Any chance of another music recommendation post in the future?

That would be awesome.

A loyal reader,

Scott

PL: First I have to get up a new piece about the holidays and a piece on cars and beer. But yes, it’s written already in longhand. Just need it typed.

I love everything about this story, but particularly love the finely calibrated opening line: “His name was Pobornik.”

PL: Interesting title. I’ll have to give that a read. Certainly has to be better than the Goldman Sacks conspiracy stuff he’s shucking on the talk show circuit.

PL: That’s the one I still have to read.

I still can’t reconcile how much you (and the majority of intelligent people on both sides of the aisle) can say Goldman was a loser and still stand so vehemently behind the bailouts. They’re minting money faster than ever precisely because the events of the past sixth months proved they’re playing the game with cheat codes. The last panic wasn’t really a perfect storm, the only real wild card was the housing bubble. A national deficit and lack of regulatory oversight are constants at this point. It seems we’re lined up for a bigger crash that we’ll be far less prepared for in the next decade.

Goldman’s lobbying didn’t cause special favors for it specifically, but its lobbying did persuade the government to go out of its way to maintain the status quo and save all the major banks. Banking isn’t that difficult. If the government had used the 2-5 trillion it injected to save struggling banks to subsidize start-ups, and allow the healthy banks to increase their operations, it could have filled the credit needs of main street and allowed the top banks to die off like they should have and be replaced by competent ones. The shock would have hurt, but our economy would have come back a lot stronger and better prepared for the future. As it is, the shock is hurting pretty bad and virtually no creative destruction has been allowed to occur.

It comes down to how painful the shock would have been if the major banks went under. I know a lot of people maintain that without saving Bear or TARP we would have seen 30% unemployment. I don’t buy it. Even in this recession there is trillions in capital floating around the country, and if main street was hungry enough for credit, those with capital would have loaned it out. Maybe we would have seen a temporary 15-20% unemployment, but I think we would have had a much stronger recovery that would have made it worthwhile. Besides, we’re not that far off as it is.

My main point is that if we had focused our effort on replacing the struggling banks instead of fixing them, we’d be a lot better off, possibly in the short run and most definitely in the long run. I’m not saying we didn’t do this entirely because of Goldman’s influence in the government. Government is almost always opposed to taking risks upsetting the status quo. What I am saying is that I found it astounding that so many usually-cynical observers bought so wholly the story “if the major banks fail we all die” without considering alternatives, when the main sellers of that story were the major banks themselves.

PL: You’re right that creative destruction would have given us the housecleaning we needed, and that we are probably just pushing off an inevitable reckoning and in so doing, making that eventuality even worse. However, the pain of the creative destruction you advocate would have been so extreme and so widespread (we’d have plunged the world into utter chaos, with trade wars and crazy protectionist measures that would drive us 100 years backward) it simply couldn’t be risked. Milton Friedman and Ayn Rand aren’t wrong. The problem is, neither addresses the human wreckage that comes with strict Capitalism. I’d love to see a more pure, kill or be killed Capitalism in this country. But it’s not going to happen. The TARP thing was as good an option as we were going to see, so I supported it, and still do.

PL: Well, we know it’s chock full of logic, that’s for sure. Religion shrinks from that like Superman to Kryptonite.

In Defense of Elitism is no longer in my collection. I gave it to a friend about a week before he started law school in the hope it would provide some balance to just the kind of academic, everyone’s views are equally valid, multicultural nonsense that I had to suffer through. If you have ever disagreed with an assertion such as “what you see as a book, someone else sees as a drum, and both are right,” this is the book for you.

PL: Very well said. If the excellence of a book can be measured in how effectively it upsets whiffle minds, In Defense of Elitism trumps Ulysses, Moby Dick, Tropic of Cancer and possibly On the Origin of Species.

Phila – you may want to check out Mason & Dixon by Pynchon. It’s in the same vein as many of these books, but with a slightly more uplifting tone and some profoundly weird shit going on.

PL: It also comes well recommended by a lot of people whose opinions I hold in high esteem. Pynchon’s one of the best, I’m told. One of these days, I’m going to have to find out.

I wasn’t nuts about the Right Stuff. Probably because I just wasn’t interested in the subject matter. Kind of unfair to omit it on that basis, but that’s the limit of criticism, right? Hard to give five stars to what you can’t finish.

Some of Taibbi’s earlier stuff for the eXile was truly classic; stuff like calling up World Bank officials for their opinions on political instability in the Olujawon Province (and eliciting sincere, totally nonsensical responses), to getting Gorbachev to agree to be the “perestroika coordinator” for the New York Jets. My personal favorite: http://exiledonline.com/feature-story-combed-over/

PL: I was kind of let down by his Goldman piece. Here’s a guy who sneers at populists and debunks conspiracy theorists writing a conspiracy story aimed at the lowest of populist sensibilities. Goldman didn’t get special favors. They were one of many firms that benefited from the AIG bailout. The fact of the AIG bailout was it had to happen. If it didn’t, the banks who bought swaps from it would have been exposed to monstrous losses in the midst of a short-selling hurricane. Also, funneling banks money through AIG allowed the Fed to keep the cost of the TARP program below 800 billion, which made it politically much more palatable.

The better argument against Goldman, and every other bank that insured risk with Joe Cassano, the idiot who ran AIG’s Financial Products division, is to ask, “Why did you keep buying swaps from those fools? Surely, you had to know that based on their exposure with your firm alone, there was no way they could make good on all of their commitments in a global crisis like the one we endured. How come your models didn’t tell you, ‘AIG cannot cover its commitments?’ You’re negligent in that regard, aren’t you? You failed to avoid a foreseeable risk. So tell me, given that your firm failed miserably in that regard, and we had to step in to save you from your bad decisions, why shouldn’t we hit you with a one time 20% windfall tax on everything AIG paid over to you? I mean, hell… bad modeling cost Lehman and Bear their lives. Why shouldn’t you pay more for your mistakes?”

I’m loathe to tax anybody punitively, but there has to be a stiffer penalty for failure than the one Goldman faced. And no – it’s not an excuse that the circumstances were unique, or once-in-a-lifetime. Risk is risk is risk and if you fail to address an element of it, no matter how slim the chance of it turning into a Black Swan, when it does, the penalty should be brutal.

PL: Vanities is his masterwork, in my opinion. I Am Charlotte Simmons isn’t bad. That a guy his age got so many elements of college fraternity life right is pretty amazing. Sadly, however, he got a few important things wrong, which makes the characters a bit gaudy.

Supposedly, he’s writing a big book about immigration based around the story of a family in Miami. As he’s closing in on 80, I have to imagine he’s giving it his all, knowing there’s a strong possibility of it being his last.