Friday, July 29, 2011
exodus at Goldman "People are monetizing the Goldman premium now because two years from now you won’t be able to"
(Reuters) - More than a dozen traders have quit Goldman Sachs Group Inc's (GS.N) North American government bonds and derivatives trading desk in New York in recent months as the bank takes fewer risks and big bonuses for ambitious traders dry up.
Goldman has been handing out promotions and better pay to its salespeople rather than the traders who manage the bank's inventory of securities and derivatives, people familiar with the bank's operations said.
The changes reflect Goldman's shift toward client trading and away from making money by betting for its own account, those sources said. Weak trading in general has compounded Goldman's difficulties as it struggles to earn profits from clients without the help of its market bets, analysts said.
It makes sense for Goldman management to reward sales staff over traders these days, said Susquehanna Financial Group analyst David Hilder.
"The client franchise is paramount," said Hilder. "You need sales people to deal with and talk to the clients. Over the long term, that's more important than a few guys trading bonds."
Among the recent departures is Brian Mooney, an interest-rate derivatives trader who spent 22 years at Goldman before joining Bank of America Corp's (BAC.N) Merrill Lynch this week, according to three sources who know about the move.
Mooney's exit follows that of Glenn Hadden, the former head of Goldman's U.S. Treasury bond trading desk, who left last year to run Morgan Stanley's (MS.N) global rates trading group in January.
At least nine other traders from the rates desk have left for jobs at competitors this year, including UBS AG (UBSN.VX), Nomura Holdings Inc (8604.T), Jefferies Group Inc (JEF.N) and JPMorgan Chase & Co (JPM.N), or hedge funds like Stark Investments near Milwaukee. Among their ranks were more junior traders, some of whom were seen as rising stars at Goldman.
Goldman has been laying off traders since March, but there has also been a flood of voluntary exits that began late last year and continued through the second quarter, sources said.
Colin Corgan, a respected partner on the rates desk, retired in late 2010. In March, Craig Reynolds, a former top interest-rate swaps trader at Goldman, left to become head of Bank of America Merrill Lynch's North American interest-rate trading desk.
Goldman has given additional responsibilities to remaining staffers and promoted others. For instance, Jonathan Hall, a rates trader in London, was tapped to oversee the entire U.S. rates trading operation after Hadden left. But the bank has kept many of the seats empty as it looks to keep staffing levels tight.
Some traders that have left the bank said they fear Goldman may turn into just another investment bank, and they wanted to leave while it was still seen as prestigious on Wall Street.
"Working for Goldman is no longer different than working for anybody else," said one former Goldman trader who left this year. "At the same time, if you have Goldman on your resume, that's still a premium. People are monetizing the Goldman premium now because two years from now you won't be able to."
"Goldman Sachs is totally committed to the interest rate products business," said spokesman Michael DuVally. The bank is staffed appropriately for the business, he added.
SPECTER OF THE VOLCKER RULE
Goldman's North American rates-trading desk handles some of the most actively traded markets in the world, including U.S. Treasury bonds and U.S. dollar interest-rate swaps.
The desk is to some degree shielded from a financial reform provision called the Volcker rule that will prevent banks from gambling on market direction.
The rule is not in effect yet, but even once it is implemented, banks will still be allowed to take proprietary positions in the Treasury market and hedge against risk using related derivatives.
Nonetheless, traders who left Goldman's rates desk complained they were hamstrung by aggressive risk managers who limited position sizes and second-guessed trades. They also said they were being asked to take on more responsibilities with less pay as Goldman tries to cut costs.
In announcing quarterly results last week, Chief Financial Officer David Viniar said Goldman plans to lay off about 1,000 people this year to reduce expenses by $1.2 billion and may slash employee pay if business doesn't pick up.
The rates-trading desk is among the largest in Goldman's enormous fixed income, currency and commodities trading business, known as FICC. Over the last six quarters, FICC trading has suffered as clients pulled back from the market.
Goldman detailed a 53 percent decline in second-quarter FICC revenue last week. Revenue there has dropped by 46 percent, on average, in each of the past four quarters.
Goldman does not break out rates trading numbers, but said revenue there dropped "significantly."
Goldman's client business has gained traction in some rates-trading areas -- for example, the bank boosted market share in U.S. Treasury trading this year to 12.2 percent from 10.7 percent, according to a Greenwich Associates survey.
Yet higher market share does not always amount to better profits, Greenwich said. Narrowing bid-ask spreads, increasing use of electronic trading and competition for big institutional clients' business are pressuring rates-trading profits.
"The market's shift in emphasis from structured products to rates products has already reduced the profitability of fixed income for sell-side firms," said Greenwich Associates consultant Woody Canaday.
A 63-year-old California man with a hernia plunged a butter knife into his abdomen to try to fix the problem, and later put a lit cigarette in the wound. Police found the man lying naked on the porch of his apartment in the Los Angeles suburb of Glendale after his wife called to report his attempt at surgery. "He actually impaled himself with the butter knife," said Sergeant Tom Lorenz, a Glendale police spokesman. "He told his wife he was frustrated with this hernia, and he didn't want to wait any longer for the medical procedure." Police watched as the man, after pulling the knife out of his abdomen, put a lit cigarette into the wound. Sgt. Lorenz said the unidentified man had committed no crime and was not under the influence of drugs or alcohol. He was taken to Los Angeles County-USC Medical Center, where he was put on a psychiatric hold. Doctors are expected to perform the surgery to fix his hernia.
Steve Jobs is now more liquid than Uncle Sam.
While it's highly unlikely that President Barack Obama is looking to ask the founder and chief executive of Apple Inc. for a loan, it became a fact as of Thursday afternoon — the world's largest technology company now has more cash on hand than the most powerful democracy on Earth has spending room.
As Republicans and Democrats continue to work towards a compromise to the country's debt ceiling crisis, the U.S. Treasury Department said on Thursday that Washington now has a total operating balance of only US$73.768-billion.
Meanwhile, Apple currently boasts a cash reserve of US$75.876-billion, as of its most recent quarterly earnings report at the end of June.
Of course, the numbers aren't directly comparable; the government's number represents how much financial headroom it has before bumping up against an arbitrary debt ceiling, while Apple's cash reserve represents the pile of money the Cupertino, California-based company has available on its balance sheet.
Still, the numbers show just how powerful Apple has become since the launch of the iPhone in 2007. Earlier this week, shares of Apple began trading North of US$400 on the Nasdaq Stock Market for the first time in the company's history.
Apple's market capitalization currently stands at US$363.25-billion, making it the second largest company on the planet, after Exxon Mobil.
(Reuters) - Despite howls of protests from many on Wall Street over some of President Barack Obama's policies, financial sector employees are giving at a greater rate to his re-election bid than during his last campaign.
One-third of the funds hauled in by Obama's big-money backers came from executives and others linked to the financial world, according to a report from the Center for Responsive Politics released on Friday.
The financial sector accounted for about 20 percent of what Obama's top fundraisers raised during his 2008 bid.
Several high-profile bank and hedge funds executives have complained publicly about Democratic policies, including the financial sector overhaul and health care revamp. Still, an incumbent is hard to beat and Wall Street likes to hedge its bets.
"Everyone likes a winner, Obama is the incumbent president and they are hard to oust," said Michael Beckel, a researcher at the center. "It is natural that they want to stay in his good graces even if some of them are upset" about certain policies.
Obama reported raising $86 million in the quarter ending June 30, which includes nearly $40 million raised for him by the Democratic National Committee.
Although Republican frontrunner Mitt Romney has not named most of his so-called bundlers -- well connected individuals committed to raising big cash -- the former private equity executive has traditionally lured major backing from the financial sector.
"From 30,000 feet, Wall Street is where a lot of candidates turn for money," Beckel said.
Among the big names aggregating funds for Obama are Orin Kramer of Boston Provident and Blair Effron of Centerview Partners.
Romney is at a disadvantage in that Obama can raise money through the national committee, which can accept donations of up to nearly $31,000. Individuals can only give up to $2,500 to personal campaigns.
The former Massachusetts governor did release the names of the lobbyists who had bundled funds, as required by law. Those include an executive at the bank Barclays (BARC.L).
Romney's campaign also relied a lot more on large donations than Obama did in the second quarter.
(Reporting by Kim Dixon; Editing by Doina Chiacu)
We don't spend much time with Jean-Claude Trichet, the president of the European Central Bank, and really that's our loss because he is quite the charmer, though less seductive and/or rapey than other French international bankers who come to mind. Last week he sat down with a French magazine for an interview that was released yesterday, and he had a message for anyone who might still want to speculate on Greece defaulting:
Such a speculation would be a sure-fire way of losing money given the decisions taken last Thursday. And let me say again, the euro, as a currency, is sound and credible, and is not affected by the pressures on sovereign risks.
You might ask, how could he be so sure that the holders of the $4.6bn of Greek CDS net exposure still outstanding as of the end of last week would lose money? Well, for one thing, he could arrange it so that the CDS won't get paid out on a Greek default, making it in fact pretty surefire. So he did:rest at http://dealbreaker.com/2011/07/jean-claude-trichet-if-you-buy-greek-cds-you-will-be-sorry/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+dealbreaker+%28Dealbreaker%29
Senior Chinese officials are "appalled" by the impasse among U.S. politicians on raising the nation's debt ceiling to avoid a default, said Stephen Roach, non-executive chairman of Morgan Stanley Asia Ltd.
"Coming so shortly on the heels of the subprime crisis, the debate over the debt ceiling and the budget deficit is the last straw" for China, New York-based Roach, 65, said in an e- mailed note today. He said his assessment was based on visits to Beijing, Shanghai, Chongqing and Hong Kong.
In another sign of concern within the nation that is the biggest foreign owner of Treasuries, the official China Securities Journal said today that the U.S. stand-off signals long-term dollar weakness that will push up commodity prices and pose inflation risks for the world. In Mumbai yesterday, a former central bank adviser, Yu Yongding, repeated his call for China to reduce its Treasury holdings, adding that a default would be "disastrous."
Roach cited an unnamed Chinese policy maker as saying in mid-July that "we understand politics, but your government's continued recklessness is astonishing." In the past, the economist has met with officials including central bank Governor Zhou Xiaochuan.
In the U.S., the Standard & Poor's 500 Index fell 2 percent yesterday, the biggest drop in almost two months, as a potential default on Aug. 2 drew closer. Stock index futures rose today, indicating that the gauge will rebound before lawmakers vote on a Republican proposal to raise the debt ceiling.
House Speaker John Boehner of Ohio gained support among fellow Republicans after reworking the legislation to cut $917 billion over 10 years, more than he originally planned. All 51 Senate Democrats and two independents signed a letter yesterday pledging to oppose the measure.
China's currency regulator, which manages the country's $3.2 trillion of foreign-exchange reserves, called this month for the U.S. to protect the interests of investors in American debt. Comments in China have also included expressions of confidence that U.S. lawmakers will reach an agreement. Xia Bin, a central bank adviser, said July 25 that the stakes were too high for them to do otherwise.
"Senior Chinese officials are appalled at how the United States allows politics to trump financial stability," Roach said. China's appetite for Treasuries will wane as stronger domestic consumption cuts its current-account surplus and reduces the build-up of foreign-exchange reserves, he added.
China, the owner of $1.16 trillion of Treasuries, is losing confidence in America's government "and its dysfunctional economic stewardship," the economist said. Declining demand from the nation will raise the question of how the U.S. economy can fund itself without suffering a "sharp" decline in the dollar, a "major" increase in real long-term interest rates, or both, he said.
To contact the reporter on this story: Paul Panckhurst in Beijing at email@example.com
To contact the editor responsible for this story: Paul Panckhurst at firstname.lastname@example.org
The madness that is the proposed tax repatriation holiday is continuing and gathering steam. More and more members of congress are coming out of the woodwork, scratching their chins in contemplative consideration as it were, pretending that they've just realized what a great day a corporate tax holiday would be – not that they've taken gazillions of dollars from the firms lobbying for it or anything.
The latest convert seems to be Nevada Democrat Shelley Berkley. Berkley's plan is to offer a pseudo-holiday – not the full-fledged happy-ending massage the companies wanted (i.e. a reduction from 35 percent+ to 5.25 percent) but a mere ten-point shave:
Representative Shelley Berkley, a Nevada Democrat, is the latest lawmaker to consider legislation allowing multinational companies to send offshore profits to the U.S. at a reduced tax rate.
Her proposal, which was confirmed yesterday by Berkley's communications director, David Cherry, would allow companies to return profits to the U.S. at a 25 percent tax rate, 10 percentage points below the maximum statutory rate. Most companies publicly supporting a holiday, such as Duke Energy Corp., have spoken favorably of the 5.25 percent rate that is being offered by Representative Kevin Brady, a Texas Republican.
One thing that people must understand about this tax repatriation business is that it's a wholly bipartisan affair. It's not solely the work of evil Republicans. This is a scheme that requires heavies in both parties to help ram the knotty, hard-to-sell legislation through. On the Democratic side, unsurprisingly, the main actor is going to be Chuck Schumer. John Kerry is also involved with this nastiness. Barbara Boxer led the 2004 effort and the failed 2009 campaign to get a holiday, and is rumored to be lurking somewhere in this business.
Note that Cisco, a California corporate heavyweight and one of the companies lobbying most ravenously for this tax holiday, has been a consistent lifelong contributor to Boxer. You'll find Cicso is also a contributor to most of the other congressional allies in the repatriation holiday effort, as are companies like Motorola, Merck , Pfizer, Proctor and Gamble, Ford, and others.
If you would like to contact Rep. Berkley and tell her how much she would suck if she voted for this thing, here's the form.
I'm still shocked at the lack of press coverage of this. In all this scratching and clawing over dimes here and there, and clamoring for trillions in cuts, we're seriously considering what amounts to a gigantic new systematic loophole for corporate taxes?
Again, if they pass this thing one more time, the fiction of the "one-time holiday" disappears forever, and the next decade will see an explosion of exported profits, "transfer pricing," and cunning use of correspondent banks to stealth-repatriate offshored funds. Everyone will know that the effective corporate tax rate has been dropped from 35 percent to 5 percent – all companies need to do is hide profits overseas and bring them back about once every presidential term or two.
This has the doubly negative effect of lowering revenue during the holiday years and reducing job investment in the intervening years, as private business revenue is kept outside the borders of the U.S. instead of staying here and dumped into the economy. Naturally, since this is the exactly stupidest thing federal lawmakers could consider doing, they are doing it.
rest at http://www.rollingstone.com/politics/blogs/taibblog/evil-corporate-tax-holiday-gains-bipartisan-support-20110726
News Alert: U.S. House passes Boehner debt plan
July 29, 2011 6:31:57 PM
With only a handful of Republicans in opposition, the House on Friday voted, 218 to 210, to approve Speaker John Boehner's bill to raise the nation's debt limit for a few months. The measure was revised earlier in the day to make it more palatable to conservatives. No Democrats supported the bill.
Senate Democrats say they cannot support the bill in its current form.
For more information, visit washingtonpost.com
Mexican Professor Not Allowed to Fly Over U.S. Territory - water activist protested the privatization of water in Bolivia #p2 #tcot
A week ago, a distinguished leftwing professor in Mexico was trying to fly from Mexico City to Europe. But when she entered U.S. airspace very early on July 21, the U.S. government ordered the plane to return to Mexico because it considered her a security risk.
Raquel Gutierrez Aguilar is a professor of sociology at the Autonomous University of Puebla. She actively protested the privatization of water in Bolivia in 2000.
Gutierrez Aguilar objects strenuously to the actions of the U.S. government that ruined her travel plans.
Here's her account of what happened.
"The flight was going normally until a little after midnight when the captain said that we would be returning to Monterrey because US airspace had been closed off," she wrote. "To my major surprise, when we landed in the city a little past one in the morning on July 21, a flight attendant approached me and asked me to show identification. I showed it without any problems. . . . Once she saw my name she asked me to collect my things and accompany her to the door of the airplane. When I got to the door of the plane with all of my luggage there were a few Mexican federal police and two or three employees of Aeroméxico that asked me to identify myself again and to leave the plane. I told them I was not leaving until they explained to me what was going on. They said that 'the United States government had refused the plane because I was on it.' "
Gutierrez Aguilar then said that Mexico's "federal police, in a very intimidating way, asked me to hand over a copy of my passport to them." After an hour and a half, they let her go.
"What I felt most deeply was a kind of shock, a deep vulnerability that basically pushed me to want to get to safety," she wrote. "I also felt an endless anger: how could it be that they are taking me off of a plane? How can these 'United States authorities' behave with such despotism? Why are we tolerating it? How do we protect ourselves against these things that they can do to us with such impunity and insolence?"
Gutierrez Aguilar wants answers.
"We demand that US authorities explain the danger that would have been caused if the passenger in seat 17J had flown 30,000 feet above the United States," she wrote. "We are asking our US friends and compañeros to help us. We want an explanation. How is this woman dangerous? How does she threaten the security of Mrs. Smith in Alabama or Miss Jones in Boston when the passenger would have been flying over their houses? We want these "authorities" to explain what they're doing. We want them to explain to us how or why they decided what they decided, because their decisions are not only foolish, but also far too arbitrary."
So I called the Department of Homeland Security. I tried Customs and Border Patrol first, and then was passed around to the Transportation Security Administration.
The TSA issued the following statement: "The United States has the authority to deny access to U.S. airspace. For security reasons, we will not discuss the details surrounding when or why access is denied."
Follow Matthew Rothschild @mattrothschild on Twitter
If you liked this story by Matthew Rothschild, the editor of The Progressive magazine, check out his story "Sen. Johnson's Former Campaign Aide Criticizes Him for Holding Up Judicial Nominee.
Why Is Pat Buchanan Still an Acceptable Television Pundit When He Is a Fringe White Supremacist? #p2 #tcot
BILL BERKOWITZ FOR BUZZFLASH AT TRUTHOUT
"Although [Pat] Buchanan doesn't have the influence he did in the 1990s when he commanded a following inside the Republican Party, he remains an influential, even cutting edge figure among a significant sector of extreme paleoconservatives," says Leonard Zeskind, president of the Institute for Research & Education on Human Rights.
For a number of years, Patrick J. Buchanan was considered "The Man" in the conservative movement; he took a back seat to no one. He ran for the GOP's presidential nomination and attracted a large following; he hosted and appeared on several cable news shows, including being one of the original co-hosts of CNN's "Crossfire"; his books have been bestsellers; and, perhaps most famously of all, Buchanan's "Culture War Speech" at the 1992 Republican Party convention both enthralled his followers and chilled a good part of the rest of the nation.
In a recent column about the events in Norway, after a perfunctory condemnation of the bombing and murder spree unleashed by Anders Behring Breivik, Buchanan was classic Buchanan suggesting that, "Breivik may be right."
Over the years, as Jamison Foser recently pointed out at Media Matters for America, Buchanan has expressed an, "almost unbelievable dislike of Nelson Mandela and Rev. Martin Luther King, Jr."; took up the cause of John Demjanuk, who was"convicted earlier this year of complicity in the murder of tens of thousands of Jews while serving at a Nazi death camp"; defended the white supremacists beliefs of Nixon's Supreme Court nominee, Harold Carswell; and,"praised Klansman David Duke for his staunch opposition to 'discrimination against white folks.'"
In a June column posted at CNSNews.com, titled "Say Goodbye to Los Angeles" Buchanan commented on the June soccer match at Pasadena's storied Rose Bowl that saw the Mexican team beat the U.S. He wrote that fans rooting for Mexico should consider returning there and they should"let someone take his place who wants to become an American."
Buchanan pointed out that "By 2050, according to Census figures, thanks to illegals crossing over and legalized mass immigration, the number of Hispanics in the U.S.A. will rise from today's 50 million to 135 million." Never one to miss an opportunity to be excessively dramatic/hyperbolic, Buchanan concluded: "Say goodbye to Los Angeles. Say goodbye to California."
When Pat Buchanan spoke, many may have turned their heads, but his core audience, anti-immigrant, white nationalists perked up and listened, and later echoed his remarks.
Despite the reams of "culture war" commentary, including anti-immigrant, anti-Semitic and anti-gay rage, for some inexplicable reason, the Washington Beltway crowd has always considered him"a good old boy."
"A cutting edge figure among a significant sector of extreme paleoconservatives"
"Although Buchanan doesn't have the influence he did in the 1990s when he commanded a following inside the Republican Party, he remains an influential, even cutting edge figure among a significant sector of extreme paleoconservatives,"Leonard Zeskind, president of the Institute for Research & Education on Human Rights told me in a telephone interview.
"His ideas may not be adopted outright, but they find their way into the mouths of others, that do have a following," Zeskind, author of the invaluable Blood and Politics: The History of the White Nationalist Movement from the Margins to the Mainstream, added. "Think of him as a cutting edge figure, with a following on television news and an influence on others who have larger followings," said Zeskind.
Buchanan hearts Breivik
Buchanan's column about Breivik may in part be an attempt to grasp renewed relevance. The piece,"A fire bell in the night for Norway,"which was posted at WorldNetDaily, maintained that Breivik is an, " evil ... though deluded man of some intelligence, who in his 1,500-page manifesto reveals a knowledge reveals a knowledge of the history, culture and politics of Europe." Breivik, perhaps unknown to Buchanan, also revealed an ability to purloin a chunk of the manifesto from other published sources and claim them as his own.
"He admits to his 'atrocious' but 'necessary' crimes, done, he says, to bring attention to his ideas and advance his cause: a Crusader's war between the real Europe and the 'cultural Marxists' and Muslims they invited in to alter the ethnic character and swamp the culture of the Old Continent," Buchanan maintained.
Now that the "atrocious" deed has been done, Buchanan is, as many other conservatives have been doing, attempting to disassociate Breivik from the conservative movement in the United States and Europe: "His writings are now being mined for references to U.S. conservative critics of multiculturalism and open borders. Purpose: Demonize the American right, just as the berserker's attack on Rep. Gabrielle Giffords in Tucson was used to smear Sarah Palin and Timothy McVeigh's Oklahoma City bombing was used to savage Rush Limbaugh and conservative critics of Big Government."
But, Buchanan wrote, the left will not get away with "guilt by association," a methodology Buchanan charged, "has been used by the left since it sought to tie the assassination of JFK by a Marxist from the Fair Play for Cuba Committee to the political conservatism of the city of Dallas."
While Buchanan admitted that there are, "violent actors or neo-Nazis on the European right who bear watching," he declared that "native-born and homegrown terrorism is not the macro-threat to the continent."
According to Buchanan,"Europe's left will encounter difficulty in equating criticism of multiculturalism with neo-Nazism. For Angela Merkel of Germany, Nicolas Sarkozy of France and David Cameron of Britain have all declared multiculturalism a failure. From votes in Switzerland to polls across the continent, Europeans want an end to the wearing of burqas and the building of prayer towers in mosques."
Buchanan concluded by pointing out that "Breivik may be right," in asserting that "a climactic conflict between a once-Christian West and an Islamic world that is growing in numbers and advancing inexorably into Europe for the third time in 14 centuries," is coming down the pike.
Buchananism "will live long after [he] has departed this mortal coil'
"Buchanan's brand of Christian nationalist xenophobia has been picked up by others, guaranteeing it will live on long after Buchanan has departed this mortal coil," Rob Boston, Senior Policy Analyst at Americans United, told me in an email. "That's his true legacy. ... The trail he blazed is now well traveled by Ann Coulter, Sean Hannity, Glenn Beck, Rush Limbaugh, Dinesh D'Souza and a host of others."
Boston noted that: "The Breivik shooting is a textbook example of what's wrong with today's cultural warriors of the far right. An angry and hate-filled man killed more than 70 people -- many of them young -- in cold blood. Yet so many on the right seem unable to condemn this without adding a 'but.' That we have come to this pass -- and that so few public commentators have the guts to stand up and call the right out for the cranks that they are -- is a telling indicator of the great moral confusion these so-called guardians of public virtue have spawned."
Leonard Zeskind pointed out that while Buchanan is not the Buchanan of the past, he still has a following: "Even if he does not have three million votes behind him, he still has [many] people who listen to [him] everyday. At the same time, he has been eclipsed by the Tea Partiers, who embody, in part, his constituency of yesteryear. The Tea Partiers are the Buchananites of the past, moving into the future."
The Centrist Cop-Out
By PAUL KRUGMAN
The facts of the crisis over the debt ceiling aren't complicated. Republicans have, in effect, taken America hostage, threatening to undermine the economy and disrupt the essential business of government unless they get policy concessions they would never have been able to enact through legislation. And Democrats — who would have been justified in rejecting this extortion altogether — have, in fact, gone a long way toward meeting those Republican demands.
As I said, it's not complicated. Yet many people in the news media apparently can't bring themselves to acknowledge this simple reality. News reports portray the parties as equally intransigent; pundits fantasize about some kind of "centrist" uprising, as if the problem was too much partisanship on both sides.
Some of us have long complained about the cult of "balance," the insistence on portraying both parties as equally wrong and equally at fault on any issue, never mind the facts. I joked long ago that if one party declared that the earth was flat, the headlines would read "Views Differ on Shape of Planet." But would that cult still rule in a situation as stark as the one we now face, in which one party is clearly engaged in blackmail and the other is dickering over the size of the ransom?
The answer, it turns out, is yes. And this is no laughing matter: The cult of balance has played an important role in bringing us to the edge of disaster. For when reporting on political disputes always implies that both sides are to blame, there is no penalty for extremism. Voters won't punish you for outrageous behavior if all they ever hear is that both sides are at fault.
Let me give you an example of what I'm talking about. As you may know, President Obama initially tried to strike a "Grand Bargain" with Republicans over taxes and spending. To do so, he not only chose not to make an issue of G.O.P. extortion, he offered extraordinary concessions on Democratic priorities: an increase in the age of Medicare eligibility, sharp spending cuts and only small revenue increases. As The Times's Nate Silver pointed out, Mr. Obama effectively staked out a position that was not only far to the right of the average voter's preferences, it was if anything a bit to the right of the average Republican voter's preferences.
But Republicans rejected the deal. So what was the headline on an Associated Press analysis of that breakdown in negotiations? "Obama, Republicans Trapped by Inflexible Rhetoric." A Democratic president who bends over backward to accommodate the other side — or, if you prefer, who leans so far to the right that he's in danger of falling over — is treated as being just the same as his utterly intransigent opponents. Balance!
Which brings me to those "centrist" fantasies.
Many pundits view taking a position in the middle of the political spectrum as a virtue in itself. I don't. Wisdom doesn't necessarily reside in the middle of the road, and I want leaders who do the right thing, not the centrist thing.
But for those who insist that the center is always the place to be, I have an important piece of information: We already have a centrist president. Indeed, Bruce Bartlett, who served as a policy analyst in the Reagan administration, argues that Mr. Obama is in practice a moderate conservative.
Mr. Bartlett has a point. The president, as we've seen, was willing, even eager, to strike a budget deal that strongly favored conservative priorities. His health reform was very similar to the reform Mitt Romney installed in Massachusetts. Romneycare, in turn, closely followed the outlines of a plan originally proposed by the right-wing Heritage Foundation. And returning tax rates on high-income Americans to their level during the Roaring Nineties is hardly a socialist proposal.
True, Republicans insist that Mr. Obama is a leftist seeking a government takeover of the economy, but they would, wouldn't they? The facts, should anyone choose to report them, say otherwise.
So what's with the buzz about a centrist uprising? As I see it, it's coming from people who recognize the dysfunctional nature of modern American politics, but refuse, for whatever reason, to acknowledge the one-sided role of Republican extremists in making our system dysfunctional. And it's not hard to guess at their motivation. After all, pointing out the obvious truth gets you labeled as a shrill partisan, not just from the right, but from the ranks of self-proclaimed centrists.But making nebulous calls for centrism, like writing news reports that always place equal blame on both parties, is a big cop-out — a cop-out that only encourages more bad behavior. The problem with American politics right now is Republican extremism, and if you're not willing to say that, you're helping make that problem worse.
This morning features two large and frustrating pieces of economic news. One: Washington's silly fight over a fake debt crisis (rather than the real debt crisis) isn't likely to resolve itself in time to avoid a manufactured catastrophe. Two: When measured by wealth, racial inequality in the US is greater than it's been since 1984. Anybody truly concerned about the country's future solvency should be most alarmed by the latter news.
The racial wealth gap has been enormous ever since the Census Bureau began measuring it 25 years ago. But it has never been larger than today. The median wealth of a white family is now at least 20 times higher than that of a black family and 18 times that of a Latino family, according to an analysis by the Pew Research Center.
Pew looked at wealth numbers between 2005 and the technical end of the US recession in 2009. It found that the racial wealth gap exploded in that time period, as blacks and Latinos suffered dramatic blows from the collapsed housing market. Median wealth—the net value of your assets versus your debts—fell by 66 percent among Latino households and 53 percent among black households, while it fell just 16 percent among white households. By 2009, median black and Latino families each held less than $7,000 in wealth; the median white family held $113,149.
That's a lot of numbers. But they all add up to something quite simple: When the economy struggles, those who are least secure get crushed. That's nothing new, and neither is Washington's refusal to deal with it. With the exception of the aggressive efforts to create a white middle class following World War II, US economic policy has never encouraged economic equality. What's new today is how much economic policy actually facilitates inequality.
Certainly the recent explosion in the wealth gap is owing to the fact that the little wealth black and Latino families hold is disproportionately locked up in homes. White families are far more likely to have jobs with retirement accounts and investments in the stock market. Those black and Latino families that have wealth depend on the housing market for it.
But that's still more symptom than root cause. Black and Latino families are also far more likely to live in places crawling with expensive, deceptive consumer lending of all sorts, from car loans to refinance mortgages. They are more likely to turn to that lending because they make less money and because they already hold less wealth to cushion themselves in tough times. It's an ugly cycle: inequality across the economy creates demand for predatory credit to bridge the gap, which in turn worsens inequality.
So things are right now growing dire in communities of color—with home wealth evaporating, joblessness lingering and wages falling, people have never been more vulnerable to predation. That's a problem for people of color, yes, but it's also a problem for the entire economy. After all, we already know what happens when we leave huge segments of our economy open to predatory credit—see under: subprime mortgages and global economic collapse. And with blacks and Latinos already accounting for roughly a third of the people whose labor and spending create the economy—a share that will increase dramatically in the next generation—this sort of deep inequality is simply untenable.
Which means today's Pew study is more of a benchmark than a final tally of the damage done in the past decade. Unless Washington intervenes to get people living-wage jobs and stop banks from preying on their wages with deceptive products, these numbers will grow more dramatic. That's a problem for everyone.
Republicans have agreed to a vote today on a budget plan they say will cut the deficit $917 billion over 10 years. The move sets the stage for a showdown against unified Democratic opposition in the Senate and threats of a White House veto. To discuss the debt talks and economic austerity worldwide, we're joined by Richard Wolff, Emeritus Professor of Economics at University of Massachusetts Amherst and author of several books,
including "Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It." "This is political theater in which two parties are posturing for the election coming next year," says Wolff. "To put it in perspective, the number of times the government has raised the debt ceiling since 1940? Ninety, almost twice a year. This is a normal, automatic procedure. Every president, Republican and Democrat, has asked for it."
rest at http://www.truth-out.org/richard-wolff-debt-showdown-political-theater-burdening-societys-most-vulnerable-video/1311958717
How Shadowy Right-Wing Front Groups Engineered Our National Embrace of Debt Reduction Over Job Creation #p2 #tcot
For the entire year, as a sluggish economy sputters by and states continue to struggle with falling revenue, the conversation in Congress has centered solely on spending reduction. Earlier this year, we witnessed looming government-showdown duels between competing spending reduction plans. Now with the debt ceiling debate, the only two options are a choice between a package of painful cuts and a package of deeply draconian cuts. There has been
no lively discussion of new policy ideas for job creation, foreclosure mitigation, or how to spur demand, the key driver of economic recovery.
Earlier this week, Politico published a piece outlining the vast disparity in the ad war over the debt ceiling. Republican-aligned groups have run over $21.2 million in attack ads highlighting Democrats as irresponsible drivers of the national debt, and elevating the debt ceiling as a top priority. Meanwhile, groups on the left have spent about $30,000 on ads calling out Republicans on the debt, with one hitting lawmakers for "recklessly risking default." Some Democratic leaning groups have even run ads casting Democrats as better at cutting than Republicans.
Since the end of the Bush presidency, shadowy right-wing groups, many of them formed for this very purpose, have primed the public with a sophisticated public relations campaign to shift the national discourse to a focus on debt reduction. Many of these groups do not appear partisan, and have figured out ways around registering their activity with the Federal Elections Commission (so the true extent to their ad-buying is rarely recorded):
– Founded in 2010 by former Bush admin flak Gretchen Hamel, the group Public Notice has quietly pumped millions into advertising about debt reduction: Public Notice sponsored at least $3 million on a debt ad called "Shovel" that falsely claims the spending doesn't create jobs, an undisclosed amount for online ads promoting a highly produced web series on the evils of government spending, a debt pledge that features pop singer Justin Bieber, and what is believed to be another multimillion dollar ad buy recently for a commercial, appearing like a PSA, that warns that government spending is akin to cocaine addiction. To warp elite opinion, the group sponsored billboard ads at Reagan National Airport and on buses and bus shelters near Capitol Hill. Although Hamel does not reveal her donors, she is connected closely with the Koch network of billionaire and investors. Last year at a right-wing donor conference attended by top hedge fund manager Steve Schwarzman and Charles Koch, Hamel gave a presentation on "Framing the Debate on Spending."
– Retired investor Pete Peterson has dedicated $1 billion of his personal wealth to reducing government spending; much of that money has gone to a multifaceted marketing campaign: The Peterson Institute has spent $1 million underwriting a movie about the debt, at least $1,010,232 developing a children's debt sports game that also directs users to a Econ4U, a front group created by infamous lobbyist Rick Berman, millions more for a TV ad campaign called "Hugh Jidette," an MTV-U cable television series that misleadingly conflates personal debt with the national debt, a newspaper partnered with the Washington Post, and even a program at Columbia University to develop a national debt-related K-12 curriculum.
– Corporate astroturf lobbyist Rick Berman has spent large amounts orchestrating a scare-mongering campaign over the national debt. Along with his connections to the Peterson network mentioned above, Berman has set up a campaign called "Defeat the Debt" to push the public into believing the national debt is the country's top priority. He has run ads on television, purchased billboards throughout the Washington D.C. metro area, and aggressively marketed his campaign to Capitol Hill staffers. Last year, Berman purchased an ad during the Super Bowl — spending approximately $3 million — that showed schoolchildren pledging allegiance "to America's debt, and to the Chinese government that lends us money."
rest at http://www.truth-out.org/how-shadowy-right-wing-front-groups-engineered-our-national-embrace-debt-reduction-over-job-creation
But aspiring bankers aren't the only students doing grueling internships this summer.
About 200 miles south of Wall Street, the Securities and Exchange Commission has 384 interns apprenticing on the other side of the financial divide. Between semesters at some of the nation's top law, business and undergraduate schools, the S.E.C.'s interns are doing a 10-week crash course in Wall Street watchdogging.
Half of the students interning at the commission's Washington headquarters and regional offices this summer are business school students, and about 38 percent are law students, with undergraduates making up the balance. More than 10,000 students applied for the internships, which are unpaid.
DealBook interviewed six Washington-based S.E.C. interns by conference call about their summer at the commission so far. This is a condensed and edited version of that interview.
So, guys, why the S.E.C.?
Christopher Avellaneda, Harvard Law School: Especially during the last three years, the S.E.C. has played a major role in the way that Dodd-Frank is restructuring the economy. It seems like they're doing a lot of important work.
Lauren Dies, Washington University Law School (St. Louis): I work in the enforcement division, so I sit in on meetings where they talk about what kinds of cases we should be bringing, and if the remedies we're seeking are sufficient. That's been probably one of the most rewarding experiences.
Some of you worked at investment banks before going to law school. Has interning at the S.E.C. changed your views about Wall Street?
Seorim Hong, Rutgers School of Law – Newark: I'd have to say yes. The mission of the S.E.C. is that we want to protect investors. That's obviously the other side. Whereas before, it was about making money. [Ms. Hong previously worked at Citigroup.]
Jared Steller, Brooklyn Law School: I don't know if it's necessarily been a shift in perspective, but the experience on the regulatory side is invaluable for anyone, whether you want to stay on the public side or go into the private sector.
Ms. Hong: Can I add something? It's not just being at the S.E.C., but being at the S.E.C. this summer that made the difference for me, with Dodd-Frank and everything going on. Working on the actual rule-making side is where I wanted to be.
What does your typical day look like?
Mr. Avellaneda: I'm working in the general counsel's office, and I've been in meetings where we're working on strategy for how these rules are going to play out in the courts when they get challenged.
Ms. Hong: The rule-making side asked for my help in reading and reviewing some of these new rules. But I started eight weeks ago, and they have been working on these releases for a year. So I've been in some meetings, but they were almost at the end of the process.
Does it bother you to be working an unpaid internship when your friends are making big money in the private sector?
Nurav Shah, Brooklyn Law School/N.Y.U. Stern School: Obviously, it's a choice that has to be made. But one way to help with that is that law schools are making a real push to support public service. We all have — or at least, I have — a stipend.
Ms. Dies: My school didn't give me a stipend for the summer, so I had to take on more debt to be here. I have friends at big law firms and they tell me about the great lunches they went to, but at the same time, they're working until 11 o'clock at night doing document review, and the work they're doing isn't necessarily as substantial as what we do.
Toyin Momoh, Howard University School of Law: It's a humbling experience seeing your colleagues making money this summer. I just think this is a great experience — you're hands on, you're doing more things, you're not just pushing paper.
Do you plan to come back after graduation?
Ms. Hong: I honestly don't know whether I'm committed. It's a very hard decision to know that you could make X amount going into investment banking or X amount going into law. For me, that's not an easy question.
Mr. Shah: I was at Lehman, and my hours weren't great. But here, from what I can tell, they're working pretty hard. It's not as cushy a government job as we all thought going in. But I think the folks here are just as bright as the folks at Lehman, maybe brighter.
Ms. Dies: It was definitely the caliber of people that struck me. I sit in meetings with Robert Khuzami and Lorin Reisner four days a week, and they are just so brilliant. They genuinely care that they're getting the best results for investors as well as being fair. One day I would hope to be like them, as cheesy as that sounds.
For the interns who used to work in finance, do you miss anything about that world?
Ms. Hong: Getting paid! Having Seamless Web, where you can order lunch and dinner.
Mr. Shah: Luckily, the attorneys here have been pretty nice about that, taking us out to lunches. Probably not on the S.E.C., but probably on their own dime.
Mr. Steller: For sure on their own dime. (All laugh.)
Earlier this week, Dunkin' Brands made its stock market debut with a blockbuster public offering, with shares soaring 46.6 percent on the first day of trading.
The offering, which raised $422.75 million, enriches the Coolatta-maker's private equity owners, Bain Capital Partners, the Carlyle Group and Thomas H. Lee Partners, and its band of underwriters, a group of 14 firms.
The underwriters, led by JPMorgan Chase, Barclays Capital, Morgan Stanley, Bank of America Merrill Lynch and Goldman Sachs, made $27,478,753 million in fees, or enough to buy 137.4 million Munchkins at about 20 cents a piece (some New York City Dunkin' Donuts sell boxes of 50 Munchkins for $9.99).
Here's a breakdown of who made what, according to data from Standard & Poor's:
The Financial Advisors
|Barclays Capital||co-lead underwriter||$6,045,325|
|J.P.Morgan Securities||co-lead underwriter||$6,045,325|
|Morgan Stanley||co-lead underwriter||$4,396,600|
|Bank of America Merrill Lynch; Pierce, Fenner & Smith||co-lead underwriter||$2,747,875|
|Goldman Sachs||co-lead underwriter||$2,747,875|
|Raymond James & Associates||underwriter||$824,363|
|Robert W. Baird & Company||underwriter||$824,363|
|Stifel Nicolaus Weisel||underwriter||$824,363|
|Wells Fargo Securities||underwriter||$824,363|
|William Blair & Company||underwriter||$824,363|
|Moelis & Company||underwriter||$480,878|
|SMBC Nikko Capital Markets Limited||underwriter||$480,878|
|Samuel A. Ramirez & Company||underwriter||$206,091|
|The Williams Capital Group||underwriter||$206,091|
Thursday, July 28, 2011
ConocoPhillips Rakes in $3.4 Billion in Profits from High Oil Prices, Buys More Influence to Keep Billion-Dollar Tax Breaks #p2 #tcot
This morning, ConocoPhillips announced their 2011 second-quarter earnings, reporting profits of $3.4 billion, bringing their total profits in the first six months of 2011 to $6.4 billion. Below is a quick look at ConocoPhillips, by the numbers:
- ConocoPhillips has spent over $6 million lobbying Congress in 2011, ranking in as the fourth largest spender this year.
- ConocoPhillips has contributed $53,600 to federal campaigns in 2011, with 85 percent of the contributions going to Republicans.
- Big Oil companies and their allies continue to aggressively lobby Congress to maintain their billions of dollars in oil industry tax breaks paid for by taxpayers.
- Conoco Phillips devoted $1.6 billion of its $3 billion 2011 first-quarter earnings to stock buybacks—more than 50 percent of its profit.
- ConocoPhillips' Chairman and CEO James Mulva received a 25-percent hike in compensation last year, earning him a total compensation of $17.9 million.
It's kind of an amplifying carbon-cycle feedback. Rake in billions from consumers, use the money to buy influence to maintain tax breaks. And as a bonus, any deficit cuts have to come at the expense of … consumers. Talk about win-win for Big Oil!
- ConocoPhillips CEO Mulva refuses to apologize for saying it is "un-American" to end oil subsidies
- ConocoPhillips chair mocks clean energy advocates as "hydrocarbon deniers"
to whip up support for Boehner plan @GOP played a clip from "The Town" - gonna hurt some people #p2 #tcot
Violent Film Motivates House GOP As They Push Us Toward Default
As we reported yesterday, Speaker Boehner is having some trouble rounding up the votes for his disastrous default bill. So much trouble that he had to postpone today's planned vote until at least tomorrow. (Good thing we're not in a rush or anything.)
In order to whip up support for the Boehner plan, the Washington Post reported that yesterday the GOP leadership played a clip from the Ben Affleck flick The Town. Here are the details, via ThinkProgress' Judd Legum:
Ben Affleck: I need your help. I can't tell you what it is. You can never ask me about it later. And we're going to hurt some people.
Jeremy Renner: Whose car are we going to take?
According to the Washington Post, Rep. Allen West (R-FL) replied, "I'm ready to drive the car."
In the movie, the characters then put on hockey masks and bludgeon two men with sticks, then shoot one man in the leg.
The controversy lit up twitter last night, and today Democratic leaders were quick to denounce the showing of the clip — and the message behind it.
Rep. Debbie Wasserman Schultz (D-FL), Chairwoman of the Democratic National Committee:
When we set out to get our country's deficit problem in order and under control, we knew that it would be a difficult debate. But I don't think anyone anticipated that our disagreements would lead to the type of vitriol and negative tone that this clip was clearly meant to incite. Not only did the Republican leadership apparently think this clip appropriate for their meeting. Those in attendance seemed to embrace its message.
Senator Chuck Schumer (D-NY) put it plainly:
Ladies and gentleman, this is your House Republican majority.
As we noted yesterday, the Center on Budget and Policy Priorities said if the Boehner plan were to be enacted, "it could well produce the greatest increase in poverty and hardship produced by any law in modern U.S. history."
In order to meet the extremely deep level of entitlement cuts implied in the Boehner plan, CBPP says policymakers would be left with basically three painful options:
- Cut Social Security and Medicare benefits heavily for current retirees, something that all budget plans from both parties (including House Budget Committee Chairman Paul Ryan's plan) have ruled out
- Repeal the Affordable Care Act's coverage expansions while retaining its measures that cut Medicare payments and raise tax revenues, even though Republicans seek to repeal many of those measures as well
- Eviscerate the safety net for low-income children, parents, senior citizens, and people with disabilities
As CBPP says, "There is no other plausible way to get $1.5 trillion in entitlement cuts in the next ten years."
Ladies and gentleman, this is the Republican plan for America.
Evening Brief: Important Stories That You May Have Missed
An "unprecedented" coalition of Christian leaders urged President Obama to protect the poor during debt talks.
No, the Obama administration did not ban the word "God" at military funerals in Houston.
Flashback: In February, Treasury Secretary Timothy Geithner correctly warned against negotiating over raising the debt ceiling because of the dire consequences.
Newt Gingrich defends his Tiffany's credit line: "I love my wife, I'm happy we're able to do nice things."
Calls to crack down on gays have Ghana's government on the defensive.
Florida Gov. Rick Scott promised today to bring comprehensive immigration reform to the legislative table in 2012.
Sarah Palin says American ideals are "foreign to our president" because of "his background."
An Office-like show set in Afghanistan is on the way, and Alyssa is intrigued, noting that "fights over office supplies are universal."
The Israeli Foreign Ministry's new YouTube video denying that the Palestinian Territories are occupied is basically just a rip-off of a propaganda video produced by a council of West Bank settlers, Gal Beckerman writes at the Forward's new blog.
Worth A Thousand Words: What If You Throw A Tea Party And Nobody Shows Up?
Senator Jim DeMint (R-SC) addressing a Tea Party "rally" held outside the Capitol today, via Slate's Dave Weigel:
Numbers To Know: Oslo Terrorist's Manifesto Cited Many Islamophobic Bloggers And Pundits
The scoop, via ThinkProgress' Eli Clifton:
Right-wing pundits and bloggers were quick to leap to judgment that the Norwegian terror attacks were the work of al Qaeda or an Islamic terrorist. But the news that the attacker had blond hair and blue eyes and was inspired by right-wing "counterjihad" bloggers suddenly turned the tables on many of the bloggers and supposed "terrorism experts."
Anders Breivik's manifesto contains numerous in-text and footnoted citations to prominent Islamophobic bloggers, supposed experts on Islamic terrorism and think tanks claiming to be on the front lines of battling Islam's attacks on democracies.
While a citation in the manifesto is far from an endorsement of violence by those Breivik referenced, it is increasingly clear that the Islamophobic right wing in the U.S. influenced his views.
Boehner’s plan: it a “job-killer”; Pelpsi says seniors could “kiss their Medicare good-bye.” #p2 #tcot
House Minority Leader Nancy Pelosi dialed up the rhetoric before Speaker John Boehner's plan to raise the debt limit heads to the House floor for a vote, declaring it a "job-killer" and saying seniors could "kiss their Medicare good-bye."
"If you believe in that the education of our children, the retirement of our seniors, the creation of jobs in a fiscally sound way, you couldn't possibly vote for the bill that the Republicans are bringing to the floor today," Pelosi said Thursday.
The speaker's legislation, which slashes $917 billion over 10 years and increases the nation's $14.3 trillion debt limit in two increments, is scheduled for a House vote on Thursday night.
House Democrats are expected to stay closely united against the Boehner legislation, with few – if any – defectors expected. If it passes and heads to the upper chamber, it faces opposition from all 53 Democratic-caucusing senators. Pelosi echoed those projections, saying she felt "very confident that if they're going to have 217 votes … they're going to have to be Republican votes."
Now just five days away from the Treasury Department's Aug. 2 deadline, Congress faces gridlock with dueling proposals from Boehner and Senate Majority Leader Harry Reid. Pelosi said she hoped Congress could come together with the White House to resolve the stalemate.
"I'm hopeful that [once] everyone has made their statement, that we can again come together with the White House … [and] that we could come to terms as to how we go forward."
She likened the current atmosphere to one that precipitated the vote before the Troubled Asset Relief Program, saying her Democrats worked together with a Republican president to try to avert an economic catastrophe.
"To see the lack of cooperation with [President Barack Obama], you have to ask the question, why?" Pelosi said. "Is it because they want to make the statement about the markets come tumbling down? That happened before and then finally we could pass the bill. Hopefully that is not the case."
IL Sen Mark Kirk says in nuclear war with Iran and NATO (ie USA) Russia is irrelevant; russians think Kirk is nuts #p2 #tcot
Russian ambassador to NATO/kooky unreformed nationalist Dmitri Rogozin, who has a habit of saying (and tweeting) somewhat nutty stuff, took a whole bunch of shots at unilateralist Russophobe dinosaurs/U.S. Senators John Kyl and Mark Kirk in his country's press after meeting with the two this week. The story is related by Josh Rogin at The Cable. Here's the money line from Rogozin:
"The meeting [with Kirk and Kyl] is very useful because it shows that the alternative to Barack Obama is a collapse of all the programs of cooperation with Russia. Today, I had the impression that I was transported in a time machine back several decades, and in front of me sat two monsters of the Cold War, who looked at me not through pupils, but targeting sights."The guy is always good for a few lulz, but Kirk was less amused. He gave Rogin a few snippy quotes that aren't worth recounting, but also dropped what I imagine he thinks is the hammer:
"In a potential missile combat scenario between NATO and Iran, Russia is thoroughly irrelevant. So Russian concerns about what we do and not do about the Iranian threat are interesting but largely irrelevant."Wow. Russia is thoroughly irrelevant, and its concerns are largely irrelevant. (See if you can't sort that one out for yourself.)
I know it's probably a bit much to expect sophisticated understanding of strategic deterrence theory from a guy who "misremembers" his own military record, but could we at least hope for some common sense?
"In a potential missile combat scenario between NATO and Iran," precisely nobody with nuclear weapons and an early-warning/launch detection system is "irrelevant." Especially not a state with a massive arsenal of nuclear warheads and the delivery systems to get them to American soil, one with a cultivated distrust of American intentions vis-a-vis missile defense.
"In a potential missile combat scenario" in which the sky fills up with ballistic missiles, every damned guy on the planet with a red button is going to go reaching for it until he has a pretty solid sense that none of those missiles is going to land on him. That solid sense is probably going to take just a little while longer to materialize when you've got a bunch of senior "statesmen" running their yaps and posturing in ways that seem almost certainly intended to impede information-sharing and common understanding, to keep the other guy off balance, wondering if -- in spite of official policy statements to the contrary -- our missile defenses really are targeting his weapons.
Russia's "irrelevant" to a scenario that could kindle nuclear war, huh, Senator? More irrelevant than a guy who has to shit-talk his own government to America's biggest foreign creditors just to get on the news? More irrelevant than a guy who spent much of his time in the House impotently railing against the government's irresponsible spending habits while serving as a member of the body that writes America's checks? More irrelevant than a guy whose idea of inspired leadership and aggressive oversight is pathetic obstructionism and delaying tactics in a condominium of ignorance with the U.S. Senate's most trifling and manifestly inconsequential clowns?
Well hell, Rogozin, I might take "irrelevant" as a compliment coming from that guy.
MICAH ZENKO is a fellow in the Center for Preventive Action at the Council on Foreign Relations, and author of Between Threats and War: U.S. Discrete Military Operations in the Post-Cold War World.
In November 2008, representatives of U.S. President George W. Bush and Iraqi Prime Minister Nouri al-Maliki signed a Status of Forces Agreement (SOFA), which established the operational and legal framework for U.S. soldiers and their civilian counterparts in Iraq. The key line in the agreement was contained in Article 24: "All the United States Forces shall withdraw from all Iraqi territory no later than December 31, 2011." In a major speech a few months later, newly inaugurated U.S. President Barack Obama affirmed that he intended to uphold the deadline.
But it is proving difficult for the U.S. military to say goodbye to Iraq, after what has now amounted to a 21-year engagement, including nearly 4,000 days of no-fly zones and 3,000 days of stability operations since the first Gulf War. U.S. defense officials have recently begun begging and bluffing to compel Iraq's government to ask the United States to stay. In April, Admiral Michael Mullen, chairman of the Joint Chiefs of Staff, gave Maliki an ultimatum: "Should the Iraqi government desire to discuss the potential for some U.S. troops to stay," he warned, "it needs to start soon -- very soon -- should there be any chance of avoiding irrevocable logistics and operational decisions we must make in the coming weeks."
Yet Baghdad seems unable to make up its mind. Some political leaders privately lobby for U.S. troops to stay, but only in training and advising roles. Still, most Iraqis and many members the Iraqi parliament are weary of a continued American military presence, which is problematic since U.S. officials insist that an updated SOFA be approved by the parliament. Iraqi President Jalal Talabani had requested that Baghdad's fractious political blocs decide by last Saturday whether to ask for an extension of U.S. troop presence into next year. They were unable to reach a consensus and have postponed additional negotiations on the topic "until further notice."
Still, according to anonymous U.S. officials, the White House is prepared to keep 10,000 ground troops in Iraq after the end of this year. It apparently has two reasons. The first is to prevent Iran from supplying improvised explosive devices and rockets to Shia militants in Iraq who have used such weapons to kill U.S. troops. According to U.S. officials, nine of the 15 U.S. soldiers who were killed in Iraq in June died from such attacks. The second is that somehow the mere presence of 10,000 U.S. troops will mitigate Iran's long-term influence in Iraq, which has been a proxy battlefield between Washington and Tehran for decades.
There are a few problems with this logic. For starters, it does not make sense for the United States to keep soldiers in Iraq to prevent Iranians from providing Iraqi Shias with weapons to kill U.S. soldiers in Iraq. As the Pentagon noted in its "Measuring Security and Stability in Iraq" report last summer, "Iran will likely continue providing Shi'a proxy groups in Iraq with funding and lethal aid, calibrating support based on several factors, including Iran's assessment of U.S. Force posture during redeployment." In other words, Iran will continue its behavior as long as there are U.S. soldiers in Iraq to target, which suggests that the surest and fastest way to prevent further bloodshed is to withdraw the remaining U.S. soldiers on schedule.
Further, no matter what the United States does, Iran will continue to try to influence Iraq. Tehran has a strategic interest in its neighbor's political makeup and will use a combination of soft-power initiatives -- including outreach to sympathetic political parties, such as Dawa, Maliki's Islamic party -- and providing weapons to Shia extremist groups for targeting U.S. forces and gaining the upper hand in the region. Countering those attempts should not primarily be the job of a diminished and constrained U.S. military presence; diplomats are better suited for such a mission, and the transition to a U.S. civilian-led mission in Iraq is already under way. After 2011, the U.S. civilian presence in Iraq will remain massive. The State Department will eventually deploy some 17,000 personnel at 15 sites across the country, 5,100 of whom will be security contractors.
If the 46,000 U.S. troops in Iraq now (and the 166,000 U.S. troops deployed there during the 2007 surge) have not been able to shut down the Iranian weapons pipeline, there is no reason to believe that the 10,000 troops the Obama administration would have stay in the country could do so. And even if Iran's weapons continued to flow into Iraq after 2011, the U.S. military would have few appealing options for addressing the problem along the 900-mile Iran-Iraq border.
The United States could choose to target assets and operatives outside of Iraq that are connected with Iran's Revolutionary Guard. But that would not be wise, either. In 2008, U.S. special operations forces did something similar when they killed Abu Ghadiya, an al Qaeda commander, in Sukkariyah, a city near Syria's border with Iraq. The mission did nothing to convince the Syrian government to close its borders to al Qaeda, which U.S. officials claimed Syria had been directly supporting. Such a move against Iran would be perceived as an attack on the state, and any resulting retaliation would needlessly place Americans in Iraq in immediate danger.
If the Obama administration believes that leaving troops in Iraq would prevent the impression that Iran is "driving us out," as a senior U.S. defense official put it, it should reconsider. The United States should not indefinitely maintain 10,000 troops in Iraq for second-order psychological reasons, such as attempting to alter the thinking of Tehran's opaque political leadership structure. Furthermore, U.S. strategy in Iraq should not be based on what Tehran might say about it.
Instead, the United States ought to base its Iraq strategy on a clear-eyed assessment of national interests, which would mean ending the U.S. military presence, reducing the operation's financial burden on U.S. taxpayers, and providing assistance to Iraq so that it can defend its borders. Sooner or later (and probably sooner) Iraq must be able to protect its own sovereign territory. Whether it succeeds is not a matter of resources; as U.S. Secretary of Defense Leon Panetta recently noted, the "damn country has a hell of a lot of resources." It is primarily a matter of Baghdad's political will, which was lacking when 166,000 U.S. troops were fighting the Sunni-led insurgency at a cost of some $12 billion a month in 2007, and remains lacking today.
In the meantime, the United States should continue to help build up Iraq's military capacity. As in other countries, this effort should be led by the State Department in Washington and the U.S. embassy's Office of Security Cooperation in Baghdad. Efforts should include training Iraqi Ministry of Interior police and border forces, educating Iraqi officers at U.S. war colleges and academies, conducting military-military exchanges, and sharing intelligence. The United States could also help by selling Iraq advanced conventional weaponry; Iraq is reportedly interested in buying 36 F-16 fighter jets from Lockheed Martin.
If the Obama administration does convince Maliki to ask U.S. troops to stay, it must explain what the operational constraints of a new SOFA would be, and provide a new timetable for withdrawal. Moreover, in a war that two-thirds of U.S. citizens oppose and that has left 4,474 U.S. soldiers dead, Obama should be pressed to provide a clear and compelling reason why leaving 10,000 troops in Iraq is in the United States' national interest and, more specifically, how it would plausibly mitigate Iranian influence. Despite his mastery of rhetoric and eloquence, chances are that he will not be able to, which is why the United States should implement the 2008 SOFA now and finally end its military presence in Iraq.Copyright © 2002-2010 by the Council on Foreign Relations, Inc.