WWSPS

No, this is not The Onion. Really.

Diplomad-libs

Very useful:

In light of the latest conservative freakout over diplomatic protocol and following the rule of law, here's a handy fill-in-the-blanks statement you can use for the next one: "I am shocked and appalled that this president would take the unprecedented step of _____ before ______ on his overseas trip to _____. This fits into a familiar pattern of the Obama administration, most recently seen at home in his decision to ______, which emboldens our enemies and further pushes America into a _____ state that would have been unrecognizable just ______ months ago."

I love time-savers.

What's really important

Her name.

Assimilated Pronunciation [Mark Krikorian]

So, are we supposed to use the Spanish pronunciation, so-toe-my-OR, or the natural English pronunciation, SO-tuh-my-er, like Niedermeyer? The president pronounced it both ways, first in Spanish, then after several uses, lapsing into English. Though in the best "Pockiston" tradition, he also rolled his r's in Puerto Rico.

By the way, can anyone point me to the video of the 1990 Saturday Night Live skit with Jimmy Smits where the news staff were doing ridiculously exaggerated pronunciations of "Neek-o-rah-gwa" and the like? I can't find it online or on DVD.

He wasn't done.

It Sticks in My Craw [Mark Krikorian]

Most e-mailers were with me on the post on the pronunciation of Judge Sotomayor's name (and a couple griped about the whole Latina/Latino thing — English dropped gender in nouns, what, 1,000 years ago?). But a couple said we should just pronounce it the way the bearer of the name prefers, including one who pronounces her name "freed" even though it's spelled "fried," like fried rice. (I think Cathy Seipp of blessed memory did the reverse — "sipe" instead of "seep.") Deferring to people's own pronunciation of their names should obviously be our first inclination, but there ought to be limits. Putting the emphasis on the final syllable of Sotomayor is unnatural in English (which is why the president stopped doing it after the first time at his press conference), unlike my correspondent's simple preference for a monophthong over a diphthong, and insisting on an unnatural pronunciation is something we shouldn't be giving in to.

Yes, there should be limits to permitting people to have names that are "unnatural in English."

What's especially amusing is that he goes on to write that somehow Sotomayor's name hindered the Princeton and Yale grad's ability to assimilate. Or something.

Can't be bothered

Classic Doughy Pantload:

Well, If She Says So It Must Be True [Jonah Goldberg]

Arianna Huffington has a too-leaden-to-be-good-parody piece on why laissez-faire capitalism has been a "monumental failure." She offers all the familiar clichés and steals all the bases she can.

I just can't bring myself to bother more than that.

12/23 11:00 AM

And I'm not exactly clear what it means to "[steal] all the bases she can."

Ice Cream for Crow

I anticipated that hacks like Gerson would lament that liberals aren't outraged by Obama's pragmatic Cabinet picks. But no! Instead, he invents a strawman as evidence of their outrage.

It is tempting for conservatives to crow -- or liberals to lament -- that Barack Obama's victory has somehow produced John McCain's administration. But this partisan reaction trivializes some developments that, while early and tentative, are significant.

He points to no specific liberals doing any such lamenting. Not even when it comes to specific picks, where surely he could have found someone to make his case.

But in true Gerson fashion, he cautions conservatives not to crow...then goes on to do just that.

Second, Obama's appointments reveal something important about current Bush policies. Though Obama's campaign savaged the administration as incompetent and radical, Obama's personnel decisions have effectively ratified Bush's defense and economic approaches during the past few years. At the Pentagon, Obama rehired the architects of President Bush's current military strategy -- Gates, Gen. David Petraeus and Gen. Raymond Odierno. At the Treasury Department, Obama has hired one of the main architects of Bush's current economic approach.

This continuity does not make Obama an ideological traitor. It indicates that Bush has been pursuing centrist, bipartisan policies -- without getting much bipartisan support. The transition between Bush and Obama is smoother than some expected, not merely because Obama has moderate instincts but because Bush does as well. Particularly on the economy, Bush has never been a libertarian; he has always matched a commitment to free markets with a willingness to intervene when markets stumble.

Crow he may, but he's deluded. Where to start? Maybe with the fact that while Obama has no desire to disrupt military operations by changing commanders before the inauguration, he's made clear to Petraeus that, while he values his advice, the president is the C-in-C, something Bush delegated, originally to Rumsfeld, then to Petraeus. And Gates, it's clear, never bought in to Rumsfeld's defense policies, and it's also clear that big changes are coming to the Pentagon.

And hiring the "main architect of Bush's current economic approach"? Um, I think not.

Gerson has simply never learned that wishing doesn't make it so.

A Buckley endorsement?

Well, not exactly, but he wishes Obama luck.

White flight

I saw this swirling around the intertubes yesterday, but thought it was probably a trial balloon that will get shot down in a heart beat. Namely, the financial meltdown you may have heard about. Well guess what, it's the fault of "minorities."

Apparently though, this idea has gone mainstream.

Now note yesterday's Wall Street Journal op-ed hints at the same thing: we're in the mess we're in because Congress mandated banks slather low-income folks with home loans they couldn't afford.

Then there's John McCain the other day in Green Bay, claiming "At the center of the problem were the lobbyists, politicians, and bureaucrats who succeeded in persuading Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac."

"Lie" is too polite a word for what is going on here.

First of all, even if Fannie and Freddie were the most awful companies in the history of the planet, its books chock-a-block with non-performing loans none of the financial contagion—none of it—would have happened had greedy financial institutions invented the risky securities that used mortgages as their foundation, via procedures that created economic incentives to write non-performing loans. We explained that a long time ago, here. Second of all, as we explained yesterday, loans that fulfilled the anti-redlining Community Reinvestment Act, performed better than the average mortgage.

Third of all: the part that makes you sick to your stomach. The pattern being drawn across the right—the Big Lie so notorious it's hard to belief they'd even dare it—is that this financial mess is something black people have done to white people.

Truly sick.

As we get closer to the election they fear they're going to lose and lose big, in the midst of a collapse that is also a collapse of their deregulatory ideology, the masks are coming off and the rank racism that has been at the core of the Republican Party's rise for the past 40 years is coming to the fore.

Our southern occupation

Typically, conservatives point to southern males as the only ones patriotic enough to serve in the U.S. military. But, it turns out, they may actually be insurgents infiltrating the occupying force!

Humming more loudly

If there is any indication that even conservative supporters of the war in Iraq are ready to just move on, look no further than Brooksie's column this morning. In a week in which Gen. Petraeus admitted he didn't know if the war in Iraq was "making us safer," and the morning after preznit gave the latest rationale for our misadventures in the middle east, David chooses as his topic this morning: the nurturing power of love on IQ assessments.

For obvious reasons, rational conservatives like Brooks want nothing more than to forget a war that has begun to resemble a going-out-of-business sale.

Steve Forbes, Bubble Boy

Today's Krugmaniad (Time$elect)

The Sum of Some Fears

By PAUL KRUGMAN

Yesterday’s scary ride in the markets wasn’t a full-fledged panic. The interest rate on 10-year U.S. government bonds — a much better indicator than stock prices of what investors think will happen to the economy — fell sharply, but even so, it ended the day higher than its level as recently as mid-May, and well above its levels earlier in the year. This tells us that investors still consider a recession, which would cause the Fed to cut interest rates, fairly unlikely.

So it wasn’t the sum of all fears. But it was the sum of some fears — three, in particular.

The first is fear of bad credit. Back in March, after another market plunge, I spun a fantasy about how a global financial meltdown could take place: people would suddenly remember that bad stuff sometimes happens, risk premiums — the extra return people demand for holding bonds that aren’t government guaranteed — would soar, and credit would dry up.

Well, some of that happened yesterday. “The risk premium on corporate bonds soared the most in five years,” reported Bloomberg News. “And debt sales faltered as investors shunned all but the safest debt.” Mark Zandi of Moody’s Economy.com said that if another major hedge fund stumbles, “That could elicit a crisis of confidence and a global shock.”

I saw that one coming. But what’s really striking is how much of the current angst in the market is over two things that I thought had been obvious for a long time: the magnitude of the housing slump and the persistence of high oil prices.

I’ve written a lot about housing over the past couple of years, so let me just repeat the basics. Back in 2002 and 2003, low interest rates made buying a house look like a very good deal. As people piled into housing, however, prices rose — and people began assuming that they would keep on rising. So the boom fed on itself: borrowers began taking out loans they couldn’t really afford and lenders began relaxing their standards.

Eventually the bubble had to burst, and when it did it left us with prices way out of line with reality and a huge overhang of unsold properties. This in turn has caused a plunge in housing construction and a lot of mortgage defaults. And the experience of past boom-and-bust cycles in housing tells us that it should be several years at least before things return to normal.

I’ve written less about oil prices, so let me emphasize two points about the oil situation. First, we’re now in our third year of very high oil prices by historical standards — prices as high, even when adjusted for inflation, as those that prevailed in the early 1980s, after the Islamic revolution in Iran. Second, unlike the energy crises of the past, this price surge has happened even though there hasn’t been any major disruption in world oil supply.

It’s pretty clear what’s happening: economic development is colliding with geology.

The “peak oil” theorists may or may not be right in asserting that world oil production is already as high as it will ever go — anyone who really knows what’s going in Saudi Arabia’s fields, please drop me a line — but finding new oil is getting a lot harder. Meanwhile, emerging economies, especially in Asia, are burning ever more oil as they get richer. With demand soaring and supply growth sluggish at best, high prices are what you get.

So why did people seem so shocked by a few more bad housing and oil numbers? What I guess I didn’t realize was how deep the denial still runs.

Over the last couple of years a peculiar conviction emerged among some analysts — mainly, for some reason, among those with right-wing political leanings — that the housing bubble was a myth and that the real bubble was in oil prices.

Each new peak in oil prices was met with declarations that it was all speculation — like the 2005 prediction by Steve Forbes that oil was in a “huge bubble” and that its price would be down to $35 or $40 a barrel within a year. And on the other side, as recently as this January, National Review’s Buzzcharts column declared that we were having a “pop-free” housing slowdown.

I didn’t think many people believed this stuff, but the market’s sudden freakout over housing and oil suggests that I was wrong.

Anyway, now reality is settling in. And there’s one more thing worth mentioning: the economic expansion that began in 2001, while it has been great for corporate profits, has yet to produce any significant gains for ordinary working Americans. And now it looks as if it never will.

© 2007 The New York Times Company

On a related note, Floyd Norris (also behind the firewall) reminds us of the Oracle at Delphi's role in all of this.

In Mr. Poole’s [William Poole, the president of the Federal Reserve Bank of St. Louis] view, it was obvious from 2002 to 2004 that short-term interest rates were all but certain to rise, thus driving up the cost of ARMs. But the bankers did not point that out to their customers.

“Apparently driven by the prospects of high fee income,” said Mr. Poole in a speech a week ago, “mortgage originators persuaded many relatively unsophisticated borrowers to take out these mortgages; then, investors willingly purchased them when they were securitized. Many of these mortgages are now in default, some of the lenders are bankrupt, and the mortgage-backed securities are trading at deep discounts to face value.”

In 2004, however, the Fed sent a different signal. Mr. Greenspan, speaking to Credit Union executives on Feb. 23, said “recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable rate mortgages rather than fixed rate mortgages during the past decade.”

He conceded that they might suffer if rates rose, but that was not the point he emphasized. Instead, he used option pricing theory to conclude that homeowners were paying a very steep price when they took out fixed rate mortgages.

“American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed rate mortgage,” said the Fed chairman.

Rarely has an industry done a better job of following a regulator’s suggestion. The bankers came up with mortgages that took 40 years to pay off, rather than the customary 30-year amortization period. If that was not enough, they offered loans with negative amortization, so that every month a borrower owed more than he had the month before. People could get mortgages without anyone’s checking to see if they had lied about their income.

Mr. Greenspan may have come to regret his 2004 remarks. In the fall of 2005, he told a group of mortgage bankers that the “apparent froth in housing markets may have spilled over into mortgage markets.” He voiced concern over “more exotic forms of adjustable rate mortgages,” but said nothing to indicate banks should stop offering them.

Had Mr. Poole been willing to talk to me, I would have asked if he thought the Fed bore any responsibility.

[...]

Actually, there were forecasts of disaster. But Mr. Poole was not among the Cassandras.

In March of last year, a few months before home prices peaked, he said a housing bubble might be brewing, but that Fed research indicated home prices were not unreasonable.

“So, if you have an academic interest in house prices, I recommend that you wait a few years,” he said. “If you have a direct financial interest, I can’t help much — you’re on your own!”

That exclamation point was in the text released by the Fed.

Good times. Good times.