Does anyone believe an American president would allow the proceedings to go forward?

Wrong question.

The Pinochet precedent, lest anyone forget, came about because when ol' Augusto stopped over in Britain some 10 years ago, Garzon served the British government with an extradition request. The British courts eventually accepted the request, but refused to enforce it as Pinochet was apparently too senile to stand trial.

But the point is that the outcome was beyond the control of the Chilean government.

Should any of the torture team visit a country with which Spain, for example, has the appropriate treaties in place, and an extradition request is served, then what exactly can a President do?

Tell Spain (or whichever country made the extradition request) to back off? Tell the host country, say Britain, to tell Spain to back off?

The question is not - would President McBama allow this? But, actually, could he stop this?

My guess - yes, he could. But thumping tables and stamping feet and sneering at Old Europe won't be the answer; only some pretty shrewd diplomacy might get you there.

Posted at October 1, 2008 10:26 AM in response to A Global Test???/.???

"The Fed should suspend for six months the mark to market accounting rule on mortgage securities."

This one gets me every time.

If we all agree that lack of confidence is at the root of the credit crisis, then how would this step - suspension of MTM - help?

Imagine we have a dangerous town, afflicted particularly by gun-crime. The Mayor of said town decrees that in order for people to feel safe again, he will require anyone carrying a fire-arm to conceal it. Problem solved, yeah?

It's not just that the suspension of MTM will achieve pricely nothing in terms of restoring confidence, it is that existing MTM rules are in fact quite good enough to deal with the existing conditions (has everyone forgotten about the famous Tier 1, 2, and 3 buckets into which firms can place their assets?). Mortgage-backed securities are trading so thinly that observable, reliable market data is impossible to come by. So the much maligned marking-to-model process is instead what pretty much every holder of MBS is doing these days. It is a process that is undoubtedly open to abuse, but so far no-one has come up with a better idea for putting a fair value on these presently illiquid assets.

Suspending MTM in this case would be like turning down the thermostat when your house is on fire. Just completely beside the point in terms of dealing with the present problems.

The issue, simply, is not that some banks are insolvent - it is that the whole system is undercapitalized. And even if there is "ample capital" in the world, until it gets invested as share capital in the financial industry, the current crisis will persist. The Paulson plan, for all its problems, is I think pretty clearly aimed at ensuring the recapitalization takes place. Not saying it will achieve this aim, but you can't say the strategy is wholly illogical.

Posted at October 1, 2008 7:27 AM in response to Democrats Beware

"I trust Warren Buffet more than I trust you"

This is not meant as a shot at Buffett's integrity, but he expressed his support for the bail-out the day after he agreed to throw 5-billion into Goldman Sachs. He is hardly an objective voice in this present crisis.

I think the issue with Dean's commentary here is that it unfairly dismisses the thinking behind the bail-out. It is true that we don't know what will happen if there is no bail-out. Of course no-one is blessed with that sort of foresight. But Paulson and Bernanke have been, literally, begging Congress to pass some sort of deal because they think the risk posed by inaction is simply far too great for the overall health of the economy. They've done their own cost-benefit analysis, and now we know what the product of that is.

When Dean writes - "There is no plausible scenario under which the no bailout scenario gives us a Great Depression" - well, the plain fact is Bernanke and Paulson do see a plausible scenario.

My view, written here before, is that Bernanke and Paulson believe the bail-out is a critical initial step in recapitalizing the system. (This is where I have diverged for once from Paul Krugman's analysis - Krugman for much of last week was chiding B and P for not talking about recapitalization, I feel he rather foolishly presumed this was not their objective.) I think there is a logic to it, and there is certainly a necessity in crafting very careful, detailed legislation to design a bail-out of the industry.

I'm afraid I can't buy Dean's assertion that doing nothing is an option - I think the risks are too great of not trying to break the vicious cycle of delevering. Whether the plan we see today has merit is a debate worth having; but the need for a government-led initiative to recapitalize banks is surely established. The "why" is plain to see, the "how" is what the world is waiting to have set out.

Posted at September 29, 2008 11:38 AM in response to Why Bail? The Banks Have a Gun Pointed at Their Head and Are Threatening to Pull the Trigger

"Before we approve any bailout bill, it would be great if we just had a clear understanding of what our $700 billion or $350 billion is supposed to accomplish."

This is my theory. Bernanke and Paulson have concluded that the financial system is severely undercapitalized - many firms are either bankrupt or perilously close to meeting that fate. After eighteen months of hopeful "liquidity crisis" talk, the realization has dawned that this is a solvency crisis the likes of which none of us has ever seen.

The overriding objective of the Big Plan therefore is to get the system recapitalized, and the reason for going ahead with an almighty ontake of imparied assets as a first step, is that they reckon this is the most likely move to provide the confidence necessary to bring about the recapitalization.

The reason they have not come out and said this explicitly is because they reckon the truth would scare the bejesus out of the markets and ensure that the recapitalization does not end up occurring, at least not any time soon.

But anyhow, I believe their thinking is that if Uncle Sam pays top dollar for banks' junk, that's the best start-point for the industry to recover. The alternative - wiping out existing shareholders either by doing nothing or forcing fire-sales - is not something they wish to contemplate.

Given this theory, I would not be asking what happens to the 700b - not at first anyway - I would be asking whether 700b is enough. 500-odd billion has already been written down by the industry; yet the reason for the present crisis is not so much this, but fear about losses not yet recognized.

On this theory, 700bn isn't going to be enough. It might be enough to repair the ship, but it won't be enough to convince people to get on board again.

Posted at September 26, 2008 9:16 AM in response to The NYT Wants to Prop Up Pets.com Stock Price

One minor quibble. McCain was not "tortured". He was subjected to enhanced interrogation techniques.

Posted at September 8, 2008 8:31 AM in response to Hey, Liberal Idiots, Here's Why I Support McCain/Palin!

One minor quibble. McCain was not "tortured". He was subjected to enhanced interrogation techniques.

Posted at September 8, 2008 8:31 AM in response to Hey, Liberal Idiots, Here's Why I Support McCain/Palin!

Heh. The Democratic "unity memo"... to be followed next week by the Republican "compassion pledge".

On the veep-stakes, Mitt Romney is now a strong favorite with the bookmakers, but seems to me that Biden v Romney is a pretty good match-up for the Dems.

Posted at August 28, 2008 8:21 AM in response to Another One Bites the Dust

I think you've missed the key point - they got the guy responsible for checking Bin Laden's car's tire pressure.

Nothing could be more important.

Posted at August 8, 2008 9:04 AM in response to Day of the Jackass

I think you've missed the key point - they got the guy responsible for checking Bin Laden's car's tire pressure.

Nothing could be more important.

Posted at August 8, 2008 9:04 AM in response to Day of the Jackass

I think there's a healthy dose of jealousy that underlies the presumptuous/arrogant/hubristic meme, especially as it applies to the media bigshots pushing this line.

Posted at July 30, 2008 1:33 PM in response to "Presumptuous"