Showing posts with label political appointees. Show all posts
Showing posts with label political appointees. Show all posts

Thursday, June 22, 2017

Strategic gerontocracy: Why nondemocratic systems produce older leaders

Strategic gerontocracy: Why nondemocratic systems produce older leaders. By Raul Magni Berton & Sophie Panel
Public Choice, June 2017, Pages 409–427. https://link.springer.com/article/10.1007/s11127-017-0449-5

Abstract: One characteristic of nondemocratic regimes is that leaders cannot be removed from office by legal means: in most authoritarian regimes, no institutional way of dismissing incompetent rulers is available, and overthrowing them is costly. Anticipating this, people who have a say in the selection of the leader are likely to resort to alternative strategies to limit his tenure. In this paper, we examine empirically the “strategic gerontocracy” hypothesis: Because selecting aging leaders is a convenient way of reducing their expected time in office, gerontocracy will become a likely outcome whenever leaders are expected to rule for life. We test this hypothesis using data on political leaders for the period from 1960 to 2008, and find that dictators have shorter life expectancies than democrats at the time they take office. We also observe variations in the life expectancies of dictators: those who are selected by consent are on average closer to death than those who seize power in an irregular manner. This finding suggests that gerontocracy is a consequence of the choice process, since it disappears when dictators self-select into leadership positions.

When the appeal of a dominant leader is greater than a prestige leader

When the appeal of a dominant leader is greater than a prestige leader. By Hemant Kakkar & Niro Sivanathan
Proceedings of the National Academy of Sciences, http://www.pnas.org/content/early/2017/06/06/1617711114.full

Abstract: Across the globe we witness the rise of populist authoritarian leaders who are overbearing in their narrative, aggressive in behavior, and often exhibit questionable moral character. Drawing on evolutionary theory of leadership emergence, in which dominance and prestige are seen as dual routes to leadership, we provide a situational and psychological account for when and why dominant leaders are preferred over other respected and admired candidates. We test our hypothesis using three studies, encompassing more than 140,000 participants, across 69 countries and spanning the past two decades. We find robust support for our hypothesis that under a situational threat of economic uncertainty (as exemplified by the poverty rate, the housing vacancy rate, and the unemployment rate) people escalate their support for dominant leaders. Further, we find that this phenomenon is mediated by participants’ psychological sense of a lack of personal control. Together, these results provide large-scale, globally representative evidence for the structural and psychological antecedents that increase the preference for dominant leaders over their prestigious counterparts.

Monday, June 12, 2017

Why do some societies fail to adopt more efficient institutions in response to changing economic conditions?

The Ideological Roots of Institutional Change, by Murat Iyigun & Jared Rubin
University of Colorado Working Paper, April 2017
Abstract:Why do some societies fail to adopt more efficient institutions in response to changing economic conditions? And why do such conditions sometimes generate ideological backlashes and at other times lead to transformative sociopolitical movements? We propose an explanation that highlights the interplay - or lack thereof - between new technologies, ideologies, and institutions. When new technologies emerge, uncertainty results from a lack of understanding how the technology will fit with prevailing ideologies and institutions. This uncertainty discourages investment in institutions and the cultural capital necessary to take advantage of new technologies. Accordingly, increased uncertainty during times of rapid technological change may generate an ideological backlash that puts a higher premium on traditional values. We apply the theory to numerous historical episodes, including Ottoman reform initiatives, the Japanese Tokugawa reforms and Meiji Restoration, and the Tongzhi Restoration in Qing China.

Sunday, June 4, 2017

Propaganda can be effective at changing the behavior of all citizens even if most do not believe it

Propaganda and credulity, by Andrew T. Little. In
Games and Economic Behavior,Volume 102, March 2017, Pages 224–232
http://www.sciencedirect.com/science/article/pii/S0899825616301476

Highlights
•   Propaganda can be effective at changing the behavior of all citizens even if most do not believe it.
•   This effect is particularly strong when citizens care a lot about behaving in a similar manner as others.
•    However, the government picks less propaganda when it is more effective.

Abstract: I develop a theory of propaganda which affects mass behavior without necessarily affecting mass beliefs. A group of citizens observe a signal of their government's performance, which is upwardly inflated by propaganda. Citizens want to support the government if it performs well and if others are supportive (i.e., to coordinate). Some citizens are unaware of the propaganda (“credulous”). Because of the coordination motive, the non-credulous still respond to propaganda, and when the coordination motive dominates they perfectly mimic the actions of the credulous. So, all can act as if they believe the government's lies even though most do not. The government benefits from this responsiveness to manipulation since it leads to a more compliant citizenry, but uses more propaganda precisely when citizens are less responsive.

JEL classification: D83

Keywords> Political economy; Propaganda; Authoritarian politics

Saturday, June 3, 2017

Political Persecutions and Social Capital: Evidence from Imperial China

Autocratic Rule and Social Capital: Evidence from Imperial China
Melanie Meng Xue, Mark  Koyama
November 30, 2016
GMU Working Paper in Economics No. 16-50
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2856803


Abstract:     This paper studies the consequences of autocratic rule for social capital in the context of imperial China. Between 1660-1788, individuals were persecuted if they were suspected of subversive attitudes towards the autocratic ruler.   Using a difference-in-differences approach, our main finding is  that these persecutions led to an average decline of 38% in the number of charitable organizations in each subsequent decade.

To investigate the long-run effect of persecutions, we examine the impact that they had on the provision of local public goods.  During this period,  local public goods, such as basic education, relied primarily on voluntary contributions and local cooperation.   We show that persecutions are associated with lower provision of basic education suggesting that they permanently reduced social capital. This is consistent with what we  find in modern survey data:  persecutions left a legacy of mistrust and political apathy.

Number of Pages in PDF File: 83

Keywords: Social Capital, Institutions, Autocratic Rule, Persecutions, China

Sabotage occurs more often when Green Party candidates fail to win even minor offices

The political roots of domestic environmental sabotage
Benjamin Farrer & Graig Klein
Journal of Elections, Public Opinion and Parties,

Volume 27, 2017 - Issue 2

http://www.tandfonline.com/doi/abs/10.1080/17457289.2016.1247846

Abstract: In this paper, we demonstrate that when environmentalist niche parties compete in a given constituency over a number of elections, but continually fail to win seats, then environmental sabotage becomes more frequent in that constituency. When mainstream tactics fail, radical tactics are used more frequently. Using a new data-set on the success rates of all Green Party candidates in US states, we show that environmental sabotage occurs more often when Green Party candidates fail to win even minor offices. This is true even when we control for other political expressions of environmentalism, such as interest group activity, and when we define ‘success’ through votes not seats. We discuss the implications of this for environmental politics, for social movements and democracy, and for political violence in the US.

Review of Vijay Joshi's India’s Long Road: The Search for Prosperity

India’s long road to prosperity, by Martin Wolf
Martin Wolf is impressed by an analysis of what the world’s largest democracy must do in order to thriveFinancial Times, May 24, 2017
https://www.ft.com/content/d5cf8bb0-3fc3-11e7-9d56-25f963e998b2

India could do far better. That, in a sentence, is the conclusion of Vijay Joshi’s superb book. Joshi is an Indian economist who has spent most of his professional life at Oxford university. In this penetrating account of the past and present of Indian economic development, he casts a bright light on the prospects ahead. If India’s aim is to become a high-income country in the next generation, its economic, social and political performance needs to improve dramatically.

The good news is that there is room for improvement on many fronts. The bad news is that the obstacles to the needed improvement are huge. Worse, many emanate from the failures of the state and the political processes that guide it. Yet, as Joshi also notes, “The two fixed points in the socio-political setting of the Indian state’s development policies are that the country is a democracy, and an extremely diverse society.” The challenge is to improve performance within the constraints of these realities.

The success of Indian development matters, for at least three reasons: India will soon be the most populous country in the world; it is already far and away the largest democracy; and, above all, despite progress in the last three decades, between 270m and 360m Indians still lived in dire poverty (on slightly different definitions) in 2011 (that is, between 22 and 30 per cent of the population). If extreme poverty is to be eliminated from the world, it must be eliminated in India.

While the focus of India’s Long Road is on the economy, its analysis is appropriately comprehensive. It considers the post-independence growth record, the failure to create remunerative employment, the excessive role of publicly owned enterprises, the poor quality of Indian infrastructure and the inadequacy of environmental regulation. The book also analyses the successes and failures of macroeconomic management, the appalling quality of government-provided education and healthcare, the need for a better safety net for the poor, the long-term decay of the state, the prevalence of corruption and the role of India in the world economy.

In covering all these issues, Joshi combines enthusiastic engagement with the detachment of a scholar who has passed much of his life abroad. No better guide to India’s contemporary economy exists.

Over the past 70 years, India’s growth has shown two marked accelerations. The first followed independence in 1947. The second followed the economic liberalisation that began in the 1980s and accelerated dramatically after the balance of payments crisis of 1991. In the first period, growth averaged 3.5 per cent a year. In the second, it rose to 6 per cent (4 per cent per head). Unfortunately, after a further acceleration in the first decade of the 2000s, growth has slowed once again. The principal explanation for this recent slowdown is a marked weakening of investment by an over-indebted private sector.

                    "Joshi argues that India could provide a basic income to all by diverting resources wasted on subsidies"

So what should be the goal for the decades ahead? Joshi describes it simply as “rapid, inclusive, stable, and sustainable growth . . . within a political framework of liberal democracy”. More precisely, if incomes per head could grow at 7 per cent a year, India would achieve high-income status, at the level of Portugal, within a quarter of a century.

Only three economies have achieved something close to this in the past: Taiwan, South Korea and China. It represents an enormous challenge that cannot be met with the current “partial reform model”. The basic flaw of that model, argues Joshi, “is a failure to put the role of the state, and the relation between the state, the market, and the private sector, on the right footing”. The state, in brief, does what it does not need to do and fails to do what it does need to do.

It is no longer enough for the state merely to get out of the way, important though that still is in crucial areas. Among these is the labour market, whose huge distortions and inefficiencies have turned the demographic dividend into a demographic disaster.

Thus, in the 10 years from 1999 to 2009, India’s workforce increased by 63m. “Of these, 44 million joined the unorganized sector, 22 million became informal workers in the organized sector, and the number of formal workers in the organized sector fell by 3 million.” This is a social catastrophe. It is due not only to labour-market distortions, but to a host of constraints on the creation, operation and, not least, closure of organised and large-scale businesses.

Yet India also needs an effective state able to supply the public goods, public services and competent regulation on which an efficient economy depends. Unfortunately, that is not what now exists. All international surveys give India a very low rank for the efficiency and honesty of the state and the ease of doing business. Joshi argues that while the economy is more dynamic and the quality of policy has indeed improved since the 1980s, the quality of the state has deteriorated in many respects.

Among the many failures is the waste of state resources on inefficient subsidies that, though often given in the name of the poor, actually go to the better off. Indeed, one of the most original and persuasive aspects of the book is the argument that it would in principle be possible to provide a basic income to all Indians sufficient to lift everybody out of extreme poverty merely by diverting resources wasted on grotesquely costly subsidies. Yet, to take just one example, state governments continue to bribe farmers with free power, at the expense of a reliable electricity supply.

Will prime minister Narendra Modi be the new broom that sweeps all these cobwebs away? Alas no. His government’s performance is “mixed at best”. It has some achievements. But it has shown insufficient energy in tackling both the immediate problems of inadequate private investment, excessive debt and feeble banks, and the longer-term problems of dreadful education, lousy healthcare, weak infrastructure, corruption, regulatory incompetence, excessive interference and government waste.

A great opportunity for radically improved performance is being missed. This is not bad just for the Indian economy. There is a real danger that if the economy fails to perform as needed and desired, the governing Bharatiya Janata party will find itself increasingly attracted to its “dark side” of communal and caste division. That way lies not just economic failure, but possibly the destabilisation of Indian democracy, one of the great political achievements of the post-second world war era.

Those who care about the future of this remarkable country and indeed the future of democracy itself must hope that Modi gets this right. If they want to understand what he needs to do and why, they should first read this book.

India’s Long Road: The Search for Prosperity, by Vijay Joshi, Oxford University Press, RRP£22.99, 360 pages
Martin Wolf is the FT’s chief economics commentator

Friday, June 2, 2017

Alemania reinventa la crisis energética. Por Holman W. Jenkins, Jr.


Alemania reinventa la crisis energética. Por Holman W. Jenkins, Jr.
http://online.wsj.com/news/articles/SB100014240527023044482045791857 20802195590
Wall Street Journal, Nov. 8, 2013 6:28 p.m. ET

ObamaCare no es el único tren en camino de descarrilar que tenemos  ahora. Como Mao apremiando a los campesinos para que fundieran sus cacharros, sartenes y útiles de labranza para convertir a China en un coloso  del acero de la noche a la mañana, Alemania repartía alegremente subsidios para alentar a los ciudadanos y granjeros a instalar  paneles solares y molinos de viento para luego vender la energía  resultante a las compañías eléctricas a precios inflados. El éxito  —Alemania obtiene un 25% de su energía de las renovables— ha  resultado ser un desastre.

Mientras los alemanes se apresuran a hacerse con su dinero fácil, la  producción de dióxido de carbono ha aumentado, no disminuido, porque las compañías, privadas de capital, han pasado a quemar carbón  americano barato para proveer de la necesaria energía cuando el  viento y el sol nos fallan.

Debido a que sol y viento son intermitentes y la red eléctrica está  pobremente preparada para acomodar estas fuentes, los apagones y las  reducciones de suministro amenazan en este invierno.

Como las facturas las pagan hogares y empresas, los precios de la  electricidad son el triple que en los EE UU. Un pánico apremiante es el del empleo, ya que industrias de gran aportación se dirigen a EE UU  para aprovechar la energía barata que ha producido la revolución de  las arenas bituminosas y los esquistos. El máximo responsable  energético de Europa habla ya francamente de la  "desindustrialización de Alemania".

En UK, donde la política pública ha sido casi tan generosa con las  renovables, "Está bien ser muy, muy verde, pero no si estás  interesado en la fabricación", según queja de un prominente CEO.

La gran virtud de la democracia es que no sigue con ciertos planes  hasta el precipicio, pero los mecanismos normales de ajuste están  agarrotados por el hecho de que el desastre energético de Europa  implica al entero espectro político.

Ed Miliband, líder del Partido Laborista de UK, ha fijado el tema de  las elecciones del próximo año cuando prometió recientemente  congelar los precios de la energía si se le elegía. Pero los  laboristas no van a abandonar los subsidios solares y eólicos que  crearon ellos mismos. Quieren dejarlos grabados en piedra, pasando  los costes a las empresas. En Alemania, la conservadora Angela  Merkel se adhirió completamente a las posiciones económicas sobre  energía de la oposición tras Fukushima, dejando a los electores  alarmados sobre los precios de la energía sin lugar al que tornar en  las elecciones de septiembre excepto a Angela Merkel, quien de forma  vaga mostró alguna moderación sobre la energiewende (revolución  energética) que lanzó y continúa liderando.

Un infrecuente destello de raciocinio ha partido en realidad del  probable socio de coalición de Angela Merkel, el SPD, autor de la  ley original sobre energías verdes, cuyo portavoz dice ahora:  "Necesitamos asegurar que la energía renovable es asequible. Y  necesitamos terminar con la idea de que podemos salirnos  simultáneamente de nucleares y el carbón. No va a funcionar."

Es tentador asumir que los políticos europeos eran feligreses de la  iglesia del calentamiento global. Pero más importante es su apego a  la ideología del agotamiento de recursos, que les convenció de haber  elegido un ganador en esta idea porque estaba garantizado que los  precios de los combustibles fósiles harían parecer baratos a los de  la energía verde.

"Cuanta más gente consuma petróleo y carbón, más subirá el precio,  pero cuanta más gente consuma energías renovables, más bajará su  precio", explicó el asesor energético de Angela Merkel.

He aquí una idea que parece ser impermeable a la experiencia y que  es parte del bagaje de todo político que pudiera ser elegido en  nuestro mundo. "Es absolutamente cierto que la demanda [de energías  fósiles] subirá mucho más rápido que el suministro. Ese es un  hecho", explicó el presidente Obama en 2011. Los EE UU "no pueden  permitirse apostar nuestra prosperidad a largo plazo a un recurso  que con el tiempo se agotará."

El Sr. Obama mencionó los fósiles no convencionales exactamente una  vez en su discurso — y solo para decir que también se agotarían.

Si todo esto fuera cierto, Europa no habría llegado a sus presentes  trabajos. Esta es la realidad: la revolución de los fósiles no  convencionales es menos revolucionaria de lo que parece. Ha sacudido  los errores comunes solo porque ha sucedido en las mismas narices de  los americanos, en áreas pobladas en que se asumía que los  "recursos" se habían extraído y transportado hace mucho.

De hecho, los depósitos de hidrocarburos que hay en el mundo son  verdaderamente vastos, incluyendo entre ellos cantidades inimaginables de hidratos de metano . El desafío es el tecnológico y económico de buscar el acceso a un determinado recurso  a un precio asequible — un desafío desde que se usaban trapos para  empaparlos en petróleo de manantiales naturales. Durante ciento  cincuenta años, el precio del barril de petróleo ha fluctuado entre  $10 y $100 (en dólares de 2011), un rango suficiente para encontrar  nuevas reservas cada vez que se quería requerían con objeto de  mantener a los hidrocarburos como fuente de energía de precio  competitivo.

La crisis energética europea es muy parecida a la nuestra de hace 40  años — autoinfligida. El sueño de Europa dejó de ser sostenible al  minuto de que los precios de la energía empezaran a caer en un  competidor comercial importante como los EE UU. LA gran pregunta ahora es cuán lejos irá la secudida política cuando toda la élite está implicada en un insatisfactorio experimento energético, que inevitablemente se ha visto envuelta en el desencanto del público con otro projecto fracasado de la élite, la Unión Europea.

Va a ser fascinante también la suerte de los shales europeos. En Europa, el gobierno, no los propietarios, controla y se beneficia de los recursos minerales, creando la política de suma zero en lo referente a recusos que han hecho al Oriente Medio un parangón de estabilidad y progreso. ¿Y el calentamiento global? Por suerte la respuesta es fácil. Los votantes europeos se van a acercar al punto en que están los americanos, dándose cuenta de que abjurar de la energía barata no hará nada por los niveles de CO2 (y aun menos por el clima) mientras otros no abjuren de la energía barata también.


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Germany Reinvents the Energy Crisis
A love affair with renewables brings high prices, potential  blackouts and worries about 'deindustrialization.'
By Holman W. Jenkins, Jr.
http://online.wsj.com/news/articles/SB100014240527023044482045791857 20802195590
Wall Street Journal, Nov. 8, 2013 6:28 p.m. ET

ObamaCare isn't the only policy train wreck in progress. Like Mao  urging peasants to melt down their pots, pans and farm tools to turn  China into a steel-producing superpower overnight, Germany dished  out subsidies to encourage homeowners and farmers to install solar  panels and windmills and sell energy back to the power company at  inflated prices. Success—Germany now gets 25% of its power from  renewables—has turned out to be a disaster.

As Germans rush to grab this easy money, carbon dioxide output has  risen, not fallen, because money-strapped utilities have switched to  burning cheap American coal to provide the necessary standby power  when wind and sun fail.

Because the sun and wind are intermittent and the power grid is  poorly arranged to accommodate them, brownouts and blackouts  threaten this winter.

Because the bills are paid by households and businesses, electricity  rates are triple those in the United States. An immediate panic is  jobs, as prized industries head to the U.S. for cheaper energy  unleashed by the shale revolution. Europe's top energy official now  speaks frankly of the "deindustrialization in Germany."

In Britain, where policy has been nearly as generous to renewables,  "It's fine being very, very green, but not if you're interested in  manufacturing," complains a prominent CEO.
Enlarge Image

Wind turbines stand behind a solar power park near Werder, Germany.  Getty Images

Democracy's great virtue is that it doesn't follow schemes off a  cliff, but the normal adjustment mechanisms are hampered by the fact  that Europe's energy disaster implicates the entire political  spectrum.

Ed Miliband, leader of Britain's Labour Party, set the theme for  next year's British election when he recently promised to freeze  energy prices if elected. But Labour isn't about to disown the solar  and wind subsidies it created. It wants to soldier on, shifting the  cost to business. In Germany, conservative Angela Merkel embraced  the opposition's energy economics wholesale after Fukushima, leaving  voters who are alarmed about energy prices no place to turn in  September's election except Angela Merkel, who vaguely indicated  some moderation of the energiewende (energy revolution) she launched  and continues to champion.

An unwonted glimmer of reason has actually come from Mrs. Merkel's  likely Social Democrat coalition partner, author of Germany's  original green energy law, whose spokesman now says: "We need to  ensure that renewable energy is affordable. And we need to put an  end to the idea that we can pull out of nuclear and coal  simultaneously. This won't work."

It's tempting to assume Europe's politicians were praying in the  church of global warming. But more important is their subscription  to resource-depletion ideology, which convinced them they'd picked a  political winner because rising fossil fuel prices were guaranteed  to make green energy look cheap in comparison.

"When more people consume oil and coal, the price will go up, but  when more people consume renewable energy, the price of it will go  down," explained Ms. Merkel's top energy adviser.

We have here an idea seemingly impervious to experience and part of  the mental baggage of every politician likely to get elected in our  world. "It is absolutely certain that [fossil energy] demand will go  up a lot faster than supply. It's just a fact," President Obama  explained in 2011. The U.S. "cannot afford to bet our long-term  prosperity on a resource that will eventually run out."

Mr. Obama mentioned shale exactly once in his speech—and only to say  shale would run out too.

If all this were true, Europe wouldn't be in its present fix. Here's  the real truth: The shale revolution is less revolutionary than it  seems. It has shocked settled misconceptions only because it  happened under the noses of Americans, in populated areas where the  casual assumption was that "resources" would long ago have been dug  out and carted away.

In fact, the world's store of fossil hydrocarbons is truly vast,  including almost unimaginable quantities of methane hydrates. The  challenge is the technological and economic one of getting access to  a given resource at an affordable price—a challenge ever since men  used rags to soak up oil from natural seeps. For 150 years, the  price of a barrel of oil has fluctuated between $10 and $100 (in  2011 dollars), a range that has been sufficient to call forth new  reserves and feedstocks whenever needed to maintain hydrocarbons as  a source of competitively priced energy.

Europe's energy crisis is a lot like ours of 40 years ago—self- inflicted. Europe's dream was untenable the minute energy prices  began falling in a major trade competitor like the United States.  The big question now is how far will the political upheaval go when  an entire elite is implicated in an unsatisfactory energy  experiment, which inevitably has become wrapped up in public  disappointment with another failed elite project, the European Union  itself.

Fascinating too will be the fate of Europe's shale. In Europe,  government, not landowners, controls and benefits from mineral  resources, creating the zero-sum resource politics that have made  the Mideast a paragon of stability and civil progress. What about  global warming? At least that answer is easier. European voters are  coming out where Americans have, realizing that foreswearing cheap  energy will do nothing for CO2 levels (and even less for climate) as  long as others aren't foreswearing cheap energy too.

Sunday, May 7, 2017

Macroprudential Liquidity Stress Testing in FSAPs for Systemically Important Financial Systems

Author/Editor: Andreas A. Jobst ; Christian Schmieder ; Li Lian Ong

http://www.imf.org/en/Publications/WP/Issues/2017/05/01/Macroprudential-Liquidity-Stress-Testing-in-FSAPs-for-Systemically-Important-Financial-44873?cid=em-COM-123-35149

Summary:Bank liquidity stress testing, which has become de rigueur following the costly lessons of the global financial crisis, remains underdeveloped compared to solvency stress testing. The ability to adequately identify, model and assess the impact of liquidity shocks, which are infrequent but can have a severe impact on affected banks and financial systems, is complicated not only by data limitations but also by interactions among multiple factors. This paper provides a conceptual overview of liquidity stress testing approaches for banks and discusses their implementation by IMF staff in the Financial Sector Assessment Program (FSAP) for countries with systemically important financial sectors over the last six years.

Series:Working Paper No. 17/102
Publication Date: May 1, 2017
ISBN/ISSN: 9781475597240/1018-5941
Stock No: WPIEA2017102
Pages: 56

Tuesday, December 6, 2016

My Unhappy Life as a Climate Heretic. By Roger Pielke Jr.

My Unhappy Life as a Climate Heretic. By Roger Pielke Jr.
My research was attacked by thought police in journalism, activist groups funded by billionaires and even the White House.http://www.wsj.com/articles/my-unhappy-life-as-a-climate-heretic-1480723518
Updated Dec. 2, 2016 7:04 p.m. ET

Much to my surprise, I showed up in the WikiLeaks releases before the election. In a 2014 email, a staffer at the Center for American Progress, founded by John Podesta in 2003, took credit for a campaign to have me eliminated as a writer for Nate Silver’s FiveThirtyEight website. In the email, the editor of the think tank’s climate blog bragged to one of its billionaire donors, Tom Steyer: “I think it’s fair [to] say that, without Climate Progress, Pielke would still be writing on climate change for 538.”

WikiLeaks provides a window into a world I’ve seen up close for decades: the debate over what to do about climate change, and the role of science in that argument. Although it is too soon to tell how the Trump administration will engage the scientific community, my long experience shows what can happen when politicians and media turn against inconvenient research—which we’ve seen under Republican and Democratic presidents.

I understand why Mr. Podesta—most recently Hillary Clinton’s campaign chairman—wanted to drive me out of the climate-change discussion. When substantively countering an academic’s research proves difficult, other techniques are needed to banish it. That is how politics sometimes works, and professors need to understand this if we want to participate in that arena.

More troubling is the degree to which journalists and other academics joined the campaign against me. What sort of responsibility do scientists and the media have to defend the ability to share research, on any subject, that might be inconvenient to political interests—even our own?

I believe climate change is real and that human emissions of greenhouse gases risk justifying action, including a carbon tax. But my research led me to a conclusion that many climate campaigners find unacceptable: There is scant evidence to indicate that hurricanes, floods, tornadoes or drought have become more frequent or intense in the U.S. or globally. In fact we are in an era of good fortune when it comes to extreme weather. This is a topic I’ve studied and published on as much as anyone over two decades. My conclusion might be wrong, but I think I’ve earned the right to share this research without risk to my career.

Instead, my research was under constant attack for years by activists, journalists and politicians. In 2011 writers in the journal Foreign Policy signaled that some accused me of being a “climate-change denier.” I earned the title, the authors explained, by “questioning certain graphs presented in IPCC reports.” That an academic who raised questions about the Intergovernmental Panel on Climate Change in an area of his expertise was tarred as a denier reveals the groupthink at work.

Yet I was right to question the IPCC’s 2007 report, which included a graph purporting to show that disaster costs were rising due to global temperature increases. The graph was later revealed to have been based on invented and inaccurate information, as I documented in my book “The Climate Fix.” The insurance industry scientist Robert-Muir Wood of Risk Management Solutions had smuggled the graph into the IPCC report. He explained in a public debate with me in London in 2010 that he had included the graph and misreferenced it because he expected future research to show a relationship between increasing disaster costs and rising temperatures.

When his research was eventually published in 2008, well after the IPCC report, it concluded the opposite: “We find insufficient evidence to claim a statistical relationship between global temperature increase and normalized catastrophe losses.” Whoops.

The IPCC never acknowledged the snafu, but subsequent reports got the science right: There is not a strong basis for connecting weather disasters with human-caused climate change.

Yes, storms and other extremes still occur, with devastating human consequences, but history shows they could be far worse. No Category 3, 4 or 5 hurricane has made landfall in the U.S. since Hurricane Wilma in 2005, by far the longest such period on record. This means that cumulative economic damage from hurricanes over the past decade is some $70 billion less than the long-term average would lead us to expect, based on my research with colleagues. This is good news, and it should be OK to say so. Yet in today’s hyper-partisan climate debate, every instance of extreme weather becomes a political talking point.

For a time I called out politicians and reporters who went beyond what science can support, but some journalists won’t hear of this. In 2011 and 2012, I pointed out on my blog and social media that the lead climate reporter at the New York Times,Justin Gillis, had mischaracterized the relationship of climate change and food shortages, and the relationship of climate change and disasters. His reporting wasn’t consistent with most expert views, or the evidence. In response he promptly blocked me from his Twitter feed. Other reporters did the same.

In August this year on Twitter, I criticized poor reporting on the website Mashable about a supposed coming hurricane apocalypse—including a bad misquote of me in the cartoon role of climate skeptic. (The misquote was later removed.) The publication’s lead science editor, Andrew Freedman, helpfully explained via Twitter that this sort of behavior “is why you’re on many reporters’ ‘do not call’ lists despite your expertise.”

I didn’t know reporters had such lists. But I get it. No one likes being told that he misreported scientific research, especially on climate change. Some believe that connecting extreme weather with greenhouse gases helps to advance the cause of climate policy. Plus, bad news gets clicks.

Yet more is going on here than thin-skinned reporters responding petulantly to a vocal professor. In 2015 I was quoted in the Los Angeles Times, by Pulitzer Prize-winning reporter Paige St. John, making the rather obvious point that politicians use the weather-of-the-moment to make the case for action on climate change, even if the scientific basis is thin or contested.

Ms. St. John was pilloried by her peers in the media. Shortly thereafter, she emailed me what she had learned: “You should come with a warning label: Quoting Roger Pielke will bring a hailstorm down on your work from the London Guardian, Mother Jones, and Media Matters.”

Or look at the journalists who helped push me out of FiveThirtyEight. My first article there, in 2014, was based on the consensus of the IPCC and peer-reviewed research. I pointed out that the global cost of disasters was increasing at a rate slower than GDP growth, which is very good news. Disasters still occur, but their economic and human effect is smaller than in the past. It’s not terribly complicated.

That article prompted an intense media campaign to have me fired. Writers at Slate, Salon, the New Republic, the New York Times, the Guardian and others piled on.

In March of 2014, FiveThirtyEight editor Mike Wilson demoted me from staff writer to freelancer. A few months later I chose to leave the site after it became clear it wouldn’t publish me. The mob celebrated. ClimateTruth.org, founded by former Center for American Progress staffer Brad Johnson, and advised by Penn State’s Michael Mann, called my departure a “victory for climate truth.” The Center for American Progress promised its donor Mr. Steyer more of the same.

Yet the climate thought police still weren’t done. In 2013 committees in the House and Senate invited me to a several hearings to summarize the science on disasters and climate change. As a professor at a public university, I was happy to do so. My testimony was strong, and it was well aligned with the conclusions of the IPCC and the U.S. government’s climate-science program. Those conclusions indicate no overall increasing trend in hurricanes, floods, tornadoes or droughts—in the U.S. or globally.

In early 2014, not long after I appeared before Congress, President Obama’s science adviser John Holdren testified before the same Senate Environment and Public Works Committee. He was asked about his public statements that appeared to contradict the scientific consensus on extreme weather events that I had earlier presented. Mr. Holdren responded with the all-too-common approach of attacking the messenger, telling the senators incorrectly that my views were “not representative of the mainstream scientific opinion.” Mr. Holdren followed up by posting a strange essay, of nearly 3,000 words, on the White House website under the heading, “An Analysis of Statements by Roger Pielke Jr.,” where it remains today.

I suppose it is a distinction of a sort to be singled out in this manner by the president’s science adviser. Yet Mr. Holdren’s screed reads more like a dashed-off blog post from the nutty wings of the online climate debate, chock-full of errors and misstatements.

But when the White House puts a target on your back on its website, people notice. Almost a year later Mr. Holdren’s missive was the basis for an investigation of me by Arizona Rep. Raul Grijalva, the ranking Democrat on the House Natural Resources Committee. Rep. Grijalva explained in a letter to my university’s president that I was being investigated because Mr. Holdren had “highlighted what he believes were serious misstatements by Prof. Pielke of the scientific consensus on climate change.” He made the letter public.

The “investigation” turned out to be a farce. In the letter, Rep. Grijalva suggested that I—and six other academics with apparently heretical views—might be on the payroll of Exxon Mobil (or perhaps the Illuminati, I forget). He asked for records detailing my research funding, emails and so on. After some well-deserved criticism from the American Meteorological Society and the American Geophysical Union, Rep. Grijalva deleted the letter from his website. The University of Colorado complied with Rep. Grijalva’s request and responded that I have never received funding from fossil-fuel companies. My heretical views can be traced to research support from the U.S. government.

But the damage to my reputation had been done, and perhaps that was the point. Studying and engaging on climate change had become decidedly less fun. So I started researching and teaching other topics and have found the change in direction refreshing. Don’t worry about me: I have tenure and supportive campus leaders and regents. No one is trying to get me fired for my new scholarly pursuits.

But the lesson is that a lone academic is no match for billionaires, well-funded advocacy groups, the media, Congress and the White House. If academics—in any subject—are to play a meaningful role in public debate, the country will have to do a better job supporting good-faith researchers, even when their results are unwelcome. This goes for Republicans and Democrats alike, and to the administration of President-elect Trump.

Academics and the media in particular should support viewpoint diversity instead of serving as the handmaidens of political expediency by trying to exclude voices or damage reputations and careers. If academics and the media won’t support open debate, who will?

---
Mr. Pielke is a professor and director of the Sports Governance Center at the University of Colorado, Boulder. His most recent book is “The Edge: The Wars Against Cheating and Corruption in the Cutthroat World of Elite Sports” (Roaring Forties Press, 2016).

Sunday, April 17, 2016

The Great Recession Blame Game - Banks took the heat, but it was Washington that propped up subprime debt and then stymied recovery

The Great Recession Blame Game

Banks took the heat, but it was Washington that propped up subprime debt and then stymied recovery.

By Phil Gramm and Michael Solon
WSJ, April 15, 2016 6:09 p.m. ET

When the subprime crisis broke in the 2008 presidential election year, there was little chance for a serious discussion of its root causes. Candidate Barack Obama weaponized the crisis by blaming greedy bankers, unleashed when financial regulations were “simply dismantled.” He would go on to blame them for taking “huge, reckless risks in pursuit of quick profits and massive bonuses.”
That mistaken diagnosis was the justification for the Dodd-Frank Act and the stifling regulations that shackled the financial system, stunted the recovery and diminished the American dream.

In fact, when the crisis struck, banks were better capitalized and less leveraged than they had been in the previous 30 years. The FDIC’s reported capital-to-asset ratio for insured commercial banks in 2007 was 10.2%—76% higher than it was in 1978. Federal Reserve data on all insured financial institutions show the capital-to-asset ratio was 10.3% in 2007, almost double its 1984 level, and the biggest banks doubled their capitalization ratios. On Sept. 30, 2008, the month Lehman failed, the FDIC found that 98% of all FDIC institutions with 99% of all bank assets were “well capitalized,” and only 43 smaller institutions were undercapitalized.

In addition, U.S. banks were by far the best-capitalized banks in the world. While the collapse of 31 million subprime mortgages fractured financial capital, the banking system in the 30 years before 2007 would have fared even worse under such massive stress.

Virtually all of the undercapitalization, overleveraging and “reckless risks” flowed from government policies and institutions. Federal regulators followed international banking standards that treated most subprime-mortgage-backed securities as low-risk, with lower capital requirements that gave banks the incentive to hold them. Government quotas forced Fannie Mae and Freddie Mac to hold ever larger volumes of subprime mortgages, and politicians rolled the dice by letting them operate with a leverage ratio of 75 to one—compared with Lehman’s leverage ratio of 29 to one.

Regulators also eroded the safety of the financial system by pressuring banks to make subprime loans in order to increase homeownership. After eight years of vilification and government extortion of bank assets, often for carrying out government mandates, it is increasingly clear that banks were more scapegoats than villains in the subprime crisis.

Similarly, the charge that banks had been deregulated before the crisis is a myth. From 1980 to 2007 four major banking laws—the Competitive Equality Banking Act (1987), the Financial Institutions, Reform, Recovery and Enforcement Act (1989), the Federal Deposit Insurance Corporation Improvement Act (1991), and Sarbanes-Oxley (2002)—undeniably increased bank regulations and reporting requirements. The charge that financial regulation had been dismantled rests almost solely on the disputed effects of the 1999 Gramm-Leach-Bliley Act (GLBA).

Prior to GLBA, the decades-old Glass-Steagall Act prohibited deposit-taking, commercial banks from engaging in securities trading. GLBA, which was signed into law by President Bill Clinton, allowed highly regulated financial-services holding companies to compete in banking, insurance and the securities business. But each activity was still required to operate separately and remained subject to the regulations and capital requirements that existed before GLBA. A bank operating within a holding company was still subject to Glass-Steagall (which was not repealed by GLBA)—but Glass-Steagall never banned banks from holding mortgages or mortgage-backed securities in the first place.

GLBA loosened federal regulations only in the narrow sense that it promoted more competition across financial services and lowered prices. When he signed the law, President Clinton said that “removal of barriers to competition will enhance the stability of our financial system, diversify their product offerings and thus their sources of revenue.” The financial crisis proved his point. Financial institutions that had used GLBA provisions to diversify fared better than those that didn’t.

Mr. Clinton has always insisted that “there is not a single solitary example that [GLBA] had anything to do with the financial crisis,” a conclusion that has never been refuted. When asked by the New York Times in 2012, Sen. Elizabeth Warren agreed that the financial crisis would not have been avoided had GLBA never been adopted. And President Obama effectively exonerated GLBA from any culpability in the financial crisis when, with massive majorities in both Houses of Congress, he chose not to repeal GLBA. In fact, Dodd-Frank expanded GLBA by using its holding-company structure to impose new regulations on systemically important financial institutions.

Another myth of the financial crisis is that the bailout was required because some banks were too big to fail. Had the government’s massive injection of capital—the Troubled Asset Relief Program, or TARP—been only about bailing out too-big-to-fail financial institutions, at most a dozen institutions might have received aid. Instead, 954 financial institutions received assistance, with more than half the money going to small banks.

Many of the largest banks did not want or need aid—and Lehman’s collapse was not a case of a too-big-to-fail institution spreading the crisis. The entire financial sector was already poisoned by the same subprime assets that felled Lehman. The subprime bailout occurred because the U.S. financial sector was, and always should be, too important to be allowed to fail.

Consider that, according to the Congressional Budget Office, bailing out the depositors of insolvent S&Ls in the 1980s on net cost taxpayers $258 billion in real 2009 dollars. By contrast, of the $245 billion disbursed by TARP to banks, 67% was repaid within 14 months, 81% within two years and the final totals show that taxpayers earned $24 billion on the banking component of TARP. The rapid and complete payback of TARP funds by banks strongly suggests that the financial crisis was more a liquidity crisis than a solvency crisis.

What turned the subprime crisis and ensuing recession into the “Great Recession” was not a failure of policies that addressed the financial crisis. Instead, it was the failure of subsequent economic policies that impeded the recovery.

The subprime crisis was largely the product of government policy to promote housing ownership and regulators who chose to promote that social policy over their traditional mission of guaranteeing safety and soundness. But blaming the financial crisis on reckless bankers and deregulation made it possible for the Obama administration to seize effective control of the financial system and put government bureaucrats in the corporate boardrooms of many of the most significant U.S. banks and insurance companies.

Suffocating under Dodd-Frank’s “enhanced supervision,” banks now focus on passing stress tests, writing living wills, parking capital at the Federal Reserve, and knowing their regulators better than they know their customers. But their ability to help the U.S. economy turn dreams into businesses and jobs has suffered.

In postwar America, it took on average just 2 1/4 years to regain in each succeeding recovery all of the real per capita income that had been lost in the previous recession. At the current rate of the Obama recovery, it will take six more years, 14 years in all, for the average American just to earn back what he lost in the last recession. Mr. Obama’s policies in banking, health care, power generation, the Internet and so much else have Europeanized America and American exceptionalism has waned—sadly proving that collectivism does not work any better in America than it has ever worked anywhere else.

Mr. Gramm, a former chairman of the Senate Banking Committee, is a visiting scholar at the American Enterprise Institute. Mr. Solon is a partner of US Policy Metrics.

 

Sunday, July 26, 2015

International Courts and the New Paternalism - African leaders are the targets because ambitious jurists consider them to be 'low-hanging fruit'

International Courts and the New Paternalism. By Jendayi Frazer
African leaders are the targets because ambitious jurists consider them to be ‘low-hanging fruit.’
http://www.wsj.com/articles/international-courts-and-the-new-paternalism-1437778048
WSJ, July 24, 2015 6:47 p.m. ET
Nairobi, Kenya

President Obama arrived in Kenya on Friday and will travel from here to Ethiopia, two crucial U.S. allies in East Africa. The region is not only emerging as an economic powerhouse, it is also an important front in the battle with al Qaeda, al-Shabaab, Islamic State and other Islamist radicals.

Yet grievances related to how the International Criminal Court’s universal jurisdiction is applied in Africa are interfering with U.S. and European relations on the continent. In Africa there are accusations of neocolonialism and even racism in ICC proceedings, and a growing consensus that Africans are being unjustly indicted by the court.

It wasn’t supposed to be this way. After the failure to prevent mass atrocities in Europe and Africa in the 1990s, a strong consensus emerged that combating impunity had to be an international priority. Ad hoc United Nations tribunals were convened to judge the masterminds of genocide and crimes against humanity in Yugoslavia, Rwanda and Sierra Leone. These courts were painfully slow and expensive. But their mandates were clear and limited, and they helped countries to turn the page and focus on rebuilding.

Soon universal jurisdiction was seen not only as a means to justice, but also a tool for preventing atrocities in the first place. Several countries in Western Europe including Spain, the United Kingdom, Belgium and France empowered their national courts with universal jurisdiction. In 2002 the International Criminal Court came into force.

Africa and Europe were early adherents and today constitute the bulk of ICC membership. But India, China, Russia and most of the Middle East—representing well over half the world’s population—stayed out. So did the United States. Leaders in both parties worried that an unaccountable supranational court would become a venue for politicized show trials. The track record of the ICC and European courts acting under universal jurisdiction has amply borne out these concerns.

Only when U.S. Defense Secretary Donald Rumsfeld threatened to move NATO headquarters out of Brussels in 2003 did Belgium rein in efforts to indict former President George H.W. Bush, and Gens. Colin Powell and Tommy Franks, for alleged “war crimes” during the 1990-91 Gulf War. Spanish courts have indicted American military personnel in Iraq and investigated the U.S. detention facility in Guantanamo Bay.

But with powerful states able to shield themselves and their clients, Africa has borne the brunt of indictments. Far from pursuing justice for victims, these courts have become a venue for public-relations exercises by activist groups. Within African countries, they have been manipulated by one political faction to sideline another, often featuring in electoral politics.
The ICC’s recent indictments of top Kenyan officials are a prime example. In October 2014, Kenyan President Uhuru Kenyatta became the first sitting head of state to appear before the ICC, though he took the extraordinary step of temporarily transferring power to his deputy to avoid the precedent. ICC prosecutors indicted Mr. Kenyatta in connection with Kenya’s post-election ethnic violence of 2007-08, in which some 1,200 people were killed.

Last December the ICC withdrew all charges against Mr. Kenyatta, saying the evidence had “not improved to such an extent that Mr Kenyatta’s alleged criminal responsibility can be proven beyond reasonable doubt.” As U.S. assistant secretary of state for African affairs from 2005-09, and the point person during Kenya’s 2007-08 post-election violence, I knew the ICC indictments were purely political. The court’s decision to continue its case against Kenya’s deputy president, William Ruto, reflects a degree of indifference and even hostility to Kenya’s efforts to heal its political divisions.

The ICC’s indictments in Kenya began with former chief prosecutor Luis Moreno-Ocampo’s determination to prove the court’s relevance in Africa by going after what he reportedly called “low-hanging fruit.” In other words, African political and military leaders unable to resist ICC jurisdiction.

More recently, the arrest of Rwandan chief of intelligence Lt. Gen. Emmanuel Karenzi Karake in London last month drew a unanimous reproach from the African Union’s Peace and Security Council. The warrant dates to a 2008 Spanish indictment for alleged reprisal killings following the 1994 Rwandan genocide. At the time of the indictment, Mr. Karenzi Karake was deputy commander of the joint U.N.-African Union peacekeeping operation in Darfur. The Rwandan troops under his command were the backbone of the Unamid force, and his performance in Darfur was by all accounts exemplary.

Moreover, a U.S. government interagency review conducted in 2007-08, when I led the State Department’s Bureau of African Affairs, found that the Spanish allegations against Mr. Karenzi Karake were false and unsubstantiated. The U.S. fully backed his reappointment in 2008 as deputy commander of Unamid forces. It would be a travesty of justice if the U.K. were to extradite Mr. Karake to Spain to stand trial.

Sadly, the early hope of “universal jurisdiction” ending impunity for perpetrators of genocide and crimes against humanity has given way to cynicism, both in Africa and the West. In Africa it is believed that, in the rush to demonstrate their power, these courts and their defenders have been too willing to brush aside considerations of due process that they defend at home.

In the West, the cynicism is perhaps even more damaging because it calls into question the moral capabilities of Africans and their leaders, and revives the language of paternalism and barbarism of earlier generations.

Ms. Frazer, a former U.S. ambassador to South Africa (2004-05) and assistant secretary of state for African affairs (2005-09), is an adjunct senior fellow for Africa studies at the Council on Foreign Relations.

Friday, April 3, 2015

The Federal President would not stay in power if he did not talk human rights. So look at it as a political imperative.

Joe Biden on Human Rights
The Vice President tells China’s leaders to ignore the U.S.
WSJ, Apr 01, 2015

White House officials can be oddly candid in talking to their liberal friends at the New Yorker magazine. That’s where an unnamed official in 2011 boasted of “leading from behind,” and where last year President Obama dismissed Islamic State as a terrorist “jayvee team.” Now the U.S. Vice President has revealed the Administration line on human rights in China.

In the April 6 issue, Joe Biden recounts meeting Xi Jinping months before his 2012 ascent to be China’s supreme leader. Mr. Xi asked him why the U.S. put “so much emphasis on human rights.” The right answer is simple: No government has the right to deny its citizens basic freedoms, and those that do tend also to threaten peace overseas, so U.S. support for human rights is a matter of values and interests.

Instead, Mr. Biden downplayed U.S. human-rights rhetoric as little more than political posturing. “No president of the United States could represent the United States were he not committed to human rights,” he told Mr. Xi. “President Barack Obama would not be able to stay in power if he did not speak of it. So look at it as a political imperative.” Then Mr. Biden assured China’s leader: “It doesn’t make us better or worse. It’s who we are. You make your decisions. We’ll make ours.” [not the WSJ's emphasis.]

Mr. Xi took the advice. Since taking office he has detained more than 1,000 political prisoners, from anticorruption activist Xu Zhiyong to lawyer Pu Zhiqiang and journalist Gao Yu. He has cracked down on Uighurs in Xinjiang, banning more Muslim practices and jailing scholar-activist Ilham Tohti for life. Anti-Christian repression and Internet controls are tightening. Nobel Peace laureate Liu Xiaobo remains in prison, his wife Liu Xia under illegal house arrest for the fifth year. Lawyer Gao Zhisheng left prison in August but is blocked from receiving medical care overseas. Hong Kong, China’s most liberal city, is losing its press freedom and political autonomy.

Amid all of this Mr. Xi and his government have faced little challenge from Washington. That is consistent with Hillary Clinton’s 2009 statement that human rights can’t be allowed to “interfere” with diplomacy on issues such as the economy and the environment. Mr. Obama tried walking that back months later, telling the United Nations that democracy and human rights aren’t “afterthoughts.” But his Administration’s record—and now Mr. Biden’s testimony—prove otherwise.

Thursday, January 29, 2015

In the name of ‘affordable’ loans, we are creating the conditions for a replay of the housing disaster


Building Toward Another Mortgage Meltdown. By Edward Pinto


In the name of ‘affordable’ loans, the White House is creating the conditions for a replay of the housing disaster

http://www.wsj.com/articles/edward-pinto-building-toward-another-mortgage-meltdown-1422489618
The Obama administration’s troubling flirtation with another mortgage meltdown took an unsettling turn on Tuesday with Federal Housing Finance Agency Director Mel Watt ’s testimony before the House Financial Services Committee.

Mr. Watt told the committee that, having received “feedback from stakeholders,” he expects to release by the end of March new guidance on the “guarantee fee” charged by Fannie Mae and Freddie Mac to cover the credit risk on loans the federal mortgage agencies guarantee.

Here we go again. In the Obama administration, new guidance on housing policy invariably means lowering standards to get mortgages into the hands of people who may not be able to afford them.

Earlier this month, President Obama announced that the Federal Housing Administration (FHA) will begin lowering annual mortgage-insurance premiums “to make mortgages more affordable and accessible.” While that sounds good in the abstract, the decision is a bad one with serious consequences for the housing market.

Government programs to make mortgages more widely available to low- and moderate-income families have consistently offered overleveraged, high-risk loans that set up too many homeowners to fail. In the long run-up to the 2008 financial crisis, for example, federal mortgage agencies and their regulators cajoled and wheedled private lenders to loosen credit standards. They have been doing so again. When the next housing crash arrives, private lenders will be blamed—and homeowners and taxpayers will once again pay dearly.

Lowering annual mortgage-insurance premiums is part of a new affordable-lending effort by the Obama administration. More specifically, it is the latest salvo in a price war between two government mortgage giants to meet government mandates.

Fannie Mae fired the first shot in December when it relaunched the 30-year, 97% loan-to-value, or LTV, mortgage (a type of loan that was suspended in 2013). Fannie revived these 3% down-payment mortgages at the behest of its federal regulator, the Federal Housing Finance Agency (FHFA)—which has run Fannie Mae and Freddie Mac since 2008, when both government-sponsored enterprises (GSEs) went belly up and were put into conservatorship. The FHA’s mortgage-premium price rollback was a counteroffensive.

Déjà vu: Fannie launched its first price war against the FHA in 1994 by introducing the 30-year, 3% down-payment mortgage. It did so at the behest of its then-regulator, the Department of Housing and Urban Development. This and other actions led HUD in 2004 to credit Fannie Mae’s “substantial part in the ‘revolution’ ” in “affordable lending” to “historically underserved households.”

Fannie’s goal in 1994 and today is to take market share from the FHA, the main competitor for loans it and Freddie Mac need to meet mandates set by Congress since 1992 to increase loans to low- and moderate-income homeowners. The weapons in this war are familiar—lower pricing and progressively looser credit as competing federal agencies fight over existing high-risk lending and seek to expand such lending.

Mortgage price wars between government agencies are particularly dangerous, since access to low-cost capital and minimal capital requirements gives them the ability to continue for many years—all at great risk to the taxpayers. Government agencies also charge low-risk consumers more than necessary to cover the risk of default, using the overage to lower fees on loans to high-risk consumers.

Starting in 2009 the FHFA released annual studies documenting the widespread nature of these cross-subsidies. The reports showed that low down payment, 30-year loans to individuals with low FICO scores were consistently subsidized by less-risky loans.

Unfortunately, special interests such as the National Association of Realtors—always eager to sell more houses and reap the commissions—and the left-leaning Urban Institute were cheerleaders for loose credit. In 1997, for example, HUD commissioned the Urban Institute to study Fannie and Freddie’s single-family underwriting standards. The Urban Institute’s 1999 report found that “the GSEs’ guidelines, designed to identify creditworthy applicants, are more likely to disqualify borrowers with low incomes, limited wealth, and poor credit histories; applicants with these characteristics are disproportionately minorities.” By 2000 Fannie and Freddie did away with down payments and raised debt-to-income ratios. HUD encouraged them to more aggressively enter the subprime market, and the GSEs decided to re-enter the “liar loan” (low doc or no doc) market, partly in a desire to meet higher HUD low- and moderate-income lending mandates.

On Jan. 6, the Urban Institute announced in a blog post: “FHA: Time to stop overcharging today’s borrowers for yesterday’s mistakes.” The institute endorsed an immediate cut of 0.40% in mortgage-insurance premiums charged by the FHA. But once the agency cuts premiums, Fannie and Freddie will inevitably reduce the guarantee fees charged to cover the credit risk on the loans they guarantee.

Now the other shoe appears poised to drop, given Mr. Watt’s promise on Tuesday to issue new guidance on guarantee fees.

This is happening despite Congress’s 2011 mandate that Fannie’s regulator adjust the prices of mortgages and guarantee fees to make sure they reflect the actual risk of loss—that is, to eliminate dangerous and distortive pricing by the two GSEs. Ed DeMarco, acting director of the FHFA since March 2009, worked hard to do so but left office in January 2014. Mr. Watt, his successor, suspended Mr. DeMarc o’s efforts to comply with Congress’s mandate. Now that Fannie will once again offer heavily subsidized 3%-down mortgages, massive new cross-subsidies will return, and the congressional mandate will be ignored.

The law stipulates that the FHA maintain a loss-absorbing capital buffer equal to 2% of the value of its outstanding mortgages. The agency obtains this capital from profits earned on mortgages and future premiums. It hasn’t met its capital obligation since 2009 and will not reach compliance until the fall of 2016, according to the FHA’s latest actuarial report. But if the economy runs into another rough patch, this projection will go out the window.

Congress should put an end to this price war before it does real damage to the economy. It should terminate the ill-conceived GSE affordable-housing mandates and impose strong capital standards on the FHA that can’t be ignored as they have been for five years and counting.

Mr. Pinto, former chief credit officer of Fannie Mae, is co-director and chief risk officer of the International Center on Housing Risk at the American Enterprise Institute.

Wednesday, December 10, 2014

Though Luke Somers died, jihadists know they are targets if they kidnap Americans

A Noble Rescue Attempt. WSJ Editorial

Though Luke Somers died, jihadists know they are targets if they kidnap Americans.

http://www.wsj.com/articles/a-noble-rescue-attempt-1417991769

WSJ, Dec. 7, 2014 5:36 p.m. ET

Condolences to the family of Luke Somers, the kidnapped American journalist who was murdered Saturday during a rescue attempt by U.S. special forces in Yemen. His death is a moment for sadness and anger, but also for pride in the rescue team and praise for the Obama Administration for ordering the attempt.

According to the Journal’s account based on military and Administration sources, some 40 special forces flew to a remote part of Yemen, marching five miles to escape detection, but lost the element of surprise about 100 yards from the jihadist hideout. One of the terrorists was observed by drone surveillance to enter a building where it is believed he shot Somers and a South African hostage, Pierre Korkie. The special forces carried the wounded men out by helicopter, but one died on route and the other aboard a Navy ship.

There is no blame for failing to save Somers, whose al Qaeda captors had released a video on Thursday vowing to kill him in 72 hours if the U.S. did not meet unspecified demands. The jihadists were no doubt on high alert after special forces conducted a rescue attempt in late November at a hillside cave. The commandos rescued eight people, mostly Yemenis, but Somers had been moved.

It’s a tribute to the skill of U.S. special forces that these high-risk missions against a dangerous enemy don’t fail more often. But given good intelligence and a reasonable chance to save Somers, the fault would have been not to try for fear of failure or political blame.

The reality is that most American and British citizens captured by jihadists are now likely to be murdered as a terrorist statement. This isn’t always true for citizens of other countries that pay ransom. But the U.S. and U.K. rightly refuse on grounds that the payments give incentive for more kidnappings while enriching the terrorists.

Jihadists don’t distinguish between civilians and soldiers, or among journalists, clergy, doctors or aid workers. They are waging what they think is a struggle to the death against other religious faiths and the West. Their goal is to kill for political control and their brand of Islam.

The murders are likely to increase as the U.S. fight against Islamic State intensifies. The jihadists know from experience that they can’t win a direct military confrontation, so their goal is to weaken the resolve of democracies at home. Imposing casualties on innocent Americans abroad and attacking the homeland are part of their military strategy.

They don’t seem to realize that such brutality often backfires, reinforcing U.S. public resolve, as even Osama bin Laden understood judging by his intercepted communications. But Americans need to realize that there are no safe havens in this long war. Everyone is a potential target.

So we are entering an era when the U.S. will have to undertake more such rescues of Americans kidnapped overseas. The results will be mixed, but even failed attempts will send a message to jihadists that capturing Americans will make them targets—and that there is no place in the world they can’t be found and killed.

It’s a tragedy that fanatical Islamists have made the world so dangerous, but Americans should be proud of a country that has men and women willing to risk their own lives to leave no American behind.

Tuesday, July 15, 2014

The Citigroup ATM - Jack Lew and Tim Geithner escape mention in the bank settlement.

The Citigroup ATM, WSJ Editorial
Jack Lew and Tim Geithner escape mention in the bank settlement.The Wall Street Journal, July 14, 2014 7:37 p.m. ET
http://online.wsj.com/articles/the-citigroup-atm-1405379378

The Department of Justice isn't known for a sense of humor. But on Monday it announced a civil settlement with Citigroup over failed mortgage investments that covers almost exactly the period when current Treasury Secretary Jack Lew oversaw divisions at Citi that presided over failed mortgage investments. Now, that's funny.

Though Justice, five states and the FDIC are prying $7 billion from the bank for allegedly misleading investors, there's no mention in the settlement of clawing back even a nickel of Mr. Lew's compensation. We also see no sanction for former Treasury Secretary Timothy Geithner, who allowed Citi to build colossal mortgage risks outside its balance sheet while overseeing the bank as president of the New York Federal Reserve.

The settlement says Citi's alleged misdeeds began in 2006, the year Mr. Lew joined the bank, and the agreement covers conduct "prior to January 1, 2009." That was shortly before Mr. Lew left to work for President Obama and two weeks before Mr. Lew received $944,518 from Citi in "salary, payout for vested restricted stock," and "discretionary cash compensation for work performed in 2008," according to a 2010 federal disclosure report. That was also the year Citi began receiving taxpayer bailouts of $45 billion in cash, plus hundreds of billions more in taxpayer guarantees.

While Attorney General Eric Holder is forgiving toward his Obama cabinet colleagues, he seems to believe that some housing transactions can never be forgiven. The $7 billion settlement includes the same collateralized debt obligation for which the bank already agreed to pay $285 million in a settlement with the Securities and Exchange Commission. The Justice settlement also includes a long list of potential charges not covered by the agreement, so prosecutors can continue to raid the Citi ATM.

Citi offers in return what looks like a blanket agreement not to sue the government over any aspect of the case, and waives its right to defend itself "based in whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the Excessive Fines Clause in the Eighth Amendment of the Constitution, this Agreement bars a remedy sought in such criminal prosecution or administrative action." We hold no brief for Citi, which has been rescued three times by the feds. But what kind of government demands the right to exact repeated punishments for the same offense?

The bank's real punishment should have been failure, as former FDIC Chairman Sheila Bair and we argued at the time. Instead, the regulators kept Citi alive with taxpayer money far beyond what it provided most other banks as part of the Troubled Asset Relief Program. Keeping it alive means they can now use Citi as a political target when it's convenient to claim they're tough on banks.

And speaking of that $7 billion, good luck finding a justification for it in the settlement agreement. The number seems to have been pulled out of thin air since it's unrelated to Citi's mortgage-securities market share or any other metric we can see beyond having media impact.

If this sounds cynical, readers should consult the Justice Department's own leaks to the press about how the Citi deal went down. Last month the feds were prepared to bring charges against the bank, but the necessities of public relations intervened.

According to the Journal, "News had leaked that afternoon, June 17, that the U.S. had captured Ahmed Abu Khatallah, a key suspect in the attacks on the American consulate in Benghazi in 2012. Justice Department officials didn't want the announcement of the suit against Citigroup—and its accompanying litany of alleged misdeeds related to mortgage-backed securities—to be overshadowed by questions about the Benghazi suspect and U.S. policy on detainees. Citigroup, which didn't want to raise its offer again and had been preparing to be sued, never again heard the threat of a suit."

This week's settlement includes $4 billion for the Treasury, roughly $500 million for the states and FDIC, and $2.5 billion for mortgage borrowers. That last category has become a fixture of recent government mortgage settlements, even though the premise of this case involves harm done to bond investors, not mortgage borrowers.

But the Obama Administration's references to the needs of Benghazi PR remind us that it could be worse. At least Mr. Holder isn't blaming the Geithner and Lew failures on a video.

Thursday, July 10, 2014

Our Financial Crisis Amnesia - Remember the S&L crisis? Nobody else does either. And we'll soon forget about 2008 too

Our Financial Crisis Amnesia. By Alex J. Pollock
Remember the S&L crisis? Nobody else does either. And we'll soon forget about 2008 too.WSJ, July 9, 2014 6:50 p.m. ET
http://online.wsj.com/articles/alex-pollock-our-financial-crisis-amnesia-1404946250

It is now five years since the end of the most recent U.S. financial crisis of 2007-09. Stocks have made record highs, junk bonds and leveraged loans have boomed, house prices have risen, and already there are cries for lower credit standards on mortgages to "increase access."

Meanwhile, in vivid contrast to the Swiss central bank, which marks its investments to market, the Federal Reserve has designed its own regulatory accounting so that it will never have to recognize any losses on its $4 trillion portfolio of long-term bonds and mortgage securities.

Who remembers that such "special" accounting is exactly what the Federal Home Loan Bank Board designed in the 1980s to hide losses in savings and loans? Who remembers that there even was a Federal Home Loan Bank Board, which for its manifold financial sins was abolished in 1989?

It is 25 years since 1989. Who remembers how severe the multiple financial crises of the 1980s were?

The government of Mexico defaulted on its loans in 1982 and set off a global debt crisis. The Federal Reserve's double-digit interest rates had rendered insolvent the aggregate savings and loan industry, until then the principal supplier of mortgage credit. The oil bubble collapsed with enormous losses.

Between 1982 and 1992, a disastrous 2,270 U.S. depository institutions failed. That is an average of more than 200 failures a year or four a week over a decade. From speaking to a great many audiences about financial crises, I can testify that virtually no one knows this.

In the wake of the housing bust, I was occasionally asked, "Will we learn the lessons of this crisis?" "We will indeed," I would reply, "and we will remember them for at least four or five years." In 2007 as the first wave of panic was under way, I heard a senior international economist opine in deep, solemn tones, "What we have learned from this crisis is the importance of liquidity risk." "Yes," I said, "that's what we learn from every crisis."

The political reactions to the 1980s included the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the FDIC Improvement Act of 1991, and the very ironically titled GSE Financial Safety and Soundness Act of 1992. Anybody remember the theories behind those acts?

After depositors in savings and loan associations were bailed out to the tune of $150 billion (the Federal Savings and Loan Insurance Corporation having gone belly up), then-Treasury Secretary Nicholas Brady pronounced that the great legislative point was "never again." Never, that is, until the Mexican debt crisis of 1994, the Asian debt crisis of 1997, and the Long-Term Capital Management crisis of 1998, all very exciting at the time.

And who remembers the Great Recession (so called by a prominent economist of the time) in 1973-75, the huge real-estate bust and New York City's insolvency crisis? That was the decade before the 1980s.

Viewing financial crises over several centuries, the great economic historian Charles Kindleberger concluded that they occur on average about once a decade. Similarly, former Fed Chairman Paul Volcker wittily observed that "about every 10 years, we have the biggest crisis in 50 years."

What is it about a decade or so? It seems that is long enough for memories to fade in the human group mind, as they are overlaid with happier recent experiences and replaced with optimistic new theories.

Speaking in 2013, Paul Tucker, the former deputy governor for financial stability of the Bank of England—a man who has thought long and hard about the macro risks of financial systems—stated, "It will be a while before confidence in the system is restored." But how long is "a while"? I'd say less than a decade.

Mr. Tucker went on to proclaim, "Never again should confidence be so blind." Ah yes, "never again." If Mr. Tucker's statement is meant as moral suasion, it's all right. But if meant as a prediction, don't bet on it.

Former Treasury Secretary Tim Geithner, for all his daydream of the government as financial Platonic guardian, knows this. As he writes in "Stress Test," his recent memoir: "Experts always have clever reasons why the boom they are enjoying will avoid the disastrous patterns of the past—until it doesn't." He predicts: "There will be a next crisis, despite all we did."

Right. But when? On the historical average, 2009 + 10 = 2019. Five more years is plenty of time for forgetting.

Mr. Pollock is a resident fellow at the American Enterprise Institute and was president and CEO of the Federal Home Loan Bank of Chicago 1991-2004.

Wednesday, December 18, 2013

The Volcker Ambiguity - The triumph of political discretion over financial clarity

The Volcker Ambiguity. WSJ Editorial 
The triumph of political discretion over financial clarity.
Wall Street Journal, Updated Dec. 11, 2013 3:52 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304744304579250393935144268

Just in time for Christmas, financial regulators have come down the chimney with a sackful of billable hours for securities lawyers. Truly a gift that keeps on giving, the Volcker Rule adopted on Tuesday by five federal agencies will create a limitless supply of ambiguity and the need for experienced counsel.

We supported former Federal Reserve Chairman Paul Volcker's simple idea: Don't let federally insured banks gamble in the securities markets. Taxpayers shouldn't be forced to stand behind Wall Street trading desks. What we can't support is the "Volcker Rule" that was first distorted in the 2010 Dodd-Frank law and has now been grinded and twisted into 71 pages of text plus 882 more pages of explanation after three years of agency sausage-making.

The general idea is to prevent "proprietary trading," in which a bank makes trades not at a customer's request but simply for its own account. Or at least some trades. The rule's new trading restrictions do not apply when Wall Street giants are trading debt issued by the U.S. government, state and local governments, government-created mortgage giants Fannie Mae and Freddie Mac, and in some circumstances foreign governments and even local or regional foreign governments.


You'll notice a pattern here. Like so many recent financial regulations, the Volcker Rule offers banks and investors big incentives to lend money to governments rather than private businesses. One Wall Street objection to the Volcker Rule has been that it will reduce liquidity in America's capital markets. And fear of a lack of liquidity in the market for government debt—especially Treasurys and European sovereign debt—is precisely the reason politicians and regulators have gone to such lengths to exempt government bonds from Volcker. Maybe Wall Street has a point.

What we don't know about the new rule are important details that will only become clear over time. At least that's according to Commissioner Daniel Gallagher of the Securities and Exchange Commission, who dissented on Tuesday along with fellow Republican appointees Michael Piwowar of the SEC and Scott O'Malia of the Commodity Futures Trading Commission.

Mr. Gallagher said the vote occurred in "contradiction of our procedural rules for voting on major rule releases, including the longstanding guideline that Commissioners should be given thirty days to review a draft before a vote." He added, "Not until five days ago did we have anything even resembling a voting draft, giving us less than a week to review the nearly one thousand pages of the adopting rule. In short, under intense pressure to meet an utterly artificial, wholly political end-of-year deadline, this Commission is effectively being told that we have to vote for the final rule so we can find out what's in it."

Lawyers will certainly find plenty of opportunities for judgment calls that will generate all those billable hours. Banks are still allowed to make markets in securities and to underwrite the issuance of new stocks and bonds, all of which often requires them to hold securities in anticipation of customer demand.

Banks also retain some ability to hedge—to make trades for the purpose of offsetting other risks that they've taken on for clients. The work required to define the difference between legal market-making, underwriting and hedging on the one hand and illegal proprietary trading on the other will now be ample enough to spark a new building boom at downtown D.C. law offices.

Rest assured banks will find loopholes. And rest assured some of the Volcker rule-writers will find private job opportunities to help with that loophole search once they decide to lay down the burdens of government service.

The long, convoluted Volcker process and result illustrate the central problem of Dodd-Frank: the belief that regulators given ever more discretion to craft ever more complicated regulations will yield a safer financial system. The Bank of England's Andrew Haldane and Vasileios Madouros have shown the opposite is true. The complexity of banking rules before the crisis failed to prevent catastrophic risks and made the job of addressing the crisis harder by obscuring the true condition of giant banks.

Especially with banking regulation, simple rules that are difficult for lobbyists and bankers to game are likely to work far better. Bankers would know what to expect and couldn't cry ambiguity if they crossed a line. And regulators would be far more likely to spy violations. The danger with this Volcker Complexity is that we'll get litigation, investing loopholes, and greater financial costs, but not a safer system.

Wednesday, November 27, 2013

IMF: Modifications to the Current List of Financial Soundness Indicators

Modifications to the Current List of Financial Soundness Indicators
IMF, November 14, 2013
http://www.imf.org/external/pp/longres.aspx?id=4832

Summary: The purpose of this paper is to inform Executive Directors on the outcomes of consultations conducted by the IMF’s Statistics Department (STA) on revising the current list of FSIs in response to the global financial crisis and the adoption of a new regulatory framework under the Basel III Accord. In addition, the G-20 Data Gaps Initiative calls on the IMF to review the FSI list (Recommendation no. 2). STA has undertaken these consultations in close collaboration with a broad-based group of national and international experts, international standard setting bodies, IMF’s relevant departments and all FSI-reporting countries and concerned international organizations.


EXECUTIVE SUMMARY (edited)

The Executive Board has requested that the list of financial soundness indicators (FSIs) be kept under review to ensure that they reflect the evolving priorities of Fund surveillance, the rapidly changing financial environment and the relative capacity of countries to compile FSIs. Accordingly, the purpose of this paper is to inform Executive Directors on the outcomes of consultations conducted by the IMF's Statistics Department (STA) on revising the current list of FSIs in response to the global financial crisis and the adoption of a new regulatory framework under the Basel III Accord. In addition, the G-20 Data Gaps Initiative calls on the IMF to review the FSI list (Recommendation no. 2). STA has undertaken these consultations in close collaboration with a broad-based group of national and international experts, international standard setting bodies, IMF
's relevant departments and all FSI-reporting countries and concerned international organizations.

As a result of these consultations, the list of FSIs has been revised. The revised FSI list includes new indicators to expand the coverage of the financial sector, including money market funds, insurance corporations, pension funds, other nonbank financial institutions, as well as non-financial corporations and households. Also, certain FSIs will be dropped due mainly to very limited reporting and comparability. Overall, 19 new FSIs will be added to the list and five will be dropped.

To improve usefulness and forward-looking features, FSIs for the sector as a whole would be enhanced with concentration and distribution measures. In this connection, STA is planning to conduct a pilot exercise with a set of FSI-reporting countries on a voluntary basis.

STA will continue to keep the Executive Board informed periodically on developments in the IMF's FSIs initiative, including its work on revising the FSI Compilation Guide.



---
Also, check the background paper: http://www.imf.org/external/pp/longres.aspx?id=4833

Friday, November 22, 2013

Control d'armes en acció: Els nois dolents enganyen i les democràcies no fan res

Les sancions contra l'Iran no es manipularan. . Per Douglas J. Feith
Control d'armes en acció: Els nois dolents enganyen i les democràcies no fan res.
Translation to Catalan of Sanctions on Iran Won't Be Cranked Back Up. By Un Liberal Recalcitrant
Wall Street Jounal, updated Nov. 18, 2013 7:24 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303914304579193652675971392

El president Obama vol que l'Iran suspengui parts del seu programa nuclear a canvi d'alleujar les sancions econòmiques internacionals. Els crítics sostenen que si Occident arriba a un acord en aquest sentit, l'Iran podria enganyar molt més fàcilment, molt abans que la resta del món pogués establir noves i dures sancions. Però el senyor Obama insisteix que relaxar les sancions és reversible : Si els iranians estan pel "no seguir endavant", va dir recentment a NBC News, "Podem anar endavant ".
Els acords de pau i el control d'armes tenen una llarga història que hauria de ser un advertiment contra aquestes garanties. Els països democràtics, durant molt de temps, no van poder aconseguir el que esperaven dels seus antagonistes no democràtics - i després es van veure incapaços o no van estar disposats a complir el tracte-.

Després de la Primera Guerra Mundial, els tractats de Versalles i Locarno van sotmetre Alemanya  a mesures de control d'armes, incloent la desmilitarització de Renània. Quan el règim nazi d'Alemanya, va remilitaritzar audaçment la Renània el 1936, ni la Gran Bretanya, ni França, ni cap altre signant del tractat va prendre cap tipus d’acció legal.

Aquest i d’altres incidents del segle XX van portar l’estratega dels EUA Fred Iklé a escriure un clarivident article el 1961 a la revista "Afers exteriors", titulat "Després de Detectar-ho - Què ?" Va sostenir : "Si signem un acord de control d'armes, hem de saber no només que som tècnicament capaços de detectar una violació, sinó que també nosaltres, o la resta del món, estarà en condicions de reaccionar eficaçment si es descobreix una violació, ja sigui legalment, política o militar. " Iklé va preveure que els soviètics violarien els seus acords i que als presidents dels Estats Units els resultaria difícil o impossible de posar remei a les violacions.

No obstant això, els EUA va fer una sèrie de tractats de control d'armes amb els soviètics i quan es van produir les violacions previstes, no va haver-hi cap tipus d'imposició, ni tan sols es va intentar.
Durant el govern de Reagan, les autoritats nord-americanes van detectar un enorme radar a la ciutat soviètica de Krasnoyarsk que violava el Tractat de Míssils Antibalístics del 1972. Malgrat la seva reputació de ser un escèptic en relació al control d'armes i de la línia dura anti - soviètica, Reagan va concloure que no tenia bones opcions, fora de la de queixar-se. Els EUA seguí per adherir-se al tractat per als següents 16 anys, fins que el president George W. Bush ho va retirar per raons no relacionades amb les violacions del tractat.

Una altra democràcia que no ha aconseguit complir els acords és Israel. Quan Israel va signar els Acords d'Oslo amb l'OAP el 1993, al després Ministre de Relacions Exteriors israelià Shimon Peres se li va preguntar què faria Israel si es es violés l'acord. Ell va declarar que era un tractat "reversible", assegurant que era escèptic i que si l'OAP trenqués les seves promeses de pau, Israel no només aturaria els recessos territorials, sinó que reprendria territoris ja negociats.
L'OAP va violar ràpidament el Tractat d’Oslo de diverses maneres, el més flagrant amb la Segona Intifada l’any 2000. Però cap govern israelià d'esquerra o de dreta mai va liquidar els acords, i encara menys revertir qualsevol retirada.

El que sol passar amb aquest tipus d'acords és el següent : Al costat democràtic, els líders polítics donen publicitat a l'acord per als seus votants significantlo com una gran fita diplomàtica de la que cal sentir-se’n orgullós. Per l’altra banda  -generalment el costat no democràtic, es porta a terme l’engany, la deshonestedat i l’agressió.

Els líders democràtics no tenen cap desig de detectar la violació perquè no volen admetre que l'acord o plusvàlua, per raons diverses, és una eina de relacions amb l’altra part i, òbviament, no volen pertorbar aquesta relació. En els casos que no es pot passar per alt la violació, afirmaran que l'evidència no és concloent. Però si és concloent, en menyspreen la importància de la infracció. Els funcionaris del costat democràtic de vegades actuen de facto com a advocats de la defensa per als tramposos.

Recordem el cas de Krasnoyarsk. Alguns funcionaris nord-americans en les reunions internes de l'administració en què he participat, van dir que no hem d’acusar els soviètics de violar el Tractat ABM, simplement perquè es va construir el radar en un camp de futbol  gran. Per desgràcia, però sostingut de forma descarada, vam haver d’esperar a que els soviètics el posesin en marxa..
Quan els funcionaris de l'OAP en la dècada de 1990 van violar el tractat d’Oslo per incitar a l'odi contra Israel i donar suport al terrorisme, els israelians que havien signat el tractat, van oferir excuses similars i vergonyoses tals com: "No ens importa el que diguin, només el que fan" i "Cal fer les paus amb els enemics, nopas  amb els amics. "

Un acord que realment desmantellés el programa nuclear iranià seria un èxit formidable. Però si Obama pot justificar el seu acord amb l'Iran només amb la promesa de “relaxar les sancions” als tramposos iranians, ningú donarà credibilitat al programa.. La història ensenya que hem d'esperar sempre l'engany, però no una aplicació efectiva del tractat.

Feith, investigador principal a l'Institut Hudson,  va exercir com subsecretari de Defensadels EUA per a la política ( 2001-05 ) i és l'autor de  "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008)


--- Sanctions on Iran Won't Be Cranked Back Up. By Douglas J. Feith
Arms control in action: The bad guys cheat, and democracies do nothing.Wall Street Jounal, updated Nov. 18, 2013 7:24 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303914304579193652675971392

President Obama wants Iran to suspend parts of its nuclear program in return for easing international economic sanctions. Critics contend that if the West strikes a deal along these lines, Iran could cheat far more easily than the rest of the world could reinstate tough sanctions. But Mr. Obama insists that relaxing sanctions is reversible: If the Iranians are "not following through," he recently told NBC News, "We can crank that dial back up."

Peace and arms-control agreements have a long history that warns against such assurances. Democratic countries have time and again failed to get what they bargained for with their undemocratic antagonists—and then found themselves unable or unwilling to enforce the bargain.

After World War I, the Versailles and Locarno Treaties subjected Germany to arms-control measures, including demilitarization of the Rhineland. When Germany's Nazi regime boldly remilitarized the Rhineland in 1936, neither Britain, France nor any other treaty party took enforcement action.

This and other 20th-century incidents led U.S. strategist Fred Iklé to write a prescient 1961 "Foreign Affairs" article titled "After Detection—What?" He argued: "In entering into an arms-control agreement, we must know not only that we are technically capable of detecting a violation but also that we or the rest of the world will be politically, legally and militarily in a position to react effectively if a violation is discovered." Iklé foresaw that the Soviets would violate their agreements, and that U.S. presidents would find it difficult or impossible to remedy the violations.

Nevertheless, the U.S. made a series of arms-control treaties with the Soviets. When the predicted violations occurred, no enforcement actions were even attempted.

During the Reagan administration, U.S. officials detected a huge radar in the Soviet city of Krasnoyarsk that violated the 1972 Anti-Ballistic Missile Treaty. Despite his reputation as an arms-control skeptic and anti-Soviet hard-liner, Reagan concluded he had no good options other than to complain. The U.S. continued to adhere to the treaty for another 16 years, until President George W. Bush withdrew for reasons unrelated to violations.

Another democracy that has failed to enforce agreements is Israel. When Israel signed the Oslo Accords with the Palestine Liberation Organization in 1993, then-Israeli Foreign Minister Shimon Peres was asked what Israel would do if the agreement were violated. He declared it was "reversible," assuring skeptics that if the PLO broke its peace pledges, Israel would not only stop territorial withdrawals, but retake the land already traded.

The PLO promptly violated Oslo in various ways, most egregiously by launching the Second Intifada in 2000. But no Israeli government—on the left or right—ever terminated the Accords, let alone reversed any withdrawals.

What typically happens with such agreements is the following: On the democratic side, political leaders hype the agreement to their voters as a proud diplomatic achievement. The nondemocratic side—typically an aggressive, dishonest party—cheats.

The democratic leaders have no desire to detect the violation because they don't want to admit that they oversold the agreement or, for other reasons, they don't want to disrupt relations with the other side. If they can't ignore the violation, they will claim the evidence is inconclusive. But if it is conclusive, they will belittle the significance of the offense. Officials on the democratic side sometimes even act as de facto defense attorneys for the cheaters.

Recall the Krasnoyarsk case. Some U.S. officials in internal administration meetings in which I participated said we should not accuse the Soviets of violating the ABM Treaty simply because they built the football-field-size radar. Rather, they disgracefully but brazenly argued, we should wait until the Soviets turned it on.

When PLO officials in the 1990s breached Oslo by inciting anti-Israel hatred and supporting terrorism, the Israelis who had made the deal offered similarly disgraceful excuses along the lines of: "We don't care what they say, only what they do," and "You have to make peace with your enemies, not with your friends."

An agreement that actually dismantled the Iranian nuclear program would be a formidable accomplishment. But if Mr. Obama can justify his deal with Iran only by promising to "crank up" the relaxed sanctions if and when the Iranian regime cheats, no one should buy it. History teaches that we should expect the cheating, but not effective enforcement.

Mr. Feith, a senior fellow at the Hudson Institute, served as U.S. undersecretary of defense for policy (2001-05) and is the author of "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008).