Lunchtime Reading

Judge Revokes Bail in Vast Fraud Case

By DIANA B. HENRIQUES and JACK HEALY 8 minutes ago

Bernard L. Madoff, who pleaded guilty Thursday to all the charges against him and expressed remorse for a vast Ponzi scheme, was sent to jail to await sentencing. ...

atrios screams LEAVE BERNIE MADOFF ALOOOOOOOOOONE

Life in prison is tough, something our press discovers any time a rich white guy pays a visit.

March 12 (Bloomberg) -- Bernard Madoff, scheduled to plead guilty today to masterminding the largest Ponzi scheme in history, may have to fight off prison inmates who want to squeeze him for money or blame him for the Wall Street crash. “Madoff isn’t going to be real popular,” said Larry Levine, who served 10 years in federal prisons for securities fraud and narcotics trafficking and now advises convicts on surviving time behind bars. “All the guys there will have wives or parents who are losing their homes or their jobs or who can’t send money to them anymore. Everybody’s going to be blaming Bernie.”

Benen on SOCIAL ENGINEERING....

For at least a few decades, conservatives had a name for the progressive desire to use the power of the state to shape and improve people's daily lives: social engineering. It wasn't a compliment.

Social engineering is predicated on the idea that the power of the state can alter how people can and will behave. It's generally considered anathema for anyone who values "limited" government. What's more, given President Obama's ambitious domestic policy agenda, the phrase seems to be popular with the right again. Just last night, Bill O'Reilly complained about "all this social engineering Barack Obama is promoting." Newsweek's Howard Fineman said the White House's "spending on social engineering" is upsetting the political establishment.

I thought about all of these complaints when I saw this report about a speech Newt Gingrich gave in Michigan earlier this week.

Former U.S. Speaker of the House Newt Gingrich arrived to tour the Henry Ford West Bloomfield Hospital at 3 p.m. today -- a facility he heard about in a speech two years ago and wanted to visit after meeting with state lawmakers about the state of healthcare earlier this morning in Lansing. [...]

The Republican told state senators Wednesday he supports paying poor children to read and the state should consider paying girls to not get pregnant. And for the teenage girls who are pregnant, they should be paid to take prenatal vitamins and stay healthy so the government avoids expensive costs when babies end up in neonatal intensive care units.

Putting aside the merit of Gingrich's ideas, I find his recommendations rather ironic. On the one hand, Republicans believe Obama is spending too much on an agenda that promotes social engineering. On the other hand, Gingrich, who is advising congressional Republicans, believes we should use tax dollars to influence children's reading habits and teenagers' sexual habits.

Isn't this textbook social engineering?

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Ezra Klein says it's the DEBTS, NOT ASSETS.

Matt Ygesias reads the Wall Street Journal talking about "distressed assets" and offers a clear explanation of one of the under-discussed facets of the banking problem. Namely, that the banks are being crushed under the weight of loans backed with distressed assets, not assets. The problem is not what the banks have. It's what they owe:

I’m increasingly frustrated with the conventions in which this idea is discussed in public. I think an ordinary person reading that sentence would think that the problem with Citi is that some of its assets are somehow “distressed” or “toxic” in a way that’s causing a problem for the rest of the bank. Take the toxicity off its hands, and the rest can go merrily about its way. But that’s not right. We can argue ’till the cows come home as to what the assets in question are “really” worth, but at a minimum they’re worth $0. And in practice they’re sure to be worth more than $0.

Assets with a positive value can’t be a problem for a company. A company gets into trouble because of its debts. Citi’s problem isn’t that it has toxic assets, it’s that it made loans backed with toxic assets. You don’t rescue banks by “tak[ing] distressed assets off the balance sheet of Citigroup or other troubled financial institutions.” The problem isn’t the assets, it’s the debts. You can deal with the problem by giving the banks vast sums of money in exchange for their toxic assets but in this case what’s solved the problem isn’t that the assets came off the balance sheet, it’s that the money you gave them got on the balance sheet. Alternatively, you can create a government-owned bad bank that owns the bad assets and assumes responsibility for much of the debt. In either case, though, the key element of the rescue is expenditure of taxpayer funds to service the debts, not anything that’s being done with the assets.

Yglesias: Political Science and Political Journalism

Via Henry Farrell, Matt Bai comments briefly on political journalists’ view of political scientists:

Generally speaking, political writers don’t think so much of political scientists, either, mostly because anyone who has ever actually worked in or covered politics can tell you that, whatever else it may be, a science isn’t one of them. Politics is, after all, the business of humans attempting to triumph over their own disorder, insecurity, competitiveness, arrogance, and infidelity; make all the equations you want, but a lot of politics is simply tactile and visual, rather than empirical. My dinnertime conversation with three Iowans may not add up to a reliable portrait of the national consensus, but it’s often more illuminating than the dissertations of academics whose idea of seeing America is a trip to the local Bed, Bath & Beyond.

I think this kind of attitude is not universally shared, and generally leads to bad political journalism. I think it’s obvious to anyone who thinks about it that the features of journalism—original reporting, first-hand conversations, speed, granularity—allow it to push the frontiers of our understanding beyond what rigorous political science could possible do. At the same time, it’s just incredibly foolish to go about doing the work of journalism about politics devoid of any broader theoretical or empirical foundations provided by political science.

The events of the day play out against a larger structural backdrop. And it’s just not possible to try to understand them a-theoretically. What journalists unschooled in political science tend to do is to substitute prejudice for understanding. So you notice that in Maryland and Virginia there are a lot of well-to-do Democrats and start writing stories which presuppose that poor people are generally Republicans and rich people are generally Democrats. An alternative approach would be to read Andrew Gelman’s book and you’d see that this is an idiosyncratic feature of a small portion of the country and that, overall, high income is a strong predictor of Republican voting.

Reading Gelman’s book isn’t a substitute for interviewing people or trying to understand campaign strategies. But it provides you with an accurate understanding of the larger context in which to situate those interviews. If you don’t read it, you won’t understand your reporting properly.