Business

"Wait a minute..."

Those were allegedly the final words of Pope Alexander VI back in August of 1503. I was thinking of fat, old, syphilitic, corrupt, murdering, adulterous Alexander just this morning. This particular Pope, known before his papacy as Rodrigo Borgia, who had so many mistresses he makes modern America's politicians and talk show hosts look chaste by comparison, is also distinguished by the fact that he was the father of, among many others, Cesare and the notorious Lucrezia Borgia. (To give you a taste for the man, upon becoming Pope he annulled his daughter's previous marriage so he could marry her off in a lavish Vatican ceremony to a relative of one of the cardinals who supported his papacy even as rumors circled of her incestuous relationship with one of her brothers. And the Heene family thought they had what it takes to make a good reality show...)

I thought of old Rodrigo as I flipped through a pile of clippings that I had set aside during the past couple of days. I started collecting the stories last week. The first were clippings about the record round of financial community bonuses in the U.S. and in the U.K. Then, as all this was happening, was Goldman Sachs' CEO Lloyd Blankfein's FT op-ed calling for financial reform. As I mentioned before I found the juxtaposition uncomfortably calculated.

A couple days later, there was the story announcing that former Goldman Sachs' VP Adam Storch was being named Chief Operating Officer of the "new and improved" SEC enforcement division. I have no doubt that Mr. Storch is an excellent fellow and a perfect choice ... other than the fact that he worked at Goldman. Does anyone think about the optics of these things? Or more than the optics, do they ever consider just how genuinely inappropriate such a hiring might be?

Of course, that's a rhetorical question. Some people do think about it. Just not people doing the hiring in the administration. Hence the articles in my pile of clips about the big bonuses that senior advisors to Tim Geithner got from big Wall Street houses prior to signing up to help devise the plans to "fix" Wall Street. I know some of these guys very well, consider them friends, consider them eminently qualified to be doing their jobs ... and yet, something gnaws at me about all this, an insensitivity on the part of the people who were putting together the administration team about what was really at stake in the financial crisis. It seems they felt the issue was more fixing the immediate problem than it was fixing the enduring problems in a system that once again has Wall Street executives lighting cigars with hundred dollar bills while unemployment hits record levels (see Mort Zuckerman's strong piece on this in today's FT) and home foreclosure are forcing former homeowners to live on the streets as never before. In any event it seems like they were really stopping to ask whether something big had changed ... or needed to.

Paul Krugman gets it, has all along and has written about it again in today's Times. Frank Rich, in yesterday's Times wrote a column capturing some of the anger that people feel about the power of Goldman and the other big banks and the utter unwillingness of Washington to do anything other than offer the occasional talk show tsk-tsk in response to the current return to profligacy (or the return of big lenders like Citi and Bank of America to losses after a momentary, bailout induced spate of profits). 

Meanwhile, John Harwood in the Times writes about Larry Summers' wise silence on sensitive economic questions while failing to go further and ask why it was that this week's tsk-tsking assignments went to Rahm Emanuel, David Axelrod, and Valerie Jarrett -- successors in function to the troika that once ran Ronald Reagan's White House (James Baker, Michael Deaver and Ed Meese). On the one hand the question is interesting because it leads one to other questions, like why the folks from the president's morning economic briefing who are being most prominently rolled out are not actually the ones who are the economic professionals? Could it be that the administration political brain trust feels the economic team has lost too much credibility by their minimalist, go-slow approach to reform? I think that would be a miscalculation because the future effectiveness of Geithner and Summers will depend on their being seen as the architects of substantially (and accelerating) reforms.

(Of course another question raised by the appearance of the Big Three on the Sunday shows is whether or not the administration really is being some so Office-of-the-President centric that it is all head and no arms and legs, kind of like one of those big-brained creatures from outer space or our future that we were led to believe would evolve from societies that didn't require physical exercise. The critique, provided to me this weekend by a prominent diplomat who has lived in Washington a long time, is that the administration has no trouble coming up with ideas or giving speeches but it has yet to put an effective implementation apparatus in place. It is kind of the Marvin the Martian model of governance.)

That particular aside aside, the pile of clippings grew this morning with the Wall Street Journal noting in its particularly "fair and balanced" way that the criticism of Wall Street from Emanuel and Axelrod was more tempered than in the recent past, suggesting that at least as far as the newspaper of record of the financial community was concerned, the White House wasn't too het up about all these fat pay checks. Apparently swine flu worries us but an epidemic of swinishness does not. At least the Journal seems to hope so.

And so, reflecting on all these clips, I started thinking to myself, is it capitalism? Could Michael Moore be right? (That seems so unlikely...) It's troubling to me, a dyed-in-the-wool practicing capitalist. And I'll have to admit I am still a long way from coming to a good answer about just how we have gone wrong and what needs to be done to fix a system that is producing greater inequality than ever and that is so apparently corrupt that even those from whom you expect big reform have either been co-opted or, alternatively, are simply reluctant to toss these particular money changers out of our particular temple (the small "d" democratic one). 

But my first instincts are what brought me back to good old Pope Rodrigo the Base and Repulsive. Because it strikes me that the issue isn't capitalism per se. Because 21st Century Wall Street is to capitalism as Pope Alexander VI was to the teachings of Jesus Christ. There was a connection but it was remote and observed more in the breach than in the honoring of the essentially good underlying ideas.

And that's where I take some comfort. It's not that we need a new economic ideology. We're just in dire need of a Reformation. (Although I for one could do without some of the wars, inquisitions, and public executions of the last one.)

EMMANUEL DUNAND/AFP/Getty Images

Attention blogosphere: By attacking Hormats, you're going after the wrong man.

Once again, it's time to slow down the blogosphere and wait for the facts to catch up to another story. (I'm starting to conclude that despite all the technical evidence to the contrary, the Internet actually runs on hormones rather than electrons.)

This time the story is about the nomination of Goldman Sachs International Vice Chairman Robert Hormats to be Under Secretary of State for Economic, Agricultural and Energy Affairs and the allegation by several small advocacy groups that he is somehow tainted by some brief comments he made about a Goldman deal that pumped cash into a division of a Chinese company whose parent organization had some ties to bad guys in the Sudan.

The problem is that in going after Hormats, they are likely going after one of the people most likely to be an effective ally for the alleged goal of these groups to further constrain any sort of private funding that might support genocide anywhere in the world.

Now as any reader of this blog knows, I am no fan of the oversized role Goldman Sachs has come to play in shaping economic policy in America. I am on the record as saying that far too many senior Goldman executives have played top roles in the United States government. I am also deeply concerned at the lack of progress the world has made to contain genocide or threats of future genocides. To me, it should -- along with combating the proliferation of weapons of mass destruction -- be a top priority of the entire international security community.

What readers of this brief post should also know is that I have known Bob Hormats for many years and that while we probably should be entering a phase in which we bend over backwards to dial down the number of Goldman appointments, this is certainly a case where an exception is warranted. I'd go further, it is a case where an exception should be actively sought.

Let's frame the question in the words of one of the appointment's critics, journalist Matt Taibbi who wrote the scorching Rolling Stone attack on Goldman that I recommended to readers very recently. He writes:

"You've got to fill a key post at State, and you can't find someone who isn't a former Goldman banker with a controversial human-rights profile? There are an awful lot of people on the earth; why this clown?"

Well, let's take his questions one at a time. First, he suggests Hormats has a controversial human-rights profile. his is clearly a reference to the current dust up in which several small groups including the Genocide Intervention Network, Investors Against Genocide and the Public Accountability Initiative all suggest that Hormats is at fault because in 2000 he made two on the record statements asserting that precautions had been taken in an upcoming PetroChina financing to ensure funds did not go to its parent company CNPC which had dealings in Sudan.

Here's what Hormats said to the Wall Street Journal at the time: "Sudan should not be an issue because of extensive legal firewalls in place to ensure that IPO proceeds are used domestically in China." But later the SEC fined Goldman $2 million for a number of minor securities law violations suggesting they had improperly promoted PetroChina stock including a reference to statements from an unnamed executive who might be Hormats that the SEC felt might have prematurely promoted interest in the stock. The statements in question were allegedly those made to the Journal and to the Washington Post by Hormats concerning the firewalls between PetroChina and CNPC.

As a result of the above and invoking the horrors in Darfur throughout, these advocacy groups have determined that Hormats nomination should be called into question. At least, they suggest, when he comes before the Senate in early September, he should face tough questioning on his views on these issues. I say, by all means question him, because I think this is what they will find:

1. Hormats statements to the press in 2000 were, as such statements always are (and as the SEC acknowledged they were) simply lawyer language provided to Hormats by Goldman attorneys. He was saying what the firm requested him to say. And furthermore, he was not only articulating what the firm saw as the truth but he was reflecting efforts by Goldman to try to keep proceeds of the financing away from operations of CNPC that might impact Sudan. Finally the IPO was, to my knowledge, structured in strict compliance with U.S. sanctions law at the time of filing.

2. That despite the implications in almost all the releases that what Goldman did is somehow connected to Darfur, the financing was in 2000 and the genocide in Darfur did not start until 2003.

3. That Hormats involvement in the deal beyond the statements he was requested to make was virtually nil.

Of course, what they will also find is that Hormats is, sorry Matt Taibi, no clown. First, he probably has one of the most exceptional records of public service of any nominee to high office in this administration. He has served in four different prior administrations for both parties. He has served as both Deputy United States Trade Representative (under Jimmy Carter) and as Assistant Secretary of State for Economic and Business Affairs.

He has managed international economic issues on the National Security Council. He has also got a long background of work on Africa and I know him to be highly sensitive to the issues of the sort raised by these advocacy groups. (He spent a year working on development issues in Kenya and Tanzania.) I have known him over 20 years and I can say also that he is undoubtedly one of the most decent (not to mention intelligent and capable) guys I have ever met in any line of work.

I'm all for going after half-baked appointments of money guys. I do it all the time. But this is actually one of the good guys. My guess is that he would give these genocide groups one of their best advocates in the administration... and that working with an administration with real sensitivities in this area, they could significantly enhance safeguards against all forms of support of genocide.

But there is an easy way to find out. They should ask him during the hearings. And if his answers are as his life's work suggests they will be, they should recognize the wisdom behind this particular nomination and support it without reservation.

Chip Somodevilla/Getty Images

In March, for the third month in a row, more cars were sold in China than in the United States. Admittedly, there are many more Chinese. But this is a sign of a permanent change in the structure of the global auto industry that even an army of car czars will not be able to reverse. Even if we had car czars that actually knew something about the industry. Even if the American auto industry did not think the height of innovation was the reintroduction of a 1960s muscle car for the Vin Diesel crowd like the new(ish) Camaro. (Although even tuners prefer to nitro boost foreign-made vehicles as well illustrated in this week's gearhead superhit, the subtle and heart-breakingly beautiful, Fast and Furious.) 

Last week, in the lead story in the New York Times, we also saw that China was actually going to have something like twice as many electric cars as the United States in the next couple years and that the country was poised to lead in electric car technology. While we actually could be competitive on the technology front, the problem we have with electric cars runs deeper. American car owners want longer range, faster, more powerful vehicles than the Chinese (and consumers in many other countries). Sure, I'll take your damn green car, we say helpfully, but only if it is the same as the gas-guzzling, road-rocket I'm used to. Oh, and please be sure it has three rows of seats, a beer cooler in the glove compartment and twin flat panel screens so the kiddies don't have to watch the same episode of Sponge Bob Square Pants (because we don't want them fighting over which life lesson they will gather from their favorite gay underwater kitchen implement).

In other words, our consumers don't look like the consumers in the rest of the world. That's been a challenge to American car makers for some time (the appetite of international consumers for smaller cars led to the rise of the Japanese, European, and later Korean auto industries at the expense of American manufacturers). But with the rise of China and India and other emerging car markets and the more willing embrace of greener standards in everything by Europeans, our consumers are sending a market signal to car makers in the United States that is just completely out of whack with much of the rest of the planet. 

Some of that is, of course, due to the success car manufacturers, oil companies and others have had in keeping U.S. mileage standards artificially low and in dragging their feet on efficiency. Some of it may be due to the same auto manufacturers' ability to persuade American men that cars are somehow direct extensions of their penises. (Oddly, I don't know that the reputation of French lovers or other Latin lovers has suffered because they drove Renaults or Fiats...even if it should have. In fact, I know for a fact that the very handsome and irresistible editor of Foreign Policy drives a Smart car that looks like a toaster on a roller skate and yet, still the legions of policy groupies gather each day outside the FP headquarters just to catch a glimpse of him.) But part of it is that American consumers are spoiled and have gigantic rear-ends that don't fit in little tiny car seats. The Obama administration can help to change this (the auto innovation and buying habits parts) with new standards and with incentives for car makers and car buyers to invest in more efficient cars going forward. U.S. consumers will also have a role to play in all this too, of course...they will have to respond to the incentives. (As for the rear ends, all of you now: clench...maintain...release...clench...maintain...release.) But the cultural shift we need can't just stop there. For one thing, it might be helpful if U.S. politicians stopped referring to the Big Three as "the U.S. auto industry," since there are hundreds of thousands of Americans employed by great companies that contribute to American growth like Toyota, Honda, Nissan, Hyundai, Mercedes, and BMW. And who knows, if we took that step, we might actually be a step closer to tuning out the idiot-populism currently clouding this issue such as that by people like noted auto industry economist John Rich (of country music's only economically titled duo Big and Rich). Writes Rich in his current hit "Shuttin' Detroit Down"...

Cause in the real world they're shuttin' Detroit down,
While the boss man takes his bonus paid jets on out of town.
DC's bailing out them bankers as the farmers auction ground.
Yeah while they're living up on Wall Street in that New York City town,
Here in the real world they're shuttin' Detroit down."

Admittedly, this is poetry. Neither Shakespeare nor later day innovators like Bukowski never dared experiment with anything quite so incomprehensibly moving as "DC's bailing out them bankers as the farmers auction ground." But the song does have so many flaws you couldn't have hid them all under Carrie Underwood's gigantic dress at last Sunday's Academy of Country Music Awards. Not the least of them being that a.) as noted earlier many of the auto companies in America are neither the "big three" nor are they doing anywhere as badly as the big three and, oh yes, b.) D.C. is actually bailing out Detroit, too. (Although it's still a horse race to see which bailout packages are actually less successful. I'm splitting my bet. We'll waste more money on Wall Street but dollar for dollar we'll be less successful in Detroit.)

Because in the end, we also need to recognize, adjust to and respond with creativity and innovation to the fact that there are secular trends afoot that make it increasingly unlikely that so-called American brands will ever dominate worldwide as they once did. Even if we do reduce the size of those ginormous tushies.  

JIM WATSON/AFP/Getty Images