Daily Archives: November 6, 2009

A lot of the post-election commentary has been entertaining, if not very enlightening. To any disinterested observer,  the Republicans had a good day on the whole last Tuesday. Not an unalloyed success, bearing in mind the self-inflicted wound in New York, but looking at New Jersey and Virginia, a pretty good day. So the question was how this good result for the Republicans was going to be turned into a bad result, or a result of no significance either way.

Eric Alterman explains “why Democrats are smiling“. Sort of explains.

While the Democratic brand is obviously not what it was when so many of us were brought to tears a year ago by that beautiful scene in Grant Park, Republicans are on the verge of civil war. The sure-to be-a loser side appears to have all the soldiers and the reasonable-sounding side, and the one that can win, appears to have well, not much going on. The Republicans’ suicide will be anything but painless if this keeps up—and it will, if only to continue to juice Fox’s ratings.

Well, as you can see, the piece is not a model of clarity. I’ve read that second sentence four or five times and I’m still not sure what it means. (Didn’t the reasonable-sounding side that can win, in fact, just do so? Can you win and still have “not much going on”? What else apart from winning do you really need to have going on?) But over the course of the article it does emerge that Alterman sincerely believes the Democrats have cause to celebrate Tuesday’s results. Well done!

Gail Collins in the NYT also deserves special mention, I think. She is not alone in believing that the elections were meaningless, but she gets extra credit for regarding their meaninglessness as so self-evident that she does not have to establish the point. She can just celebrate it, by lampooning the view that elections convey any information whatever. Love that title: “Hark! The Voters Speak!” What delicious irony. How we laughed. As though any such thing could happen in an election.

Even Charlie Cook, doyen of poll-gazers and a reliably informative commentator, comes off a little blase in this piece for National Journal. He says Tuesday did not tell us anything we didn’t already know. (Maybe he meant anything he didn’t already know.) We already knew that independents were turning in droves against the Democratic party. We already knew that Jon Corzine was so unpopular he would lose even to a divided opposition. We already knew that a staunchly conservative Republican could win a purple state by a big margin if he “projects a moderate, mainstream, nonthreatening, tolerant image”. Did we really know all those things? If I were a Republican, I’d still be pleased to have them confirmed, and if I were a Democrat I definitely wouldn’t be smiling.

My new column for National Journal agrees with the Fed that bankers’ pay needs to be supervised, but warns that by itself this will do little to improve financial safety.

The pay changes that the Fed proposes are worth making, but by themselves are insufficient. Other regulatory reforms in the works would do more to promote safety — and, indirectly, curb the excesses of Wall Street pay at the same time. Regulators are proposing to increase the capital that banks and other financial firms are required to set aside against the risk of loans or other assets going bad. They are also considering new rules on leverage (the amount of borrowing a firm can do as a multiple of its equity) and liquidity (the amount of easily salable assets it must hold). A financial institution with more capital, less leverage, and more liquidity would be a safer operation — and a less profitable one.

In thinking about future financial regulation, that is the fundamental trade-off. Taxpayers have learned that Wall Street’s profits, and the fabulous pay that went along with them, have come partly at their expense. In effect, the industry has enjoyed a disguised public subsidy, in the form of a promise to underwrite its losses when things go wrong. Heads we win, tails you — the taxpayer — lose. In demanding a safer financial industry, as we should, we will be withdrawing that subsidy and thus insisting on a somewhat smaller and less profitable industry as well.

This, in turn, will mean less-outlandish pay. Shareholders in banks and Wall Street firms have given their employees a very generous deal in recent years — far better than they have had themselves — handing over about half of their revenues in pay. If finance shrinks, pay in finance will shrink. Reviewing the wreckage of the past two years, both of those things look eminently desirable.

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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