Letter From The Capitol

Index 4/4/08

4 posts: (1) Congress's Oil-Price Agonistes--The Home Front; (2) Libel Terrorism Bill Passes--Us v. Them; (3) Dutch Film Condemns Islam--Us v. Them; (4) Jules Dassin: Flim Noir Master--Class & Crass.

Congress's Oil-Price Agonistes

A New York Sun editorial properly chides Congress for hauling oil execs in for a public shellacking over oil prices.  The NYS notes that in terms of gold, oil prices have remained constant.  It is dollar depreciation that is the prime driver of oil price rises.  Congress should be slamming the Fed for creating too much money; instead, it wants even easier money, to goose the economy, inflation be damned.  Per cartoonist Walt Kelley's Pogo, Congress has "met the enemy and he is us."

Libel Terrorism Bill Passes

New York's twin legislative houses passed Monday the Libel Terrorism Protection Act (text of A9652,the State Assembly version).  The law confers legal protection from foreign libel suits unless the foreign jurisdiction provides authors and publishers with similar protection for free speech as provided in the U.S.  Further, New York courts now will have "long arm" jurisdiction to vacate foreign judgments that do not meet the new legal standard.  The floor statement by co-sponsor Rory I. Lancman, in the New York State Assembly, explains neatly why the bill is needed.  Important is the use of "libel terrorism" rather than the colorful "libel tourism" as the label for what are acts intended to silence and intimidate; LFTC pleads guilty to using the "tourism" label before, an error that shan't be repeated.

Dutch Film Condemns Islam

Dutch parliamentarian Geert Wilders' 15-minute anti-Islam film, "Fitna" is increasingly hard to find on the Web, courtesy of vigorous protests by militant Islam's votaries, and P.C. types in the West.  Yet Haaretz, the Israeli daily, reports that within the Netherlands there has been more criticism of the film from Jews than Muslims.  The Dutch head of one Zionist group found the citation of Muslim demographics in Europe anti-Muslim, and asserted that Muslims had been told to keep quiet about the film.  Haaretz said that anticipated Muslim rioting did not happen.

The film is harshly critical of the Quran, whose interpretation is a matter of disputation among scholars.  Citing mushrooming Muslim population growth inside Europe, when coupled to riots in recent years and in light of the surfacing of practices such as honor killings, does not strike me as unfair.  Wilders might have bowed in the direction of some moderates who ha spoken up.  But Wilders himself faces death threats, and even lived in a jail cell, of his own volition, for some time after the murder of Theo can Gogh in 2004, whose film infuriated his assassin.  Wilders thus deserves a measure of latitude.

Most chilling of all in the film is the depiction of a 3-1/2 year-old child being induced to recite what she has been taught about Jews--that they are pigs and apes.  This is far more important than arguments over demographics.

Jules Dassin: Film Noir Master

Jules Dassin (1911-2008) was a name known better to viewers of art film festivals than the general public.  The Los Angeles Times obit provides biographical details.  Many among the general film-going public, of a certain age, saw and hugely enjoyed his film work.  Like composer Harold Arlen, whose songs millions hear without knowing he wrote hem (think "Over the Rainbow"), Dassin's name rarely escaped the lips of Americans who could name lesser, more famous directors.

Film noir was Dassin's best-known artistic milieu.  Dassin's Rififi (1955) is considered the model caper flick, with a riveting 30-minute heist segment that is completely silent.  Dassin remade it as Topkapi, in Greece, in 1964, to wider public notice.  (Rififi was also remade, hilariously, in the 1958 Italian satire on Dassin's classic, as Big Deal on Madonna Street.)  His Brute Force (1947) starred Burt Lancaster, Hume Cronyn and Charles Bickford, with top supporting players, in the most gut-wrenching prison escape film ever made.  Thieves' Highway (1949) starred Richard Conte and Lee J. Cobb in a gritty truck-driver drama.  Night and the City (1950) featured Richard Widmark (saluted Monday in LFTC) as a sleazy London promoter; also starring Gene Tierney, it features a memorable scene where two wrestlers slated for a public bout get into a pre-fight death match whose outcome spoils Widmark's promotional plan.  A film little-known in the U.S., He Who Must Die (1958), retells the story of Jesus through an actor acting in a Passion Play.  All these films are among the treasures of 20th-century film.

A layman has more trouble assessing the work of a director than that of actors.  Suffice it to say that Dassin's work was tightly woven, made extraordinary use of black & white as a statement of color all its own--especially suited for film noir, got the most from his actors--even those known for uneven performances, and entertained movie audiences--equally the general public and film buffs who could discuss the more arcane aspects of his work.  I fond myself seeing films whose director I did not know until the credits, to discover that the superb film I had just seen was indeed made by Dassin.  I shall raise a glass of Metaxa 7-star in memorial tribute to a great artist.

Index 4/3/08

3 posts: Treasury's Financial Reform Package--"It's the Earth Stupid!"; (2) Sovereign Wealth Funds: Militant Islam's Cash Cow--Us v. Them; (3) Surveillance Surfeit--Ap & the Cap.

Treasury's Financial Reform Package

Monday's financial services reform package--as economist Irwin Stelzer notes, made inevitable by Wall Street's epic pig-out in the Bush years--presented by Treasury Secretary Hank Paulson aims primarily at long-term evolutionary fixes (over a 2-to-8 year period), to be calibrated as empirical evidence warrants, with only a few short-term measures that directly address the current credit market mess.  The current regulatory system no longer matches an increasingly complex financial marketplace.  The group of regulatory agencies we have now were mostly responses to the great Depression, and made sense at the time.  But today, a more integrated regulatory system is needed, one that replaces today's functional regulatory division with an integrated structure that tracks increasing market integration of hitherto diverse sectors.  The current system is duplicative, has gaps and is susceptible of regulatory arbitrage by regulated firms.  ("Regulatory arbitrage" is a term of legal art, that refers to the practice of regulated firms choosing particular regulatory agencies or forums that give them a better chance of getting their desired result; the courtroom lawyer's equivalent is judge-shopping.)

Paulson's new regulatory model is tripartite, based upon three overall regulatory objectives, with each objective targeted first by a designated lead agency, albeit, only the first objective was given a named agency by Paulson in his speech: (1) market stability, assigning a broader regulatory role to the Federal Reserve; (2) safety & soundness, with a federal insurance regulator performing functions similar to those now performed by the Office of the Comptroller of the Currency in the Treasury Department; (3) protecting consumers & investors, a dedicated business conduct regulator.

With commendable candor, Paulson stated that no system will prevent periodic market crises, which Paulson believes are likely to occur every 5 to 10 years.  Rather, integrated regulation will enable better coping with crises as they arise, and, presumably, more problems addressed before they reach crisis stage.

Special measures were made in three sectors, to address current problems: (a) payment & settlement systems, which daily settle over $13 trillion, with the Fed given primary oversight; (b) phasing in the ultimate merger of securities and commodities regulation--combining the Securities & Exchange Commission (SEC) and the Commodity Futures Trade Commission (CFTC); (c) federalizing insurance regulation, via insurance company election to choose federal regulation, with state charters secondary, as with the current dual-regulatory scheme for banking.

Paulson's text gives further details, worth a look, as are a blueprint and fact sheet released the same day.  My quick reaction: Paulson's focus on long-term evolution, allowing for empirical evidence to suggest re-calibration, is a good idea.  So is integrating regulatory agencies.  The biggest hurdles are two.  First, as with homeland security, Congressional committees will prove extremely reluctant to surrender overlapping jurisdictional powers; few Members of Congress voluntarily surrender power and the camera limelight.  Second, the Democrats probably prefer to delay passage of major packages until after the November election, which to a near-certitude will give them larger majorities in both houses of Congress, plus, still more probable than not, the presidency.  The latter eventuality would likely see a Eurosocialist regulatory model--more intrusive, more pervasive, and thus less market-friendly.

The Wall Street Journal fears precisely this and notes the irony of regulators reacting to a crisis that was partly of their on making, via excessive money creation and inadequate supervision of banks.  Another WSJ editorial warns that Democrats sound like Herbert Hoover, whose high-tax and protectionist policies helped bring on the Great Depression.  Harvard economics professor Lawrence Summers targets Government Sponsored Enterprises (GSEs--like Fannie Mae, Freddie Mac) for regulators forcing dividend cuts and capital infusions; Summers wishes to avoid "heads I win, tails you lose" gambits by shareholders of such institutions, in the form of taxpayer bailouts.  The Wall Street Journal takes on Barney Frank and Chris Dodd over bailouts in the $300 to $400 billion range: 42 million of 46 million mortgage borrowers (91 percent) are not in trouble, to say nothing of 35 million home renters; the prime reason mortgage holders default is not economic desperation, but falling home prices, with those whose home values have declined 20 percent in value being 14 times more likely to default than those whose home values are up 20 percent.

Paulson is a top-drawer Treasury Secretary: serious, deeply knowledgeable, and determined to preserve maximal market flexibility.  He is, alas, unlikely to get his wish, facing a savagely partisan Congress, with many Members deeply suspicious of markets, and addicted to hyper-regulatory schemes.  Economist Lawrence Lindsey identifies three bad regulatory tendencies: (1) the political process, like markets, is inherently cyclical; (2) politicians task regulators with conflicting objectives; (3) such regulators become politically entrenched.  Read his well-written article.

History teaches that when political priorities collide with sound economics, politics almost always prevails.

Soveriegn Wealth Funds: Militant Islam's Cash Cow

Alyssa Lappen & Rachel Ehrenfeld sound the alarm on the huge Sovereign Wealth Fund (SWF) growth in the Islamic world.  Within 5 years, the $2 - $3 trillion SWF market is expected to mushroom to $6 to $7 trillion. The 100 largest Islamic banks are growing at a stupefying 26.7 percent annual rate, and already have $350 billion in assets; if that growth rate is maintained, by 2011 they will control $1 trillion.  Islamic SWFs enforce boycotting Israel, suppression of women, denigration of secular law and scientific investigation, and in general promote militant Islamic ways.  The West continues, as it has for a generation, to acquiesce in same, to its ultimate detriment.

Stuart Levey, a Treasury undersecretary, told a Senate committee Tuesday that Saudi Arabia still tops the world in funding terror, and fails to cooperate with American efforts to uncover terror financing, declining to pursue organizations that directly fund terror and individuals who indirectly do so via Islamic "charities."  Our "special relationship" with the Saudis is special indeed.

Surveillance Surfeit

While Mayor Mike puts surveillance cameras in the financial district to hunt for terrorists, the District government plans to use downtown cameras to go after the REAL homeland security threat.  WMD?  Terror cell training sites?  Terror crimes?  Nope.  Try...illegal parking violators.  OK, terrorists illegally park, too.  But does anyone think that is why DC is doing this?  The concept is called maximizing tax receipts.  This kind of imbecilic abuse of surveillance will give civil libertarians ammunition to ban surveillance when it is really needed, to find terrorists.

Index 4/2/08

2 posts: (1) Democratic Race: Rove's Take, Barone's Bake--The Home Front; (2) Credit Markets: What's Keeping GDP and Jobs Up?--"It's the Earth Stupid!".