3/21/09
Krugman Gives Free Seminar On Bank Plan: It Sucks
Maybe, after Tim Geithner resigns, Paul Krugman will be asked to run the treasury? One can hope, can't one?
More on the bank plan
Why was I so quick to condemn the Geithner plan? Because it’s not new; it’s just another version of an idea that keeps coming up and keeps being refuted. It’s basically a thinly disguised version of the same plan Henry Paulson announced way back in September. To understand the issue, let me offer some background.
Start with the question: how do banks fail? A bank, broadly defined, is any institution that borrows short and lends long. Like any leveraged investor, a bank can fail if it has made bad investments — if the value of its assets falls below the value of its liabilities, bye bye bank.
But banks can also fail even if they haven’t been bad investors: if, for some reason, many of those they’ve borrowed from (e.g., but not only, depositors) demand their money back at once, the bank can be forced to sell assets at fire sale prices, so that assets that would have been worth more than liabilities in normal conditions end up not being enough to cover the bank’s debts. And this opens up the possibility of a self-fulfilling panic: people may demand their money back, not because they think the bank has made bad investments, but simply because they think other people will demand their money back.
Bank runs can be contagious; partly that’s for psychological reasons, partly because banks tend to invest in similar assets, so one bank’s fire sale depresses another bank’s net worth.
So now we have a bank crisis. Is it the result of fundamentally bad investment, or is it because of a self-fulfilling panic?
If you think it’s just a panic, then the government can pull a magic trick: by stepping in to buy the assets banks are selling, it can make banks look solvent again, and end the run. Yippee! And sometimes that really does work.
But if you think that the banks really, really have made lousy investments, this won’t work at all; it will simply be a waste of taxpayer money. To keep the banks operating, you need to provide a real backstop — you need to guarantee their debts, and seize ownership of those banks that don’t have enough assets to cover their debts; that’s the Swedish solution, it’s what we eventually did with our own S&Ls.
Now, early on in this crisis, it was possible to argue that it was mainly a panic. But at this point, that’s an indefensible position. Banks and other highly leveraged institutions collectively made a huge bet that the normal rules for house prices and sustainable levels of consumer debt no longer applied; they were wrong. Time for a Swedish solution.
But Treasury is still clinging to the idea that this is just a panic attack, and that all it needs to do is calm the markets by buying up a bunch of troubled assets. Actually, that’s not quite it: the Obama administration has apparently made the judgment that there would be a public outcry if it announced a straightforward plan along these lines, so it has produced what Yves Smith calls “a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for [I don't think I can finish this on a Times blog]”
Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.
3/20/09
Krugman On AIG Response: Clumsy
AIG
Preliminary thoughts on the tax bill:
1. It’s not the way you should make policy — it’s clumsy, and it will punish some innocent parties while letting the most guilty off scot-free
2. But — there wasn’t much alternative at this point. And for that I blame the Obama people.
I’ll leave to others the question of who knew or should have known that the bonus firestorm was coming; but it’s part of a pattern. At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.
This was bad analysis, bad policy, and terrible politics. This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism.
Play vs. Instruction: What Should Kindergartners Be Doing?
All work and no play....
The Joyless Club: The Changing Brains of Children in Kindergarten
Kindergarten Playtime Disappears, Raising Alarm About Children's Learning and Health
College Park, MD, March 20, 2009-Time for play in most kindergartens has dwindled to the vanishing point, replaced by lengthy lessons and standardized testing, according to results of three new studies released today by the nonprofit Alliance for Childhood. Classic play materials like blocks, sand and water tables, and props for dramatic play have largely disappeared in the 268 kindergarten classrooms studied. The findings are documented in Crisis in the Kindergarten: Why Children Need to Play in School.
Researchers from U.C.L.A. and Long Island University found that, on a typical day, children in all-day kindergartens in Los Angeles and New York City spend four to six times as much time in literacy and math instruction and taking or preparing for tests (about two to three hours per day) as in free play or "choice time" (30 minutes or less). A third research team, at Sarah Lawrence College in New York, found that most of the activities available to children during choice time (a popular euphemism for playtime) are in fact teacher-directed and involve little or no free play, imagination, or creativity.
Child development experts have been raising alarms about the increasingly didactic, test-driven, and joyless course of early childhood education. "These practices, which are not well grounded in research, violate long-established principles of child development and good teaching," states the Alliance report. "It is increasingly clear that they are compromising both children's health and their long-term prospects for success in school."
The report summarizes recent studies and reports showing long-term gains from play and focused, playful learning in early education. It also critiques kindergarten standards, scripted teaching, and standardized testing and makes recommendations for change.
David Elkind, author of The Power of Play, calls the research findings "heartbreaking." In a foreword to the report, Elkind writes, "We have had a politically and commercially driven effort to make kindergarten a one-size-smaller first grade. Why in the world are we trying to teach the elementary curriculum at the early childhood level?"
The full text of Crisis in the Kindergarten: Why Children Need to Play in School is available at www.allianceforchildhood.org.
3/18/09
Red Cross: America Tortured (They Are The Last Word, Too)
Jonathan Turley makes the case for war crimes trials. Again.
International Red Cross Defines Bush Interrogations As Torture
The International Committee of the Red Cross added its considerable authority and voice to those who have called the Bush interrogation policies torture under international law. Now, Bush officials, bar groups, countless experts, and leading international organizations have all agreed that Bush ran a torture program prohibited under a variety of treaties. Those treaties require the United States to investigate and prosecute such acts as war crimes. Yet, President Barack Obama continues to block any such investigation in flagrant violation of international law.
The International Red Cross is viewed as a definitive voice on such matters [emphasis mine] and issued a secret report that informed the Bush Administration that what it was doing was torture under international law.
The IRC was given access to 14 of the CIA’s “high-value” detainees after they were transferred in 2006 to Guantanamo Bay. One such detainee was Abu Zubaydah, a Palestinian man who ran Al Qaeda recruitment. Zubaydah said in the weeks after he was captured, he was shackled naked while listening to consistent music or static. He also says he had limited nourishment and was not allowed to sleep.
President Obama has insisted that “no one is above the law” but has refused to allow an investigation into a clear and knowing war crime by his predecessor. Under international law, such obstruction is itself a serious violation. Various senators and Bush officials have stated that, while Obama was pledging to guarantee that no one is above the law in such matters, he and Holder were assuring people privately that there would be no investigations into war crimes, here and here.
There is an obvious belief in the Administration that an investigation of President Bush and his aides would endanger the Democratic hold in Congress and the president reelection. The problem has been the relatively passive role of the mainstream media on the story. There is a clear obligation of the Obama Administration to investigate and prosecute these crimes. Yet, the media has treated this as largely a political story and have rarely raised it with the President or pushed him on how he can say that “no one is above the law” while preventing high-ranking officials from being criminally investigated, let alone prosecuted.
For the full story, click here.
3/17/09
Problems With Student/Teacher Performance Linkage
Linking student performance to teachers is a dubious undertaking. Sherman Dorn explains why:
Longitudinal data systems, good; unique teacher linkage, bad
Diane Ravitch's blog entry this morning seriously disparages the value of longitudinal data systems, including the linking of teachers to students, and John Thompson's entry discusses the abuse of data by administrators. Essentially, both Ravitch and Thompson fear the brain-dead or conscious abuse of data to judge teachers out of context. That's also the reason why NYSUT (the New York state joint NEA-AFT affiliate) worked hard to convince the legislature to put a moratorium on using test scores to make tenure decisions; Joel Klein was moving very quickly, and I think UFT and NYSUT had good reason to believe that without the moratorium, there would be substantial abuses of test data in NYC (and elsewhere) in tenure decisions.
My take: longitudinal data systems are a good thing, but linking teachers to students is a much more fragile undertaking.
Florida has a longitudinal data system that began in the early 1990s and has been used for 10 years to judge schools based on test data. Approximately ten years ago, I sat in a windowless room in Tallahassee as a Florida DOE member discussed the new A-plus system and a variety of technical decisions tied to it, and for which he had brought stakeholders and a few yahoos from around the state to give advice. I was one of the unpaid yahoos who had the great joy of flying in tiny airplanes several hundred miles a few times a year to give advice on the matters.
We had so many matters to discuss that one minor conversation was almost overlooked: a state mandate that required that the FDOE link each student to a teacher primarily responsible for reading and math. One state official showed us a draft form and then explained the concerns he had about it: in his view, the state that had tried that a few years earlier (Tennessee) had multiple conceptual difficulties connecting individual teachers to individual students. But they had run roughshod over those concerns, and he anticipated that Florida would do the same.
It wasn't a matter of letting teachers off the hook (this now-retired professional staffer is what I think of as an accountability hawk) but logic and sense. How many physics and chemistry teachers help students understand algebra better? How many history teachers help students with writing or reading? For students receiving special education services in a pull-out system, do you want only the special educator to be responsible for a subject, or do you want both the general-ed classroom teacher and the special educator to have responsibility? This spring, my wife (a math major and special educator) is tutoring a local child in math on weekends or evenings; so who should get credit for how he performed on testing in the last week, his teachers in school or my wife? Today, you can add NCLB supplemental educational services (or after-school tutoring) to the mix.
The larger point: even if you decide to wave away the concerns of Richard Rothstein and others, even if you focus entirely on what happens in academic environments, it is fallacious to link every student performance with a single teacher. If we are providing the appropriate supports for children, then the students with the lowest performance are the ones for whom such unique linkage assumptions are the least justifiable, because they may be receiving academic support from general education classroom teachers, from special educators, from after-school tutors, and maybe mentors or other providers in neighborhood support organizations (such as Geoffrey Canada's). Today, I do not think one can parcel out responsibility without making assumptions that have no basis in empirical research. Those who support individual teacher linkage have the burden to demonstrate otherwise.
3/15/09
"We Are A Country Of Law..."
From HuffPo
If we are a country of law, then let's fucking act like one!
Larry Summers, chairman of the White House National Economic Council, appearing on ABC's This Week, said the Obama administration was largely powerless to stop the cash rewards. "We are a country of law [emphasis mine]. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system."That's right, Larry, who works for Obama, who supposedly hired you because of your massive intellect, which I do not doubt or question. Let's hope Obama and his administration feel that way about torture, eavesdropping, extraordinarily reditioning, and the rest.
If we are a country of law, then let's fucking act like one!
Prosecute Torture, Mr. President
Mark Danner has a story in the NYT about torture. I do not want to be associated with what I read. I assume most Americans would rather not be associated with these horrors. Here is just a snippet:
Tales From Torture’s Dark WorldWe must be vocal and press for trials against those that perpetrated these awful crimes. Obama must be held to an exceptionally high standard; the standard I thought I voted for!
He was stripped and put in a small cell. “I was kept for one month in the cell in a standing position with my hands cuffed and shackled above my head and my feet cuffed and shackled to a point in the floor,” he told the Red Cross.
“Of course during this month I fell asleep on some occasions while still being held in this position. This resulted in all my weight being applied to the handcuffs around my wrist, resulting in open and bleeding wounds. [Scars consistent with this allegation were visible on both wrists as well as on both ankles.] Both my feet became very swollen after one month of almost continual standing.”
For interrogation, Mr. Mohammed was taken to a different room. The sessions lasted for as long as eight hours and as short as four.
“If I was perceived not to be cooperating I would be put against a wall and punched and slapped in the body, head and face. A thick flexible plastic collar would also be placed around my neck so that it could then be held at the two ends by a guard who would use it to slam me repeatedly against the wall. The beatings were combined with the use of cold water, which was poured over me using a hose-pipe.”
As with Abu Zubaydah, the harshest sessions involved the “alternative set of procedures” used in sequence and in combination, one technique intensifying the effects of the others:
“The beatings became worse and I had cold water directed at me from a hose-pipe by guards while I was still in my cell. The worst day was when I was beaten for about half an hour by one of the interrogators. My head was banged against the wall so hard that it started to bleed. Cold water was poured over my head. This was then repeated with other interrogators. Finally I was taken for a session of water boarding. The torture on that day was finally stopped by the intervention of the doctor.”
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