Morning Reads: Monday, Monday,

Good Morning!

Much of the political news has to do with the lead-up to the presidential town-hall style debate on Tuesday night.  I’m going to focus on some other things this morning.

Truthdigger of the Week is Sheila Bair who is one of the women in banking and finance that I admire most. Very few people have as good of an understanding of the weirdness of the financial markets and the need for clarity and removal of moral hazard as the former head of the FDIC. She has a book out that I intend to read.

As leader of the FDIC during that period, Bair was witness to the efforts that Treasury Secretaries Hank Paulson and Timothy Geithner made to save the individuals and banks that were most responsible for the crisis, while leaving American homeowners and taxpayers high and dry. The New York Times’ Gretchen Morgenson, who hailed Bair’s book as an “important piece of history and a rebuttal to the conventional wisdom,“ offered a sample from it:

[P]erhaps the most telling anecdote is from early October 2008, when Henry M. Paulson Jr., the Treasury secretary, summoned Ms. Bair to his office. No reason was given for the meeting. When she arrived, Ben S. Bernanke, the Federal Reserve chairman, was already there. Timothy F. Geithner, then the president of the New York Fed, was on the phone.

Handed a piece of paper, Ms. Bair saw that she had been ambushed. It was a script, prepared for her by the Treasury and the Fed, stating that the F.D.I.C. was moving to guarantee all the liabilities in the financial system. Astonishingly, the guarantee would cover all bank depositors and even protect unsecured claims against institutions. In short, the F.D.I.C. was being asked to back ‘everybody against everything in the $13 trillion banking system,’ Ms. Bair writes.

Taking seriously her job to serve the American public, Bair rejected the plan to drive the FDIC’s funds directly into the pockets of everyone who held bank debts, a modest victory considering that Geithner and company eventually succeeded in handing over trillions of dollars at low interest to institutions that then refused to pump them back into the economy in the form of loans. “Workers, homeowners [and] small businesses have by and large been left to fend for themselves” amid bailouts for “too big to fail” institutions, Bair said in an interview with Morgenson.

Economics Professor Rajiv Sethi also has a review up on the book at his blog. He has a great description of the situation in the market for derivatives and about the assets themselves.  I’ll let you venture over there if you’re up for the wonky goodness.

Sheila Bair’s new book, Bull by the Horns, is both a crisis narrative and a thoughtful reflection on economic institutions and policy. The crisis narrative, with its revealing first-hand accounts of high-level meetings, high-stakes negotiations, behind-the-scenes jockeying, and clashing personalities will attract the most immediate attention. But it’s the economic analysis that will constitute the more enduring contribution.

Among the many highlights are the following: a discussion of the linkages between securitization, credit derivatives and loan modifications, an exploration of the trade-off between regulatory capture and regulatory arbitrage, an intriguing question about the optimal timing of auctions for failing banks, a proposal for ending too big to fail that relies on simplification and asset segregation rather than balance sheet contraction, a full-throated defense of sensible financial regulation, and a passionate critique of bailouts for the powerful and politically connected even when such transactions appear to generate an accounting profit.

Paul Krugman takes on Romney assertion that no one dies from lack of insurance.  I thought this was a strange comment when Romney made it but no one picked up on it the way Krugman does.  It just amazes me that Romney just seems to make stuff up whenever he talks to any one.  I can’t decide if he’s delusional or just a facile liar. Something tells me that he’s both.

Last week, speaking to The Columbus Dispatch, Mr. Romney declared that nobody in America dies because he or she is uninsured: “We don’t have people that become ill, who die in their apartment because they don’t have insurance.” This followed on an earlier remark by Mr. Romney — echoing an infamous statement by none other than George W. Bush — in which he insisted that emergency rooms provide essential health care to the uninsured.

These are remarkable statements. They clearly demonstrate that Mr. Romney has no idea what life (and death) are like for those less fortunate than himself.

Even the idea that everyone gets urgent care when needed from emergency rooms is false. Yes, hospitals are required by law to treat people in dire need, whether or not they can pay. But that care isn’t free — on the contrary, if you go to an emergency room you will be billed, and the size of that bill can be shockingly high. Some people can’t or won’t pay, but fear of huge bills can deter the uninsured from visiting the emergency room even when they should. And sometimes they die as a result.

More important, going to the emergency room when you’re very sick is no substitute for regular care, especially if you have chronic health problems. When such problems are left untreated — as they often are among uninsured Americans — a trip to the emergency room can all too easily come too late to save a life.

So the reality, to which Mr. Romney is somehow blind, is that many people in America really do die every year because they don’t have health insurance.

Jonathan Chait writes long read in New York Magazine about Obama and Romney’s approach to the size and character of government.  He basically projects what the focus of  each administration might be on day one. The character concept is an interesting one. Here’s a bit on Romney first.

Though the broad contours of the Ryan plan amount to a nonnegotiable demand thrust upon Romney by the Republican Party, there are significant gaps within the plan that leave Romney room to maneuver and that, we can imagine, he will use to his advantage. Because, starting January 20, Romney will be faced with the same crushing pressure Obama has endured for the past four years: an anemic economic recovery. If he intends to win reelection, Romney will have to come up with some plan to improve our job numbers.

Here’s where his administration could get surprising. Romney has built his campaign on the promise of alleviating the immediate pain of the recession, yet his program to reduce unemployment is vague bordering on nonexistent. (“If we win on November 6th, there will be a great deal of optimism about the future of this country,” he told donors during his infamous, secretly recorded Palm Springs diatribe. “We’ll see capital come back and we’ll see—without actually doing anything—we’ll actually get a boost in the economy.”) Republicans fervently believe the Ryan plan would restore prosperity over the long run, but even they recognize it has essentially no relation to the economic maladies of the moment. The Obama administration’s approach to the economy has been to follow the tenets of Keynesian economics, which prioritizes stimulating consumer demand (through government spending and/or tax reductions), by deliberately jacking up short-term deficits. During the 2001 recession, Republicans agreed with this theory—advocating quick tax cuts—and they appeared to be heading in the same direction in early 2008. But since Obama’s election, they have turned wholesale against Keynesian economics, instead suggesting that an immediate reduction in deficits could boost the recovery. Recent history, especially in Europe, has not been kind to these austerity enthusiasts.

One brief look at the Obama side and then I’ll let you decide if you want to go read the entire, lengthy piece.

Obama tends to leave the contours of his second term pleasantly vague, which has fueled the general impression that he is tapped out and has no particular achievable goals in mind. He often posits that, should he win reelection, Republicans will abandon their strategy of total opposition, citing Senate Minority Leader Mitch ­McConnell’s unusually frank confession back in 2010 that his top priority was to block Obama’s reelection. “Now, after the election, either he will have succeeded in that goal or he will have failed at that goal,” Obama has said. “And I’m hoping that after the smoke clears and the election season’s over that that spirit of cooperation comes more to the fore.”

There’s little reason to share this profession of faith. Republican obstructionism is not only a strategy to deny the president a second term. Some Republicans genuinely fear Obama, and others fear a right-wing primary challenge if they compromise with him. What’s more, the political calculation that undergirds his opponents’ strategy will not disappear: His popularity is the single biggest factor determining Republican prospects for enlarging their control of Congress and winning the White House. Cutting bipartisan deals increases Obama’s standing and thus reduces theirs.

You might surmise from all this that Obama is simply living in a dream world. That is the conclusion drawn by several of the smartest liberal political analysts I know. I have a different conclusion: Obama does have a plan to break the legislative impasse and settle the long-term struggle over the scope of government. It does not rest on the GOP’s coming to its senses and thinking of the national good. The plan is the very opposite of naïve. And he can put it into effect even more quickly than Romney could enact his own plan.

Here is how it will happen. On the morning of November 7, a reelected President Obama will do … nothing. For the next 53 days, nothing. And then, on January 1, 2013, we will all awake to a different, substantially more liberal country. The Bush tax cuts will have disappeared, restoring Clinton-era tax rates and flooding government coffers with revenue to fund its current operations for years to come. The military will be facing dire budget cuts that shake the military-industrial complex to its core. It will be a real-world approximation of the old liberal bumper-sticker fantasy in which schools have all the money they require and the Pentagon needs to hold a bake sale.

All this can come to pass because, while Obama has spent the last two years surrendering short-term policy concessions, he has been quietly hoarding a fortune in the equivalent of a political trust fund that comes due on the first of the year. At that point, he will reside in a political world he finds at most mildly uncomfortable and the Republicans consider a hellish dystopia. Then he’ll be ready to make a deal.

Anyway, it’s one view point.

Okay, so here’s my interesting grave site dig of the week.  It’s in Mexico from about 700 AD and features a woman buried face down.

Archaeologist Raul Matadamas Diaz, director of the Bocana del Rio Copalita investigation project, informed that the sepulcher –the first one that has been discovered in this site– is estimated to date back to 700 AD and although cultural affiliation has not been yet determined, it could be associated to ancient groups that were in contact with Zapotecs of the Valles Centrales in Oaxaca. INAH’s archaeologist elaborated about the offerings found which were accompanying the skeleton, among which a severed femur believed to have been used as a baton. “This finding –he emphasized– will help understand the funerary practices of the civilizations that occupied Copalita, especially its elite from which we have no information until now”. “Around the sepulcher, we also discovered the burial of 22 more individuals, among which a female character stood out. She was the first skeleton in this pre Hispanic site that was facing the floor, which might indicate a sign of submission to the principal character in the tomb. Her skeleton had two jade earflaps and beads located in her lumbar vertebras”, Matadamas said. The specialist at INAH-Oaxaca Center explained that over the female skeleton were four pots, one of which is a bowl decorated with a glyph in a relief that has the representation of an owl between two snakes, an image that is repeated in the contour of the piece and which is associated to ancient Zapotecs from the Valles Centrales in Oaxaca. Matadamas Diaz added that in the base of the same piece they found symmetrical figures of an alligator opening its jaws; within the jaws is the face of a man who has a scroll with a word in front of him, possibly related to cultures from the coast of Huatulco. “Said symbols will be studied in detail to see if it’s possible to elucidate through them the world view that was developed between 700 and 800 AD by groups that settled in the metropolis of Copalita, and to identify the character that is contained in the tomb” the archaeologist stated.

Yup. That’s the interpretation. She’s in a deferential position towards the male in the tomb.  Women can’t even get a break in their deaths.

So, what’s on your reading and blogging list today?