• In Web Age, Library Job Gets Update (NYT, 2.16.09) Explains how school librarians do more than just manage the library’s physical collection.
• The No Stats All-Star (NYT, 2.15.09) Details Shane Battier’s almost astonishing value-added, and the Houston Rockets’ approach to valuing players.
• Being There (NYT, 2.15.09) A look at the art – if it can be called that – of Facebook status updates.
• In Gingrich Mold, a New Voice for G.O.P. Resistance (NYT, 2.15.09) Eric Cantor is the force behind the House Republicans’ strategy and tactics under the new Administration.
• Do We Need a New Internet? (NYT, 2.15.09) A not-too-long piece about the possibility of a new internet that increases security, in part by restricting access.
• The End of Alone (Boston Globe, 2.8.09) A think-piece on the benefit – and difficulty – of disconnecting in an increasingly connected world. [DAP to the great Arts & Letters Daily website.]
• How to Save Your Newspaper (Time, 2.5.09) An interesting – but I think flawed – idea about micro-charging for newspapers and articles, trying to build on the iTunes model.
• The Big Fix (NYT, 2.1.09) David Leonhardt’s excellent long piece on the immediate and long-term economic challenges facing President Obama. [Leonhardt is the one Times columnist that I read every single time he writes. He's eminently reasonable, and makes economics readable for non-economists.]
• Kitchen Savant (GQ, February 2009) Interesting long piece on Chicago chef Michael Carlson, his big night in October 2007, and his journey since.
• Can Larry Summers Save the Economy? (Time, 1.29.09) Examines Obama’s powerful economic advisor, and how he sees the economic recovery.
• Inside an Afghan Battle Gone Wrong (Thomas Ricks’ blog, 1.28.09 – 2.2.09) An absolutely superb series of posts from the Washington Post‘s top defense reporter looking into a particularly disastrous battle in Afghanistan. [Ricks also wrote Fiasco, which is a truly great book about the military in Iraq from 2003-2005. I've yet to read his new one - The Gamble - but I can imagine it's equally excellent.]
• Bush’s finest moment on Iraq: SOFA, not the Surge (Marc Lynch’s blog, 1.18.09) A compelling argument which makes the case implied in the post’s title.
• A Higher Calling (NYT, 12.21.08 ) Long piece on Philip Seymour Hoffman. A must-read.
• Rhee Tackles Classroom Challenge (Time, 11.26.08 ) A look at DC Chancellor of Education Michelle Rhee and the debate over education reform.

You’ll notice that most of these are from the New York Times. That’s the main reason I subscribe: the journalism is great, and I thoroughly enjoy reading it. Most of the longer pieces come from the Times Sunday Magazine, which is always worth perusing.

• I will re-connect with the Body of Christ. 2008 was a year of spiritual apathy for me. I didn’t go to church very regularly. I didn’t spent much time in the Word. My prayer life was an exercise in going through the motions. I just wasn’t engaged. But in those rare instances when I was engaged, I was reminded of what a blessing – and a necessity – it is to be connected to the Body of Christ. I need to get back to that, starting with going to church on a more consistent basis.
• I will spend less time on TV/internet, and more time engaging in ‘real-world’ activities. I’ve developed some pretty bad TV and internet habits. Namely, I spend most of my time using these two media. And most of the time, I’m just randomly channel or website surfing. And I continually (I mean at a pretty embarrassing frequency) check the same handful of websites. This means less time to do other things that are much more fulfilling: spending quality relationship-building time with my wife, reading, going out with friends, exercising, playing guitar, etc. Practically, this means I will try to only watch TV when I plan to watch a specific show and use the internet – and visit the same handful of websites – less frequently. And I’ll use the spare time to do the things that are more fulfilling.
• I will exercise at least twice-per-week. This includes both cardio and weights, over 30 minutes each session. I’m probably setting the bar a bit low here, but I’d be kidding myself if I aimed for more than this to start with. I’m a believer in the Dr. Leo Marvin approach. And who knows, maybe I’ll build up to more by the end of the year.
• I will eat less overall, but more real food.  My diet right now is pretty bad. I eat more tortilla chips, pizza, ice cream, and PBJ than I care to admit. There’s nothing wrong with these things in moderation, but I’m beyond moderation. Oh, and I drink too much coffee. Way too much. And I just take in too much food. So, I’m going to try to simply eat less food. And the food that I do eat will be healthier for me.
• I will give more and consume less. I’m a consumer. I eat a lot. I pine after gadgets a lot (and often buy them eventually). This costs a lot of money, which in turn means less money is available for giving. That’s not to say that my wife and I don’t give. We do. We are just much less intentional about it than we should be. So I’m going to spend less time seeking out the latest-and-greatest gadgets (I already have a Kindle and an iPod touch anyway), and try really, really hard to buy only those things that I need. We don’t have much space for extra stuff in our place, anyway. And my wife and I will sit down and choose some ways that we can be more intentional – and hopefully more generous – in our giving.
• I will put things in their place right away. It’s just easier. And it will make my wife happy. And our house can start to look like a worthy candidate for Clean Sweep at times.

I could definitely make a longer list, but (a) you would probably get bored and (b) I’ve done huge, vague lists in the past without much success. Feel free to leave any of your 2009 resolutions in the comments.

Happy New Year!

• Marginal Revolution: Is a Potential Bailout Making Things Worse?
• Marginal Revolution: Where is the Credit Crisis?
• Anne O. Krueger: Why We Need to Act Now
• Three Economists in the WSJ: Let’s Get the Bank Rescue Right
• Greg Mankiw: A Defense of the Paulson Plan
• Megan McArdle: Why we need a bailout, even if not this bailout
• Megan McArdle: What I think about the bailout plans
• Megan McArdle: How do we know something bad is going to happen?

If you’re interested in some of my (once again long) thoughts, they’re below. (NB: I haven’t read all of the above articles/posts, so my views may change)

(NB: I probably rely too heavily on the New York Times for my news and analysis, but I find its writers/columnists to be making a good deal of sense)

Joe Nocera has a very worrisome column in todays New York Times (it’s worth reading the whole thing). In it he argues that lawmakers have very little time – not much beyond the time the markets open on Monday, he says -  to reach a compromise on a bailout plan before the market goes into serious panic mode and free falls.

On Thursday [9/25], investment-grade loans were trading lower than junk bonds, because investors were selling off their most liquid assets to raise capital. Wachovia, the nation’s fifth-largest bank holding company, suddenly appeared to be in deep trouble: “Wachovia is trading as if it’s going to fail,” Dave Klein, a manager at Credit Derivatives Research, said on Friday. Washington Mutual was seized by the government. The markets may not be as panicked as they were last week, but with every passing day, the situation is getting increasingly dangerous.

Or, to put it another way, with every passing day, Congress is fiddling while Rome is burning.

Last week, I wrote a column suggesting that the Paulson plan was unlikely to fix the enormous problems facing the financial markets and the country’s faltering economy. I am still not sure it will work — or that it is the best possible solution — but this week, I have a different, more urgent concern.

Whatever its imperfections — and despite the possibility it might not work — it needs to be approved, quickly. I’m praying that by the time the markets open on Monday, Congressional leaders will have reached a consensus on the bailout plan. We’re running out of time.

Later in the column he writes:

 

Henry Paulson is not what you’d call a socialist — nor is Ben Bernanke or President Bush. They are all holding their noses as they sell this plan. Barney Frank is allied with Mr. Paulson and a president he holds in low esteem because he, too, believes this is a step the country has to take.

And so do the markets themselves, which is the most important point of all. Psychology always drives market behavior, and right now, the markets are desperately clinging to the idea that the Paulson plan is the only hope of regaining the confidence of borrowers, lenders and investors. Politics is politics, but the markets are not going to wait forever for a deal to be struck. In fact, I don’t think they are going to wait much past the weekend. No deal, no credit markets. It’s as basic as that.

 

From all I’ve been reading/hearing over the last few days, this column rings true – I don’t think the markets are in any mood for delay on the plan.

And, to my mind, that’s what makes these bailout negotiations so difficult. Our lawmakers have an enormous challenge – both economic and political – facing them. They need to act quickly, but they also need to act responsibly with taxpayer money. Further, many of our lawmakers are generalists unprepared to delve deeply into such a complex issue (neither am I, by the way). For all the criticisms of inserting partisan politics into the bailout negotiations (some of which are justified, I think), these lawmakers really do seem to be giving the issue some thought and putting in a good faith effort to do something reasonable and responsible.

The worrisome thing is that the bailout may work, but there’s also a chance that it may not. This may lead some to question whether we should offer the bailout at all. Unfortunately, from my rather limited perspective, I’m not sure I want to risk a broad financial/credit crisis in this country to find out whether the market can correct itself in this instance. The people who operate within the market are too skittish to test the market’s mettle at this point. Unfortunately, we seem to be beyond the point at which the market can handle this mess without an infusion of US taxpayer dollars.

As I wrote earlier, I tend to think agree with David Leonhardt and others who argue in favor of the government getting an equity stake in firms that participate in the bailout. As Leonhardt wrote on the Economix blog:

I urged the government [in my 9/24 column] to take ownership stakes in companies from which it buys distressed assets. (I don’t think the government necessarily needs to do this in every case -– flexibility is going to be important here -– but Treasury Secretary Henry M. Paulson Jr. has sounded downright hostile to the idea on Capitol Hill.) Why does this seem like a good idea? There’s a lot of uncertainty about the value of these assets right now, which is why so few banks are willing to buy them from other banks. And as Professor Mankiw wrote in another recent post, “one has to be at least a bit skeptical about the idea that government policy makers gambling with other people’s money are better at judging the value of complex financial instruments than are private investors gambling with their own.”

By taking an ownership stake in the firms, the government can minimize the consequences of overpaying for the assets. It would own a piece of the very company that was benefited from the overpayment.

Professor Mankiw’s friend argued that if the government demanded an ownership stake in the companies, it would have to pay a higher price for the assets than it otherwise would. I don’t disagree with this. But it will also be getting something in return for that higher price – an ownership stake that diversifies its risks. That seems like a potentially worthwhile trade-off.

Like I said, I tend to agree with this logic. If we underpay for the bad securities, firms aren’t going to get the capital they need, and the market will likely react negatively. If we overpay without getting equity in firms, we’re essentially subsidizing these firms that have made bad decisions. This way, at least to my mind, we have a better shot at breaking even (or even making money) with taxpayer dollars. That said, I also think it behooves Congress to roll out the funds in tranches, rather than one big lump sum up front.

Alright, enough yammering. Once again, just some thoughts on an issue that seems almost intractable.

Yesterday, I encountered such a paragraph in a review of “Nights In Rodanthe” by Manohla Dargis:

It’s no wonder the faithful continue to forsake the movies, given junky embarrassments like “Nights in Rodanthe.” There’s no joy and not even much cruel laughter to be had from the spectacle of sympathetic actors — Richard Gere,Diane Lane, Viola Davis, James Franco — mouthing some of the most pitiful, platitudinous, risible dialogue in recent memory, particularly if you were suckered into watching this movie specifically because of its performers. Even those with a high tolerance for melodramatic drivel, who have stuck by Sandra Bullockthrough thick, thin and her changing smile, or found themselves sniffling at “The Notebook” yet again because, well, Ryan Gosling and Rachel McAdams should be together, will find “Rodanthe” insulting, an assault on their already perilously weakened romantic hearts.

Wow. Game, set, and match. Remind me to avoid Ms. Dargis’ acid pen.

My wife and I may eventually watch (and will likely enjoy) this movie. Nevertheless, one has to appreciate Ms. Dargis’ ability to concisely – but completely – eviscerate her subject.

The powers that be (Dwight) try to convince the taxpayers (Andy) of the need to act quickly on risky assets (the Xterra).

If we’re drawing parallels, it’s heartening that Dwight ultimately flips the Xterra for a profit.

Update: The Office episode “Money” contains too many salient quotes to count.

Here’s the text of the exchange in the clip, via OfficeQuotes.net:

Dwight: [kicks the car] Unh! Scratch.
Andy: That’s a racing stripe.
Dwight: Uh, bumper’s sagging.
Andy: Mmm, I doubt that very much.
Dwight: This car’s crap. I will buy it for next to nothing.
Andy: How next to?
Dwight: Well, here are your options: you can sell it for parts, drive it off a cliff… you can donate it to a person that you’d like to see die in a car crash, or, you can sell it to me, and I’ll use it as I would a wagon on my farm. It will be towed by a donkey.
Andy: I have to pick one of those?
Dwight: Yes.
Andy: Can you go over those options again?
Dwight: You know what? You knock $1500 of the price right now, and I will take it off your hands. It’s gotta be now.
Andy: Well I have the, the blue book value…
Dwight: Seal the deal. Let’s do it. Let’s do this thing. Three, two, one–
Andy: Can I think about it?
Dwight: Five, four, three, two…
Andy: Let me think about it–
Dwight: Now. Now. Now.
Andy: Let me think about it–
Dwight: Say it. Do it. Now.
Andy: I’m thinking about it–
Dwight: Do it now.
Andy: Thinking–
Dwight: Do it. Shake my hand. You will sell me this car. Shake my hand.
Andy: Yeah. All right!

Just a note: I’ve been reading a lot about this stuff on Marginal Revolution, Megan McCardle, Matthew Yglesias, and Paul Krugman lately. Not to mention David Leonhardt, among others, at the New York Times. They make a lot of good arguments, and some not so good. Nevertheless, they’ve put out some very timely, comprehensible analysis.

–

I agree that this is an opportunity for the market to correct itself, probably with some ruthless results. One of the things that I think has gotten a bit lost in this whole ordeal is that it takes a lender and a borrower to engage in bad lending practice. By this I mean that individuals had to make poor decisions in accepting ARMs, et. al. for which they had no realistic shot of paying over the long term. That’s not to say that large financial firms aren’t culpable – they are. They should have known that by offering these questionable debt instruments, then chopping them up and sending them to market, they were (1) abusing their position of holding the keys to the American dream and (2) putting their faith in some pretty shaky “assets”.

Fundamentally, I think this is a crisis driven by the American psyche, both in terms of the American dream and Americans’ spending/debt habits. For generations, the American dream has been to own property. This is not intrinsically a bad thing. In fact, it’s a good thing when a person and her/his family has property to call their own. We also live in a society in which credit is king. This is also not intrinsically bad. I’m really glad that I got a loan from my bank to get a car a year ago. When approached and used properly (ie, when it’s not going to break the budget), credit is a very useful financing tool.

The problem comes when one relies too much on credit, or uses credit in financially unhealthy ways, as I believe our society does, on the whole. It’s easy to justify purchases if the credit is available, even if a person can’t afford it; I’ve been there. When one mixes the American dream of owning property with an unhealthy reliance on credit, it becomes a recipe for the financial crisis we’re currently in. People were so interested in achieving the American dream that they were willing to forgo financial prudence and go for the dream. It was short term “gain” without a whole lot of thought to the long term consequences. Again, part of this is attributable to what was surely “predatory” lending in the sense that lenders, knowing their borrowers would probably be unable to keep up if rates went up, still encouraged borrowers to buy the house or re-finance the mortgage. Irresponsible lenders should be held accountable.

So this is where the bailout comes in. How does the US Government responsibly stabilize the financial system in such a way that changes the incentive structure toward safer, better decision making and lending while at the same time protecting ordinary Americans and holding those whose firms have engaged in detrimental, irresponsible practices? All that without stifling the financial innovation that drives the market forward and satisfies the growing international capital market. This is a tall order.

For my money (pardon the pun), if the government is going to bail out financial institutions with taxpayer money, it should get an equity stake in those financial institutions. If not, the government is just buying up risky assets, likely for prices well above market value, without much incentive for the bailed out firms to shape up and without much promise for positive returns on those assets. (Paul Krugman has been making a lot of sense all week – krugman.blogs.nytimes.com). Yes, this smacks of socialism, but I think you have to get the incentives right in order for the system to be fundamentally changed. I’m glad to see that there seems to have been some oversight added to the bill – the first iteration was astonishing in its request that we, the American public, just trust the Treasury Secretary, whoever s/he may be, that s/he knows best. It may also be worthwhile to give the Treasury Department a first tranche of funds, with the understanding that more will be available if they’re needed. This crisis may not cost $700 billion all else being equal, but if you make that much available, there’s a good chance the Government will spend it. The Government shouldn’t be rewarding firms who made the bad decisions that put us here.

Unfortunately, this still leaves unresolved the question of how to help people who are genuinely struggling. Frankly, I don’t know the answer. I’m not sure that’s what this bailout should be asked to do. Further, I think borrowers should be held accountable for bad borrowing decisions to some extent. Perhaps this is built into the idea of banks working to refinance homes/mortgages based on their fair market value – borrowers would certainly lose money in that case. I also think there’s some merit in the idea of a second stimulus package (although this just throws into sharper relief the notion that continued or additional tax cuts and government spending in other areas are becoming nearly untenable if we want to improve fiscal stability).

Perhaps the best thing about this crisis, if it can be put that way, is that Americans are (or should be) reexamining their financial habits. Perhaps this crisis will cause some to give a second thought to whether they can afford the new house, even though prices are currently low. Then again, if this bill goes through without much additional scrutiny and thoughtfulness, we may end up in the same place about 10 years from now, with nobody any the wiser and many people economically worse off.

DAP: Marginal Revolution