The Dish

Yesterday, regulators finalized the Volcker rule, which is intended to prevent banks from engaging in certain types of risky behavior. Neil Irwin explains the rule:

It is part of the Dodd-Frank financial reform act that passed in 2010 that aims to prevent giant banks from engaging in speculative trading activity. The idea is that, while it is important for banks to support the economy by lending to consumers and businesses, when they get into the realm of making bets in exotic financial markets — known as proprietary trading — they aren’t really doing anything to support the economy. But trading for their own accounts does risk their own solvency in ways that could lead them to fail and necessitate a costly government bailout. In short, the theory is: You can speculate on financial markets. Or you can have a government safety net. But you can’t have both. …

The rule isn’t enough to prevent any future crisis, certainly. Banks have shown plenty of ability to get into trouble with strategies that have nothing to do with proprietary trading. For example, nothing about these rules would stop a bank from making crummy mortgage loans. But it is certainly plausible that this will choke off one route by which the biggest banks could come into danger of triggering another financial crisis.

Matt Levine weighs in:

The Volcker rule was supposed to shut down proprietary trading desks, and it basically already has. The Volcker rule was not supposed to shut down market making and hedging, which are risky and proprietary and complicated and all that good stuff, but which are also both economically important and specifically allowed by Congress. That’s a simple sentence to write, but a hard thing to make happen. The final rule is 978 pages long, but it’s not a bad effort at achieving that simple result.

Mike Konczal defends the rule:

The problem there is that lending to households and businesses is the core function of banking. And there are good reasons why banks provide this service instead of other types of firms. For instance, funding increases as relationships between firms and creditors evolve (for more, see Fama 1985 or Petersen and Rajan 1994). So other firms can’t easily do what banks do when it comes to lending. But other firms can definitely engage in proprietary trading—including hedge funds, mutual funds, sovereign wealth funds and others. So if proprietary trading does have any benefits to society at large, there’s nothing to worry about. It will still take place. On the other hand, if banks are prohibited from lending, it’s not clear that other institutions could pick up the slack.

Simon Johnson is withholding judgment:

The Volcker Rule could be a major contribution to financial stability. Or it could still flop. The devil now is in the details of implementation and compliance – and how much of this becomes public information and with what time lag.

David Dayen also looks at implementation:

“The truth is that this is kind of the end of the beginning,” said Marcus Stanley of Americans for Financial Reform. The regulators must now set out guidelines for market-making, hedging and other bank activities, collecting data and developing more specific parameters for what gets prohibited. And they agreed to delay actual enforcement of the rule until July 2015. This gives banks time to open more loopholes, adjust to the requirements and ready lawsuits. Already, loopholes have been uncovered allowing banks to trade foreign sovereign debt and invest in small hedge funds, which could result in risky trading merely shifting to other areas rather than being stamped out.

Stanley worries that, as the fight shifts to implementation, regulators could shield the data from public view, designating it “confidential supervisory information.” That means we may not really know whether or not the Volcker rule is working.

Jonathan Weil expects the rule to have little effect:

[T]here’s some merit to having a ban: Lots of people dislike the idea of banks gambling with federally insured customer deposits, because they might blow themselves up and either cause damage to others or require a taxpayer bailout. But once you get into the weeds, there’s always a workaround or a nasty, unintended consequence of one sort or another. Old-fashioned lending often may be riskier than betting it on prop trades anyway. It could take years before regulators figure out the full effects of all the wonderful little loopholes that well-paid bank lobbyists worked into the language. Even if the rules were flawlessly written — and they never are — there is the matter of whether they will be enforced consistently, which they tend not to be from one administration to the next.

Yglesias bets that the rule will be weakened over time:

The way the regulatory state works is that first congress writes a law, then regulators write a detailed rule, and then people who think the rule is unfair to them get to sue and get judges to throw the rule out. If you’re some kind of bank regulation junky who thinks the rule is too kind to banks, you do not get to sue and get judges to make the rule stricter. This is one of a dozen of reasons why “judicial nominations” matter for more reasons than “the Supreme Court rules on abortion rights.” There’s an ongoing fight in Congress about appointees to the D.C. Circuit Court which is rich in regulatory implications, of which the Volcker Rule battle is one.

And Stephen Mihm notes that it could take a long time to see whether the rule is working:

And therein lies a lesson about post-crisis regulation. In the chaos of a financial crisis, never mind its aftermath, it’s easy to jump the gun and impose regulations that satisfy the urge to “do something” yet achieve little to address the underlying causes of the disaster. The resulting regulation can deliver benefits, or it can be counterproductive. Or both. But neither outcome is dependent on a correct reading of the causes of the crisis. This will probably be true of the Volcker rule, too: It will be judged not on whether it was a logical response to what happened, but whether it ushers in a new era of financial stability. On that question, we may have to wait years for a clear answer.

Alex Mayyasi explores the economics of ghostwriting and ends up defending the practice:

Jay Leno does not write his own jokes and a team of writers work on sitcom scripts. Even if books have been a more independent pursuit, every writer depends on the help of an editor whose impact on the book – cutting large sections, reorganizing, suggestions plot changes – can be substantial. Researchers are also a regular part of writing a book in both fiction and nonfiction. Ghostwriting may be an extreme case, but every book is a team effort and few writers are responsible for every single word and idea in their books. Is it more deceitful to name someone who did none of the writing an author or to give so much credit to the author in the first place?

A major benefit of ghostwriting is that it allows stories to be told that would not otherwise.

Few major public figures could write books themselves – their stories are only published because professionals step in to write them down. Even if the existence of multiple Justin Bieber memoirs does not feel like a service to the publishing world, it at least helps the bottom lines of the same publishers taking a chance on the next David Mitchell or Cormac McCarthy. It is also an open question whether ghostwriting denigrates the actual writers or celebrates their skill. Nondisclosure agreements and cryptic mentions in the acknowledgements are not signs of respect. But established ghostwriters are recognized as skilled professionals. And while ghostwriters often get asked to write at below a living wage, ghostwriting can also be one of the few ways to make a good salary writing full-time short of being a perennial bestseller.

It can also be quite enjoyable. William Novak described himself as “spoiled” by all the “wonderful people [he’s] worked with.” Michael D’Orso, who dislikes the term ghostwriter but collaborates with major figures, described in an article how “you can’t be more alive than when you’re climbing into other lives in other worlds.” Sally Collings told us that ghostwriting allows her to focus on the writing and editing part that she enjoys without having to deal with the marketing aspects that she does not. “People often ask when I will write my own book again,” she told us. “I feel like I do all the time. I have a secret sense of ownership.”

Virginia Hughes marvels at a new paper that compares how 46 species – including humans – grow old:

For folks (myself included) who tend to have a people-centric view of biology, the paper is a crazy, fun ride. Sure, some species are like us, with fertility waning and mortality skyrocketing over time. But lots of species show different patterns – bizarrely different. Some organisms are the opposite of humans, becoming more likely to reproduce and less likely to die with each passing year. Others show a spike in both fertility and mortality in old age. Still others show no change in fertility or mortality over their entire lifespan.

That diversity will be surprising to most people who work on human demography. “We’re a bit myopic. We think everything must behave in the same way that we do,” says Jones, an assistant professor of biology at the University of Southern Denmark. “But if you go and speak to someone who works on fish or crocodiles, you’d find that they probably wouldn’t be that surprised.

What the new study didn’t find, notably, is an association between lifespan and aging.

It turns out that some species with pronounced aging (meaning those with mortality rates that increase sharply over time) live a long time, whereas others don’t. Same goes for the species that don’t age at all. Oarweed, for example, has a near-constant level of mortality over its life and lives about eight years. In contrast, Hydra, a microscopic freshwater animal, has constant mortality and lives a whopping 1,400 years.

This is a problem for the classical theories of aging that assume that mortality increases with age, notes Alan Cohen, an evolutionary biologist at the University of Sherbrooke in Quebec. “The traditional idea is that this is what most things do, and that there were a few weird creatures out there that were exceptions,” he says. “But there are actually a lot of exceptions.” The question that the classical theories try to answer – How could aging evolve? – is no longer the most interesting question, Cohen adds. “What we really need to explain is why some things age and some don’t.”

(Photo by Stephanie Carter)

Reviewing a new collection of interviews, Richard Brody takes a shot at Hannah Arendt’s most famous work, Eichmann In Jerusalem. Brody writes, “Arendt’s charge that Eichmann suffered from a ‘lack of imagination’ is actually the essential flaw of her own book”:

Her mechanistic view of Eichmann’s personality, as well as her abstract and unsympathetic consideration of the situation of Jews under Nazi rule, reflect her inability to consider the experiences of others from within. … [In her 1964 interview with Günter Gaus,] Arendt explains that what she found most intolerable in Germany at the time [of her escape in 1933] wasn’t the overt hostility of anti-Semites but the compromises of “friends”—of fellow-intellectuals—with the Nazi policy of Gleichschaltung (“coördination”), the conformity of all German institutions to the Nazi party line: “Among intellectuals Gleichschaltung was the rule, so to speak,” she says. Arendt doesn’t ascribe their compromise to any personal failings, like cowardice or careerism, but, rather, to the particular flaws inherent in intellectualism:

I still think that it belongs to the essence of being an intellectual that one fabricates ideas about everything. No one ever blamed someone if he “coordinated” because he had to take care of his wife or child. The worst thing was that some people really believed in Nazism! For a short time, many for a very short time. But that means that they made up ideas about Hitler, in part terrifically interesting things! Completely fantastic and interesting and complicated things! Things far above the ordinary level! I found that grotesque. Today I would say that they were trapped by their own ideas. That is what happened. But then, at the time, I didn’t see it so clearly.

This is an astonishing passage, for several reasons.

First, Arendt reveals the ground for her belief that Eichmann was no ideological Nazi but, in fact, was just a blind functionary. Not being an intellectual, he couldn’t have had “ideas” or “terrifically interesting things” to think about Hitler, and, therefore, he couldn’t have “really believed in Nazism.” … It’s a strange badge of intellectual honor to ascribe true belief in Nazism solely to intellectuals, and it is yet another sign that the passions and the hatreds on which the movement ran were essentially beyond Arendt’s purview. Second, her charge against the intellectual class—that they invent “completely fantastic and interesting and complicated things” and get “trapped in their own ideas”—is the perfect description of her own heavily theoretical and utterly impersonal view of Eichmann.

Previous Dish on Hannah Arendt here, here, and here.

(Image of Arendt on a stamp via Wikimedia Commons)

Land O’Lake: I found evidence for an ancient freshwater lake on Mars. Details: http://t.co/Ide83zfOgZ pic.twitter.com/FvcOC1Drom

— Curiosity Rover (@MarsCuriosity) December 9, 2013

It’s been a good week for the rover:

The lake, found at a spot called Yellowknife Bay in the Gale Crater, existed around 3.6 billion years ago and could have lasted for hundreds of thousands of years. The Curiosity rover’s analysis discovered sedimentary rocks with evidence of carbon, hydrogen, oxygen, nitrogen, and sulfur, elements that suggest the lake could have sustained life. The findings were published Monday in a series of six papers in the journal Science.

This isn’t the first time scientists, or Curiosity rover for that matter, has found evidence of large bodies of water on Mars. But it is one of the first times scientists have specifically outlined an environment in which life could have survived.

The lake would have been “suitable for a wide range of microbial lifeforms” – specifically, oddball microbes known as chemolithoautotrophs:

Chemolithoautotrophs do not need light to function; instead, they break down rocks and minerals for energy. On Earth, they exist underground, in caves and at the bottom of the ocean. … “For all of us geologists who are very familiar with what the early Earth must have been like, what we see in Gale really doesn’t look much different,” Curiosity chief scientist Prof John Grotzinger told BBC News.

Joseph Stromberg sees the latest discovery as “yet another vindication of Curiosity’s mission, which is to determine the planet’s habitability.” NASA also has good news for anyone hoping to see the Gale Crater firsthand:

The risk of radiation exposure is not a show-stopper for a long-term manned mission to Mars, new results from NASA’s Curiosity rover suggest. A mission consisting of a 180-day cruise to Mars, a 500-day stay on the Red Planet and a 180-day return flight to Earth would expose astronauts to a cumulative radiation dose of about 1.01 sieverts, measurements by Curiosity’s Radiation Assessment Detector (RAD) instrument indicate. To put that in perspective: The European Space Agency generally limits its astronauts to a total career radiation dose of 1 sievert, which is associated with a 5-percent increase in lifetime fatal cancer risk.

“It’s certainly a manageable number,” said RAD principal investigator Don Hassler of the Southwest Research Institute in Boulder, Colo., lead author of a study that reports the results in the journal Science. A 1-sievert dose from radiation on Mars would violate NASA’s current standards, which cap astronauts’ excess-cancer risk at 3 percent. But those guidelines were drawn up with missions to low-Earth orbit in mind, and adjustments to accommodate trips farther afield may be in the offing, Hassler said.

Kathryn Joyce interviews members of the ex-homeschooler movement – which consists largely of individuals who where raised by fundamentalist families:

The closest parallel to transitioning from strict fundamentalist families to mainstream society may be an immigrant experience: acclimating to a new country with inexplicable customs and an unfamiliar language. “Mainstream American culture is not my culture,” says Heather Doney, who co-founded Homeschooling’s Invisible Children with [Rachel] Coleman. Doney, who grew up in an impoverished Quiverfull family in New Orleans, felt for years that she was living “between worlds,” never sure if her words or behavior were appropriate for her old life or her new one. She didn’t understand what topics of discussion were considered off-limits or when staring at someone might be disconcerting. She couldn’t make small talk, wore “oddly mismatched clothes,” and was lost amid pop-culture references to the Muppets or The Breakfast Club. When public-school friends talked about oral sex, she thought they meant French-kissing.

More than a decade later, Doney still finds herself resorting to a standard joke—“Sorry, I live under a rock”—when people are taken aback by her. “It’s a lot easier to say that,” she says, “than to explain that I was raised hearing that you’d be allowing demonic influences into your house if you watched Teenage Mutant Ninja Turtles. I feel like an expat from a subculture that I can never go home to, living in one that is still not fully mine.”

Chris Jeub disputes Joyce’s “hasty generalizations”:

Joyce’s book Quiverfull: Inside the Christian Patriarchy Movement (which I’ve read) attacked Bill Gothard’s ATI, Doug Phillips’ Vision Forum, and other groups who saw it their duty, I suppose, to populate the world with a patriarchal society. Her latest book The Child Catchers: Rescue, Trafficking and the New Gospel of Adoption (I haven’t read this one) apparently exposes abusive adoptive parents and builds a sinister case against the adoption movement.

I see a routine here. It appears that Joyce generalizes an entire population of people by focusing on the heartbreaking abuse of some. A skilled debater sees through this. In debate lingo, this is called anecdotal evidence, poor argumentation that is only surface deep in proper persuasion. Emotional appeals will work for some, but to really persuade most people, debaters know enough to dig deeper, gather evidence with substance to help build the case that will change minds and hearts and even influence legislation.

Joyce’s article has no statistics, no cited convictions, no vindictive story beyond one-sided testimonials. She digs deep into the “extremist roots of fundamentalist homeschooling,” as if public education didn’t have its own extremist roots in its history. At best this article uncovers civil unrest in homeschool families. Civil unrest is a worthy topic, by the way, but this article can be read as an indictment on the entire homeschool movement.