Monday, April 19, 2010
Bad Reporting, Good Analysis, Vampire Squids
At The Awl, Choire Sicha coolly dissects the opaque and unsatisfying and overblown coverage of The Great Goldman-Sachs Lawsuit of 2010. Which is really looking more and more like a pretty minor deal despite coverage insisting -- to people like my dad, who is keen as hell to hear as much -- that this is finally a chance to "get the bastards" or whatever. But yeah, perspective is awesome:
And this piece of financial analysis is entirely coverage of perception. It is similar to the current role of the Times in covering actual politics; the paper reports on policies and initiatives by political leaders but renders their decisions in terms of quests for "political capital," that terrible meaningless and misused phrase so beloved of the Bushes, or in terms of the reaction of the "political audience." This is a very mistaken position regarding the importance of the public—and a cynical one, too, as it chalks up all actions by politicians or bankers to a wish to court the public, instead of, you know, a wish to actually do something.
Again, it's shocking sometimes how difficult/impossible it is to talk about this stuff coherently. I want very badly to be informed about this -- at least to the extent that I can before my brain overloads or math is required -- and I'm finding it very difficult. One thing that keeps jumping out at me about the many bad news stories on this bit of bad-acting, though, goes back to Thomas Frank's point about the essential fallacy of the market-populist idea of the Little Guy Investor struggling against Big Bad Banks. As Choire points out, "investors" are the guys the NYT (among others) have routinely and erroneously identified as the victims of this sort of malfeasance, as if the shameful, scammy re-tranched mortgage-backed securities at issue in this story could somehow have been a part of your 401k. This is much bigger than that, and the old "Perfect Market Ruined For All Us Investors By Imperfect People" narrative, popular though it may be, doesn't work here. This is, effectively, its own market, and deserves its own built-from-scratch framework when it comes to understanding it.
What ruined the system were huge inter-bank deals and unconscionable levels of leverage -- unregulated (still!) and untoward, to be sure, but possessed of an impact in re: your 401k or savings rate only insofar as they cause damage to the broader banking and financial system in which some of us are (laughably) minor participants. This is the same broader system, by the way, that all 41 Senate Republicans have sworn NOT to reform, because it would lead to "bailout after bailout." Which I'm sorry but just doesn't make any fucking sense at all, Senator Mitch McConnell. But which is also sort of telling.
Because no one has adequately explained this admittedly very complicated thing that happened -- and because our money-sodden politics is so dependent on the largesse of the offenders as to disincentivize any political action (hearings?) that might allow the public to better understand all this -- our national discourse on it is essentially nonsense. We're left with a few ugly and unpopular words -- subprime, bailout, credit-default swap -- that can be used however and however cynically one wants. The more meaningless the (mis)use, the more meaningless the words become. It's TV Commercial Talking-Jerkweed-Investor-A-Hole-Babytalk. Thus the absurd-on-its-face idea that regulating dark and mostly lawless trillion-dollar markets is somehow bailout-bait gets floated -- presumably because some Frank Luntz poll told McConnell et al that linking financial reform with "bailouts" was a winner. It kind of worked, after all, when expanding health care reform was somehow linked to denying health care/killing elderlies, etc.
I don't doubt that Mitch McConnell -- let alone, like, Jims DeMint or Bunning -- understands this complicated issue exactly as poorly as I do, and he's clearly not terribly troubled by that. But obviously we need to understand this if we're going to fix it -- "we" being the nation and "we" also being voters who theoretically will exert intelligent pressure on elected officials -- and that's not happening. It would be bracing if politicians would stop mis-labeling the collapse as something caused by an excess of government, and if the media that's trying to bring it down to earth for Us would at least stop pretending that you can buy a CDO with your E*Trade account. What we're facing is a big and abstract problem based in a too-big and too-abstract system's very big and very not-abstract failings, and the plain fact is that not one of those failings can or will be remedied unless the practices that created them are either defined and regulated by law or (if they already are) the markets are brought into the light for all (who actually care to watch) to see. Let's start talking about it from there, please.