The Washington mafia in action

That sure is a nice bank you’ve got there. Shame if anything bad should happen to it….

Mr. Lewis: There was a point after that that the board brought up the fact that we’re relying on the words that obviously has some very prominent people and honorable people, but, boy, what if they don’t come through? So I called Bernanke — I don’t know why I called him versus Hank — and said, “Would you be willing to put something in writing?” And he said, “Let me think about it.” As I recall, he didn’t call me back, but Hank called me back. And Hank said two things: He said, “First, it would be so watered down, it wouldn’t be as strong as what we were going to say to you verbally, and secondly this would be a disclosable event and we do not want a disclosable event.”

Mr. Lewis testifies about why he did not disclose Merrill’s losses to BofA shareholders:

Q: Wasn’t Mr. Paulson, by his instruction, really asking Bank of America shareholders to take a good part of the hit of the Merrill losses?

Mr. Lewis: What he was doing was trying to stem financial disaster in the financial markets from his perspective.

Q: From your perspective, wasn’t that one of the effects of what he was doing?

Mr. Lewis: Over the short term, yes, but we still thought we had an entity that filled two big strategic holes for us and over long term would still be an interest to the shareholders.

Q: So isn’t that something that any shareholder at Bank of America who had less than a three-year time horizon would want to know?

Mr. Lewis: The situation was that everyone felt like the deal needed to be completed and to be able to say that, or that they would impose a big risk to the financial system if it would not.

Q: When you say “everyone,” what do you mean?

Mr. Lewis: The people that I was talking to, Bernanke and Paulson.

Q: Had it been up to you would you made the disclosure?

Mr. Lewis: It wasn’t up to me.

Q: Had it been up to you.

Mr. Lewis: It wasn’t.

Q: Why do you say it wasn’t up to you? Were you instructed not to tell your shareholders what the transaction was going to be?

Mr. Lewis: I was instructed that “We do not want a public disclosure.”

Q: Who said that to you?

Mr. Lewis: Paulson.

For those who think the problem is free market capitalism, on what planet can this sort of thing be reasonably described as anything even remotely approaching a free market. And, of course, it’s no surprise that the CEO and board of directors are perfectly willing to destroy the corporation they run if the alternative is threatens their jobs.

It’s hardly Diamond’s first fiction

His correct observation that territorial conflicts are more rooted in geography than religion notwithstanding, I have tended to consider Guns, Germs, and Steel to be little more than an ahistorical concoction that combines pop history and science with illogical speculation and political correctness. So, his apparent carelessness with easily verifiable facts doesn’t surprise me at all:

In an April 21, 2008, article on blood feuds by Pulitzer Prize-winning scientist Jared Diamond, tribesman Daniel Wemp recounts how he spent three years hellbent on getting revenge for his uncle Soll’s death. The feud led to six battles and the deaths of 300 pigs, the story went. Finally, a hired thug shot Isum Mandingo, the man Wemp held responsible for Soll’s murder, in the back with an arrow, leaving him paralyzed and in a wheelchair, according to Diamond….

When media watchdog group stinkyjournalism.org sent a team of fact-checkers to New Guinea to check the article’s veracity, they found Mandingo, who disputed reports of his paralysis by walking on his own two feet.

“No matter what The New Yorker says and what Diamond says, the fact is that he is not paralyzed and is not confined to a wheelchair,” said Rhonda Shearer, the site’s founder…

There were no shouts and murders, but the story remains the talk of the tribes, she said. Mandingo told the researchers he had no involvement in any blood feuds.

Journalists always get something basic wrong. Always. I’ve seen factual errors in pieces only one paragraph long! The facts only exist insofar as they support the preconceived narrative, and if the two happen to come into conflict, most of the time it’s the facts that will be jettisoned.

Not a democracy

This Rasmussen Report illustrates why genuine democracy, with all its flaws, would be vastly preferable to the strictly limited system of elite-dominated faux democracy presently in place:

Looking back, 59% of voters nationwide believe the federal bailouts for banks and other financial institutions were a bad idea. The latest Rasmussen Reports national telephone survey found that just 26% think they were a good idea. The numbers are similar for the bailout loans given to General Motors and Chrysler: 60% say they were a bad idea, and just 26% hold the opposite view. Public opposition to the bailouts has been strong right from the start. In September, right after Lehman Brothers collapsed, just seven percent (7%) of voters thought the federal government should use taxpayer funds to keep a large financial institution solvent. Sixty-five percent (65%) said the companies should file for bankruptcy….

Today, by a 61% to 23% margin, the Political Class still believes the bailouts for the financial industry were a good idea. By a 64% to 23%, they say the same about the auto bailouts.

This is why it really doesn’t matter for whom you vote. The Political Class is going to do whatever it wants to do on matters it deems important, it’s only influenced by the voters on the marginal issues that it really doesn’t care about. Hoi polloi are smarter, too. Consider this: “29% of all voters believe the bailouts will have a positive long-term impact on the economy. Most (51%) believe the bailouts will hurt. Once again, the Political Class has an entirely different view. By a 75% to 17% margin, the Political Class believes the bailouts will have a positive long-term impact.”

The Keynesians need a new model

You may recall that I have, in the past, anticipated that the Chancellor of the Exchequer’s projections would not be correct. The latest figures are, again, over-optimistic:

Chancellor Alistair Darling is expected next week to downgrade the government’s forecast for the growth of the UK economy in 2008…. The chancellor is expected to reduce the growth forecast from 3.0% to 2.5%.
– October 2007

Delivering his budget plan to the House of Commons, Chancellor of the Exchequer Alistair Darling on Wednesday cut his forecast for 2008 U.K. economic growth, predicting gross domestic product will increase by 1.75% to 2.25%. Darling had previously forecast growth of 2% to 2.5% in 2008…. For 2009, Darling sees GDP at 2.25-2.75 pct, lower than the 2.5-3.0 pct range previously. For 2010, however, he maintained the GDP growth estimate at 2.50-3.00 pct.
– March 2008

Mr Darling forecast that although the economy will contract by 3.5 per cent this year – far worse than expected – it will start growing again towards the end of the year, expand by 1.25 per cent next year, and rise to 3.5 per cent in 2011.
– April 2009

In light of this reliable record of failure, I see absolutely no need to modify what I have been saying since last October. “Considering that Darling’s brilliant plan has literally been textbook macroeconomics for the past five decades, what are the chances that this is somehow going to fail? Infinity to one against or Infinity squared to one?”

One thing that few are taking into consideration is the way that a large government sector makes the Keynesian approach to spending one’s way out of recession even less viable than it was back in the 1930s.. Government is not productive and cannot be a real source of growth; if it could, then few economies would be experiencing problems now. Since government accounts for between one-third and one-half of most economies now, this means that achieving the goal of 3.5 percent growth in 2011 would require the private sector to grow between 5.25 and 7 percent while being handicapped by higher taxes, increased regulation, and upside-down mortgages.