Daily Archives: October 16, 2009

Charles Krauthammer and Bill Schneider offer contrasting takes. Krauthammer as always makes some powerful points. His catalogue of Obama’s failures to date is correct, isn’t it? In particular, Russia’s lack of response to the administration’s multi-track overtures has received too little attention.

And what’s come from Obama’s single most dramatic foreign policy stroke — the sudden abrogation of missile defense arrangements with Poland and the Czech Republic that Russia had virulently opposed? For the East Europeans it was a crushing blow, a gratuitous restoration of Russian influence over a region that thought it had regained independence under American protection.

But maybe not gratuitous. Surely we got something in return for selling out our friends. Some brilliant secret trade-off to get strong Russian support for stopping Iran from going nuclear before it’s too late? Just wait and see, said administration officials, who then gleefully played up an oblique statement by President Dmitry Medvedev a week later as vindication of the missile defense betrayal.

The Russian statement was so equivocal that such a claim seemed a ridiculous stretch at the time. Well, Clinton went to Moscow this week to nail down the deal. What did she get?

“Russia Not Budging On Iran Sanctions: Clinton Unable to Sway Counterpart.” Such was The Washington Post headline’s succinct summary of the debacle.

You can make a better case than Krauthammer allows for changing the missile-shield policy, but the fact that Russia hasn’t budged on Iran is indeed a notable failure.

Krauthammer goes much further, of course, and says that calling Obama’s Nobel merely “premature” is absurd. He thinks we can already write off the administration’s whole approach. There he loses me. Such certainty, less than a year in, seems as daft as saying it’s all going great.

I think this FT leader is very good. First it says that public money underwrites the bonuses banks are getting ready to hand out. That is a familiar point but one that deserves to be emphasised. Then it puts its finger on something mentioned less often. These huge bonus pools are diverting funds that could be used to build capital, which the industry as a whole urgently needs to do.

The problem is not limited to the bonuses on which political debate has unhelpfully focused. It is widely agreed that variable pay must be designed to discourage risks to the economy. But current plans for regulating pay will not limit the total amount bankers extract from profits, which could instead be added to capital.

In principle, other planned regulation – strong insolvency regimes and risk-sensitive capital requirements – can limit banks’ profits from risks underwritten by others. But it will take years before these are credibly enforced.

Yes. At the present rate of progress, in fact, one wonders if they will ever be credibly enforced. In any event, regulation of the overall level of bankers’ pay, not just its design with respect to risk-taking, is evidently going to be needed–something I never expected to say.

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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