The Long View

Centrifugal Force

The award for best headline about the SEC's lawsuit against Goldman-Sachs goes to David Goldman at First Things: Leviathan Eats the Giant Vampire Squid .

Readers will recall that the suit, filed last week, accuses GS of colluding with a hedge fund to create an investment pool of sure-to-fail mortgage-backed securities, selling interests in the pool to unwary investors, and then helping the hedge fund insure against the pool's inevitable failure. This summary may miss certain nuances of the complaint, but the affair does fall into the “you can't make this stuff up” category. In any case, this is what the writer says about the significance of suing his namesake just now:

It's clever: President Obama gets to run against the Giant Vampire Squid in November with the Republicans floundering in a defense of a rather tarnished free market. On the heels of the SEC announcement, Obama intoned in his Saturday radio address: “Every day we don't act, the same system that led to bailouts remains in place, with the exact same loopholes and the exact same liabilities. And if we don't change what led to the crisis, we'll doom ourselves to repeat it.”

The widespread accusation that the financial industry has undue influence over the government, repeated prominently in the Atlantic Magazine by former IMF chief economist Simon Johnson, appears refuted. If, as I suspect, the GS case is the thin end of the wedge, the administration will silence its critics on the left, ram through regulatory reform, and demonstrate that it isn't the financial industry that's taken over the government — it's the government that's taken over the financial industry.

If the writer has any sympathy for GS, he does not display it in this piece, though he does rather wistfully deplore the prospect of wider financial regulation. I am not so sure. Frankly, I think that almost everything that has happened to the financial industry since the end of the Cold War has been a mistake. Securitized assets are a bit like cellphones: people got along just fine without them 20 years ago and there is reason to suspect they cause brain cancer.

In any case, this week the markets in general and Goldman-Sachs in particular were taking the SEC suit in stride. GS says it did nothing illegal. The investors who bought interests in the booby-trapped pool were sophisticated actors who ought to have known what they were doing.

Maybe they were, but the fact is they did not understand what they were being sold. GS may discover there is a kind of innocence that is worse for business than any guilt. Jeremy Warner at the Daily Telegraph speculates:

The client desertions will come first at the edges of the Goldman revenue stream. Governments will stop using the bank for advisory work, corporations may have clauses in their articles of association that prevent dealings with banks charged with deception. The same may be true of some investors, such as pension funds.

In any case, once a bank starts to be ostracised, it can very quickly snowball. I'm not saying this outcome is now inevitable: far from it. But I do think markets may be underestimating the seriousness of what's just occurred. Worse, the SEC charges start the clock on what's likely to be a veritable deluge of litigation as counterparties seek to recover their credit crunch losses. The bank could find itself tied up in legal knots for years to come.

Of course, maybe now to save its slippery skin the Vampire Squid will abandon its penchant for liberal Democrats and throw all its support to Republicans, who can be counted on to oppose further regulation. This political investment might have results like many of the financial investments GS has facilitated in recent years: dubious enterprises will wax great with unmerited cash and then burst for lack of a genuine market.

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The Zeitgeist is darkening, it seems, but Tim Cavanaugh at Reason Magazine says it is not nearly dark enough:

When Andrew Joseph Stack, a software consultant with a history of tax troubles and marital problems, crashed his Piper Cherokee into the Austin, Texas, office of the Internal Revenue Service in February, the crime was widely seen as a referendum on the national psyche… A similar genre of morbid appreciation arose during the prosperous mid-1990s around Unabomber Ted Kaczynski's 35,000-word Luddite manifesto Industrial Society and Its Future.

But outlaw intellectualism is part of a larger trend in declinism. The recession has not just hustled the U.S. economy back to a late-20th-century state of nature that resists all efforts at reinflation, stimulus, and outcome management. It has created a conviction that American society itself, rather than just its institutions of government and public/private rent seeking, is in collapse.

What this country needs, the writer suggests, is for more big, loser institutions to fail, and to fail as fast as possible. There is an argument to be made for that. On the whole, though, I think the point we should remember is that it is rarely wise to set off even a controlled demolition explosion in a building we cannot leave.

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So you want dissolution and collapse, do you? Well, then, Patrick J. Buchanan asks with scarcely concealed glee, is a New Tribe Rising?

So asks Kelefa Sanneh in the subtitle of "Beyond the Pale," his New Yorker review of several books on white America, wherein he concludes we may be witnessing "the slow birth of a people." 

Sanneh is onto something. For after a year of battering as "un-American," "evil-doers" and racists, and praise from talk-show hosts and Sarah Palin as "the real Americans," Tea Party America seems to be taking on a new and separate identity. . . Ethnonationalism is the pre-eminent force of the age we have entered, the creator and destroyer of empires and nations. Even as Schlesinger was writing his "Disuniting of America," Yugoslavia and the Soviet Union were disintegrating into 22 new nations, along the lines of ethnicity. In Dagestan, Ingushetia, Chechnya, Ossetia and Abkhazia, the process proceeds apace. 

The review that sparks these meditations is Beyond the Pale: Is white the new black? I would only add that the growth of “whiteness” as a strong ethnic identity is really another instance of the southernization of America. Lingering post-immigration European ethnic and confessional identities counted for at least as much in the Northeast until two generations ago, a fact that the Civil Rights Movement never entirely took on board.

Be that as it may, I am willing to believe that the trek to Utah created a Mormon Tribe, but I have doubts about the Tea Parties. Readers may recall that the Dead Heads, the brightly colored rabble that followed the jam-group the Grateful Dead all around the country, were often called a tribe.

We may note that the Dead began performing so long ago that the memory of man runs not to the contrary. Neither have they wholly ceased. There were Deadheads for Obama in the last presidential campaign. A selection of surviving band members performed at one of President Obama's inaugural ball. No doubt the event was hosted by Goldman-Sachs. But I digress.

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Meanwhile, back at the Daily Telegraph, Benedict XVI's admirer Damien Thompson asks whether time is running out for a great reforming Pope :

I was in St Peter's Square five years ago [when Benedict was elected]. It was hilarious to witness the rage of the Tabletistas [partisans of the liberal British Catholic journal The Tablet] . . . But it was hard to know what to expect of a papacy led by “God's Rottweiler”, as we still thought of him. Not yet having read his amazing books, I didn't anticipate the intensity of Ratzinger's vision of renovation. Still less did I guess that his reforms might founder because he is simply too nice.

Readers of this space, and indeed of just this entry, may have noted that several major institutions seem to be misfiring at just the same time. The effect is like being in a railway carriage with the shades drawn when the train takes a sharp turn: glasses fly from all the trays and stuff falls out of the luggage compartments in a most uncanny fashion. Benedict has succeeded in putting the important liturgical and doctrinal reforms on the books. They will be implemented as the world settles down on its new trajectory.

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Atheism apparently needs a major overhaul, too, if we may believe David Hart at First Things. He finds the New Atheists philosophically naive and historically ignorant. Back in the good old days these things were better managed:

Where Nietzsche was almost certainly correct, however, was in recognizing that mere formal atheism was not yet the same thing as true unbelief. As he writes in The Gay Science, “Once the Buddha was dead, people displayed his shadow for centuries afterwards in a cave, an immense and dreadful shadow. God is dead: —but as the human race is constituted, there will perhaps be caves for millennia yet where people will display his shadow. And we—we have yet to overcome his shadow!” . . . He is referring principally to those who think they have eluded God simply by ceasing to believe in his existence. For Nietzsche, “scientism”—the belief that the modern scientific method is the only avenue of truth, one capable of providing moral truth or moral meaning—is the worst dogmatism yet, and the most pathetic of all metaphysical nostalgias. And it is, in his view, precisely men like the New Atheists, clinging as they do to those tenuous vestiges of Christian morality that they have absurdly denominated “humanism,” who shelter themselves in caves and venerate shadows.

The writer suggests that the New Atheism is a passing fashion, like the Pet Rock, that will prove ephemeral. That sounds fair enough. Certainly the New Atheism seems unlikely to lay down a new layer of workable skepticism, like Hume's, or even a Byronic cultural moment informed by the spirit of non serviam, like the Existentialist episode. However, just because a fashion passes does not mean it will be replaced by a better one.