Sacha Baron Cohen is Part-Iranian

Borat/Bruno/Cohen is part-Iranian!

http://www.guardian.co.uk/uk/2006/sep/29/film.media

Sacha's mother is Israeli-Iranian (of Persian ethnic ancestry, born in Israel), and his father is Welsh. I always thought Sacha Baron Cohen looked Iranian, but I hadn't checked his background until now.

Anyway, I haven't seen the Bruno movie, and I probably won't (I've heard it's really tasteless humor). I miss Ali G, though. I loved his interview with Steve Nash, where Ali G. claimed Canadians don't speak English and instead speak a strange language called "Canada." See clip above, or just do a search for, "I can't understand you, you're speaking in Canada."

Thomas Jefferson's First Inaugural Speech

I cannot believe I didn't read this speech in high school, college, or law school. For God's sake, I took three college-level American history classes!

http://www.princeton.edu/~tjpapers/inaugural/indraft.html

Thomas Jefferson's first inaugural speech (revised to modernize language):

The American citizen knows where his station should be. The law is his sovereign. We are but the servants of the law. In attempting to be more, we become nothing. Sometimes it is said that man cannot be trusted with the government of himself. Can he then be trusted with the government of others? Or have we found angels in the form of kings to govern him? Let history answer this question...

[We shall have] a wise and frugal government which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry or improvement, and shall not take from the mouth of labour the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities.

Yup, still one of my favorite Presidents.

Great Debate on Race and Affirmative Action

Visit msnbc.com for Breaking News, World News, and News about the Economy

John Yoo Defends Bush Administration

Professor John Yoo recently wrote an article (WSJ, July 16, 2009) defending President Bush's warrantless wiretapping program. Mr. Yoo's reasoning is sound only if Americans desire a world where the Constitution is selectively applied using ethnic or religious criteria.

Mr. Yoo begins by using the government's incompetence as an excuse to ignore civil liberties. He says that post-9-11, we didn't know much about Al-Qaeda, so the best option was to tap everyone's telephones and computers to learn more. He also alleges that compliance with FISA--which requires a judge to approve a wiretap if the target is an American citizen or permanent resident--would have been cumbersome and impractical post-9-11.

Mr. Yoo's arguments have merit. A warrant requests permission to spy on a specific person, telephone number, or email account. If you don't know who the terrorists are or what email/telephone accounts they use because your foreign intelligence services are incompetent, how do you ask a court for a warrant? The only option--at least initially--is to start spying on everyone to narrow the list of likely suspects. Consequently, any discussion about warrantless wiretapping must begin by accepting Mr. Yoo's general premises: getting a warrant is cumbersome, and it prevents law enforcement agencies from identifying terrorists as quickly as possible.

Mr. Yoo damages his credibility, however, by not disclosing other relevant facts: one, existing law does not require a FISA court order to spy on non-U.S. citizens or non-lawfully admitted permanent resident aliens; two, most of the 9-11 terrorists were not American citizens or permanent residents; and three, his argument requires Americans to ignore the 4th Amendment, which protects U.S. persons from unreasonable and unlimited government surveillance.

FISA requires a warrant only when American citizens or permanent residents are involved. The CIA and FBI may intercept communications between two non-U.S. persons without a FISA warrant, as long as they follow certain procedures. While it is true that American residents may engage in terrorism, most of the 9-11 hijackers were not U.S. citizens or permanent residents. As a result, the Constitution's so-called "dysfunctional" warrant procedure had little to do with 9-11.

In fact, the CIA's and FBI's failure to prevent 9-11 was clearly not affected by any Constitutional limits. Think about it: even having access to every email and spoken word doesn't mean anything if our security agencies lack the linguistic and cultural competence to determine what is "noise" and what is relevant. It should also be obvious that any competent terrorist will use code words, so even intercepting every communication with the words "Muslim," "airplane," or "terrorist" won't help anyone find potential hijackers. Thus, Mr. Yoo's intent on creating reasons to ignore the Constitution is misplaced, because the real issue has always been how to properly gather and analyze relevant information.

Most troubling, however, is Mr. Yoo's failure to realize the real effect of warrantless spying--namely, that it gives carte-blanche to law enforcement to single out Americans based on nothing more than their ethnicity or religion. How much do you want to bet that singling out American citizens because of their religion or ethnicity will make them less loyal to America and law enforcement in particular? Why would people belonging to any targeted religion or ethnicity report suspicious persons or activity to law enforcement agencies if they think they will be treated differently than other Americans? Once you follow Mr. Yoo's belief that warrants are not required during wartime, you realize that what he's really saying is that every time there is a war, certain groups of Americans--whether Japanese, German, or Muslim--may be disproportionately targeted based on their religion or ethnic background. Under Mr. Yoo's logic, if Muslim terrorists attack Americans, then the quickest way to find more information is to target all communications involving Muslims or Islamic-related words. In reality, however, allowing the executive branch to selectively apply the 4th Amendment makes it harder to protect Americans.

Allow me to explain. Let's assume, as a purely theoretical exercise, that the primary threat of terrorism comes from Muslims. If we agree with Mr. Yoo's statement--that the lack of information about terrorists post-9-11 required suspending the Constitution--then it follows that we need more information about Muslims to protect America. What are the best sources of information about Muslims? People who go to mosques; people who have Muslim friends; people who eat in halal restaurants; and people who understand basic Muslim culture, allowing them to have comfortable interactions with Muslims. What groups of people fit into all of the aforementioned categories? Primarily Muslims. In general, a Muslim is more likely to have information about other Muslims, some of whom may be terrorists, than a non-Muslim. Overall, the best source of information about Muslims probably comes from Muslims themselves.

Once we accept that a) Muslims represent the greatest threat of terrorism (again, this is a purely theoretical exercise); and b) in general, Muslims have the most access to information about Muslims, then it should be follow that we would want to maximize the number of Muslims who are more loyal to the United States. As such, treating Muslims differently than other groups is a terrible idea. When a Muslim reads a webpage about how violent Islam is, do you think he or she becomes more or less likely to report potential terrorist activity to the government? When a Muslim reads that evangelical Christians believe that Islam is the natural enemy of Christianity, does that perception make it more or less likely that he will share information with other Christians? When a Muslim reads yet another anti-Islamic Daniel Pipes article, do you think he suddenly feels compelled to give up his religion and dedicate his life to finding Muslim terrorists? Allow me one last example: when a Muslim reads that his government's top legal advisor believes that the executive branch may spy on Americans without any checks and balances and realizes it means that his communications will be more heavily scrutinized than other Americans, does that make him more loyal or less loyal to America?

Each and every time a Muslim reads an ignorant statement about his religion or about the government spying on a mosque, he trusts his government less. This is a natural reaction. Anyone who believes his fellow citizens think he is not fully American because of his religion or ethnicity will probably isolate himself or associate only with people with similar backgrounds. This logical reaction--to withdraw and self-segregate--leads to less interaction, less openness, and less trust between Americans. We can prove that singling out people based on their religion or ethnic background leads to distrust and a lack of national allegiance by recognizing France's inability to assimilate its Muslim population. The French are notorious for believing that Muslims are not truly French and for attempting to restrict the exercise of Islamic modesty. As a result, in France, discrimination against Muslims is commonplace, which has led to riots. In America, law enforcement's disparate treatment of African-Americans caused riots, including the Watts Riots. (Note: despite America's participation in Abu Ghraib, Guantanamo Bay, and Iraq, America has not experienced any Muslim riots.)

When Mr. Yoo proposes to ignore the Constitution during wartime, he's saying it is acceptable to antagonize certain groups and make them less loyal to America during a time when we need all Americans to be more loyal. In order to maximize our chances of gaining viable intelligence regarding suspicious activity, it is vital that all Americans, regardless of their religion or ethnic background, feel loyal to their country and their government. Thus, in the real world, Mr. Yoo's proposed Constitutional interpretation restricts information about potential terrorists by weakening loyalty and increasing distrust of government, making us less safe.

Also, practical consequences aside, if Mr. Yoo is legally correct, why did America's founders specifically include a warrant requirement in the 4th Amendment if they believed the executive branch could freely spy on American citizens during wartime? The founders could have included a wartime exception within the 4th Amendment. They did not.

There is another problem with Mr. Yoo's argument. He states that in wartime, the President may bypass Constitutional safeguards to protect the American people because war requires quick action; however, post-9-11, the United States declared war on "terrorism," not a specific country. Such a war could last another hundred years or more. Without any oversight, who decides when the war is over and how to erase personal information gathered during the surveillance? Does the executive branch get to keep all the personal information it has gathered for the next wartime emergency? Without continuing oversight, who decides what information to keep, how to protect that information, and what information should be erased? What if Congress decides a war is over, but the President disagrees? If the executive branch believes an attack is imminent but does not want to share information with Congress, may it spy on Americans without a warrant? Most important, without a warrant procedure, who decides when to stop surveillance? After East Germany's experience with the Stasi, you would think that an educated person like Mr. Yoo would realize the need for safeguards.

Mr. Yoo's belief that the executive branch may ignore the 4th Amendment during wartime would be more reasonable if the FISA courts were unduly interfering with the terrorism investigations. In reality, FISA courts have rubber-stamped the government's requests for a warrant. From 1979 to 2006, FISA courts approved all but nine wiretapping applications. (See here for the statistics.)

While Mr. Yoo's basic premise is correct--the 4th Amendment is indeed cumbersome--from a practical and legal standpoint, his interpretation of the Constitution makes us all less safe. What is most interesting about Mr. Yoo is his utter lack of self-awareness. One of the most serious threats to the United States right now is North Korea. Mr. Yoo is ethnically Korean. If North Korea attacks Hawaii, will Mr. Yoo mind if the government spies on him and his family, unmolested by the 4th Amendment? He probably won't. Anyone who interprets the Constitution in such a way that approves of an American version of the Stasi clearly expects to be the one doing the monitoring, not ever the one being monitored. Perhaps Mr. Yoo, with his government connections, is more self-aware than I give him credit for.

Bonus: information from wiretapping isn't necessarily helpful. The following newstory further indicates that loyal citizens and their willingness to communicate with the government are essential elements of any effective counter-terrorism operation. From CNN:

Friday's report found that the intelligence gathered [from Bush's wiretapping program] was only a small part of counterterrorism work, and most intelligence officials interviewed for the report had trouble "citing specific instances where PSP reporting had directly contributed to counterterrorism successes."

Bonus: ROBERT FISK: No, not at all. Look, over and over again, we’ve been told about the enormous sophistication of the intercepts and the surveillance and the satellite pictures and so on. So why have they not got bin Laden 'til now? They were after him when I first met him in 1994. And then they were after him in 1996 when I met him. And then they were after him in 1997. If they have all this information, why didn't they use it? I’m sure they have bits and pieces. But, you see, the problem is that the Americans are blind on the ground. They don’t have—I love these phrases—HUMINT, human intelligence, on the ground in Afghanistan.

Elie Wiesel's Moving Remarks (June 2009)

REMARKS BY PRESIDENT OBAMA, GERMAN CHANCELLOR MERKEL, AND ELIE WIESEL AT BUCHENWALD CONCENTRATION CAMP, June 5, 2009, Weimar, Germany

Link [Update: broken link. Original remarks were on White House's website.]

MR. WIESEL: Mr. President, Chancellor Merkel, Bertrand, ladies and gentlemen. As I came here today it was actually a way of coming and visit my father's grave -- but he had no grave. His grave is somewhere in the sky. This has become in those years the largest cemetery of the Jewish people.
The day he died was one of the darkest in my life. He became sick, weak, and I was there. I was there when he suffered. I was there when he asked for help, for water. I was there to receive his last words. But I was not there when he called for me, although we were in the same block; he on the upper bed and I on the lower bed. He called my name, and I was too afraid to move. All of us were. And then he died. I was there, but I was not there.
And I thought one day I will come back and speak to him, and tell him of the world that has become mine. I speak to him of times in which memory has become a sacred duty of all people of good will -- in America, where I live, or in Europe or in Germany, where you, Chancellor Merkel, are a leader with great courage and moral aspirations.
What can I tell him that the world has learned? I am not so sure. Mr. President, we have such high hopes for you because you, with your moral vision of history, will be able and compelled to change this world into a better place, where people will stop waging war -- every war is absurd and meaningless; where people will stop hating one another; where people will hate the otherness of the other rather than respect it.
But the world hasn't learned. When I was liberated in 1945, April 11, by the American army, somehow many of us were convinced that at least one lesson will have been learned -- that never again will there be war; that hatred is not an option, that racism is stupid; and the will to conquer other people's minds or territories or aspirations, that will is meaningless.
I was so hopeful. Paradoxically, I was so hopeful then. Many of us were, although we had the right to give up on humanity, to give up on culture, to give up on education, to give up on the possibility of living one's life with dignity in a world that has no place for dignity.
We rejected that possibility and we said, no, we must continue believing in a future, because the world has learned. But again, the world hasn't. Had the world learned, there would have been no Cambodia and no Rwanda and no Darfur and no Bosnia.
Will the world ever learn? I think that is why Buchenwald is so important -- as important, of course, but differently as Auschwitz. It's important because here the large -- the big camp was a kind of international community. People came there from all horizons -- political, economic, culture. The first globalization essay, experiment, were made in Buchenwald. And all that was meant to diminish the humanity of human beings.
You spoke of humanity, Mr. President. Though unto us, in those times, it was human to be inhuman. And now the world has learned, I hope. And of course this hope includes so many of what now would be your vision for the future, Mr. President. A sense of security for Israel, a sense of security for its neighbors, to bring peace in that place. The time must come. It's enough -- enough to go to cemeteries, enough to weep for oceans. It's enough. There must come a moment -- a moment of bringing people together.
And therefore we say anyone who comes here should go back with that resolution. Memory must bring people together rather than set them apart. Memories here not to sow anger in our hearts, but on the contrary, a sense of solidarity that all those who need us. What else can we do except invoke that memory so that people everywhere who say the 21st century is a century of new beginnings, filled with promise and infinite hope, and at times profound gratitude to all those who believe in our task, which is to improve the human condition.
A great man, Camus, wrote at the end of his marvelous novel, The Plague: "After all," he said, "after the tragedy, never the rest...there is more in the human being to celebrate than to denigrate." Even that can be found as truth -- painful as it is -- in Buchenwald.
Thank you, Mr. President, for allowing me to come back to my father's grave, which is still in my heart.

Disney's Up

If you liked Disney's movie, "Up," I've got a treat for you. Lou Romano, also known as the voice of Remy in Ratatouille, has revealed color scripts from the film. Scroll down his blog to find them:

http://louromano.blogspot.com/

The best part of "Up" was the first ten minutes, which are unforgettable.

Book Review: Barry Ritholtz's Bailout Nation

I'm a huge fan of Barry Ritholtz. His blog, The Big Picture, accurately predicted the most recent stock market collapse; as a result, Mr. Ritholtz gained millions of fans. Not being content with blogging and television appearances, Mr. Ritholtz published a book, Bailout Nation. His thesis is that excessive financial leverage, lax regulation, and government incompetence and cronyism caused our current economic crisis.

Bailout Nation is geared towards the general public, i.e., non-experts. If you have been waiting for an easy-to-read, thorough explanation about how we reached our current economic crisis, Bailout Nation is for you.

The flip side of making Bailout Nation so accessible is that long-time market followers will not be surprised by most of book's substantive content. In addition, I was disappointed that Mr. Ritholtz used a more formal writing style for his book. On his blog, Mr. Ritholtz brings an irreverent tone that makes him a delight to read. In fact, I've called Mr. Ritholtz the "Anthony Bourdain of Wall Street" because of his intelligent, devil-may-care style. (Jim Cramer would be Rachael Ray, of course.) Fans of The Big Picture, where curse words are used on a semi-regular basis, will be disappointed to know that I found only one curse word (on page 165).

Perhaps Mr. Ritholtz sanitized his writing style to reach a broader audience. (Either that, or Aaron Task, his editor, had a heavy hand in the book.) Whoever decided to sanitize Mr. Ritholtz made a mistake. As anyone who's read his blog posts can tell you, one reason people love Mr. Ritholtz is because he's the opposite of uptight. In fact, if there was ever such a thing as a "blue-collar" banker, Mr. Ritholtz would be it. There are too few people on Wall Street who have inside knowledge of the business and who are willing to take on the big boys (like Goldman Sachs) with panache. When you are one of the very few people on Wall Street who told people to get out of the market before it collapsed, your record speaks for itself--you don't need a dry, Utah-esque writing style to gain anyone's credibility. Even though readers won't see much of Mr. Ritholtz's normally informal style, don't let it stop you from reading the book--it's not quintessential Barry, but it's still pretty darn good.

Mr. Ritholtz starts out by telling us the "modern era of finance is now defined by the bailout...Perhaps what the government should be doing is acting to prevent systemic risk before it threatens to destabilize the world's economy, rather than merely cleaning it up and bailing out out afterward." (page 5) He then distinguishes between corporate welfare--bailing out individual companies--and broad-based stimulus plans, noting that the "public works programs of the Depression era were designed to impact the entire economy," not a few politically-connected groups. (page 11)

Although Mr. Ritholtz singles out the government's 1971 Lockheed Martin bailout, which he believes paved the way for other taxpayer-backed boondoggles, he places much of the blame on the banking sector and the Federal Reserve. His scorn for former Federal Reserve chairman Alan Greenspan is palpable. Mr. Ritholtz believes Greenspan actively aided and abetted the financial and housing bubbles when his job was to prevent bubbles, not make them. (As Charlie Munger once said, "Greenspan overdosed on Ayn Rand.") Given the ripple effects of the banking sector's collapse on the general economy, Thomas Jefferson's quote--that "Banking establishments are more dangerous than standing armies"--seems all too prescient today. (page 15)

Mr. Ritholtz then surveys the financial damage, and it is heartbreaking. "[A]s of March 2009, the S&P 500 was back at levels below where it was [in] 1996...If you bought the broad index [in 1996] some 13 years later you would have nothing to show for it." (page 66) The market's reversion to 1996 levels makes sense, because so much perceived wealth creation was based on false housing valuations. Most of us know that consumers used their homes as piggy banks, but I was unaware of the extent to which this occurred. Mr. Ritholtz says that "the impact of mortgage equity withdrawal [MEW] has been nothing short of breathtaking: MEW was responsible for more than 75 percent of GDP growth from 2003 to 2006." (page 96)

It doesn't get better, unfortunately. Mr. Ritholtz slams us with another shocking statistic: "From 2001 to 2008, the [American] greenback lost nearly 40 percent of its purchasing power." (page 106)

One reason Mr. Ritholtz may have seen the crisis coming was because of the unreasonable yield spread between U.S. Treasuries and mortgage-backed CDOs. He points out the absurdity in having mortgage-backed CDOs rated the same as U.S. Treasuries but paying a much higher interest rate: "These CDOs rewrote the laws of economics. They promised to be as safe as U.S. Treasuries, but paid out a significantly higher yield. In other words, for the same exact risk, the reward was much greater. This should have been recognized as an impossibility...Someone would either be winning a Nobel Prize in economics--or going to jail." (page 113)

Mid-way through the book, Mr. Ritholtz mentions the "net capital rule." "From 1975 to 2004, this was the primary tool used to prevent investment banks from taking on too much leverage. The rule limited their ratio of debt to net capital to 12 to 1; in other words, $12 was the maximum they could borrow for every $1 in capital." (page 143) After 2004, however, the net capital rule did not apply to major investment banks.

After reading about the SEC's relaxation of the net capital rule, I made up my mind--the economic collapse occurred because the SEC allowed a small number of investment banks to take on an unholy amount of leverage. How much more leverage? Well, in 2004, the SEC exempted investment firms with a market capitalization of over $5 billion from the net capital rule. Thus, Goldman, Lehman, Bear Stearns, and Morgan Stanley were no longer governed by the 12 to 1 limit. These investment firms promptly increased leverage dramatically, sometimes up to a 40 to 1 ratio. Welcome to Wall Street on steroids. Initially, the growth looks good to you and everyone else, but the shrinkage is inevitable. Or, as Mr. Ritholtz writes,

Thus we learn that the tragic financial events of 2008 and 2009 are not an unfortunate accident. Rather, they are the results of a conscious SEC decision to allow these firms to legally violate net capital rules that had existed for decades, limiting broker-dealers' debt-to-net-capital ratio to 12-to-1. You couldn't make this stuff up if you tried. (page 144)

The paragraph above sums up the book for me, but Mr. Ritholtz isn't done. He talks about the fact that "We in the United States have lived beyond our means for many years. " (page 210) As a result, we are dependent on the kindness of foreigners willing to fund our spendthrift ways, and once "you begin to depend on the kindness of strangers, it's best not to make those strangers too angry." (Id.) So, "Why bail out overseas counterparties and debt holders? One gets the sense Uncle Sam had little choice in the matter." (Id.) I echoed Mr. Ritholtz's conclusion here in September 2008:

The money belongs mostly to the Japanese and Chinese, who have lent us trillions of dollars by buying up U.S. debt, bonds, and preferred shares. If we want them to continue financing our lifestyle—-which they will do, because few other places contain citizens so willing to spend—-they set the terms of the bailouts, not us...In large part, international investors are willing to forgive our transgressions because of the bailouts.

Or, as the joke goes, "I just took out a dollar bill to buy coffee and the bill had the inscription, 'Made in China.' Is this going to be a problem?" It's funny, in a Weimar Republic sort of way.

Lest you think Mr. Ritholtz favors bailouts, don't worry--he later writes, "We cannot have privatized profits and socialized risks." (page 227) I wholeheartedly concur. If you're interested in reading about the seeds of the current economic crisis, you'll enjoy Barry Ritholtz's book.

English Majors Unite: on page 199, "tax deferred" is spelled "tax defered."

Note: page numbers refer to the 2009 hardcover edition, published by John Wiley & Sons, Inc.

Disclosures: the publisher provided me with a complimentary copy of Bailout Nation. I do not currently have a financial stake with the author or the publishing company.