|
In comments to my earlier diary, "It's the Criminality, Stupid! Bill Moyers/William Black On The Wall Street Meltdown", the issue was raised whether Black was misrepresenting the scope of the Prompt Corrective Action Law, as alleged in a recommended DKos diary, "Please be smarter than the Freepers". While the accusation in the diary is over the top, the question of whether Black is misrepresenting the law (and if so, intentionally or not, clearly or not, etc.) is certainly germane to his arguments based on it. My initial response was that that was not my main concern, as there was a broader thrust to Black's argument that doesn't depend on legal specifics, and that broader thrust was my main concern. This contrasts with what's happening over at DKos, where the diary linked to above was responding to another more narrow and sensationalist diary.
Then, in another comment, Joel wrote:
But if the guy's lying about even one minor part of his argument, probably best to make an argument without relying on him personally.
(Though maybe he's not lying. I'm gonna poke around and see if I can figure that out to my own satisfaction.)
While I can certainly appreciate this approach in terms of gladiatorial argumentation--and want to hear what Joel turns up--it's somewhat different from a reporter's point of view, where even very unreliable sources sometimes provide invaluable information that turns out to be crucial as well as boringly true. Or sometimes they simply point you in the right direction by posing questions you hadn't thought of before. Questions, after all, aren't right or wrong. They're fruitful or not. Insightful or not. Misleading or not. Etc., etc., etc.
So, on the flip I want to look back at a set of suggestions that Black and James Galbraith made last fall, which I referred to in my previous diary. I believe they stand up very well, and are not undermined in any way by questions about whether Black was right or wrong about the Prompt Corrective Action Law, either wittingly or not. Others may not agree. But, hey, what's a comment thread for?
|
The Galbraith/Black piece was called "Bailout Plan: Trust But Verify.". In it they said:
Congress must now impose conditions to protect the public, the national interest and, not least, the interests of the next administration.
Herewith a short list:
Needless to say, no such list of conditions was adopted, but it could have been adopted when Obama took office. Instead, Obama opposed any added safeguards. Here, then is the list:
1) A disclosure clause. Treasury should have immediate and complete access to information about portfolios, counterparties, the internal valuation methods used by financial firms, their proprietary models and the history of adjustments made to those models to recognize or conceal losses as the crisis unfolded.
This seems both eminently sensible, and in no way related to, or thrown in question by any concerns about Black's statements about the Prompt Corrective Action Law (PCAL from here on out).
2) A pricing clause. Treasury should establish a transparent mechanism to establish a before-the-bailout fair market value for mortgage-backed securities, set limits on the premium paid over that value and require that financial institutions value their full portfolios at the sale price. In other words, the practice of concealing losses--"accounting forbearance"--should be prohibited.
Again, this seems perfectly reasonable to me, and totally unrelated to Black's claims about the PCAL.
3) A fraud clause. Securities purchased should be reviewed and those found to be based on fraudulent appraisals, inadequate documentation, predatory and other abusive practice should be kicked back to the lenders at a penalty rate.
Again, seems quite reasonable to me. I'm open to arguments to the contrary, of course. But how is refusing to honor fraud a bad thing? Again, no connection to Black's statements regarding the PCAL that I can see.
4) An enforcement clause. Treasury should be required to establish a framework for investigations and criminal referrals and to prove that the framework is in aggressive use. Participating firms should be required to investigate and document past frauds, to establish internal anti-fraud controls and make criminal referrals as necessary. The FBI and Assistant US Attorneys should get "'blank check" authorization to pursue the crimes behind this debacle.
I can certainly understand why Republicans would object to this. But I'm of the opinion that any Democrat who does ought to be kicked out of the party. Connection to Black's statements about the PCAL? None.
5) An arbitrage clause. One big danger of Paulson's plan is that non-US institutions, hedge funds and others will seize the chance to sell their bad holdings to eligible US institutions, replenishing the swamp just as the Treasury seeks to drain it. All US financial institutions should be required to provide baseline information on their mortgage-backed securities and other eligible holdings as of September 15, 2008.
Another seeming no-brainer to me. Tell me why I'm wrong, and I'll listen. But I doubt if anyone can draw a connection between this and Black's statement about the PCAL.
6) A transparency clause. Treasury operations under this plan, including communications and consultation with outside advisers, should be transparent to Congress, which should be get whatever information it wants, at regular intervals. No exceptions.
Congressional oversight is one of Congress's most basic and vital functions. It's why we have separate branches of government. To make sure they keep each other honest. What part of "separation of powers" doesn't who understand? And WTF does this possibly have to do with whatever Black said about the PCAL?
7) A crony clause. This program must be run by people who are free of abusive conflicts of interest. To ensure this, the Treasury should require full financial disclosure for anyone hired to administer the program, and impose rules and a system to enforce a strict conflict code. Special note to Congress: John McCain personifies and embodies the crony system. Do not pass a bill that would give him, as president, unfettered control over how this program is run.
Another no-brainer. Another no-connection-with-Black-re-the-PCAL.
8) A modification and disposal clause. As foreclosures mount, Treasury will end up in control of physical properties, which degrade rapidly if not sold or rented and occupied. To prevent this, a new agency should be established to rapidly modify existing mortgage contracts, to manage rental conversions and to lease, sell or demolish vacated homes. This agency can be run as draft boards were in wartime, by citizens in each community under federal guidelines.
A very commonsense idea, and one that others made as well. Again, no connection with Black's statement re the PCAL.
I think the above is a very good demonstration of why Black is well worth listening to, even if he was wrong about the PCAL. Of course I would want to know if he is wrong and why, because one wants to know about people's fixations, blind spots, foibles, etc. But one does not want to throw out valuable sources of insight willy-nilly. One wants to be judicious, even when dealing with people one discovers to have given you bad information from time to time.
As Black and Galbraith said, "Trust But Verify." This actually came from Gorbachov before Reagan, btw. Please go ahead and verify. |
STATE BLOGS
