the Kochs libertarians. They are NOT.

        If you really want a grande libertarian conspiracy, you want the “Vast Rightwing Conspiracy”. Because Scaife really was a libertarian, through and through.Report

  5. Avatar Brandon Berg says:

    So…forty years ago, when Reason was under different editorship, it was not the high-quality publication it is today? That’s interesting and all, but trying to use it to smear today’s Reason, or libertarianism in general, is about as legitimate as using Soviet apologism from the same era to smear the modern left.Report

    • Avatar dhex in reply to Brandon Berg says:

      i am generally not in agreement with brandon nor have i read reason in many years but, yeah. that was a long time ago.

      ames is a crank about them, which works well if you liked the exile back in the day but not so much for reality.

      http://www.thenation.com/article/156647/tsastroturf-washington-lobbyists-and-koch-funded-libertarians-behind-tsa-scandalReport

      • Avatar Jonathan McLeod in reply to dhex says:

        I’m with dhex and Brandon. I don’t think we can look at an issue from 40 years ago and glean all we need to know about the magazine and the political philosophy(ies) behind it.

        There are plenty of ways to critique present-day Reason and present-day libertarianism that you shouldn’t need to go digging so far into the past.

        It will be interesting to see how Reason responds, though (if they do, of course – considering the merit of the earlier critique, they might not bother paying attention to this one).Report

    • Avatar Brandon Berg in reply to Brandon Berg says:

      Also, to add a bit of context here, the early libertarian movement was much more militantly pacifist than than it is today. There’s a pretty strong consensus nowadays among Libertarians that getting involved in World War II was the right call, but back then a lot of them took a more absolutist stance against war, perhaps owing to recent experience with the draft. You still see this from the Lew Rockwell camp today.

      I’m pretty sure that this, rather than anti-semitism, is what made them so eager to accept, or at least consider, claims that the Holocaust was overhyped. Because that might mean that getting involved in World War II was a bad idea. Note that there was also an article arguing against getting involved in the Pacific, which can’t be explained in terms of racism. Moreover, they were opposed to the Vietnam war as well, and libertarians hate communism more than just about anything else in the world, even puppies and rainbows.Report

      • Avatar zic in reply to Brandon Berg says:

        militantly pacifist

        now that gave me a chuckle.Report

      • Avatar Brandon Berg in reply to Brandon Berg says:

        Particularly militant pacifists opposed the Pacific War.Report

      • Avatar LeeEsq in reply to Brandon Berg says:

        There was an aversion to war among the early libertarian movement but I wouldn’t exactly call it militant pacifism. I’m pretty sure that most of them would support war in the context of a Communist invasion of the United States. Its more accurate to describe the early libertarian movement as isolationist. They simply didn’t want active American involvement in world politics. A person could be a militant pacifist but favor active foreign policy in the form of aid money for development or use of third party diplomacy to end wars and conflicts. The early libertarians would oppose that as well. Many of them seem to be ideological descendants of the American First faction of the 1930s. Some of them probably were literal descendants of American Firsters to.Report

      • Avatar Brandon Berg in reply to Brandon Berg says:

        @leeesq
        I was wrong to call them militant pacifists for the reason you stated: Most would have been okay with fighting off an invasion of the US. But “isolationists” is also wrong, as they supported free trade, and some supported open borders. The correct term to describe libertarian foreign policy was (and largely still is) noninterventionism.Report

      • Avatar LeeEsq in reply to Brandon Berg says:

        Even American firsters believed that the United States should maintain embassies across the world and engage in commercial relations with other countries. An isolationist is a non-interventionalist.Report

      • Avatar Mad Rocket Scientist in reply to Brandon Berg says:

        @leeesq

        No, an isolationist wants to effectively seal the borders with others, non-interventionists are happy to trade & permit immigration/emigration, but balk at getting involved in the internal affairs of other nations.

        Japan before the White Fleet was isolationist. Japan now is largely non-interventionist (at least, I don’t see them sending troops to other nations on a grand scale).Report

      • Avatar Jaybird in reply to Brandon Berg says:

        An isolationist is a non-interventionalist.

        But a non-interventionist is not necessarily an isolationist. Non-interventionism allows for vigorous trade, cultural exchange, and so on.Report

      • Avatar Mike Schilling in reply to Brandon Berg says:

        Note that there was also an article arguing against getting involved in the Pacific, which can’t be explained in terms of racism.

        Though it can be explained quite well in terms of attacking anything associated with the Democratic party in general and Franklin Roosevelt in particular, which is unsurprising for a movement that (at the time) had better things to say about the Confederacy than the New Deal or the 1964 Civil Rights Act.Report

      • Think “isolationism” and “American Firstism” tend, especially the latter, to be almost Godwinian epithets. Even if one doesn’t go that far, one has to admit they’re loaded terms, useful more for obfuscating than for clarification.

        If we look at the egregious human rights violations elsewhere in the world during, say, the past two decades, we can find instances in which US military intervention may have helped others, where along some line of action, people’s lives could have been saved. And yet the US often did nothing or pitifully little. I think ascribing inaction or insufficient action to “isolationism” does too much work. Even people who advocated US intervention into those places might not have been willing to take up arms themselves. Normally that’s an ad hominem argument, but it’s easy to cheer on intervention when one is unlikely to be the agent of intervention.

        Going on to America Firstism. That “movement” quickly descended into a right-wing movement with antisemitic under- and overtones, or at least that’s my understanding. And that movement’s success arguably prevented US intervention in WWII sooner and therefore arguably led to more long-term loss of lives, and if that movement’s preferred policy had won the day, even more people would have died and the world would be a much, much darker place.

        But….[and you knew there was going to be a “but”]….from the vantage point of 1940 or so, with a horrible war of attrition only 20 odd years before still fresh in memory, I think it’s hard to blame people for not wanting to re-engage in a conflict of such large magnitude.

        Again, I don’t mean to defend America First. But one reason it was so powerful is that a lot of people shared its ambivalence toward entering the conflict, even if they weren’t members of the movement.

        And, speaking for myself, I was and am ambivalent about urging armed US intervention in such places as Syria, Sudan, or Rwanda. I do ask some of the commenters here if they honestly believe differently? Or if they would support intervention knowing that the cost of such intervention might be in thousands of lives. Maybe 100’s of thousands could have been saved, and maybe the cost in some of those proposed interventions would have been less than I fear(ed). I’m not even going to deny the role racism probably played in opposition to intervention or apathy about the crises that intervention would have been directed at solving. I don’t know enough about those conflicts to know. It’s easy to judge after the fact, but not so much in prospect.Report

    • Avatar Brandon Berg in reply to Brandon Berg says:

      Seriously, though, as soon as you guys purge everyone who ever suggested that communism might not be so bad compared to the alternative, I’ll seriously consider switching teams.Report

    • Avatar Mike Schilling in reply to Brandon Berg says:

      it was not the high-quality publication it is today?

      Objection: assumes facts not in evidence.Report

    • Avatar LWA in reply to Brandon Berg says:

      “about as legitimate as using Soviet apologism from the same era to smear the modern left.”

      Yeah, that’s just what Saul Alinsky would say.Report

    • @brandon-berg

      I think I agree, but to be fair to Ames, he focuses his criticism of Reason on what he believes to be the current editorship’s refusal to apologize for the earlier issues. Now, others here have called into question Ames’s interpretation of what Reason’s editors actually said or what the offending 1970s issues actually said (or how they said it), and other than reading Ames’s article, I haven’t followed any of the other links. But Ames’s argument isn’t reducible only to what Reason did in the 70s.Report

  6. Avatar Mad Rocket Scientist says:

    This is not the first time I’ve seen someone mine a publication for something objectionable & then use it to smear. Such offending articles, while certainly historically interesting, are just that (even more so when viewed in the context of the time, rather than against the opinions of today).

    Once a publication/organization has a change of leadership, you get a very limited amount of time by which you can use the past to smear the present. Call it a “Statute of Limitations” regarding offense, & I give it at most, two years. Hell, even within a leaders time, I’d keep that opinion mining to five years or less, since opinions can change. Or do I get to still hammer the Democrats for being the party of Jim Crow?

    While Mr. Welch may have handled that with a bit more care, but the Pando writer is being an ass for dredging it all up as some kind of reflection on the thinking today.Report

  7. Avatar Brandon Berg says:

    The mention of the Vietnam War sent me off on a bit of a mental tangent: Although the Vietnam War is generally regarded as having been a mistake, hardly anybody ever says that about the Korean War. I assume that the reason for this is that in hindsight the consequences have been undeniably good: At the cost of half a million to a million deaths, on the order of a hundred million South Koreans have been spared the horrors of communism and the Kim dynasty. In the Vietnam War 2-4 times that many died and nothing good came of it.

    For those who know the relevant history better than I, is this pure hindsight bias? Was there any reason at the time to believe a priori that the Korean War was a better idea than the Vietnam War?Report

    • Avatar LeeEsq in reply to Brandon Berg says:

      The Korean War had the benefit of better timing than the Vietnam War. It occurred right after World War II and when the decolonization process barely started but when the Cold War was just beginning. This meant that it was mainly fought by people with recent experience with war even if they weren’t veterans of World War II and when there was less fatigue about the Cold War. The anti-Communist faction in Korean society was more popular and widespread than the one in Vietnamese society. In hindsight, North Korean communism was also one of the battier versions of it so preventing the Kim dynasty from ruling the entire Korean peninsula ended up as an obvious good. The South Korean government had its problems but it never had the shammy appearance of the South Vietnam government.

      Vietnam occurred at the height of decolonization. This made American involvement in the war look more suspect in the hearts of many people and more imperialistic on its face. The majority of the Vietnamese people seemingly supported the Communists. While Vietnamese communism had problems similar to other Communist countries, it wasn’t nearly as batty as the North Korean or Cambodian versions. The Vietnam War was also being fought by generation that grew up with only indirect memories and experiences with war.Report

      • Avatar Mad Rocket Scientist in reply to LeeEsq says:

        +1

        I agree with this analysis.Report

      • Avatar Mark Thompson in reply to LeeEsq says:

        Yeah, this is spot-on, I think.Report

      • Avatar Chris in reply to LeeEsq says:

        What’s more, the Korean war hadn’t been ongoing for a decade or more before we ever got there, meaning we weren’t fighting against vast and well-built guerrilla forces and infrastructure. On top of that, the lessons of the Korean War (specifically the invasion of Korea by China), made us significantly more cautious in Vietnam.

        Though I imagine that if there were a difference between the two that made the latter less urgent at the time, it would probably be the fact that by the time of the Vietnamese War, China and the Soviet Union were at odds with each other (with China actually helping us spy on the Soviets in some cases), whereas at the outset of the Korean War, they were essentially working together to support the North Koreans. This meant that a communist Vietnam would be as much of a flash point between the Soviets and the Chinese (and it was, resulting in actual war) as it was between us and the Soviets, making Vietnam less of a threat to us strategically than a communist Korea.Report

      • Avatar Gabriel Conroy in reply to LeeEsq says:

        I agree with @leeesq ‘s analysis. I’ll add, though, that the Korean War aroused a lot of opposition of the “war weary” variety. It wasn’t necessarily that there was a strong antiwar movement, but more that people just hated being at war and wanted the war to be over. At least that’s my sense of it as a non-expert.Report

  8. So, if I were to go digging into the archives of, say, The Nation from the ’70s, I’m sure there’d be no denialism about the Khmer Rouge or Stalinism that someone with an axe to grind could concoct to tie to what that magazine does today, right?

    Oh, look: http://www.frontpagemag.com/2013/dgreenfield/the-nation-of-tyranny-lovers/

    I submit that both of these are silly exercises. What Reason published in 1976 was appalling. 1976 was also well before the Virginia Postrel era, much less the era of any of the current editors. Hell, Matt Welch was a whopping 8 years old at the time. What The Nation published over the years about Stalin and the Khmer Rouge was also appalling. It was also a long time, and several editors, ago.Report

    • Avatar LeeEsq in reply to Mark Thompson says:

      While its unfair to flag Reason’s current editors for the Holocaust denial issue, its not unfair to use it as an indictment against the Koch Brothers who were heavily involved in funding reason back than.Report

      • Avatar Kim in reply to LeeEsq says:

        Take the opposite view: If the Kochs had not intended to sign their own names to this sort of STUPIDITY, they should have disassociated themselves from the enterprise, entirely, moments after they read this issue.

        And yes, it’s stupidity. This sort of propaganda is that idiotic.
        Vince Foster was more effective.Report

      • Avatar Mark Thompson in reply to LeeEsq says:

        I’m pretty sure that his claim about them funding Reason as early as 1970 is inaccurate. Indeed, he doesn’t provide any documentation for that claim, and he’s got a history of dishonesty when it comes to his reporting on libertarians and the Kochs in particular. Reason wasn’t one of the organizations that the Kochs founded, and it’s never been owned by the Kochs either to my knowledge. At the time, Reason was also a very small publication – if the Kochs were donating to it at the time, it wouldn’t have even been something that would have been the object of much of their donations.

        Last but not least, are we really going to get into the business of holding mass donors to the standard of holding them responsible for everything that goes out under the name of an organization that they donate to, even when that occurred 40 years ago? Because I find it pretty hysterical when the Right plays that game with George Soros, and I’m not really sure why it’s any less hysterical when “Soros” is changed to “Koch.” And I might add that The Nation has been owned for the last 20 years by the guy who was its editor in the late ’70s. So….yeah.

        Seriously, this is a ridiculously silly game, particularly when the source is someone with a history of dishonesty on this subject.Report

      • Avatar Kim in reply to LeeEsq says:

        Mark,
        if that’s the case, I withdraw what I was saying.
        Your proof is not in evidence either, but…
        I’m belatedly recalling some commentary about Scaife that lends
        credence to your story.Report

    • Avatar James Pearce in reply to Mark Thompson says:

      A little “I know you are, but what am I?” don’t you think?

      From my perspective, Reason and The Nation published a lot of nonsense in the 70s, and that tradition continues today. Pointing out one fact does not obscure the other.Report

      • My point is that the entire game of “see what this ideologically oriented publication wrote in the ’70s” is silly, and only made sillier by then using that in an attempt to tar the entire ideology. Both publications may well publish a lot of nonsense today – but so do most publications. More importantly, though, pointing out the nonsense written by other people in those publications 40 years ago has exactly nothing to do with pointing out the nonsense of today, particularly when the alleged nonsense at issue today is of an entirely different sort than the nonsense of yesterday.Report

    • @mark-thompson

      As per my response to Brandon above, I think I agree, but Ames’s point was also about how the current editors of Reason handle it, not only about what the journal did in the 1970s.Report

  9. Avatar Mad Rocket Scientist says:

    Re: Publishing nonsense.

    There is a constructive aspect to publishing nonsense, in that it can, in many ways, air out lines of thought that need a healthy dose of fresh air & sunlight. Call it playing with ideas, or thought experiments, or just tossing ideas around to see what kind of reception it gets.

    We can’t see the comments from the 1970’s era articles, because we’d have to dive into Reasons archives & pull the letters to the editor from back then. Unlike today, when someone writes something abjectly stupid, we can see the backlash in real time.Report

  10. Avatar Kolohe says:

    I stopped paying attention to anything Mark Ames said when he put Radley Balko on that extensive enemies list that is in Ames’s head.Report

    • Avatar Mark Thompson in reply to Kolohe says:

      That piece is….staggering in the different forms of dishonesty it displays. What I want to know is why you were paying attention to him before then. Dude seems to be about as reliable a source as Joseph Farah.Report

      • Avatar Kolohe in reply to Mark Thompson says:

        Like dhex said above, eXile used be amusing if a bit (or more) tendentious (which describes both Ames and Matt Taibbi) (and Gary Beecher writes well, but is not as smart as everyone thinks he is – beating up on American foreign policy choices over the last 10 years is like Ken Jennings playing in the Jeopardy teen tournament)Report

  11. Avatar trizzlor says:

    Ames seems like a maniac, but he’s entirely open about his intent: to get the current Reason editors to repudiate (or not) the previous positions of the magazine. This is actually a pretty useful exercise that lots of journals go through voluntarily. Commentary periodically reprints Norman Podhoretz’s racist humblebrag “My Negro Problem – And Ours” and offers him the opportunity to discuss in hind-sight. And the discussion is informative; NPod has clearly matured in his thinking on the issue, but still continues to down-play the power of racism and pat himself on the back for being an admitted racist. National Review will sometimes reference Buckley’s white-supremacist writings; aggressively denouncing them while simultaneously lashing out at liberals. Both cases offer a unique window into the current editorial thinking that’s going on there.

    At Reason, Welch did a good job of demonstrating that the magazine was mostly on the side of good in the Apartheid debate (though a bit less of the victim card would’ve been nice). His response (or silence) to the Holocaust denial issue will be similarly informative.Report

  12. Avatar Tod Kelly says:

    Is it just me, or does this feel the same as when wordsmith used to trot out quotes from Democratic leaders from the 1960s and 1970s to “prove” today’s Democrats are the real racists?Report

    • Nob Akimoto Nob Akimoto in reply to Tod Kelly says:

      I don’t really know if it feels the same as quoting leaders from the 60s and 70s, if only because the piece points to people who are around today and putting money into various causes as being connected to this movement. If there’s a comparison, it’s probably more to do with Ron Paul and his newsletters as much as anything else.

      I’m more curious about this point:

      Perhaps the reason Reason’s current editor is hesitant to distance his magazine from past contributors is that some of them are still around, still running the Reason show, and otherwise remain major names in the Koch brothers’ libertarian network. Robert Poole and Manny Klausner, listed on the masthead of the Holocaust-denier issue as co-editors, also co-founded with David Koch the nonprofit Reason Foundation, which publishes Reason magazine to this day. The Reason Foundation still lists Poole, Klausner and Koch as trustees; Poole is also listed as a Reason Foundation “Officer,” alongside Reason editors Matt Welch and Nick Gillespie. The Koch brothers have donated millions to Reason, which, besides publishing the magazine, also advises state and local governments on mass privatizations of public assets and services.

      Besides working as a privatization advisor to several US presidents and Margaret Thatcher, Robert Poole has more recently served as a privatization advisor to Florida governor Rick Scott and Texas governor Rick Perry.

      Marty Zupan, listed on the Reason masthead as Book Review Editor in the February 1976 Holocaust deniers’ issue, is today president of the libertarian Institute for Humane Studies, whose chairman is Charles Koch. Tibor Machan, listed as “Senior Editor” of the issue, is the son of a Hungarian Nazi war criminal. Machan and Zupan were married when they worked together on Reason’s special Holocaust-denier issue.

      Report

      • Avatar Mike Schilling in reply to Nob Akimoto says:

        That’s a pretty awful smear of Machan. He was 6 when the war ended and isn’t responsible for his father’s actions.Report

      • Avatar James Hanley in reply to Nob Akimoto says:

        So, the guys who published this one single issue giving a voice to some holocaust deniers nearly 40 years ago are still affiliated with the magazine? One single issue nearly 40 years ago, where they gave dome ithers a voice, not even where they wrote the denialism themselves.

        You’re not even 40 years old, right, Nob? Would you hold everyone to account for a single mistake they made years before you were even born? Is there no implicit statute of limitations, or can Reason never move past that until they cut all ties with those who one time decades ago gave a bad guy a platform?

        As for the slam against Tibor Machan, he can’t even dredge up something Machan did, but only something his father did, something he only knows about because on his memoirs Tibor Machan condemns his father. Only a vile POS suggests the sins of the father taint the sonReport

      • Avatar Tod Kelly in reply to Nob Akimoto says:

        This is worse.

        This actually sounds like ever Glenn Beck bit I’ve ever seen about George Soros or how every Muslim President Obama has ever met is part of a far-reaching, Muslimy conspiracy.Report

      • Avatar James Hanley in reply to Nob Akimoto says:

        Glenn Beck: “James Hanley has a friend who has family in the Assad government. So we know that Hanley is supportive of Assad’s murderous thuggery. Tod Kelly let Hanley become a contributor to his blog, after offering him numerous guest posting opportunities. They even met in Chicago two years ago, while the Assad regime was struggling for its life against freedom fighters, and gassing its own citizens. Ergo, Tod Kelly is an Assad sympathizer who has committed treason by providing aid and comfort to Amerjca’s enemies.” (Add tears and protestations that he doesn’t take pleasure in bringing such ugly truths to light.)Report

  13. Avatar Murali says:

    I’m of two minds about this. On the one hand, this was a long time ago. On the other hand, when I think about the Ron Paul Newsletters, I am horrified and want to distance libertarianism from them. Hell, Rothbard himself has written horrendous stuff and I wish libertarians paid far less attention to Rothbard than they do now. It seems that consistency requires me to give on at least one of these points.

    To see an example of some of the really horrible things Rothbard has written, (as recently as less than 20 years ago) look at this:

    http://archive.lewrockwell.com/rothbard/ir/Ch75.html

    Rothbard was a grade A asshole and I think less of the Mises Institute for not disavowing RothbardReport

    • Avatar Saul Degraw in reply to Murali says:

      @murali

      Of course Rothbard himself wad Jewish which makes his attraction and attachment to Holocaust deniers even more psychologically intriguing.

      Ludvig von Mises was Jewish as well but the institute named after him seems to attract a lot of neo-Confederate types.

      Again, plenty of people can find ways to make an ideology fit their bigoted purposes. In this case libertarianism can be used to defend Jim Crow styled bigotry.Report

      • Avatar LeeEsq in reply to Saul Degraw says:

        Rothbard’s attraction to Holocaust Denial isn’t really that psychologically intriguing. Its the same self-hatred that you see in a lot other very assimilated Jewish intellectuals. The only difference was that Rothbard’s politics were very different than the Far Left politics that usually co-exist with Jewish self-hatred.

        One problem that early libertarianism had was that many of its doctrines made it attractive to unsavory types that weren’t at ease with the move for minority rights in mid-20th century America. If you were a racist or an anti-Semite but were looking for away to justify segregation without actually saying that you favored Jim Crow, the property rights stance and ideas of minimal government advocated by libertarians provided for attractive cover.

        I also think that many of the early libertarians just wanted to shock liberal sensibilities. During the 1960s and 1970s, blatant racism and anti-Semitism were real easy ways to do this.Report

      • Avatar Stillwater in reply to Saul Degraw says:

        Rothbard’s attraction to Holocaust Denial isn’t really that psychologically intriguing. Its the same self-hatred that you see in a lot other very assimilated Jewish intellectuals.

        Wow. WHen you say it like that, it really isn’t intriguing. “He’s just a self-hater, nothing more to it than that!”

        I’ve always found the concept of the “self hating Jew” to be either vacuous or circular (which is another form of vacuity, I guess). Seems to me any time a Jewish person says something critical of another Jewish person or Israel, the standard, all-too-prevalent response offered by other Jews is to account for those sentiments as expressing a form of self-hatred rather than address the content of the view. It’s a psychological reduction that assumes the basic criticism itself is entirely invalid. When expressed by a Jewish person.

        That’s circular, no?

        In saying that, I don’t want to imply that I entirely reject the concept or that it has some descriptive accuracy. I just think it’s become in general a way to deflect discourse away from content and substance in a pretty obvious (to me, anyway) way.Report

      • Avatar dhex in reply to Saul Degraw says:

        are there self-hating catholics?Report

      • Avatar Jaybird in reply to Saul Degraw says:

        Technically, that’s part and parcel with Catholicism.Report

      • Avatar Stillwater in reply to Saul Degraw says:

        Self-hating capitalists? Self-hating Democrats or Republicans?

        If one of my liberal colleagues were to offer a criticism of liberal policies (impossible, I know!), would I be justified in saying that person is a “self-hating liberal”?

        I think I would, actually, insofar as mu usage mirrored the standard usage of “selfhating Jew”. In my case, tho, if I did that, people would just laugh at me!Report

      • Avatar Stillwater in reply to Saul Degraw says:

        Jaybird wins! That was awesome. I’m married to a recovering Catholic, and that strikes me as about right.Report

      • Avatar Saul Degraw in reply to Saul Degraw says:

        @stillwater

        Self-Hating Jew has more to do with assimilation than anything else. The term was coined in 1930 so even before the Nazis achieved power.

        http://en.wikipedia.org/wiki/Self-hating_Jew

        There has always been a fear among a subset of assimilated Jews that they will always bee seen as Jewish (and therefore not really mainstream and always apart from proper society). It is a fear of the Yiddishkeit (Jewishness). German Jews always looked down upon Oust Juden (East European Jews) for keeping with the traditions more. German Jews tended to be clean-shaven, used to worship on Sunday instead of Saturday, and also put up Christmas trees. Eastern European Jews who kept their beards, their language, separate education, and treated Christmas like a day of semi-mourning reminded them too much of the past.

        I admit that it can be used as a swipe against Jews who criticize Israel though.

        The main issue is that it really comes down to the tricky question of whether Judaism is a religion, an ethnicity, a culture, or all of the above. You have to remember that a good deal of anti-Semitic thought lies behind treating Jews as a separate race/ethnicity/culture that could never assimilate truly into North American and/or European society. The Jews would always be a people apart with “dual loyalties” (not necessarily to Israel but to their fellow Jews). Many Jewish people embrace the idea of Judaism and Jewishness as an inescapable fact no matter how religious or secular or not. For better or for worse, this is the “good enough for Hitler argument.” For better or for worse, I am a believer in the idea that Judaism and Jewishness are inescapable facts. A person can convert, get tattoos, and eat as many pork products as they want, in the end, he or she will be still seen as Jewish by both Jews and non-Jews when push comes to shove. Note, I don’t keep kosher.

        If one believes that Judaism is just a religion that can be embraced or discarded like any other, the idea that the Yiddishkeit can’t be escaped is pretty damning.Report

      • Avatar Road Scholar in reply to Saul Degraw says:

        Is this really about self-hatred? How about just not particularly caring that much about your ancestry one way or another? Wouldn’t that be consistent with the general libertarian disdain for group identification as anything of import?

        I offer myself as an example, though I’m not a libertarian. My ancestry, on both sides as far as anyone has been able to determine, is 100% Dutch back at least three centuries. For some of my older relatives that seemed to be of some importance to them, at least judging from the living room decor of windmills, wooden shoes, and blue-glazed plates. But all that matters very little to me and, to the extent that I indulge in group identification, I identify as “American” sans hyphen.

        Now you can complain that that is all well and fine for me, seeing as the Dutch have never been a persecuted group on either continent. But then that distinction just begs the question of why bad stuff that happened to your ancestors is a reason for stronger group identification in the present.Report

      • Avatar James Hanley in reply to Saul Degraw says:

        The problem I have with the “self-hating Jew” terminology (and I’ve also heard the term “self-hating black”) is that it denies individuality. As Mike says, why can’t a person just not care? What about that is “self hating?” How do we know they hate themselves? To me it seems to be a lashing out, anger at those who dare to ditch the identity and strike out to make their own identity, and it’s really about what those who hold to the identify think about them, than about what those who ditch the identity think about themselves.

        I mean, self hating. How the fuck do you know they hate themselves? Do you have some special insight into their psyche?Report

      • Avatar j r in reply to Saul Degraw says:

        Larry David had the best response to the self-hating accusation: http://www.youtube.com/watch?v=1PoPZF82FX8Report

      • Avatar LeeEsq in reply to Saul Degraw says:

        @james-hanley, its true that a person can simply be apathetic towards his or her ancestry or birth group identity but actively socializing with people and ideas openly antagonistic towards your birth group rightly raises suspicions. I’m sure that if an African-American who engages in CSA apologia would at least raise an eyebrow or two. Rothbard actively promoted Holocaust denialism or at least didn’t mind people who did so for some reason. Thats more than just not caring about his Jewishness, that is an active attempt to purge himself of it. It goes beyond apathy.

        @road-scholar, libertarians might be ideological adverse to group identity but playing around with racism and sexism isn’t really a good way to convince minorities and women to abandon their communalism.Report

      • Avatar James Hanley in reply to Saul Degraw says:

        Thats more than just not caring about his Jewishness, that is an active attempt to purge himself of it

        That doesn’t mean he hated himself. Even if he hated all the attributes of Jewishness, it would only mean hating himself if you assume his fundamental identity is ineradicably Jewish. I’m not sure who, other than he himself, would have standing to make such a claim.

        This isn’t an argument that you have to like his choices, or admire/respect him for making them. It’s just an argument that the “self-hating” claim relies on the assumption that someone other than the person him/herself can define their true identity. And that’s a hell of an assumption.Report

      • Avatar Stillwater in reply to Saul Degraw says:

        Thats more than just not caring about his Jewishness, that is an active attempt to purge himself of it.

        To follow up on James’ point, I’d also say the above quotation is just breathtakingly circular: Jewish identity is imposed on a person and a person’s failure to appropriately express that identity is accounted for by attributing them a psychological defect, one which is only attributed by assuming the concept of an imposed Jewish identity in the first place. It doesn’t explain anything, or account for anything (at least, from my pov) except that the folks who use the term believe individual identity is subordinate to cultural identity and is not something a Jewish person is at liberty to determine on their own.Report

      • Avatar Mike Schilling in reply to Saul Degraw says:

        Rothbard was born in 1926, meaning that he grew up in the shadow of what anti-Semitism could mean for him and his loved ones. That makes his embrace of both anti-Semitism and racism in the interest of advancing the libertarian project (Here’s a Rothbard column cheering on David Duke, both a Klansman and a Nazi; Weigel and Sanchez’s Reason piece on the Ron Paul newsletters ties them to Rothbard and Rockwell pretty convincingly) is pretty extraordinary: not proof of being a self-hating Jew, necessarily, but a clear demonstration of being a reprehensible asshole.Report

      • Avatar James Hanley in reply to Saul Degraw says:

        I’m with Mike and Saul, in contrast to Lee (if a goy can take sides in this debate!). Why Rothbard took the path he did is certainly interesting, I think. For any group of people, the norm is to maintain identity, so there’s usually something of interest going on when a person breaks away, and particularly when they don’t just slip away quietly but go toward what seem to be the group’s actual opponents.Report

      • Avatar j r in reply to Saul Degraw says:

        I don’t have all that much to add on the issue of self-loathing Jews, but coincidentally, I did come across this article on my Twitter feed: http://www.pewforum.org/2014/07/16/how-americans-feel-about-religious-groups/.

        It is a Pew article about how Americans feel towards various religious groups. Captured in the data is a measure of how members of each group feel about members of their own group. Jews have the highest ratings (the most positive feelings) of their own group among all of the groups included.

        Don’t know exactly what to make of this, but one possible interpretation is that there is a much higher bar for inter-group support among Jews and, therefore, a much lower threshold for what can be considered self-hating behavior. Obviously, there are all sorts of other interpretations as well.Report

      • Avatar Kim in reply to Saul Degraw says:

        Stillwater,
        there’s precisely one Jew that I’d trust to use that term. He gets paid to analyze people psychologically, though. It probably says something that he’s much more willing to use the term psychopath than self-hating, doesn’t it?Report

      • Avatar Kim in reply to Saul Degraw says:

        Saul,
        the German Jews put it VERY differently than you do, here.

        The Slavic Jews adopted Christian traditions, claimed they were Jewish, and then refused to stop because “It’s Tradition!”Report

      • Avatar Kim in reply to Saul Degraw says:

        Lee,
        Buuuuulshit. A quick google on Harold Ford and self-hating pulls zilch.Report

      • Avatar Jaybird in reply to Saul Degraw says:

        I didn’t bother to do a search on Harold Ford and self-hating but I did one on Ben Carson and self-hating and, hooo doggies.Report

  14. Avatar Saul Degraw says:

    @james-hanley

    “Both have a common core, I think, in believing–whether rightly or wrongly–that in a less regulated environment in which a) investors are not actively incentivized to make risky investments, and a) bear the cost of their own failures, we’ll get less of this kind of stuff. The arguments aren’t really opposed, but are just looking at difference facets of the same issue.”

    The big issue I have is whether this can ever be true or whether upper management and investors will find a way to make people but themselves suffer first even if there was no bailout or too big too fail. I would love to see investors and upper-level bankers bear the risk when their investments don’t pan out but the problem is that there seem to be too many layers and ways they make money first via management fees that are not invested and laying off the staff with the least amount of power first in cost cutting and belt tightening exercises. Even if a place does fold, the old boys network tends to protect upper-level people and given them cushy jobs at other places again.

    I admit that this is more of a social/cultural problem and one that law and regulation potentially cannot solve but damn if it does not piss me off.

    I generally see upper-level business people and bankers as being rather insulated from their idiotic decisions most of the time because of cultural insularity more than anything else and it is generally just ordinary workers who suffer. The necessary backbone support that does not make the risky decisions and just pulls in a decent pay check. Not the people who work hard, party hard and make the decisions or will get to make the decisions. Small to medium size business owners might suffer from bad decisions but it seems once you get to a certain level of size, you do not.

    This is largely why I am for very strong welfare states and social safety nets. Ordinary workers should not be the ones told to tighten their belts because of bad business decisions done by investment banks.Report

    • Avatar James Hanley in reply to Saul Degraw says:

      In part, it’s a consequence of the ability to create limited liability corporations. It’s a cost we have to decide whether or not its worth paying. In the big picture, I think it is. But that doesn’t mean we can’t change the rules a little bit, if we can figure out a way to do so that has greater benefits than costs, or that we can’t be more aggressive about prosecuting actual fraud.Report

  15. Avatar Jaybird says:

    Aaaand Nick Gillespie responded today:

    http://reason.com/blog/2014/07/26/did-reason-really-publish-a-holocaust-de#comment

    Here’s the apology part, kinda:

    Ames is correct that some of the contributors to that issue developed an interest in or were fellow travelers with that most pathetic area of study known as Holocaust revisionism or denialism. That scurrilous topic is not the focus of any of the articles in the issue, but the inclusion of contributors such as James J. Martin, who would go on to join the editorial board of the contemptible denialist outfit the Institute of Historical Review, is embarrassing.

    and

    Much of the material from the issue doesn’t hold up, which is hardly surprising for a magazine issue published almost 40 years ago. Even as the various writers warn explicitly against uncritically accepting revisionist accounts out of inborn contrarianism, there is a generally adolescent glee in being iconoclastic that I find both uninteresting and unconvincing. However, to characterize the issue as a “holocaust denial ‘special issue,’” as Ames does, is an example of how quickly he can lose his always-already weak grasp on reality.

    Now, I had assumed that the Sudenten-German Tragedy was the “holocaust denial” article and, thus, didn’t read it… I’m going through now again and will read the articles looking for Holocaust Denial.

    If this is called the Holocaust Denial issue because it has an article in it written by someone who was into Holocaust Denial (but the article itself isn’t about that), I’m pretty sure that Reason comes across looking somewhat better than Ames does.

    Now I’m getting to reading…Report

    • Avatar Jaybird in reply to Jaybird says:

      Huh. For a Holocaust Denial issue, it’s not got a whole lot of denial of the Holocaust in it.

      Now I guess I get to wonder why I was so willing to believe that it had Holocaust Denial in it to the point where I wasn’t going to read the article that I assumed was the bad one.

      I think it has to do with the “generally adolescent glee in being iconoclastic” that Gillespie mentions that makes me shrug and say “well, of course they would have done something like this in the 70’s.”

      Even though they didn’t.

      The level of revisionism seems to be on the same magnitude of discussing how we didn’t need to bomb Dresden like we did and the fact that we did reflects badly on us… let alone our treatment of Japan.

      If anything, I suppose we can yell at this issue for not discussing the Holocaust. But given that we were yelling at it not that long ago for denying it, that seems a bit petulant.Report

    • Avatar Mike Schilling in reply to Jaybird says:

      Gillespie is a regular Karl Marx:

      As the conservative right and progressive left feel threatened by libertarianism, such attacks will multiply in number and intensify in venom.

      “A specter is haunting America: the specter of libertarianism.”Report

    • Avatar Mike Schilling in reply to Jaybird says:

      That scurrilous topic is not the focus of any of the articles

      The second Reason article that Ames shows bits of contains the following:

      The anonymous author of The Myth of the Six Million […] has presented a solid case against the Establishment’s favorite horror story .

      He then goes on to list other works of Holocaust revisionism that “seriously challenge the story”. Gillespie is technically accurate that this isn’t the main focus of the piece, which is a lament for isolationism (the author’s own term); North simply dismissed the Holocaust as an interventionist lie and proceeded from there. It’s still Holocaust revisionism, not just mentioned but championed. It wouldn’t cost Reason anything to be honest about that, but what the hell, looks like they’re getting away with it,Report

      • Gillespie is technically accurate that this isn’t the main focus of the piece

        Is that more or less technically accurate than the claim that Reason published a Holocaust Denial Special Issue?Report

      • Avatar Mike Schilling in reply to Mike Schilling says:

        If Gillespie wants to be somewhat more accurate than Ames, he’s golden.Report

      • Avatar j r in reply to Mike Schilling says:

        I will give Ames credit for this: he has quite the ingenious strategy. Take a nugget of truth and spin it into an exaggerated narrative of non-existent connections and made-up motivations. Then when the target of your attack dares to defend himself from all the made-up stuff, you can accuse him of being insufficiently attentive to the one small bit of accuracy in your initial claim. Most people will eventually see through that sort of thing, but you’ll keep a few people hooked.

        Also, I give @mike-schilling credit for the speed and agility with which he moves goalposts.Report

      • Avatar Mike Schilling in reply to Mike Schilling says:

        I’ve never defended Ames. I’ve consistently said that there’s real Holocaust denial in that article. There is. If you want to ignore it because you dislike the messenger, knock yourself out.Report

      • Well, part of the problem is that the sin was oversold in the first place. “HERE IS REASON BEING PRO-APARTHEID!” and, well, Reason wasn’t exactly being pro-Apartheid. As a follow-up “OH YEAH?”, the accusation became “THEY HAD A SPECIAL HOLOCAUST DENIAL ISSUE!”

        Well, had the argument been that, in 1976, they had an issue that had some writers who had some really ugly associations, including holocaust denial, and one of them referenced his holocaust denial in his article, then that’d be accurate but also somewhat less interesting.

        Less interesting to the point where an editor might look at it and say “yeah, his inclusion in the issue as a contributor is embarrassing” and that might be enough.

        As it is, the accusation was a one-two punch of Apartheid and Holocaust Denial and, in denying the accusations, they didn’t go far enough in acknowledging the stuff that was there. But they did acknowledge it and they did say it was embarrassing.Report

      • Avatar Mike Schilling in reply to Mike Schilling says:

        I’d like the acknowledgment a lot more without the weasel-wording.

        And “embarrassing” is ghost-writing an advice column for Alyssa Milano.[1] This goes a bit beyond that.

        1. Gillespie used to do that, at least according to Wikipedia.Report

      • It seems to me that failure to take the weasel attacking into account is to ignore some fairly important context of the weasel defense given.Report

      • Gillespie used to do that, at least according to Wikipedia.

        Oh, are we finding other things written by these folks to be relevant to the argument?

        I’ve got a handful of interesting sentences that Ames wrote, for example. I found them not exactly relevant to the argument but if you’d like to introduce such things, I would like to hear what you think about them.

        Do we agree that that’s someplace worth going?Report

      • Avatar Mike Schilling in reply to Mike Schilling says:

        It wasn’t a criticism. He wanted to be a writer badly enough to do something pretty unrewarding in other ways. Good for him.

        And as far as I know, he never claimed that Teen magazine won a Peabody.Report

      • Avatar Mike Schilling in reply to Mike Schilling says:

        IThe only reason not to weasel is because being completely honest is important to you and, hell, it’s a political magazine.Report

      • As interesting as a framing as that is, I more see them responding to the criticism that they were given rather than the grain of honest criticism at the core of the criticism that they were given… and yet they still responded to that grain as well and conceded that Ames had a point and criticized the writer and the issue as a whole.

        To be perfectly honest, I don’t understand why you’re expecting their response to Ames to be more measured than it is, given that they’re responding to Ames.Report

      • Avatar Mike Schilling in reply to Mike Schilling says:

        Are they? I read it as an open letter to their entire readership.Report

      • Avatar Glyph in reply to Mike Schilling says:

        “something pretty unrewarding”

        I’d say that depends on your definition of “unrewarding”. Did he get to meet Milano in person at any point?

        If so, that’s more reward than most writers ever get.Report

      • I read it as an open letter to their entire readership.

        Huh. And I read it as an exasperated response to yet another article full of Ames’s accusations founded in very, very little (and yet what was there still got acknowledged and addressed).

        I’m still not understanding why you’re expecting them as if they were responding to the piece you would have written if you were Ames rather than the piece that Ames did write (and, more than that, in the context of the other piece that he wrote).Report

      • Avatar Mike Schilling in reply to Mike Schilling says:

        As I said, I don’t expect complete honesty from a political site. I would have found it refreshing, though. And they’ve not been shy about pointing out the sins of libertarians past, e.g exposing Ron Paul and pointing out what miscreants Rockwell and Rothbard were.

        I honestly don’t know why this thread has gone on so long. We both agree that Reason weasel-worded its defense, which was the extent of my observation.Report

      • Avatar j r in reply to Mike Schilling says:

        We both agree that Reason weasel-worded its defense, which was the extent of my observation.

        Maybe I’ve missed something, but I haven’t seen @Jaybird say any such thing. I am trying to understand the twisted logic of someone who reads Ames two articles and reads both Gillespie’s and Welch’s response and comes away accusing the Reason folks of dishonesty. Honestly, though, I can’t, even assuming the usual sort of partisan rationalizations.

        Even with the most uncharitable view of Reason, there is nothing to support the view that they are being dishonest. I suppose that if you insist, you can gig them for being insufficiently penitent on behalf of former editors that ran Reason when both Gillespie and Welch were in grade school. That, however, is not what the “dishonest” means. Neither response misrepresented what was in the magazine.Report

      • Avatar Mike Schilling in reply to Mike Schilling says:

        Jaybird said:

        It seems to me that failure to take the weasel attacking into account is to ignore some fairly important context of the weasel defense given.

        Which sounds to me like agreement that Reason’s defense was weaselly.

        And it was. “None of the articles were focused on Holocaust denial” is technically true, but ignores the fact that one of them asserted it and used it as a jumping-off point.Report

      • I do find the failure to acknowledge what Reason was actually accused of to be frustrating.Report

  16. Avatar Jaybird says:

    Nob, out of curiosity, have your issues been addressed to your satisfaction?Report

  17. Avatar j r says:

    I am interested in hearing the answer to @jaybird’s question and I have one as my one, as well.

    A few people have said that Ames goal in writing those two pieces was to see if the current Reason editors would speak out against what was written in the magazine forty years ago. It seems quite obvious to me, however, based on reading lots of other things that Mark Ames has written, that he is not after a response and that no matter what Reason’s response were, Ames would keep going after them. Ames is quite convinced that the Koch brothers are oligarchs in the mold of the men who split up Russia after the fall of the Soviet Union who present a clear and present danger to American democracy, which therefore justifies his scorched earth campaign against the Kochs, anyone involved with any of their affiliated organizations, or anyone tangentially connected. Read the hit piece on Balko and tell me what other interpretation is possible.

    I am open to considering that Ames is someone with a point of view worth considering, but nothing I’ve seen from him so far, whether his writings on libertarianism or the gonzo journalism from his Russia days, gives me anything but a negative opinion of him.Report

    • Avatar Mad Rocket Scientist in reply to j r says:

      @j-r

      Ames is quite convinced that the Koch brothers are oligarchs in the mold of the men who split up Russia after the fall of the Soviet Union who present a clear and present danger to American democracy…

      So what you are saying is Ames lurks around on this blog & writes under the pseudonym of Kim?Report

    • Avatar James Hanley in reply to j r says:

      I think you forgot about your question.Report

    • Avatar Gabriel Conroy in reply to j r says:

      @j-r

      This thread/OP is the first I’ve ever heard of Ames. And all I’ve read was Ames’s piece, and that I skimmed and didn’t read very closely. I didn’t read Reason’s response, but from what I gloss from other commenters, the response was more, err, reasonable than Ames suggests. If so, then we should consider the response.

      However, I don’t Ames’s duplicity is very relevant when it comes to assessing Reason’s response to its 1970s articles. What is important is the response and, perhaps, looking more closely at the offending articles.

      To be sure, I agree with others here that it’s generally unproductive to find something a publication issued 40 years ago and try to smear its current editors/contributors/readers with that brush.Report

  18. Avatar Jaybird says:

    “It”s good to keep wide-open ears and listen to what everybody else has to say, but when you come to make a decision, you have to weigh all of what you’ve heard on its own, and place it where it belongs, and come to a decision for yourself; you”ll never regret it. But if you form the habit of taking what someone else says about a thing without checking it out for yourself, you”ll find that other people will have you hating your friends and loving your enemies.”

    – Malcolm XReport

  19. Avatar Dave says:

    It’s official. My head officially hurts.

    Multiple responses to multiple people below:

    @james-hanley

    Zic, you’ve made that point repeatedly, but repetition doesn’t make it true. Coyote blog recently had a good post on this…

    I’ve read articles about Basel II’s standards as a cause of the crisis but I have four concerns about that argument. The first is that no matter what anyone says, it all starts and ends with Greenspan’s manipulation of interest rates circa 2003-2004. Whatever capital standards were in place, yields on fixed income instruments plummeted to a point where fixed income investors had to go elsewhere (and with subprime/CDOs). The second concern is that the damage was so widespread I’m not sure how significant this is to begin with. The third concern is regarding capital, the problem wasn’t with the regulations per se but the fact that the Wall Street firms were using very short-term and volatile sources of funding to originate and sell long(er)-term securities thereby creating a substantial duration mismatch and exposed themselves to liquidity problems. The fourth concern is that even if Basel II provided the incentive on the demand side of the equation, that alone should not excuse the myriad of problems that are well-documented on the supply side of the equation. Basel II should not justify the bad behavior of mortgage brokers that were generating fraudulent loans. Basel II notwithstanding, the real problem is that a supply of toxic loans made it into the capital markets. This is what concerns me the most.

    @zic

    There were all sorts of other problems, and they all matter. But banks could not have capitalized to cover the synthetic derivative losses and they were not actually dependent on the underlying securities; just as you can make a bet on a horse and not own part of the horse at the track.

    Yes, AIG did overtextend itself, but overall, the CDS markets functioned relatively well throughout the crisis. The CDS markets were a far better indicator of signalling which companies were in trouble than the traditional way of ratings agencies downgrades and when all the Lehman CDS positions were settled post-crisis, the market did not go into a tail spin.

    @mike-schilling

    The usual (entirely false) claim is that the collapse was caused by the CRA, which forced banks to make bad loans to poor and/or dark-skinned people.

    Oh nice. Someone has read my post on the subject!!! Five years later and I still refer to it.

    @james-hanley

    Banks traditionally did not give the types of subprime loans–particularly the ARMS, which were the bulk of the bad mortgages–but they were pressured by the federal government to give them, and the mortgage originators had the assurance that they would be bought (both by investment banks and by Fannie/Freddie, although to be fair, the latter two were actually a bit slow to get into the game, although they did end up getting in in a very very big way).

    This was my take in 2009 and I stand by it.

    https://ordinary-times.com/blog/2009/06/30/theyre-coming-to-get-you-barbara

    I would argue that even if Fannie was buying CRA-loans, they had done it long before they went all-in on subprime in 2005 and were buying loans underwritten to GSE standards. Fannie is a whole other story because circa 2005, an argument can be made that its foray into subprime had nothing to do with politics and everything to do with market share and profits.

    @zic

    Government and markets can each be both good and bad actors; they can constrain and limit or empower.

    I’ve always held that view. Am I not allowed to given my libertarian streak?

    First, I really dislike the term ‘mortgage backed,’ because it presumes there were actual mortgages as the basis for synthetic derivatives, and this is not the case.

    There were mortgage-backed securities. You couldn’t have created synthetic securities without having an actual portfolio to track. This sounds a bit apples and oranges to me. Yes, investors were over-invested in MBS as well as CDOs and other synthetic derivatives.

    The derivatives were based on bets of portfolios of mortgages, and they were originally designed as hedges.

    The credit default swaps yes but they were added to CDOs as ways to over-collateralized and “over insure” the cash flow streams. We saw how well that worked out.

    They were also derivatives of derivatives of derivatives. It was insane.

    As to why the market attracted the investments it did — there were no restraints on it. It was unregulated. I keep repeating this, too, but read about Brooksley Born. If Greenspan and Summers had listened to her in the mid-to-late 1980?s, this would not have happened.

    That aspect of it would have been significantly lessened. I believe the time frame was the late-90s since reforming the derivatives markets became an issue after the near failure of Long Term Capital Management.

    i think individual banks could have failed without the kind of economic free-fall we would have seen had AIG failed

    I strongly disagree. Lehman’s failure triggered the run on money market funds. Had that been allowed to continue, the blood would have spilled over on to Main Street and it would not have been pretty.

    From an investment banking perspective, the bit problem was that far too many of the synthetic-derivative bets were based on stock margins;

    And “market” valuations based on the opinion of the seller of those securities who would force margin calls and record the gains as profits. Yes, it was that bad.

    @james-hanley

    The issue is not that zic claims there was insufficient regulation. The issue is that she keeps implying that bad regulation played no role, that the sole regulatory problem was lack of regulation. Those aren’t the same thing. More importantly, she refuses to actually address the substance of what Coyote Blog said.

    I think I addressed the Coyote Blog above and I’m more inclined to believe that poor or poorly-enforced regulations bear more of the responsibility here. Mortgage-backed securities are sold in a regulated environment so even if the loans themselves were originated in a lightly-regulated/poorly-regulated environment, the hope is that the checks that were in place pursuant to securities laws would have identified issues and prevented otherwise toxic instruments from going out to market. It didn’t happen that way.

    Institutional investors are very “check the box” type people. They aren’t risk takers. They make their investments pursuant to the conservative requirements of the various funds. One thing they do and have done for years is rely on the ratings agency credit ratings, and for good reason – for most kinds of securities like railroad bonds, they know how to rate them.

    Not at all. The point is that it made the accounting of those investments very favorable, by allowing the full book value of the investments to be counted toward the firm’s assessed capital sufficiency.

    I agree but my problem is that these securities should have never gotten to them in the first place and this is a whole separate issue.

    Do you think that if the accounting rules for MBSes and government securities had been the same as for other investments that businesses would have been just as inclined to invest in them?

    Yes, but I also believe that had more been taken with respect to the originate-to-securitize end of the mortgage business, even with the incentive, the product the investors would have bought would not have blown up in their faces.

    @clawback

    Not in any meaningful sense, no. They had a wide variety of investments X to choose from, most of them genuinely safe. The existence of some other discouraged investments in class Y cannot meaningfully be said to “incentivize” them to invest in the riskiest ones from X. Just pick the safe ones from X.

    I disagree. It most certainly would and James did not differentiate the risk characteristics of X and Y like you did. I think this skews your answer a bit.

    If investment banks had been required to properly value synthetic derivatives, it is unlikely the real-estate bubble would have happened;

    The bubble was in full swing long before the explosion of synthetic derivatives. Synthetic derivatives became more favorable after investors couldn’t get their hands on enough mortgages, which was what was happening after most creditworthy and non-creditworthy applicants were spoken for.

    With mortgage-backed derivatives, there was no piece of the actual mortgage at the back of the financial instrument; there was a rated security value of a separate transaction — clumps of mortgages.

    The pool of mortgages is the collateral. The cash flows generated from each of the mortgages get passed through to the investors based on their tranches and total positions. I don’t understand why you’re attempting to make this distinction.

    @mike-schilling

    Cite? Because those two, which were the first big ones to fail, didn’t get bailed out, and I honestly don’t recall anyone suggesting at the time that they should. If they were expecting bailouts and the government showed unusual courage in denying them, you’d think that would have made the news.

    The bailout talk didn’t start until it became clear that the rot was endemic and the risk of not having bailouts was complete financial havoc, i.e. something resembling the Great Depression. I would certainly prefer a system in which financial power was far less concentrated, so that a relatively small, homogenous group didn’t hold the rest of us hostage, but so long as we insist that inequality isn’t a problem and antitrust legislation is pointless, we lack even the tools to discuss possible solutions for that.

    There was plenty of reason for Lehman to believe that it would receive a bailout. The first was that Greenspan had already built a reputation for intervening into volatile markets both in 1987 (Black Monday) and 1998 when he orchestrated a Wall Street-led bailout of Long Term Capital Management, a hedge fund that was believed to have posed a systemic threat if the fund failed and had to be unwound (it had total derivatives exposure in excess of $1 trillion – not bad for $3.5 billion of equity).

    While Bear was not bailed out the way the later firms would be via TARP, Greenspan did orchestrate a soft landing through the arranged acquisition by JP Morgan (and taking $29 billion of toxic assets for itself). The reason was systemic risk. Bear held huge derivatives positions with various counterparties and forcing those counter parties to go into the market to cover themselves could have caused all sorts of hell.

    If I recall, a lot of people said letting Lehman fail was a mistake and it was. It should have been bailed out the way Bear was, orderly liquidation with the assurance that counter parties would be covered. Punish the firm but keep the systemic issues to a minimum.

    I can’t picture management saying to themselves “It’s OK for us to be reckless, because we’ll get bailed out and the shareholders will only lose about 90% of their equity.”

    I can picture them saying “It’s OK to be reckless because we’re too big to fail and while your stock price may temporarily suffer during the downturn, the government will give us money, we’ll pay it back and in a few years our share price will return and we’ll be back to seven-figure bonuses.”

    That’s what happened, right?Report

    • Avatar James Hanley in reply to Dave says:

      Sorry to make your head hurt. A couple of responses.

      First, if I made it sound like I think CRA “caused” the crisis, then I wasn’t clear. I don’t think that at all. Rather, I think that to whatever extent it increased the number of subprime loans–particularly ARMs, which from the data I’ve seen were the type of subprime that had the greatest increase in default rates*), it played an exacerbating role.

      But that’s not actually my true objection. Although I don’t think I’ve been clear, what really gets me is the irony of folks criticizing lenders for extending mortgages to people who couldn’t actually afford them while being wildly supportive of the CRA, which in part promoted extending mortgages to people who couldn’t actually afford them by traditional standards. Somehow it’s wicked when banks do it on their own, but it’s praiseworthy when they do it with government encouragement. There’s a level of double-think there that really gets my goat.

      Here’s an NBER paper addressing the issue of CRA and risky loans. The abstract says,

      We use exogenous variation in banks’ incentives to conform to the standards of the Community Reinvestment Act (CRA) around regulatory exam dates to trace out the effect of the CRA on lending activity. Our empirical strategy compares lending behavior of banks undergoing CRA exams within a given census tract in a given month to the behavior of banks operating in the same census tract-month that do not face these exams. We find that adherence to the act led to riskier lending by banks: in the six quarters surrounding the CRA exams lending is elevated on average by about 5 percent every quarter and loans in these quarters default by about 15 percent more often. These patterns are accentuated in CRA-eligible census tracts and are concentrated among large banks. The effects are strongest during the time period when the market for private securitization was booming.

      That doesn’t mean CRA “caused” the crash. It does mean CRA encouraged the kind of behavior for which lenders are criticized.

      As to Greenspan’s manipulation of interest rates, I’ve long agreed that’s a part of the cause. With less “extra” money looking for a place to roost, the real estate bubble would have been much harder to generate.

      Basel II should not justify the bad behavior of mortgage brokers that were generating fraudulent loans

      I don’t think anyone used the term “justified.” If I leave my liquor cabinet unlocked and my kids sneak into it and get blitzed, I could rightly be criticized without anyone meaning my kids’ drinking was thereby justified. Nor would such criticisms imply the idea Mike Schilling tossed out that they were “forced” to do it. Rather, the issue is just that if we think someone is inclined toward bad behavior, we shouldn’t make rules that further incentivize that bad behavior, even at the margin.

      That’s not a whole lot of disagreement with any of your substantive points. And I take what you have to say about this issue very seriously.

      ________________
      *Full disclosure: We bought our first house with an ARM.Report

      • Avatar Kim in reply to James Hanley says:

        kos had some data about the ARMs under the CRA being a lot less likely to default.
        So, um, it sounds like they really could afford the loans they were signing up for…
        unlike the LIARs and NINJAs.Report

      • Avatar Mo in reply to James Hanley says:

        @james-hanley I worked at Countrywide from 2003-2005 and I can assure you that the CRA was not a major* part of the decision-making on offering exotic subprime loans. It was seen as a way to increase churn and get origination fees. There’s not a lot of money to be made from servicing fees once loans are packaged up and sold, so they needed a way to convince people to refi. ARMs are great for that because once the interest rates reset there is demand for a whole new loan and the circle of life continues. When I joined CHL, it was 80-20 A v. subprime, when I left it was 66-33 and when the proverbial poop hit the fan it was 33-66. That was not CRA related, that was bad management blindly chasing high rates and pushing crazy bad products like no doc loans and 125 LTV products because the margins are higher.

        * I would say no part as it never came up, but I don’t know what was said at levels above mineReport

      • Avatar Dave in reply to James Hanley says:

        @james-hanley

        But that’s not actually my true objection. Although I don’t think I’ve been clear, what really gets me is the irony of folks criticizing lenders for extending mortgages to people who couldn’t actually afford them while being wildly supportive of the CRA, which in part promoted extending mortgages to people who couldn’t actually afford them by traditional standards. Somehow it’s wicked when banks do it on their own, but it’s praiseworthy when they do it with government encouragement. There’s a level of double-think there that really gets my goat.

        Here’s a way to look at this:

        The purpose of the Community Reinvestment is to ensure that, to some degree, depository institutions that accept deposits in traditionally under served communities invest some of that money back into those communities through loans. To the extent that they have to relax their underwriting standards to extend credit to lower and middle income borrowers, that’s what they’ll do (and take more risk accordingly) but under no circumstances are banks required to make loans to people that they know can’t pay them back. Not a lot of CRA loans made it into the subprime private label securitizations so my guess is that there are a lot of CRA loans sitting in loan portfolios.

        I can see why people would support the CRA. The government played a role in aligning the interests between lenders looking to lend and borrowers in under served communities. At the same time, nothing in the CRA required banks to take on unreasonable levels of risk.

        To me, the real difference between loan officers and loan brokers that were placing loans on behalf of non-bank lenders is that the loan officers were constrained by the fact that the loans they originated were going on the balance sheets of their banks. Because of the environment that existed during the housing bubble, loan brokers did not have to worry about balance sheet risk or whether or not borrowers could really repay a loan (hello NINJA). Plus given that loan brokers were given incentives to originate certain kinds of loans (by being paid higher commissions) and were steering borrowers towards them (many of those borrowers not saavy enough to realize it), I’d say that the environment was characterized more by conflicts of interest than any kind of reasonable alignment. The fact that the non-bank lenders were not subject to the same regulations as the banks and were left to their own devices didn’t help matters.

        The reason that this was allowed to happen was because the people that were originating the loans weren’t the ones bearing the risk and the ones bearing the risk had no idea how much risk they were taking largely because the true nature of the risk became as clear as black paint.

        Relaxing lending standards to provide NINJA loans wasn’t undertaken for any kind of purpose other than to make the loan brokers, the finance companies and Wall Street as much money as humanly possible while not caring one bit about the damage that would happen when people would try to refinance loans and not be able to because the kinds of loans they would have needed no longer existed by 2009.

        I have no problem with profit seeking in lightly regulated environments so long as it is 1) legal; 2) done with full and fair disclosure of relevant information and 3) done so without causing any kind of systemic risk to the economy. Seeing as there was a lot of fraud and risk got obscured to the point where hundreds of billions of dollars in toxic assets brought our nation’s financial system to near insolvency, I can understand why people are decrying this.

        CRA lending could have never gotten us to that point because the banks would not have engaged in those kinds of practices given the risk.

        I don’t think anyone used the term “justified.”

        That was all me. I didn’t mean anything bad by it. Just a poor word choice is all. It happens when I try to get thoughts to paper as fast as I can. I leave words out of sentences too. Schilling would know. 😉Report

    • Avatar Mike Schilling in reply to Dave says:

      Yes, but I also believe that had more been [XXX] taken with respect to the originate-to-securitize end of the mortgage business, even with the incentive, the product the investors would have bought would not have blown up in their faces.

      Is there a word missing at XXX, something like “care”?Report

      • Avatar Dave in reply to Mike Schilling says:

        @mike-schilling

        Yes, thanks. I think that’s the point I was trying to make. I know I’ve been very vocal about that fact in the past.Report

      • Avatar Mike Schilling in reply to Mike Schilling says:

        Well, sure. Mortgages are loans secured by a specific piece of property; they are traditionally very safe investments. Aggregating them should create investments that are even safer, since the risk of non-payment gets spread out. In fact, once you have a sufficiently large number of mortgages. it should be possible to estimate the number that will become delinquent quite accurately and price the securities accordingly. In a world where the naive view of the free market (you know, people getting ahead by creating a superior product) obtained, CDOs would be a wonderful investment.

        The problem comes because the relationship between the security and the mortgages it’s composed of becomes sufficiently opaque that you have to recall that bankers are people who would happily adulterate baby formula with sulfuric acid for an extra nickel a gallon.Report

      • Avatar Dave in reply to Mike Schilling says:

        @mike-schilling

        Aggregating them should create investments that are even safer, since the risk of non-payment gets spread out. In fact, once you have a sufficiently large number of mortgages. it should be possible to estimate the number that will become delinquent quite accurately and price the securities accordingly.

        Default risk gets spread out as well as concentration risk since you can have loans backed by collateral in other markets. In the commercial real estate space, you can further diversify loan pools by diversifying the asset classes (office, retail, industrial, multifamily, etc.).

        With a sufficiently large number of mortgages as well as good historical data on default rates, pricing across the tranches isn’t a difficult exercise (the bubble years notwithstanding).

        The problem comes because the relationship between the security and the mortgages it’s composed of becomes sufficiently opaque…

        This was the primary problem, one I will explain in a bit more detail when I reply to James. How can risk be accurately priced if no one wants to see it?Report

      • Avatar James Hanley in reply to Mike Schilling says:

        This was the primary problem, one I will explain in a bit more detail when I reply to James.

        No need to bother, unless you just want to get it out there for other eyes. The problem of opacity was one of the key points I made when I wrote elsewhere about this issue back in ’09 or ’10, so you’ll find you’re preaching to the choir (unless you surprise me by saying opacity wasn’t a problem).

        I suspect that investment firms shrugged off the problem of opacity off in part because housing prices were continually rising, so that refinancing subprimes was relatively easy, diminishing the expected default rate and making the investments seem less risky, and your thoughts on that suspicion would be very welcome.Report

      • Avatar Dave in reply to Mike Schilling says:

        I suspect that investment firms shrugged off the problem of opacity off in part because housing prices were continually rising, so that refinancing subprimes was relatively easy, diminishing the expected default rate and making the investments seem less risky, and your thoughts on that suspicion would be very welcome.

        I am probably preaching to the choir a bit but I described the differences between non-bank lending and balance sheet lending with respect to the risk profiles.

        All of what you wrote above was right. That and if they tried to pay more attention to the quality of the loans, the sellers of those loans would have sold them to someone else. Competition for product was so fierce that the sellers for loans demanded the buyers do as little due diligence as possible and the buyers went along with it.Report

    • Avatar Jonathan McLeod in reply to Dave says:

      I haven’t been following this thread, so I have no idea how this turned into a discussion about Basel II, but i’s rather remarkable that it did.Report

    • Avatar Mike Schilling in reply to Dave says:

      Oh nice. Someone has read my post on the subject!!! Five years later and I still refer to it.

      I don’t think I’d ever read that (it was a bit before my time here.) Really excellent piece.Report

      • Avatar Dave in reply to Mike Schilling says:

        @mike-schilling

        Thank you Mike.

        @james-hanley

        Regarding the paper you cited, I’ll direct you to this link:

        http://www.nextnewdeal.net/rortybomb/what-does-new-community-reinvestment-act-cra-paper-tell-us

        He addresses the questions I had when I read the abstract (I couldn’t find the actual paper). It wouldn’t surprise me to see banks take on more risk in order to be CRA-compliant, but when that risk is quantified (i.e. the increase in default rates), it doesn’t seem like there was much of an impact. Consider this excerpt:

        But this is question 1 territory. 94 percent of higher priced loans came outside CRA firms and outside CRA loans, and this research doesn’t really change that. Since we are talking about regular mortgages – more on that in a second – that higher default isn’t that scary. To put that in perspective, loans made in the quarter following the initiation of a CRA exam in a non-CRA tract are 8.3 percent more likely to be 90 days delinquent. That sounds scary, but it is an increase of 0.1, from 1.2 percent to 1.3 percent. In the CRA tract it is 33 percent more likely to default, going from 1.2 percent to 1.6 percent. FICO scores drop 7 points from 713.9 to 706.9. That’s an increase I wouldn’t want in my portfolio, but it is light-years away from 25%+ default rates, and very low FICO scores, on actual subprime.

        This research, if anything, pushes against movement conservative CRA arguments. In light of the evidence in question 2, many conservatives argue that regulators used CRA to push down lending standards, which then impacted other firms. But this paper finds that extra loans aren’t more likely to have higher interest rates, lower loan-to-value, or be balloon/interest-only/jumbo/buy-down mortgages, although there is a slight increase in undocumented loans. And their borrowers aren’t more likely to have risky characteristics themselves. The authors conclude that “this pattern is consistent with banks’ strategic attempts to convince regulators that the loans they extend that meet CRA criteria are not overtly risky.”

        From what I understand, albeit from a secondary source, this goes to my point about banks trying to find that balance between CRA compliance and portfolio risk. While CRA by its nature will encourage banks to take on additional risk, the banks only have so much risk tolerance and bank regulators didn’t seem to push the banks too far past their limits, if at all.

        If anything, this paper reinforces my general approach on discussing markets and regulations – the details matter.Report

      • Avatar James Hanley in reply to Mike Schilling says:

        All right, I’ll back off from my already moderate position. 😉Report

      • Avatar Dave in reply to Mike Schilling says:

        @james-hanley

        Now if we can only get some people to not equate gambling with investing, I’ll call it a good day!!!

        😀Report

      • Avatar Kim in reply to Mike Schilling says:

        Dave,
        When I sell stock options on a stock I own, it is gambling. I’m just playing the house. And the house always wins.Report

  20. Avatar Kim says:

    I’d be far less concerned with the Kochs if it was only their /affiliations/ that mattered.
    They’re enough of a problem themselves.Report

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