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November 2010 Archives

November 2, 2010

It Is What It Is--Skeel

I first heard this expression two years or so ago, when a poet friend in New York used it. It reminded me a little of Bill Clinton’s disquisition on the word “is,” and much more of a little poem by Galway Kinnell which managed to squeeze three “is’s” into a single three word line. (The poem, “Prayer,” I think in its entirety, is: “Whatever what/is is is/what I want. Only that. But that”)

I quite like the expression in small doses. Used once in a conversation, “It is what it is” seems to me to suggest a clear-eyed acceptance of complexity that doesn’t pretend that every difficulty has an easy solution. Used more than once in the same conversation, it quickly becomes annoying.

TARP Confusion--Skeel

One of the biggest punching bag this election season seems has been the $700 billion TARP legislation that Congress passed in fall 2008 to rescue the banks. Those who voted no have trumpeted this fact, and many of those who approved have said as little about it as possible.

There were indeed several major problems with TARP and its rollout. The first was that then-Treasury Secretary Henry Paulson stunned Congress when he told lawmakers, with almost no explanation, that the economy would crash unless they immediately handed over $700 billion. Indeed, some studies show that the shock of Paulson’s Congressional appearance was the single most unnerving moment of the fall 2008 crisis. The second problem is that the TARP funds, which were designated for “financial institutions,” were treated as an all-purpose kitty that Paulson and his successor Tim Geithner could use for purposes that Congress never intended, like bailing out Chrysler and GM.
 
But this doesn’t mean that pumping money into the banking system was a mistake.  In my view, rescuing individual firms like Bear Stearns or AIG is almost always a terrible idea.  But if the entire banking system is on the verge of paralysis, as it was in 2008, industry-wide intervention is necessary.

November 8, 2010

Last Week's Church-State Case--Skeel

For those who might be interested, here is a little column I wrote on an important new church-state case (Arizona Christian School Tuition Organization v. Winn) that was argued in the Supreme Court last week. One interesting dimension of the case that I wasn’t able to squeeze into the column was the Obama administration’s stance: the administration came out squarely in favor of the Arizona program, supporting it both in an amicus brief and at the argument. This put the administration on the opposite side as the teacher’s unions, suggesting that the administration is serious about school reform. This may be one of the issues on which President Obama may find common ground with Republicans in the wake of last week’s election results.

November 21, 2010

Christ's Parables and Bank CEOs--Skeel

I’m just back from a wonderful visit to Liberty University’s law school, where I gave a talk called “Making Sense of the New Financial Deal.” (I also had a chance to spend several hours in the Jerry Falwell archives). The talk was based on the book I wrote this summer (due out any day now), and in addition tried to consider some of the Christian implications of the crisis and financial reforms.  

One of the sources I used for the last part of the talk was Christianity and the Social Gospel, a 1907 book by Walter Rauschenbusch, the most famous representative of the social gospel.   In critiquing the heads of the giant corporations of his own day, Rauschenbusch drew on Christ’s servant parables:
 
“In the parables of the talents and the pounds [Matthew 25:14-30; Luke 19:11-27], he evidently meant to define all human ability and opportunity as a trust. His description of the head servant who is made confident by the continued absence of his master, tyrannizes over his subordinates, and fattens his paunch on his master’s property [Matthew 25: 45-51], is meant to show the temptation which besets all in authority to forget the responsibility that goes with power. …”
 
Like the servants in the parable, Rauschenbusch argues, the head of a large corporation (such as, in our context, the CEO of a financial institution like Bear Stearns or Lehman Brothers) is a steward of the enterprise he oversees and bears the responsibility of a steward.
 
I find the connection Rauschenbusch draws between the servant parables and the heads of corporate enterprise quite compelling. And it strikes me as a very useful framework for thinking about the failures of the CEOs of the largest financial institutions that contributed to the recent crisis.
 
In my view, Rauschenbusch’s analysis also offers a useful illustration of the extent to which Scripture gives us clear and at times uncontestable teaching on a political or social issue, on the one hand, and the extent to which the implications are less clear, on the other. Based on his analysis of the servant parables, Rauschenbusch makes an argument for nationalization of many large corporations. While his conclusion that the parables offer a telling critic of poor business leadership (and suggest what true servant leadership would look like) is persuasive, the policy implications he draws from this are much more debatable. In my view, Rauschenbusch’s call for nationalization would correct for the abuses of corporate leaders by inviting comparable abuses by government overseers of the big businesses. At least in the current environment, a more modest strategy of correcting regulation that encouraged misbehavior by bank executives (such as tax rules that abetted risktaking) seems more promising.
 
Like Rauschenbusch’s, my policy conclusion is of course debatable. I would argue that the critique of corporate leadership that flows from the servant parables is not.

November 24, 2010

Should States be Allowed to File for Bankruptcy?--Skeel

The next big bailout issue in the U.S. is likely to be the question whether to provide rescue financing for states like California and Illinois that are running huge deficits.  I make an argument for adopting a bankruptcy chapter for states, similar to the provisions we already have for municipalities, in this little magazine article.  In my view, bankruptcy wouldn't be a perfect solution, but it is likely to be a lot better than the current alternatives (such as a federal rescue or simply watching California default).