Bobo has a question in “The ESPN Man:” With all the fundamentals gone haywire, why is Obama staying competitive at the polls? Maybe because your entire party belongs in a lunatic asylum, Bobo? Just a thought… Mr. Nocera says we should “Make Banking Boring,” and that JPMorgan’s bad bets show why regulators need to force changes that will curb risky behavior. Mr. Bruni looks at “The Right’s Righteous Frauds” and says many of the country’s self-appointed moralists are hypocrites whose own histories tumble out the window as soon as there is a check to be cashed. Here’s Bobo:
Two of the nation’s smartest analysts have just come out with reports on how the presidential election looks six months out. Bill Galston of the Brookings Institution argues that at this point President Obama has a modest advantage over Mitt Romney. The pollster Peter D. Hart says that “this election is no better than a 50-50 proposition for the president.”
But when I look at the data, a slightly different question comes to mind: Why is Obama even close? If you look at the fundamentals, the president should be getting crushed right now.
The economic mood of the country is terrible. Roughly 75 percent of Americans believe the economy is still in recession. According to a Quinnipiac survey, only 35 percent of Americans say they are better off than they were four years ago. Barely a third believe the country is heading in the right direction. The economic climate is as bad as or worse than it was in 1968, 1976, 1992 and 2000, years when incumbent parties lost re-election.
Then there is the ideological climate. Obama has governed from the left, but the country, as Galston notes, has shifted to the right. Forty percent of Americans call themselves conservatives, the highest number ever measured.
According to an ABC News/Washington Post survey, only 22 percent of voters believe Obama’s views on the size and role of government are a reason to vote for him. The share of Americans who say the current level of inequality is acceptable has increased by seven percentage points since 1998, to 52 percent. Obama’s main policy initiative, health care reform, remains decidedly unpopular: 39 percent now support it, and 53 percent oppose, according to another ABC News/Washington Post poll.
Finally, Obama has lost support among crucial constituencies. He alienated independents in 2009 and has never won them back. According to a Pew Research Center poll, his support among Catholics has fallen to 42 percent from 49 percent. Even young voters are moving away. And as Galston notes, voter registration among Hispanics has declined by five percentage points, the first significant drop in four decades.
The fundamentals suggest that Obama will go the way of Gordon Brown and Nicolas Sarkozy — incumbents who were trounced in hard times. And yet Obama isn’t on the same trajectory as other global leaders, left or right.
This race, like almost all re-election races, is shaping up to be a referendum on the incumbent, not a choice between two visions. Obama’s job approval numbers are driving everything else. Today, 48 percent of Americans approve of his performance. That’s high given the circumstances, and near the 50 percent threshold he will need to win.
How has he stayed so competitive?
First, the Democrats’ demographic advantages are kicking in. The population segments that are solidly Democratic, like single women and the unchurched, are expanding. The segments that are more Republican — two-parent families and observant Catholics — are shrinking.
But most of the cause is personal. There’s an interesting debate over how much personal qualities matter in a presidential election. The evidence this year suggests: a lot. Take one contrast. According to a Fox News poll, only 36 percent of voters believe Obama has a clear plan for fixing the economy. But 48 percent approve of his performance. That means 12 percent of Americans approve of Obama even though they don’t think he has an agenda for moving us forward. In survey after survey, Obama is far more popular than his policies.
The key is his post-boomer leadership style. Critics are always saying that Obama is too cool and detached, arrogant and aloof. But the secret to his popularity through hard times is that he is not melodramatic, sensitive, vulnerable and changeable. Instead, he is self-disciplined, traditional and a bit formal. He is willing, with drones and other mechanisms, to use lethal force.
Normally, presidents look weak during periods of economic stagnation, overwhelmed by events. But Obama has displayed a kind of ESPN masculinity: postfeminist in his values, but also thoroughly traditional in style — hypercompetitive, restrained, not given to self-doubt, rarely self-indulgent. Administrations are undone by scandal and moments when they look pathetic, but this administration, guarded in all things, has rarely had those moments.
In 2008, Obama had that transcendent, messianic tone. This year, he has adopted a Clinton 1996 type of campaign — strong partisan attacks combined with an emphasis on small and medium-sized policies — like the Buffett Rule and student loans — intended to display his common man values. As a result, Obama has come off aggressive, but also, (unlike Romney) classless and in touch with middle-
I’d say that Obama is a slight underdog this year: the scuffling economy will grind away at voters. But his leadership style is keeping him afloat. He has defined a version of manliness that is postboomer in policy but preboomer in manners and reticence.
Bobo is so full of crap… Here’s Mr. Nocera:
Let’s begin by stipulating the obvious: nobody outside of JPMorgan Chase knows for sure what really happened with those trades that have cost it so much money and done such severe damage to its once stellar reputation.
In his conference call last Thursday, Jamie Dimon, the bank’s chief executive, characterized the trades as “stupid,” but refused to get into any specifics. Even hedge fund managers on the other side of the JPMorgan trades have been able to cobble together only bits and pieces. Most of the emphasis has been on the credit derivative business managed by one Bruno Iksil in JPMorgan’s London office — a k a the “London whale.” Yet from what I hear, his losses probably won’t total more than $600 million — while the bank’s total losses have reached $2.3 billion, and could well hit $4 billion, according to The Wall Street Journal. Where are the rest of the losses coming from? As I say, nobody knows.
Still, we know enough to be able to make some informed judgments. We know that JPMorgan, awash in taxpayer-insured deposits, took some of that money — around $62 billion at last count — and decided to invest it in corporate debt, which had the potential to generate higher returns than, say, old-fashioned loans. Citigroup and Bank of America, chastened by the financial crisis in ways that JPMorgan was not, had far less invested in such securities.
We know that JPMorgan’s chief investment office, which had orchestrated the debt purchases, decided to hedge the entire portfolio by selling credit default swaps against a corporate bond index. You remember our old friends, credit default swaps, don’t you? Three years ago, they nearly brought down the financial world. Not content with its hedge, it then hedged against the hedge. It was all very complex, of course, and all done in the name of “risk management.”
We also know that Ina Drew, a JPMorgan veteran who headed the chief investment office — and who departed on Monday — made $14 million last year. Wall Street executives who make $14 million are not risk managers. They are risk takers — big ones. And genuine hedging activity does not cost financial institutions billions of dollars in losses: their sole purpose is to protect against big losses. What causes giant losses are giant, unhedged bets, something we also learned in the fall of 2008.
Thus, the final thing we know: At JPMorgan, nothing changed. The incentives, the behavior, even the trades themselves are basically the same as they were in the run-up to the financial crisis. The London whale was selling underpriced “credit protection.” Isn’t that exactly what A.I.G. did? The only difference is that JPMorgan has the balance sheet to absorb the losses that Iksil and his colleagues have racked up. That is small comfort.
In recent years, whenever I heard Dimon defend derivatives, he cast it as something banks had to offer their clients. Caterpillar, he liked to say, needed to hedge its exposure to foreign currency shifts, which JPMorgan’s derivatives made possible. But what client was being served with these trades? They were done for the bank, by the bank, solely to fatten the bank’s bottom line.
Which brings us, inevitably, to the Volcker Rule, that part of the financial reform law intended to prevent banks from doing what JPMorgan was doing: making risky bets for its own account. JPMorgan executives have insisted in recent days that the London trades did not violate the Volcker Rule (which, for the record, has not yet taken effect). But that is only because the banks have lobbied to protect their ability to hedge entire portfolios. A letter to regulators written in February by a top JPMorgan lobbyist — a letter denouncing the potential effects of a strictly interpreted Volcker Rule — describes a trade that sounds exactly like the ones that have just caused all the problems. Such trades need to be preserved, the lobbyist argues.
Actually, they don’t. “I just want all this garbage out of insured banks,” said Sheila Bair, the former head of the Federal Deposit Insurance Corporation. “A bank with insured deposits should be making loans. If they have excess they should put the money in safe government securities. If they want to trade, set up separate subsidiaries that have higher capital requirements.”
What banking most needs is to become boring, the way the business was before bankers became addicted to trading profits. But if that were to happen, Ina Drew wouldn’t make $14 million. Safer banking means lower profits, which means smaller compensation packages. That is precisely what JPMorgan’s London traders were trying to avoid.
“Paul Volcker by his own admission has said he doesn’t understand capital markets,” Dimon has famously said. What Volcker understands is far more important: the behavior of bankers.
Happily, the recent behavior of JPMorgan’s London traders could well cause regulators to put in place a Volcker Rule so tough that it would make banking boring again. One can only hope.
When pigs fly… Here’s Mr. Bruni:
Say what you will about Bristol Palin, she’s a quick study. It didn’t take her long to master the ways of her elders on the censorious right and decide that personal circumstance and past error needn’t prevent someone from claiming righteous leadership. Uncle Rush must be proud.
Soon after President Obama stated support for same-sex marriage, Bristol publicly weighed in. Because, you know, the world was on tenterhooks.
In a blog post she focused on the reference that Obama made to his daughters — and to the same-sex parents of some of the girls’ friends.
“It would’ve been helpful for him to explain to Malia and Sasha that while her friends (sic) parents are no doubt lovely people, that’s not a reason to change thousands of years of thinking about marriage,” wrote Bristol, making her heady debut as the new Dr. Spock for a nascent millennium. She added that “in general kids do better growing up in a mother/father home. Ideally, fathers help shape their kids’ worldview.”
Fathers like…Levi Johnston? It’s with him that she conceived her child — out of wedlock, at the age of 17 — and by most accounts, his relationship with her and the Palin family isn’t any warmer than Juneau in January. A mother/father home is not what he and Bristol have succeeded in creating.
What’s more, she has made sure that their son, Tripp, will at some point be treated to a worldview-shaping image of Dad as something akin to a date rapist. That’s the description of him immortalized in her memoir, one of her many efforts to monetize her surname. It recounts the loss of her virginity as a result of getting drunk and blacking out in the company of Levi, who pounced. What a gift that narrative is to Tripp, now being hauled into a TV reality show, “Bristol Palin: Life’s a Tripp,” already in production. Little children are known to thrive in such environments.
I hesitated before picking on Bristol because she’s an easy target. It’s like shooting moose from a helicopter flying low over the tundra.
But she so perfectly distills the double standards and audacity of so many of our country’s self-appointed moralists and supposed traditionalists: hypocrites whose own histories, along with any sense of shame, tumble out the window as soon as there’s a microphone to be seized or check to be cashed.
She proves that they’re not going away anytime soon — a new generation rises! — and that they haven’t been daunted by the ridicule justly heaped on Newt Gingrich during the Republican primaries, when he dared to cast himself as a religious conservative.
Certainly Rush thunders on. Last week he bellowed that Obama had decided to “lead a war” on traditional marriage. Seems to me Limbaugh started those hostilities long ago, if not with his first divorce then certainly with his second and third.
For entertainment at Wedding No. 4, to a woman 26 years younger than he is, he hired Elton John (who very questionably took the gig). Gays shouldn’t be allowed to tie the knot, but they sure can carry a tune.
More interesting than the tired, press-a-button condemnations from Bristol and Rush was Mitt Romney’s comportment. He didn’t hasten to turn same-sex marriage into a wedge issue, the way Rick Santorum urged him to, or use his commencement speech at Liberty University to fan the flames of hellfire.
He instead held back a bit, no doubt partly because his need at this particular juncture, as he recovers from the compromising and brutalizing primaries, is to pivot to the center, not cling to the right. I think Obama and his tacticians counted on as much.
And I think that the extent to which Romney continues to hold back will have enormous consequence for the Republican Party’s destiny.
Within its uppermost ranks are many champions of small government who squirm at the small-mindedness of the scowling theocrats in an increasingly uneasy coalition. These fiscal conservatives take advantage of the religious right’s political muscle but have reservations about its hectoring piety, and their own views on social issues are often moderate or somewhat liberal. Recall that Republican money played a pivotal role in the successful campaign for same-sex marriage in New York.
It came from donors who don’t want to see Romney take up an anti-gay mantle and who understand that a reputation for intolerance and bigotry imperils the future of the party, which they would like to orient away from stone throwers in glass houses. They’re Rush-fatigued. Palin-weary.
Bristol’s recent parenting advice to the Obamas extended into the realm of TV. She seemed to question whether they were watching “too many episodes of ‘Glee.’ ”
“Life’s a Tripp,” starring a single mom who once sold a family revelation to Us Weekly, will be more edifying, I’m certain. And it will showcase a woman who’s a shining testament to conventional, old-fashioned families.