David Brooks: The Master of False Equivalencies

I usually avoid reading Brooks NYTimes column because its become so predictable and usually completely wrong or pointless. He's made a career out of pretending there's always a correct and moderate middle ground between the right and left in American politics and that he's the guy who sits in that perfect spot. Self-righteous and psuedo-intellectual, thy name is brooks.

So today i was reading the physical paper, which is rare, so i read the brooks column since i already had the page open and didn't really care about bob herbert's childhood hero. And not to disappoint, brooks was formulaic as usual.

1) Start with some random, archaic story which no one cares about but has emotional impact. this makes one seem smart and well read, while keeping the reader both interested and distracted from facts or logic. in this case he out did himself by writing several paragraphs about a woman undergoing a mastectomy while fully conscious and with no pain killers. i would call is disturbing at best.

2) Make a tortured analogy between the random story and some political or social event of today. In this case its a particularly tortured (pun intended) analogy between the woman's ability to endure pain and modern folks' inability to overcome confirmation bias. Or something like that. It really doesn't make any sense, but it does make Brooks think he sounds smart.

3) Present loosely two related examples of the thesis from step 2 from the Left and Right and create a false equivalence between them. This allows brooks to sound moderate, while falsely making it seem like both sides are wrong. In this case he compares the mindless bigotry, demagoguery and blatant lies of those who insist Obama is a Muslim with the reasonable and thoughtful (if in retrospect incorrect) opposition to the Iraq troop surge. We all know (those of us who are sane) the Barak Obama is Christian and American. At the time leading up to the "surge" in Iraq, the country was in a shambles, we'd spent years trying to prob up a government that seemed hopelessly corrupt and various factions within Iraq were busily murdering each other. I, for one, thought it was hopeless to try to occupy and rebuild the nation on any time frame acceptable to the American people. I thought adding more troops would be a waste of lives and money while inflaming anti-American sentiment around the muslim world. It turns out the surge so far has been successful (though i still harbor serious doubts about the long-term benefit and stability of Iraq once we complete withdrawal) but that does not mean my position was driven some mindless, partisan, anti-Bush sentiment. Unless you're David Brooks and its the time of the week when you need a fake left-right equivalency.

4) Close with something that sounds both pretentious and profound. Today's example

To use a fancy word, there’s a metacognition deficit. Very few in public life habitually step back and think about the weakness in their own thinking and what they should do to compensate. A few people I interview do this regularly (in fact, Larry Summers is one). But it is rare. The rigors of combat discourage it.

Of the problems that afflict the country, this is the underlying one.

http://www.nytimes.com/2010/08/24/opinion/24brooks.html?_r=1&hp=&adxnnl=1&adxnnlx=1282676448-72MalTqO59Ks1CpmWcUKoA

And that's how you write a New York Time Column.

I am now a fan of Current TV

They had the Current channel at my hotel last week and its amazingly good. check out Viral Video Film School, its like Tosh.0 for the east coast liberal elite

-

and That's Gay -

- a show making fun of gay trends in the media.

testing my blog twitter feed

lets see if this works

--UPDATE: it does not. twitterfeed is garbage and/or i'm a moron.

here come the terrorist babies from the future!!!

http://www.cnn.com/video/#/video/bestoftv/2010/08/10/ac.birth.terroism.tourists.cnn?hpt=C2

Two things i like about this clip. One when cooper asks her if she has any proof and the crazy lady says "in the initial conversation with your producers i wasn't told i'd be grilled to produce any evidence of what i'm saying is true". Second is that her botox makes her look like the crypt keeper - only her mouth moves and the rest is wrinkled and dead looking. Love it.

P90X update

ok, its been a couple weeks since the last post. i'm still not really completing any of the routines, but i talked to others who are doing p90x and neither have they. and these are people who've been working out regularly for awhile before starting. but i have kept up 6 days a week plus some bike riding for 5 or so miles a couple times.

so anyway, results have been good. i feel better and everyone i haven't seen in a few weeks or longer says i look thinner. i also put on a belt today which i had to cut an extra notch in when i bought it. now i don't need that notch and can wear it about 1.5 or 2 inches tighter. The only downside is i don't feel like i'm building much muscle mass so far. that could be my fault because i'm not completing the workouts, or because i only have 25 lb dumbbells. the 45 lb pair of quick adjust dumbbells was like 300 bucks so i just spent 120 on the 25's. They're actually really nice. I got them from Walmart. I forget the name but you can find them easily, they have square plates and are nice to use as pushup handles as well. i'll probably weigh myself soon too and check body fat somehow. i usually range from 167-172 (pre p90) and am 5'10''.

so the current conclusion is its working, try it if you want to lose wieght, tone and get some video motivation.

sometimes you just really want chicken nuggets

http://www.bbc.co.uk/news/world-us-canada-10922428

h/t to Gabe http://gabegodin.com/home.html

Zandi Blinder paper

There's be a lot of talk about the Zandi-Blinder paper on the effects of fiscal and monetary stimulus which was recently released. Basically they say that the government stimulus measures were very successful and prevented a depression 2 scenario with 16+% unemployment, continued negative GDP growth through 2011 and serious deflation. So here's the link http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf .

I don't have enough of a background in economic forecasting to really dissect the paper's conclusions but I'll point out that Zandi is not a liberal economist, and in fact was a McCain economic adviser. Also, as I understand they used pretty standard models to make their analysis and it is relatively consistent with related alalysis from the CBO.

But the main reason I read the paper wasn't for the stimulus analysis but because i was interested in exactly how the Moody's Analytics economic model works and that's touched on in Appendix B of the paper. It talks about inputs to the model such as credit spreads (TED, LIBOR etc), household cash flow, mortgage rates, treasury yields, Federal Reserve asset values, undewriting standards on lending, business cost of capital (corporate bond yields), labor supply (based on full employment level of labor), and other capital stack input factors, FOMC's inflation target and several other factors. This is covered starting on page 18 of the paper. If anyone knows more about the nitty gritty of how this model functions please add a comment.

Elizabeth Warren and the CFPA

Likewise, having the formidable, and seemingly strong priored Warren at the head of CPFA is dangerous. She seems to have strong beliefs and the analytical ability to plow through anyone in her way.
http://modeledbehavior.com/2010/07/29/the-confirmation-bias-of-e-warren/

Its very strange to me that many seem to think its critical that the head of the consumer finance protection bureau not be too interesting in protecting consumers. and more so that they think its a convincing argument to anyone who's not out to support the financial industry over the rest of the country. And as many others have said, the politics of it before the midterms make the appointment a no brainer. sure the financial industry is gonna be pissed and they might weaken support for democrats in the future. but they're already pissed and many are already publicly blaming obama for economic weakness in spite of the unprecedented stimulus measures he's pushed through. so i'm operfectly happy to piss them off and try to keep our congressional majorities with a great, publically popular pick for CFPA.

By the way, there's more to Karl Smith's criticism of Warren, which is why I linked it, but it basically boiled down to she's too tough and she will have "confirmation bias", ie she thinks to banks need agressive regulation already and therefore will agresively regulate the banks even if the data doesn't warrant it. Well, lets just say i'm not too worried about the banks or their overregulation right now. After a couple decades of deregulation and growth in the financial industry's wealth and influence, i think they, their lobbyists and their pawns in congress are perfectly capable of looking after their interests.

So my body has continued to deteriorate

from alcohol and i was developing hypertension, a gut and was always pretty exhausted in the morning or after minimal exertion. So i decided to try the infomercial P90x shit. It was the only tv workout system that looked like it would work since it seemed really hard and aweful. Well, it is really hard and aweful. I've been kinda doing it for about 2 weeks, and by kinda i don't mean halfassing it. Ive been working out 6 days a week till i can't continue, but that takes about 30-40 minutes doing tony i'm-an-asshole horton's crazy workouts. They are actually about an hour long, plus another 13 minutes for an ab workout some days. No way anyone coming in to this out of shape can complete a full workout (or maybe i'm just a pussy). But it seems to be working. I have more energy, i'm definitely feeling better and most important I can recover from a hangover much better. so I'll update in a couple more week on how its progressing. maybe by then i'll actually be able to finish a complete workout.

BASEL III - nerdy finance stuff you don't care about

So a friend asked me to write up a post on the BASEL bank regulations which i thought i'd crosspost here.

The Basel Accords are a set of international banking regulations which were created by the BASEL Committee, made up of members of the Group of 10 (G10) nations to provide regulatory consistency and stability for banks worldwide. BASEL I was triggered by the collapse of 2 major banks in 1974, Franklin National Bank and Bankhaus Herstatt. The first BASEL accords were published in 1988 and enactred in the G10 in 1992. This coherent, unified regulatory code increased confidence and transparency for banking across borders and also promoted competition by ensuring similar costs and requirements across the globe. The BASEL committee does not possess any direct regulatory authority, and its up to individual nations to enact and enforce the BASEL standards. In the US, for example, the recent financial reform legislation contained language to automatically adopt the requirements of BASEL III, which is being negotiated currently.
One of the most important and highly debated issues in the currently BASEL III negotiations is capital requirements. Capital requirements are regulations controlling the ratio of a bank’s capital to its risk weighted assets. This basically means banks much be able to absorb the unexpected loss of value to risky assets (think subprime mortgage loans, MBS’s, etc) with cash or highly liquid, non-risky assets they have. To be more specific:

“To be adequately capitalized under federal bank regulatory agency definitions, a bank holding company must have a Tier 1 capital ratio of at least 4%, a combined Tier 1 and Tier 2 capital ratio of at least 8%, and a leverage ratio of at least 4%, and not be subject to a directive, order, or written agreement to meet and maintain specific capital levels. To be well-capitalized under federal bank regulatory agency definitions, a bank holding company must have aTier 1 capital ratio of at least 6%, a combined Tier 1 and Tier 2 capital ratio of at least 10%, and a leverage ratio of at least 5%, and not be subject to a directive, order, or written agreement to meet and maintain specific capital levels.”
Wikipedia.org - http://en.wikipedia.org/wiki/Regulatory_capital

Tier 1 capital refers to shareholder equity, retained profits, and some other assets. Tier 2 capital is undisclosed reserves, revaluation reserves, general provisions, hybrid instruments and subordinated term debt. (whatever the hell those are).
The big problem with the current capital requirements as defined by BASEL II is that it just doesn’t include lots of risky assets. These assets are called “off balance sheet”. This was apparently partially adressed in BASEL II but not implemented in the US till 2007, after the bubble was built on the back of overleveraged banks and other financial institutions with short term financing (often as short as overnight on REPO markets). But even after 2007, there remained the possibility to hide risky assets in off-balance sheet entities. Here’s an excerpt from a research paper explaining how a bank could take securitized MBS’s and hide them to circumvent the capital requirements, thus increasing leverage and risk for the institution and increasing the possibility of default and bankruptcy.

“One way to understand where and why possible frictions might have occurred is
to consider an idealized securitization transaction whereby the originator, bound by
capital adequacy rules, sells a pool of assets to an off-balance-sheet entity. What is of
critical importance, however, is the issue exactly what kind of an off-balance sheet
entity takes control over the assets. It may be a special purpose vehicle (SPV), i.e. what
Gorton and Souleles (2005) call a bankruptcy remote, “robot firm,” with no employees,
no physical existence, and no capacity to make substantial economic decisions. SPVs
typically carry out predefined tasks of tranching pools of receivables obtained from the
originator into asset-backed securities which are then sold on the market in much the
same way as described above. Alternatively, the originating bank could set up an offbalance-
sheet conduit called structured investment vehicle (SIV), a physically existing,
managed and leveraged financial company whose purpose will be to undertake arbitrage
by buying long-term fixed-income assets from its sponsors to fund them with short-term
liabilities such as asset-backed commercial paper (ABCP).
As Shin (2008) astutely observes, the critical difference between SPVs and SIVs
stems from the fact that selling a loan is entirely different from issuing liabilities against
it. While the former – to the extent that loans are indeed passed down the chain –
contributes to spreading credit risk around the whole economic system, the latter keeps
it concentrated around the very bank that originates the loans and only hides it from the
regulators. As recognized by the IMF (2008, p. 69) in one of its latest reports on global
financial stability:
…SIVs and commercial paper conduits, are entities that allow financial institutions
to transfer risk off their balance sheet and permit exposures to remain mostly
undisclosed to regulators and investors; to improve the liquidity of loans through
securitization; to generate fee income; and to achieve relief from regulatory capital
requirements.”http://www.ijesar.org/docs/volume2_issue1/impact_basel.pdf

So banks don’t want these requirements because it limits their ability to leverage and take risk and thus make tons of money. The biggest banks in particular believe they will not be allowed to fail and even if they are, the executives will still be rich and taxpayers or investors will take the hit. And the latest news is that the latest draft of BASEL III is watered down, weak tea.

“Early reports suggest that the final draft accord — agreed to by everyone except Germany so far — largely caved in on its definition of capital, which will allow banks a lot more leeway to skirt the new rules. It also, as expected, allows a long transition period before the new rules take effect. In return, it mandates a minimum leverage ratio. This would be great news except that the new minimum is 3%, or 33:1”-http://motherjones.com/kevin-drum/2010/07/are-bankers-winning-again

And that’s that.