Greenspan's Folly and Borenstein's Law

On October 23, former Fed chair Alan Greenspan testified before Congress, trying to explain how he blew it, failed to anticipate the current economic tragedy, and in fact, had fashioned policies and theories that led to it.

According to the AP, Greenspan, 82, acknowledged under questioning that he had made a "mistake" in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. Greenspan called that "a flaw in the model ... that defines how the world works."

DUH!

Greenspan's error was that he failed to read Intro to Borenstein's Law.

In June, 2005, I was trying to explain why our criminal clients act in ways that are often ascribed to stupidity. I pointed out that intelligence and education was an unreliable barrier to risky behavior.

As I explained, people (not just our clients) act contrary to their best interests so often that it can be called the norm, not an aberration.

In fact, supposedly smart people (like Bill Clinton and Dick Nixon) commit reckless acts that satisfy immediate urges without considering the consequences.

The drive for sex, money, power and other elemental desires often overwhelms caution, reason, or religious teachings (uh, abusing priests ... q.e.d.).

Greenspan's presumption that bankers would be restrained by their sense of financial responsibility because it was in their own self-interest to do so is naive, reflecting a misunderstanding of history and law.

Supposed conservatives recognize the wisdom of restraints on government and individuals imposed by the Constitution and criminal laws. Yet, they also urge limiting restraints on the so-called Free Market, assuming that the inherent structure of the marketplace will suffice.

Smart people like Alan Greenspan thus draw risky conclusions about human behavior --- not too different from the kinds of decisions our dumb criminal clients make, like assuming that their homies won't snitch them off when cornered by the cops.

Here Lies My Generation (1968-2008) R.I.P.

To use an old "Ghostbusters" phrase, the streams of crime and politics crossed this week with nearly cataclysmic results.

In Pennsylvania, a young white woman who claimed to be a McCain worker played a nasty race card, trying in her sadly psychotic way to "work" for her candidate. Conspiracy theorists didn’t need to sound paranoid to question whether she was a designated "suicide bomber" for her cause rather than a weird sick kid acting alone. Certainly, it can be reasonably argued that in the least, she was inspired to her crime by the panicky rhetoric of her candidate’s supporters.

Maybe I’m a bit paranoid to suggest that a shiver goes up my spine imagining what would have happened if the cops believed her story and if she had picked some black man from a line-up, but I don’t think so. I’ve seen too many such cases end up with long prison sentences.

It didn’t take Nostradamus to foresee that Barack Obama’s presence would stir thousands of ugly and dangerous vermin to rise from the substrata where they hibernate. Such creatures thrive during hard times. Economic distress releases forces that drift on the air, demanding scapegoats for the coming bloodlust. It is possible to read too much into the shouts of "terrorist," "socialist," and "kill him" that have been heard on the fringes of crowds or in blogs. But the law doesn’t think so. It is a crime in California and most states to threaten death or injury even if there is no intent to actually carrying it out if the person threatened can be said to be reasonably placed in fear. (Penal Code section 422).

Campaigns of the recent past haven’t stirred such juices on any side. I haven’t seen this much emotion since 1968, and I think I know why.

The screams are the death rattle of a generation, at least the half of the generation that fought the central wars of the last half of the 20th Century from the Right.

The Cold War, The Civil Rights struggle, and The Viet-Nam War each revealed (or caused or exacerbated) traditional cultural divisions in our country. Most people aligned themselves on the same side of all three issues. If you were anti-communist, you were against "radical" solutions for racial equality, and certainly against terminating the Viet-Nam War without "victory" and "honor".

If you favored rapprochement with the Soviets and opposed support for dictators, even if anti-communist, the odds were that you supported civil rights and liberties, and also, you protested and opposed the Viet-Nam War.

All of the ancillary battles of the era generally found the same alignment. Your attitudes about The War also predicted your feelings about women, gays, immigrants, crime, welfare, drugs, abortion, and often seeped into many other tangential cultural issues, including parenting, religion, education, rock music, fashion, entertainment, movies.

Of course, race was the initiating wedge issue. Nixon's southern strategy of 1968 and 1972 was premised on the South's resistance to racial progress, and bled into every other cultural issue we live with today.

The cultural divisions were so bitter that they colored every election since until each side was polarized, manipulated by hot button wedge issues. Throughout the next thirty years, the generation was split down the middle on virtually every issue and presidential candidate. The more or less permanent 45% to 45% permanent split reflected in divided government for most of the time, with the "swing" 10% of "independent" voters in a few states becoming the deciding vote, sometimes tweaked by third party nuisance candidates (like Perot and Nader).

George W. Bush’s pitifully flawed presidency with its disastrous policies and incompetence has caused severe mental depression for the aging pro Viet-Nam half of the generation. They are almost too old to have the energy to fight back this time. Katrina, Iraq Cheney, Gonzales, Rumsfeld, Libby, and all the other blows have taken most of the fight out of them.

This happened to the Left after Carter’s debacle laced presidency, with oil crises, inflation, high crime rates, the Iran embarrassment, leading to Reagan "democrats" crawling to the right, until redeemed by a triangulating centrist, Bill Clinton, who cruised barely left of center, co-opting some previously divisive issues by conceding them (welfare, fiscal restraint, crime).

The Crash of 2008 is the final crushing skull exploding blow to the other half of my generation. They must now go hat in hand and beg BIG GOVERNMENT to save them so that they can crawl away into retirement.

Yet, I see a weird, almost tragic irony to McCain’s status. He reminds me a bit of Hubert Humphrey, a man with a reputation for decency, a pioneer of civil rights, who found himself running in 1968 as the supporter of the war despised by his own party. He became an object of ridicule, an anachronism on the wrong side of generational shifts.

But John McCain is no Hubert Humphry. He is psychologically incapable of disassociating himself from his side of the '60's generation struggle. He remans a prisoner of war.

McCain sees "victory in Iraq" as a way to disprove the truth of Viet-Nam, to justify his life. He represents the last gasp of his frustrated and terrified lost generation. That is why, for all his obvious deficiencies as a perfect candidate, for these unreconstructed survivors of the "Silent Majority" of the 60's and 70's, he is the appropriate symbol.

Then again, maybe this election is also the last best hope for my side of the generation war as well. Obama seems like JFK reborn for many of us, and maybe it is wishful thinking. But we haven't got too much time left to wish or to dream impossible dreams. One last gasp of optimism is all we have. So we're going all in this time.