Tuesday, September 30, 2008


With the defeat of the 'Bailout Bill' in Congress yesterday, one can't help but think of the Panic of 1907, which occurred almost 100 years ago.

In 1907, horse-drawn carriages and 'special' trains were state-of-the-art. But while financial markets change, the core elements of a panic remain the same: financial innovation runs ahead of regulation; a short-squeeze; interlocking and connected financial institutions, resulting in a domino-effect of falling institutions; the spread of the contagion; and then, most dangerously, a run on previously-healthy banks.

The 1907 Panic was stemmed on the evening of November 2-3, when JP Morgan famously locked a number of presidents of trust companies (which were the financial innovations of the day, as derivatives and credit-default swaps are today) in his library; they were not 'released' until they all agreed to subscribe to a $25M loan for the Trust Company of America, an otherwise healthy institution that was facing a run. And like in 1907, it is collective action -- individuals acting against their own personal short-term interests for the good of all -- that can stem a panic.

The House vote yesterday was a political version of the 'Prisoner's Dilemma.' The bill would help everyone, but it was in many member's interest to have been able to vote against an unpopular bill. But once it became clear that the House Republicans were not near the 100 votes that Speaker Pelosi wanted, Democrats were not going to pass a bill with little or no GOP support.

The good news, if any, is that the lessons of 1907 still hold; the meeting in Morgan's library was not the first time that "Pierpont" had tried to stem the tide. More than a week earlier, on October 23rd, 1907, Morgan had summoned the trust presidents to his office and urged them to help TCA; but at that time, they were still more concerned about their own cash position, and Morgan had trouble raising $10M. (A week later, it required considerably more money -- $25M -- to stop the run on TCA.)

And as the contagion spread throughout the stock market, Morgan had to inveigh upon then-President Teddy Roosevelt to allow the takeover of Tennessee Coal, Iron & Railroad by US Steel. Roosevelt was known as a 'trust buster', so politically he was contradicting his well-established position. But TR did what was needed to be done, and so avoided (in his words later) "a panic and general industrial smashup at this time."

Thursday, September 18, 2008

With the Volume Down?!?

Gov. Sarah Palin was asked last night by Sean Hannity whether she had seen Tina Fey's portrayal of her on last weekend's Saturday Night Live:

HANNITY: One last question that I didn't ask you: Did you watch Tina Fey on "Saturday Night Live"?

PALIN: I watched with the volume all the way down and I thought it was hilarious, she was spot on.

HANNITY: Do you think you could play her one day?

PALIN: Oh absolutely. It was hilarious. Again, I didn't hear a word she said, but the visual was spot on.
Watching SNL with the volume down?!?!?

Isn't this the moral equivalent of then-Governor Bill Clinton's statement in 1992: "When I was in England, I experimented with marijuana a time or two, and didn't like it. I didn't inhale and I didn't try it again."

Tuesday, September 16, 2008

Electing FDR

With shadows from 1929 appearing -- seemingly -- on the business (and front) pages every day, it is perhaps instructive to look back at the true "Great Depression", and the election held in 1932. (It is worth noting that there appears to be an increase in interest in the FDR era in pop culture at this time as well, from AMC's "Mad Men" and the "Hobo Code" to John McCain's memories of Pearl Harbor in his RNC Nomination Speech.)

Donald Ritchie's "Electing FDR: The New Deal Campaign of 1932" begins with the rise of Herbert Hoover, self-made man, shortly after the turn of the century. By the end of the First World War, Hoover (then just 43 years old) was entrusted with the Food Administration, and had become a national figure. By 1920, some Washington wags were discussing a potential Hoover-FDR ticket on the Democratic side; Hoover demurred, and eventually declared himself a Republican. (It was interesting to learn that Hoover and Roosevelt were social acquaintances.)

By 1927, Hoover helped organize relief for the Mississippi River flood (the previous 'big one' that was referenced during Hurricane Katrina), and became the GOP nominee in 1928. Facing Al Smith, the New York Governor and first Catholic to head a party ticket, Hoover won with the promise of a "chicken in every pot, a car in every garage."

Four years later, promises of the "Hoover economy" had collapsed into the bitterness of "Hoovervilles" and "Hoover blankets" (newspapers). But he was relieved when FDR won the Democratic nomination in Chicago (holding off a challenge from his former mentor, Al Smith); Hoover felt that FDR would not be a tough opponent.

FDR for his part did not underestimate the incumbent, although Hoover did not campaign vigorously (employing the Rose Garden strategy) until very near the end. Moreover events moved against Hoover: a "Bonus March" of WWI veterans was broken up -- albeit over Hoover's orders for non-violence -- by calvary commanded by Douglas MacArthur (with assistance from Dwight D. Eisenhower). Public opinion -- which incredibly seemed split evenly between FDR and Hoover, although polling was in its infancy -- began to move against the sitting President.

In the end, the country was ready to turn to a fresh leader (although one with a familiar name). FDR tallied 22.8M votes against just 15.7M for Hoover.

The transition, which lasted through March, when FDR was sworn in, was marked by a near assassination (in Miami, when Chicago Mayor Anton Cermak was struck and eventually died; the assassin was convicted and executed within 33 days after the shooting); and increasing tension between former associates Hoover and FDR.

Although the Depression would linger for much of the rest of the 1930s, the country was clearly headed in a new direction. Hoover's reluctant campaigning and bad luck (as evidenced by the Bonus March), combined with the crushing economic climate, made the result a foregone conclusion (in retrospect).

But the backstory -- and the personal relationship between the two combatants -- made the re-telling an interesting one, especially given the current business headlines.

Here's What Mitt Thinks...

We wondered a few days ago what Mitt Romney would think of the current McCain/Palin Campaign efforts to distort Obama's record (and for that matter, to obfuscate some of the weaker points of Palin's record).

[Apparently clip was from earlier in the year; we still don't know what Mitt thinks...apologies for any confusion]

Sunday, September 14, 2008

Boats Against the Tide

While it has been 20 years since Morgan Magic, it has been an unbelievable 30 years since the first public statement of "Bucky Bleeping Dent."

Although born in 1967 with the Impossible Dream, and baptized with the 1975 World Series, it was truly 1978 that forged "Red Sox Nation."

A season that began with so much promise (the Sox were ahead by 8.5 games on the second place Brewers and 14 on the Yankees on July 17th), ended with an injury-riddled disaster of the "Boston Massacre" in early September.

But despite allegations of "choking", the '78 Sox came off of the mat and closed with a 13-2 streak that allowed them to crawl into a first-place tie with the Yankees on the last game of the season, thanks to the final win in a storied (Sox) career by all-time gamer Luis Tiant.

Richard Bradley chronicles the season, and the Playoff Game between the two clubs (played in Fenway on October 2, 1978), in the "The Greatest Game."

Bradley does a great job of reaching many of the Game's protagonists, and putting them in the frame-of-mind that they were during that October afternoon. From the night before at latter-day Sox' Derek Lowe's favorite 'local watering hole' -- Daisy Buchanan's -- to the tension between Reggie Jackson and Billy Martin (replaced at mid-season by Bob Lemon.)

The pivotal figure -- as in ESPN's chronicle of the previous season, "The Bronx is Burning" -- is Thurman Munson (played by Erik Jensen in the TV series). Munson reminds one of the role apparent played by Jason Varitek on the current Sox team, with value well in excess of OPS+ or OBP.

Unfortunately, the text is from time-to-time littered with logical or editing inconsistencies, which take away from the overall narrative. For instance, in the chapter on the Second Inning of the Playoff Game (page 99), Bradley writes:
Yaz had pulled a home run off a pitcher who almost never gave up home runs -- just 12 in 269 innings up to that point, and only one of those home runs had been hit by a left-handed hitter. Players on both sides knew what that meant: Guidry's fastball wasn't up to par.
So far, so good. But then, it is followed by this non sequiter:
In right field, Lou Piniella, playing in place of the defensively challenged Reggie Jackson, took note. If Yaz had been able to homer off a Guidry fastball, the Red Sox might all be pulling the ball a little more than usual. He resolved that when left-handers came to the plate, he would play a few steps closer to the left field line than he normally would. (Emphasis added)
While such editing issues are not fatal, they pull away from the general impression of the work; but all-in-all, a good read, at least (for Sox fans) until the final pages.

The Spring of 1940

With news that Lehman Brothers hangs on the brink of bankruptcy, one is reminded of the words of novelist Graham Greene in The End of the Affair. Writing (with the benefit of hindsight, in 1950), of the Spring of 1940, he wrote:
the spring like a corpse was sweet with the smell of doom.

Thursday, September 11, 2008

Tampa Bay: AL East champs?

By grinding out wins on successive nights in Boston, the Tampa Bay Rays have made a strong case that they might cling to their 2 1/2 game lead in the AL East, despite a tough September schedule, as previously discussed.

(Of course, after the infamous collapse of the Mets a year ago, going 5-12 over the last 17 games, no lead is safe.)

The Rays have hung in despite losing two stars -- Carl Crawford and Evan Longoria -- for most of the past two months to injury.

They are also an inspiration to small-market teams everywhere: they play in the shadows of AL East superpowers Yankees and Red Sox, with a combined $340M payroll.

In fact, with the Red Sox paying Manny Ramirez's salary for the entire year (a condition for the July 31st three-way trade with the Dodgers and Pirates), the Sox pay almost as much for their (two) leftfielders (Ramirez ($19M) and his replacement, Jason Bay ($6M) as the Rays pay their entire team ($43M).

Tampa Bay Rays.

Good for baseball.

Wednesday, September 10, 2008

A Week in Politics

A week ago today, Sarah Palin had yet to speak to the GOP Convention, and the markets were predicting that there was a 15% chance that she would not make it on the ticket through November.

A week later, there's few who thinks she's coming off the ticket, and the market for Obama winning the Presidency has dropped from about 60% likelihood to 49.

A week can be a long time in politics.

Inside Mitt's Mind

The news this morning is that the McCain/Palin campaign has apparently released a new ad accusing Barack Obama as having a single educational legislative accomplishment: that of passing "legislation to teach 'comprehensive sex education' to kindergartners. Learning about sex before learning to read?"

The Obama campaign reacted swiftly, and accused the McCain campaign of being dishonorable:
It is shameful and downright perverse for the McCain campaign to use a bill that was written to protect young children from sexual predators as a recycled and discredited political attack against a father of two young girls - a position that his friend Mitt Romney also holds. Last week, John McCain told Time magazine he couldn't define what honor was. Now we know why.
Smearing an opponent is not honorable, but it's not the first time that McCain has done so in this cycle.

In late January, with his campaign in trouble, Romney was buried in Florida when McCain took a Romney quote about setting timetables in Iraq and twisted its meaning by changing the context. Here's the Romney quote:

[T]he president and Prime Minister al-Maliki have to have a series of timetables and milestones that they speak about. But those shouldn’t be for public pronouncement. You don’t want the enemy to understand how long they have to wait in the weeds until you’re going to be gone. You want to have a series of things you want to see accomplished in terms of the strength of the Iraqi military and the Iraqi police, and the leadership of the Iraqi government.
But during the primary season, McCain seized on the single word "timetable" and claimed that by discussing 'timetables', even in private (with Iraq PM Maliki), Romney was part of the defeatist crowd that was against the Surge:
Governor Romney obviously said there had to be, “timetables,” although they had to be secret because we weren’t going to tell the enemy when we were leaving. I mean, that’s — that’s just a fact. And if we’d have done that, as the Democrats and some Republicans wanted to do, we would’ve lost that surge and al-Qaeda would be celebrating a victory over the United States of America.
To be sure, Romney was in trouble already, having lost Iowa and New Hampshire; but a win in Florida would have put him back on the map, and McCain's distortions helped seal his fate.

At the time, the mainstream media didn't pay much attention to what McCain was engaged in; after all, as George W. Bush famously told McCain himself in 2000 (when McCain was being smeared for his adopted daughter from Bangladesh), it's just 'politics.'

McCain's 2000 experience may have changed him, like Richard Nixon's experience in Illinois and Texas did in 1960. When the "new Nixon" got another change -- in 1968 and 1972 -- he left nothing to chance.

Wonder what Mitt thinks.

Shades of 1988 (Part I)

While we march towards the 30th(!) anniversary of the seminal modern-day Red Sox/Yankees game (the 2 October 1978 one-game playoff, of which more later), this year also marks the 20th anniversary of 'Morgan Magic.'

John McNamara was a year-and-a-half-removed from Game Six in Shea Stadium, but a disappointed 78-win season in 1987 (collective hang-over from the World Series, personified by Bob Stanley's 4-15, 5.07 ERA, 1.572 WHIP campaign.)

With the 1988 edition stuck in mediocrity (43-42), then-GM Lou Gorman fired McNamara, and gave the helm to local son (and Sox-lifer) Morgan while Gorman interviewed 'real' managers to take over. But when the Sox won 12 in a row, and 19 of 20, the former snow-plow driver dropped the "interim" label.

The 1988 team won the division, but faced the Canseco/McGuire-fueled A'steam in the ALCS.

Morgan led the team to another title in 1990, and again the Sox were swept by the Bash Brothers; but the manager also known as "the other Joe Morgan" still brings a smile to Red Sox Nation.