Matt Yglesias has no (0) use for businesspeople

Yglesias on what the business press thinks:

The basic business outlook is very focused on the key role of the executive. Good, profitable, growing firms are run by brilliant executives. And the ability of the firm to grow and be profitable is evidence of its executives’ brilliance. And profit ultimately stems from executive brilliance. This is part of the reason that CEO salaries need to keep escalating — recruiting the best is integral to success.

This is overstating the case. First, you have to separate the opinion pages of the business press (WSJ, Kudlow, IBD), which do spend a lot of time justifying income inequality, from the news and analysis pages, which aren't nearly as starry-eyed about celebrity executives. And really, no one actually spends much time arguing that profit "ultimately stems from executive brilliance." That's a blatant straw man.

By the end of the post, Yglesias is arguing (again) that there is literally nothing to being the chief executive of a major corporation, and that it's all a question of where the interchangeable parts happen to be resting on the grand roulette wheel of capitalism.

There's no need for liberals or opponents of excessive executive compensation to make arguments this facile. I wonder what Yglesias would think about the theory that all political commentary is basically interchangeable, and the authors who get jobs at The Atlantic and CAP just happen to have been lucky enough to be cranking out the right copy at the right time. Probably wouldn't care for it.

It's not easy to measure CEO performance against some baseline "replacement level" of executive effectiveness. Determining exactly how much credit Steve Jobs deserves for Apple's success is kind of a silly exercise, but the correct answer is not zero.

Political activism? No fair!

I was disappointed that Prop 8 passed in California, and as I wrote before I don't have much sympathy for the Mormons who don't like that they're being demonstrated against. The argument that the No side should "protest" black people as well, since they voted at a 70% clip for the measure, is idiotic on its face as being black is not tantamount to membership in an organization that can be readily protested against.

But there's also something pathetic about this Pandagon post whining about how those damn Mormons played dirty by actually campaigning in support of the measure:

In the NYT article, ”Mormons Tipped Scale in Ban on Gay Marriage,” the details emerge about the win-at-all-costs strategy that seems less about pure belief and faith than political activism and bullying.

First approached by the Roman Catholic archbishop of San Francisco a few weeks after the California Supreme Court legalized same-sex marriage in May, the Mormons were the last major religious group to join the campaign, and the final spice in an unusual stew that included Catholics, evangelical Christians, conservative black and Latino pastors, and myriad smaller ethnic groups with strong religious ties.

And the bottom line is that the full-frontal assault by Yes on 8 came down to the fact that the Mormons were willing to go door to door in a systematic manner-- to make the difference. See how they did it below the fold.

What follows is the bill of particulars of their organizing efforts, and by the end of the post there's a certain amount of grudging admiration for the Mormon ground game (not to be confused with the Mormon passing game as practiced on Saturdays by BYU).

But still, there's this sense in the reaction to the passage of Prop H8 that something bizarre and nefarious happened to revoke gay people's civil rights, when a much simpler explanation presents itself in that laws permitting gay marriage are still not wildly popular. They're getting much more so, but even in California it was expected to be a close vote based on the polls, with the bad guys having a slight edge, and sure enough it was 52-49.

So go ahead and give the Mormons hell, and challenging their tax-exempt status sounds like a good idea to me, but spare me the whining about how they played dirty when all they did was successfully defend relatively favorable political terrain.

Cognitive dissonance

When the bailout plan was first conceived, the reaction to it in the liberal blogosphere was extremely negative. The argument was that any bailout would necessarily be a handout from everyday Americans to the rich Wall Street assholes who were themselves responsible for the mess, and that would be bad. The whole notion that there is a "credit crisis" was largely derided as a ploy to get Uncle Sam to reach for his billfold faster.

Now that it appears it's going to be Republicans, including possibly John McCain, that are providing the opposition to the plan, everyone's worried about the consequences of inaction.

Sure, the bailout has been chopped into installments and made more taxpayer-friendly, but it's still a massive transfer of wealth from the Treasury to a bunch of struggling banks, which a lot of people were screaming bloody murder about on principle just a few days ago.

Pull yourselves together!

William Greider's "Paulson Bailout a Historic Swindle" is a pretty good case study in liberals going absolutely bananas about the proposed remedy to the financial crisis. It worked poor Bradrocket into such foaming rage that he threatened to withhold his vote for Obama if he acquiesced to the $700 Billion Blank Check.

A few points:

1) A lot of people, Greider included, are overstating the extent to which the people who actually work "on Wall Street" were the primary beneficiaries of the housing/credit bubble. Yes, they made a lot of money, but the total amount of wealth creation from the rise in housing prices and the overextension of credit was huge and widespread. The dot-com bubble was actually not as major as the housing bubble, and a lot of people sold houses from 2002-2006. If profiting from asset price inflation per se is a sin, there was plenty of sinning going on off Wall Street as well.

2) Related to this tendency to be blinded by the hubris of super-rich people is overstating the extent to which large capital infusions for major financial institutions benefit the executives of the banks personally. Yes, they make huge amounts of money, but it's not as though the $700b is going right into Jamie Dimon's expense account. It's overcompensation, not rampant embezzlement. That money is going on the balance sheets of the banks, in place of their Monopoly money Level 3 assets, so they can slow down their deleveraging and relieve the market of some forced selling. This isn't being proposed solely to make super-rich people feel super-rich again. I'm not sure how many cents on the dollar the Treasury will eventually recover, but if Barney Frank suggests (as he did this morning on TV) that it could be approach breakeven then I'm convinced it's at least plausible.

3) The spite factor seems to loom large as Greider dwells on the fact that the government could, if it wanted to, crush all these banks like so many grapes:

Government can apply killer leverage to the financial players: accept our objectives and follow our instructions or you are left on your own--cut off from government lending spigots and ineligible for any direct assistance. If they decline to cooperate, the money guys are stuck with their own mess. If they resist the government's orders to keep lending to the real economy of producers and consumers, banks and brokers will be effectively isolated, therefore doomed.

Yeah, no kidding. The government could doom the banks, but that's not the object of the game now, is it? That would be counterproductive in the extreme. Everybody likes a solvent banking system, not just bank CEOs. It's pretty much Paulson's talking point from his tour of the Sunday shows, but the American taxpayer is already in dire financial trouble. I'm all for Congressional hearings when this is over, but people need to realize that massive bank failures would also suck in their own way.

Most Americans come out behind in their dealings with both Wall Street and Washington, but neither can just be given up on. You can't call John McCain the second coming of Herbert Hoover while also insisting that the banking industry be left to its own devices. Yes it's a blank check. Yes it's a taxpayer giveaway to investors. What taxpayers get in return is a new, substantially-less-doomed financial system, which can survive to be thoroughly overhauled afterward.

I'd like to see some strings attached to the money, but the Democrats' decision to focus on executive pay limits almost makes me wish they had just laid down completely. What a feckless, superficial demand. The big question is how should the deal be structured to minimize moral hazard and economic damage to those who didn't own this crap. That the funds are to be administered at Hank Paulson's discretion doesn't strike me as prima facie evidence that those goals won't be met.

Given how many much smarter people whom I usually agree with oppose this plan, it's likely I'm wrong about it. But from where I'm sitting (i.e. in the financial industry), the outrage is completely out of proportion and largely misdirected.

Update:
The Politico has a roundup of economist skepticism about the plan, but there's some pretty notable concessions made by two of the quoted skeptics:

Prof. Zingales of U. Chigago, in the linked piece entitled "Why Paulson is Wrong": "The Paulson RTC will buy toxic assets at inflated prices thereby creating a charitable institution that provides welfare to the rich—at the taxpayers’ expense. If this subsidy is large enough, it will succeed in stopping the crisis."

Nouriel Roubini: “He's saying, ‘Trust me, I'm going to do it right if you give me absolute control.' This is not a monarchy.” (Roubini told the New York Times that despite these concerns, he also thought the plan could help stave off a recession.)

And the Financial Times likes it outright. But other than that, it is quite unpopular.