Deaf-Signing at Mandela's Memorial and Kavanaugh's Confirmation FBI Probe: Cover-Ups?

Watching U.S. President Barak Obama speak of his hero, Nelson Mandela, on December 10, 2013, something was distracting me; the rather large man signing for the deaf used such exaggerated gestures I had trouble concentrating on what Obama was saying. Little did I know that the interpreter was a “fake,” according to the Deaf Federation of South Africa. “It was horrible; an absolute circus, really, really bad, Nicole Du Toit, an official sign language interpreter, told the AP. “Only he can understand those gestures,” she added.[1]  I suspect that labeling the fiasco a “circus” skates over the underlying mentality in over-reaching and lying to cover it up. Years later, I wondered the same thing concerning Brett Kavanaugh's nomination to the U.S. Supreme Court. Are we, the public, out of the loop concerning what really goes on inside governments? 
As soon as I read that the interpreter is a fake, I suspected that the South African government fronted the man so to appear sophisticated to the world. I recalled how just hours after Nelson Mandela died, “spontaneous” dancers in formal black dresses preformed outside Mandela’s house. I had the sense of self-aggrandizing people behind the scenes taking advantage of the obvious publicity for South Africa.
To be sure, the interpreter would explain that he had been in a schizophrenic episode while he was signing and that he could not even remember having signed afterward. Hearing this “explanation,” I suspected that with so much on the line, powerful players behind the scene may have pressured the man to lie. One American news network showed footage of the signer using strange signs at yet another occasion. Perhaps with so many schizophrenic episodes while signing, the man might have picked another profession. I suspect the mental health explanation is a fake on top of a fraud, both indicative of a broader attempt by government officials or other power brokers in South Africa to “cash in” at the nearest opportunity, regardless of any sense of solemnity at such a momentous occasion.
In 2018, the quick FBI investigation of Brett Kavanaugh's past sexual behavior was closed to the public even as U.S. senators relied on the findings, at least in part, before voting on whether to confirm him as a justice of the U.S. Supreme Court. The private nature of the report opened up the possibility that a cover-up between the Republican Party and the FBI was in the works. According to an opinion-piece at CNN, numerous sources who could have confirmed Kavanaugh's sordid behavior at a party at Yale were excluded from the interview list by the White House.[2] A lot was on the line; the high court stood to be conservative-leaning for decades. That such an outcome should pivot on a politicized nomination "circus" ought to raise enough concern; that the court's leaning could be due to a private report being a charade ought to make frustrated blood boil.
Both of these cases raise the unhappy possibility that what happens inside governments is effectively shielded from the public eye such that democratic accountability cannot function. The cases also raise the specter of outwardly nice public officials being in government anything but. Are we, the public, too gullible, or is it simply the case that people in positions of great power are not wielding it responsibly and able to get away with it? 

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Sources:

1. Kim Hjelmgaard and Marisol Bello, “Interpreter For Deaf Branded a Fake,” USA Today, December 12, 2013.
2. Frida Ghitis, "Kavanaugh Probe Was a Cover Up," CNN.com. (accessed October 5, 2018)

Can the Federal Reserve Handle Banks Too Big To Fail?

The biggest banks operating in the U.S. reaped an estimated $13 billion of income by taking advantage of the Federal Reserve’s below-market rate of .001% on $7.7 trillion in emergency loans in the wake of the credit freeze in September 2008. Rather than using the additional funds to increase lending, the banks fortified reserves and paid bonuses out to executives. Had member of Congress had been able to anticipate all this, it is possible that they would have prescribed stronger medicine, perhaps even including breaking up the banks with over $1 trillion in assets.
As Shakespeare has Marcellius say in Hamlet in reference to moral and political corruption, “something is rotten in Denmark.” Another line could be added from Macbeth. “Out, out damn spot!” Bloomberg News reported that “the Fed and its secret financing helped America’s biggest banks get bigger and go on to pay employees as much as they did at the height of the housing bubble.”
Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data reported by Bloomberg. Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. “The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.”
When members of Congress were voting on the $700 billion TARP, they were being kept in the dark on the Fed’s loans. The general public was out of the loop as well. Ted Kaufman, a former U.S. senator from Delaware, said that if Congress had been aware of the extent of the Fed rescue, the knowledge “could have changed the whole approach to reform legislation,” He claims he “would have been able to line up more support for breaking up the biggest banks. More than three years after the financial crisis, Sen. Sherrod Brown of Ohio observed, “There are lawmakers in both parties who would change their votes now [i.e., in December, 2011].” Byron L. Dorgan, a former senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking. Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse.”
The government’s response to the crisis has not significantly reduced systemic risk, even with the higher reserves requirements for the biggest banks. According to Bloomberg, “Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system.” For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate,” he continued. “I’m in favor of breaking them up and slimming them down.” Oliver William, an economist, concluded that the “banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process.” A conflict of interest may be part of the underlying cause.
It could be that the bankers at the Federal Reserve Bank have been overly friendly to the bankers getting the funds. This conflict of interest could expose the Fed to losing lent funds should one or more of the troubled banks become insolvent and with insufficient collateral. Therefore, in an attempt to make the Fed accountable in regard to its emergency lending,  Congress included in its Dodd-Frank legislation (2010) requirements stipulating that the Fed develop and submit guidelines regarding selection criteria to be applied to banks seeking emergency loans and requirements by which bank collateral is to be reckoned as sufficient.
The publication of selection criteria would reduce the risk of moral hazard. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard—the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers.” Jeremy Stein, a Fed governor, has spoken of moral hazard, according to the New York Times, as “the belief that government support can subsidize banks and make them less careful about the dangers inherent in their businesses.” Depending how strict the selection criteria are, “the banks might then realize that the Fed will not be a pushover in times of market stress.” At least as of April 2013, the Fed had not followed through on the mandate in Dodd-Frank that the Fed promulgate rules.
The Fed might have good reason to stave off rules that could restrict the Fed’s flexibility in a crisis. “The Fed might be thinking, ‘We don’t want to make a lot of rules that might hinder us from acting in an emergency situation that we can’t anticipate,’” Michael Bradfield, a former general counsel at the Fed, remarked. “I think the Fed should have reasonably broad discretion to deal with systemic issues,” he continued, “(b)ut then the question is, What’s systemic and what’s really needed, and what conditions ought to accompany that lending?” Demanding too much in collateral, for example, might mean that some very big banks that are hemorrhaging capital might not qualify for an emergency loan and go under as a result. If those banks are too big to fail, the entire financial system could follow suit.
Unfortunately, discretion at the Federal Reserve could enable the “insider” conflict of interest to be exploited. Such exploitation is likely from the banking lobby as well as from the Federal Reserve. Bloomberg reports that “(l)obbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up—a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate.
In a rare glimpse of how the banking lobby operates, there is evidence that the lobbying firm Clark Lytle Geduldig & Cranford sent a memo to the American Bankers Association expressing worry that the Occupy movement and the Tea Party movement might find common ground and become a potentially potent threat by joining forces. Tellingly, the memo’s writers reveal how even potential threats to big business are relegated: “If we can show they have the same cynical motivation as a political opponent it will undermine their credibility in a profound way.” Using the media outlets, the “messengers” of powers vested in the status quo can quickly discredit others, as if from a popular wave of mass opinion. Meanwhile, the matter of the very existence of the banks too big to fail continued to float below the radar—the media dutifully transmitting the transparent issue of tents and evictions in various cities. In other words, even the occupiers—the anarchists outside the system!—allowed themselves to be played. Perhaps we are all being played.

Sources:

Bob Ivry, Bradley Keoun, and Phil Kuntz, “Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress,” Bloomberg Markets Magazine, November 27, 2011.

Peter Eavis, “Fed Still Owes Congress a Blueprint on Its Emergency Lending,” The New York Times, April 23, 2013.

Skip Worden, Essays on the Financial Crisis, available at Amazon.

Picking a President by Polls

It is one thing to say that something is broken; it is quite another thing to fix it. In such a case, if it ain’t broke, don’t fix it doesn’t cut it. Any pathological fear of change must give way or the brokenness must be endured. During the last half of 2011, over a year before the U.S. presidential election, the election season was already in full swing. Without any primaries or caucuses, the media and “debate” (i.e., talking points) organizers divided the Republican candidates into two tiers. Besides being an artificial dichotomy given the spectrum of support revealed in polls, that they were being used to prioritize among the candidates in the “debates” and more generally in terms of electability is problematic.
Most importantly, a poll is not an election. To relegate some candidates while privileging others (even crowning a “front runner”) ahead of any primary or caucus is without democratic legitimacy because polls have no decision-making authority. In other words, for the media (and “debate” organizers) to rely on polls to discriminate between candidates both in terms of electability and in allotting attention deprives the electorate at the polls or caucuses to break up the pack. Indeed, even aside from the fact that a poll does not constitute an election, relying on polls is problematic.
For one thing, relying on a poll can give the false impression of permanent preferences. Bill McInturff, a Republican pollster who directed the WSJ/NBC poll with Peter Hart in October 2011, remarked, “How quickly candidates have risen and then, like a soufflé, how quickly they’ve fallen back down.” A poll is at best a snapshot, and is thus obsolete even on the next day. Furthermore, the proliferation of cell phones in lieu of LAN lines and of do-not-call lists makes the “science” of polling less exact than even it portends. Indeed, to rely on the telephone in conducting surveys introduces a certain bias. For example, how many homeless people have phones?  Less obviously, how many survey callers get through to corporate executives who have gate-keepers poised to divert such calls?
Even if polling were capable of giving an accurate snapshot, the polls would have to be interpreted correctly. That obvious error can be perpetuated even by a media heavy-weight like The Wall Street Journal should give us all pause in whether we should rely on the reporting of polls. For example, the October 13, 2011 headline reads, “Can Vaults to Lead in Poll.” The WSJ/NBC News telephone poll of Republican primary voters that month put Herman Cain at 27% and Mitt Romney at 23 percent. Unfortunately for the poll and for the headline, the margin of error of the poll is 5.35 percentage points. Now, math is not my strong suit by any means, but the last I checked, 4 (27-23) is less than 5.35. The poll itself does not justify the headline.

Given the margin of error, Romney could claim to be in the lead!  This conclusion too is within the poll’s result. In fact, Romney in the lead is just as valid a conclusion from the poll. So it is indeterminate as to which of the two candidates is in the lead. This why the newspaper's headline is dogmatic. Within a margin of error, no particular result is privileged over any other. To pick out one “result” within the margin of error is dogmatic in the sense of being arbitrary, and yet it is done all the time. Given the graphic above, readers who do not understand statistics and surveying as a  social-scientific method are apt to fixate on the 27% and the 23% as if these figures were engraved in stone.

Moreover, typically people apply a false sense of exactitude when numbers are reported. It is like driving from Pittsburgh to Indianapolis and remarking while passing Youngstown, we will arrive in Indy at 5:45pm. Airline pilots in particular enjoy exercising the error of exaggerated exactitude by announcing the arrival time for the destination even from the departure airport before takeoff. At New York’s Kennedy, a pilot might announce, “we will touchdown in Paris at 6:47a.m. tomorrow morning.” Not 6:48a.m. Not 6:46a.m. Rather, 6:47a.m. on the dot. On your next flight, you might point this error of excessive exactitude out to your pilot (after you have landed—you wouldn’t want to provoke a nervous breakdown before you are back safely on the ground at the appointed time).

Besides the problems in interpreting and reporting particular polls, relying on them before the first primary or caucus is problematic from the standpoint of democracy itself. To the extent that Cain’s 27% “front-runner’s status,” anointed by the October poll more than a year before the presidential election, impacts or detracts from the electoral choices of the primary or caucus voters, the democratic process itself suffers. In other words, introducing error into an electoral process does not bode well for a democratic system or a specific electoral outcome. Moreover, willowing down a field of candidates by polls circumvents a democratic system wherein elections are the means by which decisions are made with respect to candidates for public office. In effect, pollsters, commentators and news editors (and executives) have supplanted, or at least jumped the gun on, the primaries and caucuses. The elongated electoral “season” (measured in years) even relative to the primaries and caucuses has provided the vacuum in which the “early decisions” can be made by (unelected) pollsters, commentators, and journalists. The U.S. presidential election process is broken. Whether anything will be done to fix the process remains to be seen. I’m not holding my breath, given the magnitude of the problem and the headlines. Indeed, saying that the process in the fall of 2011 is democratically illegitimate would be like saying that the emperor is wearing no clothes. Resisting the urge to make a joke at Gov. Christie’s expense (he has said the jokes have to be funny at least—he is indeed a class act), I will rest my case here—hoping that I have adequately reserved my readers’ respect.

 

Source:

Neil King, Jr. and Jonathan Weisman, “Cain Vaults to Lead in Poll,” The Wall Street Journal, October 13, 2011. 

U.S.Budget Deficits: Of Virtue or Vice?

Chronic government fiscal deficits, and thus debt, may suggest that a people is not up to self-governance. Moreover, the imbalance may be a drawback of democracy itself. That is to say, a people may not have sufficient will to constrain its own consumption to that which the people are willing to pay.

 

In the period from 1970 to 2012, that the vast majority of the years show a deficit indicates the difficulty involved in elected representatives voting to ensure that the people pay in taxes as much or more than the government spends. “It’s an extraordinarily dangerous situation,” former Federal Reserve Chairman Alan Greenspan said in 2012. “I believe we underestimate the size of current financial imbalances and how difficult it will be to resolve them. We’re trying to do this without pain. There’s just no credible scenario in which that happens.” The key phrase here is “without pain,” for it points to the underlying mentality that was pushing back a viable solution. To be sure, both the widening deficits and lack of desire to close the gaps from 2009 could draw on Keynes’ theory that governments should spend more and tax less during a recession in order to stimulate economic growth. However, the sheer number of years between 1970 and 2012 with significant deficits in terms of GDP suggests that the rationale has at best limited applicability. Even in the context of recession, the fact that the deficits were over $1 trillion in each of the four years after 2008 suggests that something else is in the mix. Nor could “wartime spending” be cited for those deficits, as significant domestic spending was also involved. Moreover, the U.S. was not at war during all the years of deficit spending from 1970 to 2012. In other words, something more systemic was going on throughout the period than recession or war.
According to the Wall Street Journal, the federal debt in the U.S. grew “through a combination of economic downturns, tax cuts and spending choices made by lawmakers and presidents from both parties.” It is not a partisan matter; rather, it involves choices made by elected representatives irrespective of party-affiliation. For this reason, we can begin to suspect democracy itself as the culprit, and below this the values and mentality (and indeed character) of the voters. In particular, too many are too fine with spending or consuming without feeling the need to pay for it in a timely manner. This is ultimately a question of values behind one’s character. At the political level, this manifests as societal or cultural in nature; even so, the imbalance is really in the individual psyche itself.
The vice is one of slothful selfishness at the expense of others—those in the future who will ultimately either have to pay the bill or see the government default. It is significant in this regard that Thomas Jefferson and John Adams agreed that a virtuous citizenry is necessary for a viable republic to endure. The question is perhaps what happens to it once a citizenry is no longer virtuous. Collapse even from a fundamental lack of fiscal balance can be stayed by the inertia of the status quo, as though a ship kept moving by its own momentum for a considerable time. In the soothing motion, the passengers can easily be lulled into the sensation that all is well.

 

Source: Damian Paletta, “Tough Calls on Deficit Await the Winner,” The Wall Street Journal, November 6, 2012.

Democracy and Over-Population in India: Foreign Direct Investment

How well can the democratic form of governance serve as a means by which a society is circumscribed, or restricted in some way? In other words, can self-government be used to enact self-discipline on the body politic itself? Adding another level to this question, can elected representatives be expected to go beyond fixes that are perceived societally as sufficient to redress the underlying causes of governmental, economic, or societal problems? Far from urging or implying the supremacy of non-democratic forms of government, such questions invite improvement in democracy itself. In this essay, I reflect on these questions using India’s industrial policy as a case study.

Faced with economic growth below 6 percent, a budget deficit expected to breach 6 percent of India’s GDP, a possible downgrade in the country’s credit rating to junk status, and the rupee hitting record lows, Sonia Gandhi, the head of the Congress Party, spoke for the first time in late 2012 in support of allowing foreign companies such as Wal-Mart into India. Prime Minister Manmohan Singh and others had been urging her to embrace the reform. Appealing to Sonia Gandhi’s passion for social welfare programs, the prime minister told her that more foreign direct investment would be necessary to expand them. Most notably, the Congress Party boss was pushing a $5.6-billion food-security bill and a rural employment-guarantee program. According to the Wall Street Journal, there was already “high spending on subsidies” at the expense of “growth-generating capital projects.” In effect, the latter get “sub-contracted” in foreign direct investment.  Relatedly, the finance minister, P. Chidambaram, issued a plan to reduce the federal government’s deficit and sell stakes the government has in state-owned companies.

 

Singh and Gandhi at a rally. It is clear who's the boss.   AP

 

Lest Sonia Gandhi’s support be viewed as a panacea, other reforms, such as making it easier to acquire land, remained “stuck in the bureaucracy,” according to the Wall Street Journal. The government’s “mind-set is I will not fix the cause of the issue, I will put a Band-Aid on it,” Rahul Bahsin of Baring Private Equity Partners India said. Indeed, although Walmart would doubtless hire local labor both in the construction and retail-operations of the stores, that foreign-direct-investment alone would not be large enough to make a dent in the social welfare needs of India’s poor. Additionally, the company’s aversion to workers’ rights (not to mention unions) and the related low compensation and benefits for in-store employees could mean additional troubles for Sonia Gandhi as worker groups seek protection from the federal government.

 Moreover, with over a billion people at the time the policy was being considered, the prospect of employing all able-bodied people of working-age in India was undoubtedly a daunting task in the midst of a global recession following the financial crisis of 2008. It was not as though the Indian government could simply invite hundreds of millions of Indians into computer-science and engineering classes and then into high-tech ready-made jobs. Over-population could have been the long-standing underlying problem, or cause of the unemployment and related subsidies.

 The bureaucracy and coalition in-fighting, as well as the “Band-Aid” approach oriented to incremental additions in employment through FDI could be a reflection of India’s over-population—a more basic problem that eludes mere policy prescriptions increasing foreign-direct-investment. Especially if a given  over-populated area has a disproportionate number of unemployed people, tackling the underlying problem could be expected to relieve the pressure on policies such as foreign direct investment to make up the difference. Meanwhile, other symptoms, like global warming and food prices, would be redressed. The question may therefore be whether a democracy is a feasible venue for such “cause-oriented” legislation to be enacted.

 Whereas government officials in China did not have to worry about a democratic backlash from the government’s one-child policy in the late twentieth century, the case of India raises the question of whether a self-governed people can regulate their own society by democratic means. A democracy may be hard-pressed in putting into effect painful legislation to curb excesses such as over-population—literally to restrict rather than promote a basic sort of growth. The value put on that value alone since the mercantile days could give legislators an implicit mandate to foster rather than retard population growth.  Furthermore, the “Band-Aid” approach might be more in line with the workings of a democracy if apparent measures are sufficient to get one re-elected. One could point to the perennial “fixes” in the U.S. regarding entitlement programs and deficit-cutting as other examples, and to the efforts of the E.U. to bail-out heavily indebted states as yet another example. Elected representatives seem to prefer to take little bites, incrementally, rather than enact fundamental laws that are oriented to causes rather than symptoms.
In contrast to these questions, an uncritical approach to the spread of democracy around the world, such as potentially in the “Arab Spring,” could actually exacerbate global problems. If the species continues “un-self-regulated,” meaning more and more over-populated, nature will undoubtedly step in at some point and impose restraint (e.g., famine, climate, war, disease). It may be an open question whether we as a species can stave off such a verdict from Mother Nature. Ironically, our consensus form of government may lessen the odds.

 

Source:

Romit Guha and Rajesh Roy, “India’s Gandhi Now Backs Overhauls,” The Wall Street Journal, November 9, 2012.