July 8, 2008 4:38

Meet Ben Bernanke, good cop. And his partner Ben Bernanke, bad cop

Reading through Ben Bernanke's speech today about "Financial Regulation and Financial Stability" is enough to give a person whiplash. One second he's calling for actions to crack down on reckless lending. The next he's calling for more reckless lending. He's a good cop/bad cop partnership, all contained in one mild-mannered Fed chairman.

First Bernanke announces that the Fed will issue the final version next week of its new, tougher rules on mortgage lending under the Home Ownership and Equity Protection Act. The preliminary version--which, among other things, bars lenders from "engaging in a pattern or practice of extending credit without considering borrowers’ ability to repay the loan"--came out in December. (BAD COP!)

Then he applauds Congressional efforts to regulate Fannie Mae and Freddie Mac more tightly (BAD COP!) and to expand the "products and programs" offered by the Federal Housing Administration (GOOD COP!). After that it's on to explaining the Bear Stearns bailout (GOOD COP!) and announcing that the Fed may extend its emergency Primary Dealer Credit Facility and Term Securities Lending Facility into the new year (GOOD COP!).

Bernanke says the Fed has "redoubled its efforts to strengthen the capital positions, liquidity reserves, and risk-management practices of the institutions for which we have supervisory responsibility." (BAD COP!) He says the Fed needs to be involved in the supervision of investment banks (BAD COP!) but says any such regulation needs to take care not "inhibit efficiency and innovation nor to induce a migration of institutions that are less regulated or beyond our borders." (GOOD COP!)

It keeps on going like that. You could say the man is talking out of two sides of his mouth. But I'll give him the benefit of the doubt and argue that he's walking a tightrope. He's got plans for a tougher regulatory regime aimed at tempering lending binges like the one we've just been through, but he's also still working to keep the aftereffects of that lending binge from ruining us all. He's trying to keep his balance between the two priorities.

Or maybe the better metaphor is that he's handing us a glass of the hair of the dog that bit us before sending us off to an AA meeting.

July 8, 2008 11:44

Oilman to the next President: Ditch the oil

In the last Presidential election, Texas-oilman-turned-corporate-raider-turned-alternative-energy-believer T. Boone Pickens plowed money into the Swift Boat Veterans for Truth—even offering to pay $1 million to anyone who could disprove a single claim from one of the group's John-Kerry-bashing TV ads.

This election cycle he's attacking a different sort of record: America's "addiction" to foreign oil. As you might have read in USA Today this morning, Pickens is kicking off a campaign to convince the country that we should switch our cars to natural gas, and then replace the natural gas we've currently got going into the electrical grid with wind power. He held a press conference in midtown Manhattan this morning. This is what he looked like as he was doing it:

Pickens has signed off on spending up to $58 million of his own money for TV and print ads to get word out. The first wave, which cost some $10 million, started this morning. He's hitting all the big cable TV and national print outlets, as well as local markets in swing states and areas with elected officials who sit on energy-related and otherwise important committees in Congress.

Pickens is selling his push as a non-partisan plea to get the next President, whoever that may be, to do something about all the money we send overseas to those often-less-than-geopolitically-desirable places—$700 billion a year, by his calculation, assuming oil costs $140 a barrel. "I don't think energy is in the debate, and it's our No. 1 problem," he said this morning. "I'm going to get this into the Presidential debate." (Actually, it kind of already is, but we won't let a detail like that slow us down.)

Back in 1996, Pickens helped advise Dole on energy issues, and this time around, he was supposed to be Giuliani's energy go-to guy... alas. Pickens has said he supports McCain, but this morning he made it clear that he hasn't talked to either candidate about his ideas for natural gas and wind. He said he'd be open to sitting down with both of them together, in a non-partisan sort of way. Once one of them does get elected, Pickens' policy folks will hit the ground running with model legislation they'd hope to get passed in the first 100 days.

One big problem with tacking so much in favor of wind—Pickens likes to talk about the Department of Energy's estimate that 20% of the power we need for the electrical grid could, theoretically, come from wind—is that the wind is in the middle of the country and the demand for energy is on the coasts. That's part of the reason Pickens is going national with his idea. He thinks it's time for a little Eisenhower/Interstate Highway System-style leadership to get the infrastructure up and running.

So why is Pickens doing this? The cynical answer is that he is positioned to make a lot of money. He just so happens to be building what could be the world's biggest wind farm. And while a lot of his portfolio is in oil stocks, many of those companies also have big natural gas operations. Plus, he founded and owns a big chunk of the nation's largest seller of natural gas for vehicles.

I'm guessing the sudden interest in securing America's energy future also has something to do with the sort of legacy preening we often see from gentlemen of a certain age who have spent their lives building themselves into billionaires. Pickens said he really got into this idea about six months ago. I'd wager that was just about the time his wife started planning his 80th birthday party.

Though that's not to say we shouldn't make a big push for wind—or for more natural-gas-powered vehicles. In fact, there's a little something about America's quintessential oil investor hopping on board that signals now is exactly the time.

UPDATE: More on Pickens and wind at another CC post here.

Barbara!

July 8, 2008 6:38

John McCain Gets His Budget Ideas From South Park. Cool!

Mark Thoma has a lengthy and meaty roundup of various appalled reactions to John McCain's half-baked pledge to balance the budget by 2013. He points out that, in April:

Sen. McCain ... backed off his earlier promise to eliminate the budget deficit by the end of his first term and now says it may take two terms.

But the best analysis Thoma found came from somebody who sent this e-mail to Brad DeLong:

You all remember the plan of the Underpants Gnomes from South Park:

1. Collect underpants.
2. ?
3. Profit!

That's the perfect analogy for John McCain's budget policy:

1. Cut taxes and spend more on the military.
2. ?
3. Balanced budget!!