THE WORLD IS WATCHING

Obama takes charge, demands vote on health care.

By DAVID ESPO, AP Special Correspondent – Wed Mar 3, 6:19 pm ET
WASHINGTON – The end game at hand, President Barack Obama took command Wednesday of one final attempt by Democrats to enact bitterly contested health care legislation, calling for an “up or down vote” within weeks under rules denying Republicans the ability to kill the bill with mere talk.
Appearing before a White House audience of invited guests, many of them wearing white medical coats, Obama firmly rejected calls from Republicans to draft new legislation from scratch. “I don’t see how another year of negotiations would help. Moreover, the insurance companies aren’t starting over,” the president said, referring to a recent round of announced premium increases affecting millions who purchase individual coverage.
While Obama said he wanted action within a few weeks, Senate Majority Leader Harry Reid, D-Nev., seemed to hint a final outcome could take far longer. “We remain committed to this effort and we’ll use every option available to deliver meaningful reform this year,” he said.
The results will affect nearly every American, mandating major changes in the ways they receive and pay for health care or leaving in place current systems that leave tens of millions with no coverage and many others dissatisfied with what they do get. With Republicans united in opposition, there is no certainty about the outcome in Congress — or even that Democrats will go along with changes Obama urged on Wednesday in what he described as a bipartisan gesture.
With polls showing voters unhappy and Democrats worried about this fall’s elections, Obama also sought to cast the coming showdown in terms larger than health care, which is an enormously ambitious undertaking in its own right. “At stake right now is not just our ability to solve this problem, but our ability to solve any problem,” he said.
Republicans dug in for another struggle on an issue that they agreed would echo into the fall campaign.
The Senate GOP leader, Mitch McConnell of Kentucky, said a decision by Democrats to invoke rules that bar filibusters would be “met with outrage” by the public. “This is really not an argument between Democrats and Republicans. It’s an argument between Democrats and the American people,” he said.
At its core, the legislation under discussion still is largely along the lines Obama has long sought and GOP critics attack as a government takeover of health care. It would extend coverage care to tens of millions of uninsured Americans while cracking down on insurance company practices such as denying policies on the basis of a pre-existing medical conditions.
A new “insurance exchange” would be created in which private companies could sell policies to consumers under terms fixed by the federal government. Much of the cost of the legislation, nearly $1 trillion over a decade, would be financed by cuts in future Medicare payments to hospitals and other providers and higher payroll taxes on individuals earning more than $200,000 and couples over $250,000.
The president’s appearance marked a presumably final pivot point in a long, uphill effort by Obama and other Democrats to enact far-reaching changes to the health care system — and with his own administration at an important crossroads. Eager to turn attention to efforts to stimulate the economy and create jobs, the president is seeking a victory on health care that can also give him a boost on other priority legislation.
At the same time, a defeat could damage Obama’s ability to help fellow Democrats heading into the fall campaign. Failure on health care could well lead to a shake-up of the president’s White House team, which has received criticism recently from Democratic lawmakers.
After nearly a year of struggle, the House and Senate passed separate bills late last year, and appeared on course for approving a final compromise version early in 2010. But those efforts were abruptly abandoned when Republicans unexpectedly won a special election in Massachusetts. Sen. Scott Brown’s victory gave the GOP an ability they had lacked, the strength to sustain a filibuster, a form of opposition that requires supporters of a bill to post 60 Senate votes in order to cut off debate and force a final decision.
Democrats went into something of a political fetal position, and have begun to stir in recent days only as Obama asserted his determination with a bipartisan summit followed by a revised set of proposals.
Obama said the use of rules that deny the minority the right to a filibuster had been used numerous times in recent years, including on passage of welfare reform legislation in the 1990s and twice when President George W. Bush pushed tax cuts to passage. Health care “deserves the same kind of up or down vote” as those earlier measures, he said.
Under the rather complicated approach under discussion, the House would be asked to approve the bill that passed the Senate late last year, despite objections by many members of the rank and file to several provisions. Simultaneously, both houses would also vote for a companion measure whose purpose would be to make changes in the first bill sought by either House Democrats or the White House.
Obama said he was exploring GOP proposals for cracking down on fraudulent medical charges, revamping ways to resolve malpractice disputes, boosting doctors’ Medicaid reimbursements and offering tax incentives to curb unnecessary patient visits to doctors.
The ideas include an experiment that would establish special courts in which judges with medical expertise would decide malpractice allegations. The idea has been criticized by the Center for Justice & Democracy, a consumer group that prefers the current system of awarding damages. It said health courts would be “anti-patient.”
The White House and Democratic leaders said they hoped that Obama’s maneuvering would at least win the votes of wavering conservative and moderates in their own party, even if it didn’t entice Republicans.
But there was no guarantee of success, despite Obama’s vow to do everything in his power to succeed — and a White House announcement that he would travel to Pennsylvania and Missouri next week to campaign for the legislation.

—————-

POLITICO, OPINION CONTRIBUTOR

Sarah Palin a populist?

By CHARLES POSTEL  3/3/10

When David Broder praised Sarah Palin’s speech at the National Tea Party Convention as “perfect-pitch populism,” real Populists were surely spinning in their graves.

In the 1890s, American farmers and other activists rocked corporate power in a populist revolt. Now, the Washington Post columnist has passed the populist mantle to Palin. If they could, the Populists would protest this misuse of their name.

But why do political analysts insist on using the word “populism” to describe conservative activism? Why should we care? Because it makes hash of both history and our current political conflicts.

The Populists were all about economic justice. They demanded government regulation of railroads, banks, telecommunications and insurance. And if that failed to curb corporate abuses, they wanted public ownership or at least a “public option.” They demanded a federal stimulus to get the economy out of the terrible depression of 1893-97.

The Populists were the ones who pushed for a progressive income tax to pay for the needs of the people, especially for better and more accessible public schools and universities. The Populist Party of the 1890s failed. But, in failure, its proposals refashioned progressive politics for generations.

Yet the populist reputation has suffered a cruel fate. In the 1950s, historian Richard Hofstadter discovered a “cranky” side of populism. “Progressive populism,” he suggested, had morphed into the conservative intolerance of McCarthyism.

It didn’t matter that this never happened. It didn’t matter how many scholars had showed that there was not a scintilla of evidence for a populism/Joe McCarthy connection. The damage was done.

Today’s political analysts channel Hofstadter. George Will’s Feb. 18 Washington Post column smugly reduces populism to the whiny politics of self-defeating resentment “that never seems serious as a solution.” It may be bad history, but it makes for simple story lines about “angry” politics.

So they tell us Palin is a populist because she speaks for the “common people.” But every ambitious politician over the past 200 years has laid claim to “the plain people,” “the neglected middle class” or “the silent majority.”

Palin is a populist, the political analysts tell us, because she is “resentful” and “angry.” But Americans are divided in their anger. And those divisions run along well-worn historical ruts.

Take health care. Lots of Americans, in the populist tradition, are mad at the social injustice of 40,000 people dying every year because of a lack of health care. Lots of other Americans, in the conservative tradition, are no less angry at the idea that government would provide the care that they need.

Or income taxes. Lots of Americans, in the populist tradition, resent the fact that schools and bridges are crumbling because Wall Street millionaires no longer pay their share of taxes. Lots of other Americans, in the conservative tradition, believe that progressive taxation means theft — putting “your tax dollars at work for those who won’t!”

Or President Barack Obama’s stimulus. Lots of Americans believe that the feds should take more action — that is, print more money to pull the economy out of its slump and put people back to work. The Populists of old wanted to do this by taking the United States off the gold standard and printing money or coining silver.

This gave rise to the late-19th-century “battle of the standards” that we learned about in high school — with the conservative “gold bugs” pitted against Populist “greenbackers” and “silverites.”

Today’s tea party conservatives, like the gold bugs of yore, have put fear of inflation at the top of their political agenda. Tea party protesters are demanding a return to the gold standard.

Earlier this month, Mike Pitts, a conservative legislator in South Carolina, introduced a bill to make gold coins the only legal currency in the state. Fox News’s Glenn Beck peddles his “three-G system” of “God, gold and guns” on his show.

If we want to make sense of the storms brewing in American politics, a little history can’t hurt. The conservatives haven’t adopted gold as their symbol by accident. They are today’s gold bugs.

They proudly follow in the footsteps of the “sound-money” enemies of Populism. Of the conservative bloc that fought Franklin D. Roosevelt’s New Deal. Of the militant Republicans of the McCarthy cabal, who exposed Harry Truman and Dwight Eisenhower as traitors. Of the Barry Goldwater and Ronald Reagan wing, who promised to free America from Social Security and government slavery.

But many Americans have different concerns. They want government action to put the unemployed back to work, to stem the tide of foreclosures and evictions, to regulate the financial industry, to provide health care security and to repair schools and infrastructure.

For such people, there’s another historical tradition they need to know about: It’s called Populism.

Charles Postel, an assistant professor of history at San Francisco State University, won the Bancroft Prize in American history for his book “The Populist Vision.”

Dear DHFC Supporter,

He warned us!

In his State of the Union Address, President Obama said he wouldn’t quit trying to thrust his radical transformation of America down your throat. Now he’s arrogantly fighting for a health care plan that you don’t want any part of, despite the loud-and-clear message from the voters in New Jersey, Virginia, and most of all Massachusetts, who have rejected his “transformation.”

But a genuine fight is taking place, and I’m proud to say that the Freedom Center is leading the charge! The Freedom Center has published and distributed more than 200,000 copies of two booklets designed to expose Obama and the radical left and empower Tea Party activists as they take to the streets.

The first booklet, Obama’s Rules for Revolution, reveals the links of radicalism from Saul Alinsky right up to today’s White House. Thanks in part to your steadfast support, Obama’s Rules is in the hands of 200,000 Americans! And the demand is still high! And our second booklet, The Art of Political War for Tea Parties, has become a basic text for men and women across the nation who have had enough and are ready to take to the streets to stop Obama’s radical agenda!

Both booklets are flying off the Center’s bookshelves. We need to produce and distribute more. It is precisely because you know who I am are and what the Freedom Center has done to defend our country and its traditions that I now ask you to make a contribution of $25, $50, $100 or more to the Freedom Center to help us print and distribute another 250,000 copies of these booklets.

The real hope on America’s horizon is not in the rhetoric of the President’s empty promises. It’s in the Tea Parties, the demonstrations in Washington, and the recent elections in Massachusetts, New Jersey and Virginia. Your countrymen are learning all about Obama and the radical leftist machine, knowledge you’ve had for a long time by virtue of working beside me at the Freedom Center.

I have said it many times, the Freedom Center is not just another think tank; it is a battle tank. But we can only do this with your help. You have been the backbone of the Center, one of our most loyal supporters. Please make a tax deductible contribution to the Freedom Center that will allow us to complete the mission we have undertaken.

America stands at the precipice. Let’s act together to save our country, our liberty and our future by bringing it back from the brink. Thank you so much for helping me in the past, and I hope you are standing with me still.

Sincerely,

David Horowitz
President & Founder

P.S. I don’t have to tell you that the Freedom Center has been in the forefront of the fight against the left for the last 20 years. Now that it is Paul Revere time in America, we will be even more aggressive in telling it like it is, more active in warning our countrymen what they face, more determined in stopping the left’s advance. As we go to war with the leftists in the Obama administration, I ask you to reenlist one more time to serve with us. We will fight the battles, but we need you to pass the ammunition.

The David Horowitz Freedom Center
P.O. Box 55089
Sherman Oaks, CA 91499-1964
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Posted in Israel, Reporting from Washington DC

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Kill Your Lawn, Earn Some Green !
By Katie McCaskey Feb 19th 2010 on an aol blog
Southern California residents have not one, but two thousand more reasons to rip out their water-wasting turf: a check in the mail.

The Los Angeles Department of Water and Power (LADWP) and a handful of other utility companies are paying SoCal residents to rip out their suburban lawns. In exchange, homeowners are required to replace grass with drought-tolerant, native plant species or install permeable surfaces which filter water back into the ground. Common permeable surface choices include flagstone, brick, and gravel. The rebate is $1 per square foot, up to a maximum of 2,000 feet.

The process works like this:
The homeowner notifies the utility company of changes made to their lawn. The utility company comes to verify changes have been made and then issues the check. Specific enrollment details can be found on the Socal Water$mart Web site.

Cyberhomes blogger Marcie Geffner writes:
The rebate might not be enough to persuade homeowners who really love their lawns. But for me, the offer was a no-brainer as I wanted to replace my big boring lawns with flagstone walkways, cactus and other plants that are more natural to the climate, if not necessarily native.

Other water-saving rebates available through LADWP include incentives to replace toilets and clothes washers with high-efficiency models, timer controlled irrigation, and pressure-reduced sprinkler nozzles. If you’re willing, there is even a rebate for installing synthetic turf.

Check with your local utility company or DSIRE.org to see what environmentally-conscious rebates are available in your area.

The New York Times Co.’s stock was surging today, March 1st, up 6.3%. It reached greater heights earlier in the day, spiking an astounding 11% on rumors that a billionaire shareholder – the Mexican Carlos Slim – would buy the whole company.

A representative for Mr. Slim has told CNBC that Slim won’t be buying The New York Times. For its part, the Times Co. has said it doesn’t comment on rumors.

Trading volume in New York Times shares is about four times as much as average today.

Slim bought a 6.9% stake in the Times in 2008. In January 2010 he invested an additional $250 million.

Over the weekend, New York Magazine reported that Rupert Murdoch’s Wall Street Journal was mooting a $15 million initiative to take on The New York Times with a new New York metro section, in hopes of cut into the Times’ advertising base. The Times needs money even though it actually returned last week the salaries of some of its employees that were cut because of the recession.

Does the NYT try to retain some of the staff so that its writing does not suffer further?

Are Murdoch – Salim fighting matches on New York’s horizon?

We think the beneficiary of this will continue to be The Financial Times.

HRW Press – HUMAN RIGHTS WATCH AT THE UN.

Egypt: Student Wrote About Corruption in Military Academy and was put before Military Court Trial.

(New York, March 1, 2010) – The Egyptian authorities should drop all charges against Ahmad Mostafa, a 20-year-old engineering student charged with writing about corruption in the military academy on his blog, Human Rights Watch said today.  Security officials are prosecuting Mostafa before a military court in a trial that began March 1, 2010.

“The government should not be prosecuting Mostafa at all, much less before a military court, with no possibility of appeal,” said Joe Stork, deputy Middle East director at Human Rights Watch.  “Instead of looking into his accusations, the government is trying to silence him.”

Writing that exposes corruption is protected under Egypt’s international obligations, Human Rights Watch said. Article 9 of the African Convention on Human and People’s Rights, and article 19 of the International Covenant on Civil and Political Rights, both ratified by Egypt, require Egypt to protect freedom of expression.

Mostafa, a student at Kafr El Sheikh University, in northern Egypt, is a member of “April 6,” a political activist youth group, and has a blog called “Maza Asabuki Ya Watan” (What is Ailing You, My Country?). On February 15, 2009, his post, “Scandal in the Military Academy,” contended that a teacher whose son was forced to leave the Military Academy later discovered that this was to make room for the son of an influential individual who would make financial contributions to the academy.

Military intelligence officers arrested Mostafa on February 25, 2010, while he was on his way to the Faculty of Engineering at Kafr El Sheikh University, and the prosecutor ordered his detention pending trial, based on a Military Academy complaint about the 2009 posting.

Gamal Eid, director of the Arab Network for Human Rights Information, told Human Rights Watch that military intelligence officers questioned Mostafa on January 17 about his blogging, demanded his password, and then changed his password to keep him from accessing the blog before releasing him that same day. The blog post appears to have come to their attention after Mostafa discussed plans to hold a demonstration during a January visit by President Hosni Mubarak to Kafr el Sheikh with other April 6 members.

The prosecutor concluded the investigation on February 28 and referred the case to the military court in Nasr City, Cairo.   The trial began March 1. At the first session, the judge agreed to defense lawyers’ request for an adjournment to study the court documents, but only by one day.

The prosecutor charged Mostafa under Law 113 of 1956 and the Penal Code which prohibit “the publication of information considered a secret of the armed forces, spreading false information with the goal of causing harm and insulting officials responsible for admission of students into the military academy.” The only evidence presented is the post on Mustafa’s blog.

Defense lawyers from the Arab Network for Human Rights Information and the Association for Freedom of Thought and Expression told Human Rights Watch that the judge only allowed them a brief review of the court file and refused to allow them to see a memo regarding the case from the military academy or to take any notes.

Egypt has arrested and detained other bloggers for acts protected by freedom of expression.  Kareem Amer, whose real name is `Abd al-Karim Nabil Suleiman, has been in Borg El Arab prison, in Alexandria, since November 7, 2006, for writing about sectarian tensions in Alexandria and criticizing President Mubarak and the Al-Azhar religious institution on his blog. On February 22, 2007, a court sentenced him to four years in prison for “insulting the president,” “spreading information disruptive of public order,” and “incitement to hate Muslims.”

Hany Nazeer, another blogger, is being detained without charge in Borg El Arab prison, under the country’s emergency law. State Security officers arrested him at his home in Naga Hammadi, Qena, on October 3, 2008, after he expressed opinions critical of Christianity and Islam on his blog. Mostafa Hanafy, vice president of the Egyptian Council of State and a member of the Egyptian delegation to the United Nations Human Rights Council, told the human rights body  on February 17 that the Egyptian government had “made a commitment before parliament to use the emergency law only for terrorism and drug-related crimes and it has only implemented the rules of the emergency law in these cases.”

Musad Abul Fagr, a novelist and rights defender who had been outspokenly critical of violation of the rights of Sinai Bedouin, remains in prison under an emergency law order despite several court orders for his release. On July 17, prison officials transferred him to Borg El Arab prison under the 13th emergency law order extending his detention.

Human Rights Watch strongly opposes any trials of civilians before military courts, whose proceedings do not protect due process rights. The African Commission on Human and Peoples’ Rights, in interpreting the African Charter on Human and Peoples’ Rights, has said that military courts “should not, in any circumstances whatsoever, have jurisdiction over civilians.” The Human Rights Committee, the expert body that monitors compliance with the International Covenant on Civil and Political Rights (ICCPR), expressed concern in 2002 that Egypt’s “military courts and state security courts have jurisdiction to try civilians accused of terrorism although there are no guarantees of those courts’ independence and their decisions are not subject to appeal before a higher court,” as required by the ICCPR.

In a 2009 report following his visit to Egypt, Martin Scheinin, UN Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism, reiterated that “the trial of civilian terrorist suspects in military and Emergency Supreme State Security Courts raises concerns about the impartial and independent administration of justice and furthermore does not comply with the right to have a conviction and sentence fully reviewed by a higher court.”

During the review of Egypt’s record by the UN Human Rights Council, several countries recommended that Egypt stop detaining bloggers under the emergency law and stop trying civilians before military courts. Hanafy, the Egyptian delegation member, told the Council on February 17 that “there are very few cases of [civilians tried before military courts]; the decision [to refer a civilian to a military court] is an administrative one that can be appealed against in all cases.”

“The Egyptian government says one thing in Geneva and then immediately makes a mockery of the Human Rights Council’s review process,” Stork said. “No civilian should be tried before a military court, and no government that claims to respect human rights should be prosecuting someone solely for writing about corruption.”

For more Human Rights Watch reporting on Egypt, please visit:
 http://www.hrw.org/en/middle-eastn-afric…

For more information please contact:
In Cairo, Heba Morayef (English, Arabic, French): +201-2381-0319; or  morayeh at hrw.org
In Washington, DC, Joe Stork (English): +1-202-612-4327; or +1-202-299-4925 (mobile)

Better than sliced bread?

{Now please – do not be sarcastic – this
should have been an Obama moment. Will the White House buy one – or
get one for free if this is permissible – and install it in the White
House Basement – Please? The point is that people should realize that
clean DECENTRALIZED ENERGY is the best we will ever get!}

Bloom: Thinking inside the box – { a new meaning for this – please! }

• Posted on Sustainabilitank.info on March 1st, 2010
  by Pincas Jawetz (PJ@SustainabiliTank.com)

  from:    Ignacio Montero <im638@nyu.edu>

  date :    Mon, Mar 1, 2010 a

  Event: Middle East Lecture Series MONDAY, Mar. 8 with Daniel L. Byman

  U.S. and Middle East Policy Lecture Series.

  Mondays at 12:30pm at NYU Wagner

  Monday, March 8 for – spring semester

  Middle East and U.S. Strategy lecture series with Daniel L. Byman, Director, Center for Peace and Security Studies, Georgetown University; and Senior Fellow, Saban Center for Middle East Policy, Brookings Institution.

  
  Date: Monday, March 8 / 12:30-1:30pm
  Location: NYU Wagner, Puck Building
  295 Lafayette Street, Rudin Family Forum, 2nd floor
  ……………………………………………………….

  Israeli Counterterrorism and its Implications for the United States
  Daniel L. Byman, Director, Center for Peace and Security Studies, Georgetown
  University; and Senior Fellow, Saban Center for Middle East Policy,
  Brookings Institution

  Dr. Byman has written widely on a range of topics related to terrorism,
  international security, and the Middle East. In this talk, Dr. Byman will
  examine Israel’s counterterrorism efforts against Fatah, Hamas, Hezballah,
  and other groups to draw lessons about counterterrorism for Israel and other
  countries.

  For the last decade, the Middle East has occupied a place of primacy in
  debates over U.S. global aims and strategies. NYU Wagner will sponsor a
  year-long lecture series that will bring to campus original thinkers from
  academics, research centers and government.

  RSVP for this event and others in the series (see below) by clicking on the
  following link http://wagner.nyu.edu/events/

  —————–

  Monday, March 22 / 12:30-1:30pm
  A Strategy of Tactics: Countintsurgency and the American Army
  …with Colonel Gian Gentile, Professor, Department of History, U.S.
  Military Academy

  Monday, March 29 / 12:30pm – 1:30pm
  The Strong Horse: Power, Politics and the Clash of Arab Civilizations
  …with Lee Smith, Visiting Fellow, The Hudson Institute; and Middle East
  correspondent, The Weekly Standard

  Monday, April 5 / 12:30pm – 1:30pm
  Why is Muslim Extremism Attractive? And How Do We Uproot It?
  …with Ed Husain, co-director of the Quilliam Foundation, and author of The
  Islamist

  –
  Robert F. Wagner Graduate School of Public Service
  New York University
  295 Lafayette Street, 2nd Floor
  New York, NY 10012
  e:  yvette.white at nyu.edu
  t: 212.992.9884
   http://wagner.nyu.edu

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  Posted in Arab Asia, Future Meetings, Iran, Israel, Reporting from Washington DC

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As Berkshire Returns to Form, Buffett Blasts Wall Street.

By SAM GUSTIN
Posted 5:45 PM 02/27/10 Company News, People, Earnings, Berkshire Hathaway

Berkshire Hathaway (BRK.A), the giant investment and holding company run by legendary investor Warren Buffett, returned to form in 2009, delivering a 20% return to shareholders. Despite a few key missteps and lingering fallout from the recession, the results were strong enough for Buffett to express optimism in his widely read annual letter to investors — and get in a few shots at “reckless” Wall Street executives along the way.

Buffett’s outlook is certainly more positive than it was a year ago — for good reason. During 2009, the company notched its best performance since 2003. Shareholder book value increased 19.8% after falling 9.8% in 2008. Berkshire’s 2009 performance slightly trailed the S&P 500, however, but over the entire financial meltdown the company outperformed that index thanks to a comparatively small 2008 loss.

Blasting Wall Street

Buffett’s letter was a mix of lively — and occasionally pungent — investment philosophy, contrition over Berkshire’s missteps, and condemnation of those Buffett sees as bad actors on the financial stage. In particular, he criticized Wall Street executives and board-members for failing to control risk and then avoiding what he said should have been “severe” consequences. Without naming names, he castigated Wall Street honchos for engineering their own industry’s doom and then shoveling the losses onto investors, all while maintaining lavish lifestyles.

“It has not been shareholders who have botched the operations of some of our country’s largest financial institutions,” Buffett wrote. “Yet they have borne the burden, with 90% or more of the value of their holdings wiped out in most cases of failure. Collectively, they have lost more than $500 billion in just the four largest financial fiascos of the last two years. To say these owners have been ‘bailed-out’ is to make a mockery of the term.”

“The CEOs and directors of the failed companies, however, have largely gone unscathed,” Buffett continued. “Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price – one not reimbursable by the companies they’ve damaged nor by insurance.”

Getting Back to Basics: Core Investment Principles

As usual, Buffett reiterated the core investment philosophy that has made him an investing legend, along with longtime partner Charlie Munger: invest in easy-to-understand companies run by honest and talented managers at a good price. Then, nurture those companies and investments over the long-term.

“Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be,” Buffett wrote. “At Berkshire we will stick with businesses whose profit picture for decades to come seems reasonably predictable.”

In a not-so-subtle dig at profligate Wall Street firms that gambled on risky mortgage-based bets and then begged the federal government to save them, Buffett said Berkshire would never rely on taxpayers – or anyone else – for salvation. He has long decried excessive leverage as little more than irresponsible gambling that puts the entire enterprise at risk.

“We will never become dependent on the kindness of strangers,” Buffett wrote. “Too-big-to-fail is not a fallback position at Berkshire. Instead, we will always arrange our affairs so that any requirements for cash we may conceivably have will be dwarfed by our own liquidity.”

Providing, Not Asking, for Aid

To prove his point, Buffett noted that instead of asking for help during the financial crisis, Berkshire actually dispensed aid to others in need — thereby allowing the company to snap up bargain stakes in Goldman Sachs, GE and Harley Davidson.

“When the financial system went into cardiac arrest in September 2008, Berkshire was a supplier of liquidity and capital to the system, not a supplicant,” Buffett wrote. “At the very peak of the crisis, we poured $15.5 billion into a business world that could otherwise look only to the federal government for help.”

Buffett wholeheartedly rejected the short-term investment posture that leads many companies and shareholders to live from one quarter to the next, trading on earnings results and forecasts. “We make no attempt to woo Wall Street,” he wrote.

And he offered a warning he’s given increasingly in recent years: Don’t expect Berkshire to repeat its stunning past performance. As the company has grown it has lost the some of the advantage it had as a smaller, more nimble company, he said.

“The big minus is that our performance advantage has shrunk dramatically as our size has grown, an unpleasant trend that is certain to continue,” Buffett wrote, adding that “huge sums forge their own anchor and our future advantage, if any, will be a small fraction of our historical edge.”

Taking the Blame for Major Missteps

Going forward, Buffett wrote, “we will make plenty of mistakes” — and in his letter, he took clear blame for two major missteps. He called the performance of NetJets, the company’s prized fractional ownership jet unit “the major problem for Berkshire last year.” Buffett has been fond of Netjets, which he, his family, and company board members use frequently.

“In the eleven years that we have owned the company, it has recorded an aggregate pre-tax loss of $157 million,” Buffett wrote. “Moreover, the company’s debt has soared from $102 million at the time of purchase to $1.9 billion in April of last year. Without Berkshire’s guarantee of this debt, NetJets would have been out of business. It’s clear that I failed you in letting NetJets descend into this condition.”

In a characteristic display of humor, Buffett said he had been “bailed out” by David L. Sokol, the Berkshire star who took over as CEO of NetJets last year. “Debt has already been reduced to $1.4 billion, and, after suffering a staggering loss of $711 million in 2009, the company is now solidly profitable,” Buffett wrote. He described Sokol’s leadership as “transforming.”

Buffett was also blunt in blaming himself for last year’s failed experiment to introduce credit cards to Geico customers. “Last year your chairman closed the book on a very expensive business fiasco entirely of his own making,” he said. Buffett had thought that Geico policyholders “were likely to be good credit risks.” But top managers warned him that “instead of getting the cream of GEICO’s customers we would get the – – – – – well, let’s call it the non-cream.”

Buffett says he “subtly indicated that I was older and wiser.” Turns out, he wrote, “I was just older.” Berkshire lost over $50 million on the experiment.

Dealing With the Dangers of Financial Derivatives

Buffett also addressed a topic that has been a growing source of controversy for the company – its use of derivatives, the complex financial products that caused so much havoc during the financial meltdown. Buffett has famously called such products “financial weapons of mass destruction.” How then to explain Berkshire’s use of them? Lack of irresponsible leverage, for starters.

“The dangers that derivatives pose for both participants and society – dangers of which we’ve long warned, and that can be dynamite – arise when these contracts lead to leverage and/or counterparty risk that is extreme,” Buffett explained. “At Berkshire nothing like that has occurred – nor will it. It’s my job to keep Berkshire far away from such problems. Charlie and I believe that a CEO must not delegate risk control. It’s simply too important.”

“At Berkshire, I both initiate and monitor every derivatives contract on our books, with the exception of operations-related contracts at a few of our subsidiaries, such as MidAmerican, and the minor runoff contracts at General Re,” Buffett wrote. “If Berkshire ever gets in trouble, it will be my fault. It will not be because of misjudgments made by a Risk Committee or Chief Risk Officer.”

Who Will Be Buffett’s Successor?

As always, Buffett offered little guidance on his possible successor. (He has famously said that he has the name of his successor in a sealed envelope in his office. He’s also made it clear that he’ll most likely be followed by two managers – one to run Berkshire’s operating businesses and the other to run the investment portfolio.)

One possible hint came in Buffett’s glowing mention of Ajit Jain, the Berkshire superstar who runs the National Indemnity business. “If Charlie, I and Ajit are ever in a sinking boat – and you can only save one of us – swim to Ajit,” he wrote. Buffett also praised Sokol, the intense chief of major Berskshire subsidiary MidAmerican Energy and recently-installed CEO of NetJets, who is also considered one of the top succession candidates.

But as usual, the Oracle of Omaha insists that he “skips to work every morning.” Berkshire’s annual meeting – often called the “Woodstock of capitalism” – will take place on May 1 in Omaha, Nebraska, where the company is headquartered.

A Film Screening and Conversation on New Muslim Cool

Is America Really Post-Racial?

———- Forwarded message ———-
From: Al Gore, Repower America <info@repoweramerica.org>
Date: Mon, Mar 1, 2010
Subject: What is required
To: Pincas Jawetz <PJ@sustainabilitank.com>

Dear Pincas,

Winston Churchill said, “Sometimes doing your best is not good enough. Sometimes you must do what is required.”

Now is that time.

Our elected officials must rise to face the challenge of the climate crisis. And we must demand that they do what is required before it is too late.

That’s what I wrote yesterday in the New York Times, and today I need your help to make sure our Senators pass a strong climate bill this year.

The good news is we could be very close. A bipartisan group of Senators is drafting a bill right now that could be introduced within weeks — and critical negotiations over its content are taking place right now.

So starting Tuesday, a broad coalition of climate groups is launching a massive calling campaign to build grassroots pressure for the strongest bill possible. Will you join us by pledging to call your Senator on Tuesday?

Clicking here will add your name to the thousands who have already pledged to call.

It would be an enormous relief if the recent attacks on the science of global warming actually indicated that we do not face an unimaginable climate calamity. But the overwhelming scientific consensus remains unchanged. Every day we dump 90 million tons of global warming pollution into the atmosphere, as if it were an open sewer.

There is still a narrow pathway to stopping catastrophic climate change — and it begins with a choice by the United States to pass a law establishing a clear cost for global warming pollution.

The House of Representatives has already passed comprehensive clean energy and climate legislation with bipartisan support. Now the Senate must follow suit, and the current effort may bring us closer than we’ve ever been.

To arrive at a strong bill, we must demand that our Senators take bold action on climate change. They need to know that we will support them if they do what is required.

That means you have to pick up your phone.

Pledge to call your Senator.

After all has been said and so little done, the truth about the climate crisis — inconvenient as ever — must still be faced.

The future of our nation and our world is depending on the United States Senate. Please join us this week to make sure they do what is required.

Thanks,

Al Gore
Founder
The Climate Protection Action Fund

P.S. To read my full op-ed, click here

–
From: P F Henshaw <eco@synapse9.com>
Date: Mon, Mar 1, 2010
Subject: The trouble with being good at controlling nature – our healthcare addiction

Philip F. Henshaw sent us the following and we thought it should give us further material for thought and we invite your reaction.

Phil Henshaw writes:

I’ve been looking right at it, studying it deeply, for years.    This week I found another side of the moral quandaries of the healthcare crisis in America that seems to raise it to the scale of the mortal and moral threats we face with the energy crisis, climate change or that loss of bio-diversity.   We’re addicted.    It started with the great early achievements of healthcare, like the universally acclaimed combination of great science and our societal commitment to good works in eradicating Smallpox.

Even the best of solutions, or could I say *especially* the best of solutions, tend to lead people not having foresight into the deepest sort of trouble.   Eradicating Smallpox was greeted as proof we could overcome any great threat of nature, but incidentally also did serve to greatly multiply people and kicked off our great completely unaffordable profit/science healthcare spiral.   That this is what our healthcare crisis is really about sort of just dawned on me.

What makes healthcare an all but incurable growing addiction is the combination of:

1) our being mortal, so the more healthcare we get the more we physically need, and 2) that this has become the last great growth industry for American capitalism.

It combines the economic arts we are most proud of, science, finance, good works and marketing, to create an incurable and unaffordable economic addiction to disease.

That healthcare has become a genuine cancer by multiplying cures and costs toward the exhaustion of the economy, is a true Gordian Knot of moral quandaries rapidly bankrupting everyone.

Has our talent for controlling nature really become incurable?  … destined to overwhelm us with its natural complications?   That very dilemma also seems to be one that nature solves in making literally every perfect thing she makes, though… i.e. that she somehow doesn’t get carried away with limitless problem solving, and is able to make things whole and perfect anyway.

It’s “a long shot”, of course, but this suggests we really need to change.     If we weren’t so busy telling nature how to behave maybe there actually are secrets to find in how she does things worth studying.

Phil Henshaw      ¸¸¸¸.·´ ¯ `·.¸¸¸¸

NY NY     www.synapse9.com

– The Grand Old Party of Republicanism on President Obama’s Health Care Reform: “We Need To Start From Scratch.”

– The Patient: “I HAVE A SCRATCH.”

– The GOP Leading Insuring Doctor: “That’s All We’re Gonna Cover.”

$ $

NOT AMERICA’S DILEMMA – BUT AMERICA’S REALITY.

$ $

The range of questions on health care in GOP circles are:

Q.  IS HEALTH CARE REFORM -

a.   A BAD IDEA?

b.   A REALLY BAD IDEA?

c.   A TOTALLY DESPICABLE IDEA?

A.  Now please vote!      a.       b.      c.

$ $

The US spends about twice as much on health as other industrialized Nations – in absolutes and as percentage of GDP -  and see what you got – scratch coverage if it is not a pre existing condition!

 http://www.arabianbusiness.com/582471-sa…

Saudi Alwaleed reiterates support to Citi’s Pandit
by Souhail Karam on Saturday, 27 February 2010

Prince Alwaleed Bin Talal, a prominent Saudi investor in Citigroup, reiterated on Saturday his support 0f the bank’s management led by Chief Executive Vikram Pandit.

“Prince Alwaleed emphasised his support of Pandit and Citigroup’s management,” Alwaleed’s Kingdom Holding Co said in a statement.

Prince Alwaleed met Pandit in Saudi Arabia. Pandit also met the kingdom’s Finance Minister Ibrahim Al Assaf and the head of its central bank Muhammad al-Jasser, added Kingdom in the statement without giving more details. (Reuters)

—————–

What is there to lose for the US had the Saudis bought even a larger stake of Citi? Citi has a long history of working anyway for Saudi interests – directly or via US big oil companies. Our experience taught us that the $4.8 billion financing of the “Gas-to-Gas” New Zealand boondoggle that took good Natural Gas of Motunui and funded its transformation into unneeded synthetic gasoline via methanol – a loss of energy independence for New Zealand that eventually led further to the full give-away of the New Zealand gas resources to Mobil Oil in lieu of paying technology fees before Mobil joined EXXON. Without the backing from Citi – this mess might not have occurred. We did document this at the time and it was brought into the open via a presentation at a Petroleum Science conference in Houston. Why did Washington have to bail out Citi rather then let its shareholder lose some money? Did this serve US interests? If I do not make myself clear, why do you not read Professor Joseph Stiglitz’s article we posted yesterday?

—————-

Further:

Saudi to build $13bn ‘tourist city’ on east coast
Bikini Beaches: Saudi Arabia has its own rich tradation; I mean why they need to allow bikini’s on their beaches and why people need to travel to Saudi to wear Bikini… Javed Iqbal from Jeddah, 27 February 2010, 14:49:40 ( UAE Time )

Those are very logical remarks we found in the UAE posting – why indeed do people want to go to Saudi Arabia and infuriate people there by imposing mores that are strange to them? This is really not so different then selling parts of Citi to the Prince while reassuring him that if the bank flops Washington will bail it out? The real stink is here – not there!

Sunday, Feb. 28, 2010, Kyodo News of Japan:

Six-party talks up to North: Bosworth.

U.S. special envoy to North Korea Stephen Bosworth said Saturday in Tokyo he hopes to see “fairly soon” the resumption of the stalled six-party talks on Pyongyang’s nuclear programs, but added whether that is realized depends on the North.

“Five of the six parties are prepared to move very quickly. And we would hope that the sixth, that is to say the DPRK, will also decide to move ahead very quickly,” Bosworth told reporters, referring to North Korea by its official name of the Democratic People’s Republic of Korea.

But the U.S. point man for North Korea policy also said, “In the end, of course, the decision as to whether they are going to come back and when, it is up to the DPRK.”

While admitting that there is no agreement yet on when to resume the multilateral talks involving North and South Korea, China, Japan, Russia and the United States, Bosworth said, “I hope that, in the not too distant future, but fairly soon, we will see a resumption of the talks.”

=====================

UN-North Korea talks hint at a peace treaty on the Korean Peninsula
Source: Global Times ,  February 21 2010
By Ronda Hauben also of www.taz.de/blogs/netizenblog

This June 25 marks the 60th anniversary of the beginning of the Korean War in 1950. Only an armistice and a temporary agreement, not a peace treaty, are in place to help prevent a renewed outbreak of hostilities.

A four-person delegation from the office of the UN Secretary-General which included B. Lynn Pascoe and Kim Won-soo recently returned to the UN after their visit to North Korea, between February 9 and 12, 2010.

This was the first delegation to establish official relations between North Korea and the UN Secretariat since Maurice Strong acted as an envoy of Kofi Annan to North Korea in 2004.

At the press conference at the UN, held on the return of the UN delegation, only minimal information was provided about the issues that North Korea raised.

In his brief presentation, Pascoe, Under-Secretary-General for Political Affairs, mentioned some of the issues discussed, including a statement that there had been back-and-forth talks about a peace treaty.

Pascoe said, however, that he was not going to get into details. A little later in the press conference, a question was asked about what issues North Korea had brought up. Pascoe’s response included that North Korea did talk about a peace treaty and why they saw it as an important way to build trust.

Much of the press conference, focused on questions about North Korea returning to the Six-Party Talks.

A purpose of the UN secretariat trip was to convey messages from other parties of the Six-Party Talks to North Korea, and to convey the Secretary- General’s view that talks need to begin without preconditions.

At the end of WWII, Korea was artificially divided into two separate entities: the Republic of Korea in the south, or South Korea, and the Democratic People’s Republic of Korea in the north, or North Korea. This division was initially regarded as temporary. Instead, it was maintained and reinforced by various actions of the UN. Then during the Korean War, the United Nations flag and name were used.

North Korea sees the need for a peace treaty to help calm the tension that exists because currently there is only the temporary armistice agreement.

North Korea proposes that three parties to the armistice, the US (for the UN command), North Korea, and China (the Chinese People’s Volunteer Army) to negotiate for the peace treaty. It also proposes to include South Korea.

This is proposed as the means to build confidence among these four parties so as to be able to return to the Six- Party Talks with experience to make possible reaching an agreement on the denuclearization of the Korean Peninsula.

The actual denuclearization will be a task that will involve both North Korea giving up its nuclear weapon capability and South Korea giving up the protection that the US offers it by including it under the US’s nuclear umbrella.

The press conference at the UN, however, didn’t discuss the issue of the peace treaty or the need to consider the denuclearization of both nations on the Korean Peninsula.

Instead, the majority of questions concerned whether North Korea would return to the Six-Party Talks.

North Korea has criticized the talks as not helpful to solving the disputes that continue to breed hostility in the region. Recent talks have focused on removing the nuclear capability of North Korea, rather than similarly considering North Korea’s claim that it needs its nuclear capability as a security measure as long as hostile actions continue by other members of the Six-Party process.

In previous talks between North Korea and the US, one of the negotiators explained the most difficult part of the negotiations was determining how to phrase the issue of the talks so that it recognized the interests of different parties to the controversy. He said that North Korea made the reasonable request that the issue be phrased in a way satisfactory to both North Korea and the US.

One would expect a similar problem will need to be solved to facilitate discussion among the parties to the Six-Party Talks, or to facilitate negotiations toward a peace treaty to end the Korean War.

After the press conference, Kim Won-soo, Deputy Chef de Cabinet of the UN, said the dispute over how to get back to negotiations could be seen as a difference over what sequencing was acceptable.

What order of actions would the parties agree to with regard to discussing a peace treaty, ending the UN sanctions, or returning to the Six-Party Talks process, could be considered an issue to be discussed, rather than phrasing the problem in terms favorable to one side or the other. This is the basis for further discussion and negotiation among North Korea and the other countries.

The UN is technically still at war with North Korea. These current developments raise the question of whether Ban Ki-moon is willing to use the good offices of his position as Secretary-General to offer what help he can to facilitate a peace treaty to end the Korean War.

Even this first step of an official visit by the four-member UN Secretariat delegation and the mere mention that the North Korea referred to the desire for a peace treaty can be seen as a step forward.

The Secretary-General is endeavoring to help solve the stalemate among the parties regarding the continuing tension on the Korean Peninsula.

————–
The author is an award-winning US journalist covering the United Nations.  netizenblog at gmail.com
 http://opinion.globaltimes.cn/commentary…

————–

Global Times appears in English and originates from Beijing.

Contact the Global Times (GT) newspaper:
Add.  7/F Topnew Tower, 15 Guanghua Road, Chaoyang District, Beijing, CHINA PC:100026
Tel.+86-10-52937565
Fax.+86-10-52937584
Email:  editor at globaltimes.com.cn

W. W. Norton & Company / By Joseph Stiglitz
The Great American Bank Robbery:How did the big banks nearly take down the entire economy and still continue to profit? Nobel Prize-winning economist Joseph Stiglitz explains.
February 27, 2010  |

The following is Part I of a two-part excerpt from Freefall: America, Free Markets, and the Sinking of the World Economy by Joseph Stiglitz ( W.W. Norton & Co., 2010). Read AlterNet’s recent interview with Stiglitz by Zach Carter.

Bankruptcy is a key feature of capitalism. Firms sometimes are unable to repay what they owe creditors. Financial reorganization has become a fact of life in many industries. The United States is lucky in having a particularly effective way of giving firms a fresh start—Chapter 11 of the bankruptcy code, which has been used repeatedly, for example, by the airlines. Airplanes keep flying; jobs and assets are preserved. Shareholders typically lose everything, and bondholders become the new shareholders. Under new management, and without the burden of debt, the airline can go on. The government plays a limited role in these restructurings: bankruptcy courts make sure that all creditors are treated fairly and that management doesn’t steal the assets of the firm for its own benefits.

Banks differ in one respect: the government has a stake because it insures deposits….The reason the government insures deposits is to preserve the stability of the financial system, which is important to preserving the stability of the economy. But if a bank gets into trouble, the basic procedure should be the same: shareholders lose everything; bondholders become the new shareholders. Often, the value of the bonds is sufficiently great that that is all that needs to be done. For instance, at the time of the bailout, Citibank, the largest American bank, with assets of $2 trillion, had some $350 billion of long-term bonds. Because there are no obligatory payments with equity, if there had been a debt-to-equity conversion, the bank wouldn’t have had to pay the billions and billions of dollars of interest on these bonds. Not having to pay out the billions of dollars of interest puts the bank in much better stead. In such an instance, the role of the government is little different from the oversight role the government plays in the bankruptcy of an ordinary firm.

Sometimes, though, the bank has been so badly managed that what is owed to depositors is greater than the assets of the bank. (This was the case for many of the banks in the savings and loan debacle in the late 1980s and in the current crisis.) Then the government has to come in to honor its commitments to depositors. The government becomes, in effect, the (possibly partial) owner, though typically it tries to sell the bank as soon as it can or find someone to take it over. Because the bankrupt bank has liabilities greater than its assets, the government typically has to pay the acquiring bank to do this, in effect filling the hole in the balance sheet. This process is called conservatorship. Usually the switch in ownership is so seamless that depositors and other customers wouldn’t even know that something had happened unless they read about it in the press. Occasionally, when an appropriate suitor can’t be found quickly, the government runs the bank for a while. (The opponents of conservatorship tried to tarnish this traditional approach by calling it nationalization. Obama suggested that this wasn’t the American way. But he was wrong: conservatorship, including the possibility of temporary government ownership when all else failed, was the traditional approach; the massive government gifts to banks were what was unprecedented. Since even the banks that were taken over by the government were always eventually sold, some suggested that the process be called preprivatization.)

Long experience has taught that when banks are at risk of failure, their managers engage in behaviors that risk taxpayers losing even more money. The banks may, for instance, undertake big bets: if they win, they keep the proceeds; if they lose, so what? They would have died anyway. That’s why there are laws saying that when a bank’s capital is low, it should be shut down or put under conservatorship. Bank regulators don’t wait until all of the money is gone. They want to be sure that when a depositor puts his debit card into the ATM and it says, “insufficient funds,” it’s because there are insufficient funds in the account, not insufficient funds in the bank. When the regulators see that a bank has too little money, they put the bank on notice to get more capital, and if it can’t, they take further action of the kind just described.

As the crisis of 2008 gained momentum, the government should have played by the rules of capitalism and forced a financial reorganization. Financial reorganizations—giving a fresh start—are not the end of the world. Indeed, they might represent the beginning of a new world, one in which incentives are better aligned and in which lending is rekindled. Had the government forced a financial restructuring of the banks in the way just described, there would have been little need for taxpayer money, or even further government involvement. Such a conversion increases the overall value of the firm because it reduces the likelihood of bankruptcy, thereby not only saving the high transaction costs of going through bankruptcy but also preserving the value of the ongoing concern. That means that if the shareholders are wiped out and the bondholders become the new “owners,” the bondholders’ long-term prospects are better than they were while the bank remained in limbo, when they were not sure whether it would survive and not sure of either the size or the terms of any government handout.

The bondholders involved in a restructuring would have gotten another gift, at least according to the banks own logic. The bankers claimed that the market was underestimating the true value of the mortgages on their books (and other bank assets). That may have been the case—or it may not have been. If it is not, it is totally unreasonable to make taxpayers bear the cost of the banks’ mistake, but if the assets were really worth as much as the bankers said, then the bondholders would get the upside.

The Obama administration has argued that the big banks are not only too big to fail but also too big to be financially restructured (or, as I refer to it later, “too big to be resolved”), too big to play by the ordinary rules of capitalism. Being too big to be financially restructured means that if the bank is on the brink of failure, there is but one source of money: the taxpayer. And under this novel and unproven doctrine, hundreds of billions have been poured into the financial system.

If it is true that America’s biggest banks are too big to be “resolved,” this has profound implications for our banking system going forward—implications the administration so far has refused to own up to. If, for instance, bondholders are in effect guaranteed because these institutions are too big to be financially restructured, then the market economy can exert no effective discipline on the banks. They get access to cheaper capital than they should, because those providing the capital know that the taxpayers will pick up any losses. If the government is providing a guarantee, whether explicit or implicit, the banks aren’t bearing all the risks associated with each decision they make—the risks borne by markets (shareholders, bondholders) are less than those borne by society as a whole, and so resources will go in the wrong place. Because too-big-to-be-restructured banks have access to funds at lower interest rates than they should, the whole capital market is distorted. They grow at the expense of their smaller rivals, who do not have this guarantee. They can easily come to dominate the financial system, not through greater prowess and ingenuity but because of the tacit government support. It should be clear: these too-big-to-be-restructured banks cannot operate as ordinary market-based banks.

I actually think that all of this discussion about too-big-to-restructured banks was just a ruse. It was a ploy that worked, based on fear-mongering. Just as Bush used 9/11 and the fears of terrorism to justify so much of what he did, the Treasury under both Bush and Obama used 9/15—the day that Lehman collapsed—and the fears of another meltdown as a tool to extract as much as possible for the banks and the bankers that had brought the world to the brink of economic ruin.

The argument is that, if only the Fed and Treasury had rescued Lehman Brothers, the whole crisis would have been avoided. The implication—seemingly taken on board by the Obama administration—is, when in doubt, bail out, and massively so. To skimp is to be penny wise and pound foolish.

But that is the wrong lesson to learn from the Lehman episode. The notion that if only Lehman Brothers had been rescued all would have been fine is sheer nonsense. Lehman Brothers was a consequence, not a cause: it was the consequence of flawed lending practices and inadequate oversight by regulators. Whether Lehman Brothers had or had not been bailed out, the global economy was headed for difficulties. Prior to the crisis, as I have noted, the global economy had been supported by the bubble and excessive borrowing. That game is over—and was already over well before Lehman’s collapse. The collapse almost surely accelerated the whole process of deleveraging; it brought out into the open the long-festering problems, the fact that the banks didn’t know their net worth and knew that accordingly they couldn’t know that of any other firm to whom they might lend. A more orderly process would have imposed fewer costs in the short run, but “counterfactual history” is always problematic.

There are those who believe that it is better to take one’s medicine and be done with it, that a slow unwinding of the excesses would last years longer, with even greater costs. Perhaps, on the other hand, the slow recapitalization of the banks would have occurred faster than the losses would have become apparent. In this view, papering over the losses with dishonest accounting (as in this crisis, as well as in the savings and loan debacle of the 1980s) would be doing more than just providing symptomatic relief. Lowering the fever may actually help in the recovery. A third view holds that Lehman’s collapse actually saved the entire financial system: without it, it would have been difficult to galvanize the political support required to bail out the banks. (It was hard enough to do so after its collapse.)

Even if one agrees that letting Lehman Brothers fail was a mistake, there are many choices between the blank-check approach to saving the banks pursued by the Bush and Obama administrations after September 15 and the approach of Hank Paulson, Ben Bernanke, and Tim Geithner of simply shutting down Lehman Brothers and praying that everything will work out in the end.

The government was obligated to save depositors, but that didn’t mean it had to provide taxpayer money to also save bondholders and shareholders. As noted earlier, standard procedures would have meant that the institution be saved and the shareholders wiped out, with the bondholders becoming the new shareholders. Lehman had no insured depositors; it was an investment bank. But it had something almost equivalent—it borrowed short-term money from the “market” through commercial paper held by money market funds, which acted much like banks. (One can even write checks on these accounts.) That’s why the part of the financial system involving money markets and investment banks is often called the shadow banking system. It arose, in part, to circumvent the regulations imposed on the real banking system—to ensure its safety and stability. Lehman’s collapse induced a run on the shadow banking system, much as there used to be runs on the real banking system before deposit insurance was provided; to stop the run, the government provided insurance to the shadow banking system.

Those opposed to financial restructuring (conservatorship) for the banks that are in trouble say that if the bondholders are not fully protected, a bank’s remaining creditors—those providing short-term funds without a government guarantee—will flee if a restructuring appears imminent. But such a conclusion defies economic logic. If these creditors are rational, they would realize that they benefit enormously from the greater stability of the firm provided by conservatorship and the debt-to-equity conversion. If they were willing to keep their funds in the bank before, they should be even more willing to do so now. And if the government has no confidence in the rationality of these supposedly smart financiers, they could provide a guarantee, though they should charge a premium for it. In the end, the Bush and Obama administrations not only bailed out the shareholders but also provided guarantees. The guarantees effectively eviscerated the argument for the generous treatment of shareholders and long-term bondholders.

Under financial restructuring, there are two big losers. The executives of the banks will almost surely go, and they will be unhappy. The shareholders too will be unhappy, because they will have lost everything. But that is the nature of risk-taking in capitalism—the only justification for the above-normal returns that they enjoyed during the boom is the risk of a loss.

Joseph Stiglitz, a Nobel laureate, is a professor of economics at Columbia University.