Patterico and I are having a debate about American attitudes toward the law. We’ve settled on a hypothetical, and disagree about what people’s reactions to it will be.

Ground rules: This is a hypothetical, a gedanken experiment like Schrodinger’s cat. Yes, I acknowledge that it couldn’t be true. But don’t comment here on this topic if you cannot literally accept the assumptions.

Stipulate that there is a small machine that I could put into your home or workplace that with absolute accuracy – I mean 100% accuracy – would send an alarm in the specific case that a person who had the true intent to commit murder was close to it. Yes, it’s Minority Report territory. But accept it as true.

Would you – as an American – be comfortable having something like that in your house?

Update: So let’s explain where this came from.

Patterico and I were having a long discussion on voting, and on some ideas I have to test whether there is in fact meaningful voting fraud of certain types. He explained that he was far less concerned about voting methodology, and far more concerned about the risk that non-citizens were registering and voting in significant numbers. He was unhappy that we did not require proof of citizenship in order to register to vote.

I explained that there were two reasons for it, one good and one much less so. The less good reason is obvious; there are political factions who believe they gain support from the presence of the group of voters who can’t prove they are citizens. The good reason is more complex – it goes to the nature of our relationship as Americans with the law.

I started by explaining why America doesn’t like speed cameras, and why we feel it’s important that the law by arms-length away from us. We debated, and I raised the stakes to the idea expressed above.

We don’t like the direct intrusion of control – even when it’s for as important a purpose as preventing murder. We don’t like “showing our papers.” That’s a good thing, in my view, and something to protect.

It seems like a lot of you agree.

Miscalibrated voting machines in North Carolina…

Several early voters have called into WFMY News 2 with concerns about a voting machine glitch.

All callers reported that they touched their finger to the screen for the person/party they wanted to vote for, but the wrong person/party was marked.

One person reported trying to check the McCain/Palin ticket, but Obama/Biden was highlighted.

Another person reported the exact opposite. They tried to check the Obama/Biden ticket and McCain/Palin was highlighted.

George Gilbert, the director of the Guilford County Board of Elections says, “If the machine was out of calibration, it could do that and that’s when the precinct officials need to stop, and put them on another machine or go back and try again.”

Fortunately – in these cases alert voters caught the mistake before walking away. If you live someplace where they use touchscreen voting equipment, ask to see if you can vote on a paper ballot. If not, be sure to check the voter-verifiable paper trail. Do not automatically assume that these machines will count your vote as intended.

And I don’t say that because I think there’s some vast conspiracy to steal votes (yet). I say it because the machines are POS’s that shouldn’t be allowed to count the quarters in your kid’s piggy bank much less help determine who will be president next year…

Prop 5 is an extension of Prop 36 a few years ago, which diverted many drug offenders out of the criminal justice system into rehab. But 36 made rehab enforceable – judges could put people who walked out of rehab into prison. Prop 5 takes this protection away. Personally, I could see legalizing and taxing drugs and spending a lot of money on rehab. I think that overall, the benefits would outweigh the costs. And I believe in “evolution in action.”

But this pastiche is just bad policy and bad law. So I’ll vote No on 5.

Similarly, Prop 6 is a tough-on-crime bill that in several points looks unconstitutional – it allows hearsay, weakens the right of the accused to have witnesses testify, expands the financial penalties (including seizure, which I detest) for property used in crimes even without the owner’s knowledge or consent. Some good criticism of 6 can be found here.

Plus it will cost a boatload. So, also – No on 6.

So here are the books I bought at the Strand. there’s a rationale for many of the the choices (three of the books don’t belong to the set), and the first correct guess wins something (to be determined).Carew, Jihad!
Ewans, Afghanistan, A Short history of Its People and Politics
Fraser, Flashman
Gerber, The Social Origins of the Modern Middle East
Gerges, Journey of the Jihadist
Hodes and Sedra, The Search for Security in Post-Taliban Afghanistan
McIntyre, The Man Who Would Be King
Meyer, The Dust of Empire
Rashid, Taliban (yes, I appear to have won the used-book lotto on this one…)
Renault, Fire From Heaven
Rushdie, The Best American Short Stories 2008
West, No True Glory

You know, maybe I’m just in a bad mood about the blog today.

I’m looking back on a massively unpleasant correspondence – an email flame war – with D-Day. I’m reading comments to some old posts and finding less and less of the dialog that’s important to me, and more and more baiting on issues.

Maybe it’s me; maybe I’m frustrated that I can’t stand the people who I’m politically allied with, and can’t agree with the people I like. Maybe I need a longer walk in the woods or a different blog.

But right now, what I need is to see grown-up behavior here on the site. We have an old rule about no sock-puppetry, and we’ve had multiple instances this month of people changing pseuds or posting under different names.

That’s a banning offense – the death penalty on this blog – and I want to remind people that we need to start hanging a few people pour l’ecourager les autres. So from now forward, if you post under another name, you’re gone. We IP match comments, and if you’re on a shared connection, and feel like your Brazilian boyfriend has been using your laptop (ob Glenn Greenwald joke), feel free to email someone after you’ve been banned.

I’m about 30 seconds from requiring commenters to register with a real email address. Seriously.

So a 2001 radio interview with Obama has the airwaves buzzing. It’s even made the Post as a fact-check to the McCain campaign’s charges that Obama had criticized the Warren court for not being radical enough. Listen to the whole thing yourself.

…and the rightblogs are all aflutter.

Here’s my friend Bill Whittle, at NRO (hey, cool that he has a gig there, btw…):

If the second highlighted phrase had been there without the first, Obama’s defenders would have bent over backwards trying to spin the meaning of “political and economic justice.” We all know what political and economic justice means, because Barack Obama has already made it crystal clear a second earlier: It means redistribution of wealth. Not the creation of wealth and certainly not the creation of opportunity, but simply taking money from the successful and hard-working and distributing it to those whom the government decides “deserve” it.

This redistribution of wealth, he states, “essentially is administrative and takes a lot of time.” It is an administrative task. Not suitable for the courts. More suitable for the chief executive.

Now that’s just garden-variety socialism, which apparently is not a big deal to many voters.

Here’s Jeff Goldstein:

In Obama’s America, we’ll finally be able to break free of the “constraints that were placed by the founding fathers in the Constitution” – and in so doing, achieve “social justice” through “redistributive change.”

Well, then. Fine .

But this is not the America I knew…

There’s more,

Pardon me while I fan myself.

It’s obvious that neither of them is a big fan of Charles Beard. He’s the author of “An Economic Interpretation of the Constitution of the United States,” a book everyone interested in US politics ought to read. While I don’t agree entirely with his analysis, the history that he lays out shows clearly how the creation of the Constitution was a balancing act firmly grounded in the affairs of the day, and the conflicts between merchant traders, farmers, land speculators, currency speculators, tradesmen, and landed gentry.

Look, most of my academic career was spent studying political theory and political history. All politics is redistributive; it distributes power and goods (tangible and intangible). For Obama to call for a political effort to tip the balance doesn’t seem any more outrageous to me than, say – Arthur Laffer’s.

The reality is that we have for all of American history had redistributive battles – does Teddy Roosevelt ring any bells? – and had a government that was waist-deep in the economy. It is certainly legitimate fodder to debate what the policies of that government ought to be, and who they are unfair to.

But let’s start by dropping the outrage over the notion that politics can be around distributive issues – if you’re making that argument, you need to read more about the history of politics to have much standing. For Obama to have said this is hardly something to lose one’s water over, whether in genuine or feigned outrage.

It is certainly appropriate to discuss the shortcomings of policies that benefit the poor – I certainly do that enough. But in a world where the wealth and income gaps are widening, and where social mobility is declining, arguments against government even attempting to do something to make some efforts at rebalancing things to a Burkean mean would have be powerful indeed for me to take them seriously.

I’m sure I’ll see some in the comments..

Update: Lawprof Ann Althouse weighs in:

If this alarmed you, chances are, you are not a law professor. Let me tell you that, in this radio interview from 2001, Obama is making the most conventional observation about the limits of constitutional law litigation: The courts will recognize rights to formal equality, but they hesitate to enforce those rights with remedies that become too expensive or require too much judicial supervision and they resist identifying rights to economic equality. Such matters are better handled by legislatures, and courts tend to defer to legislatures for this reason.

Go read her whole post – she deals with all the issues pretty neatly.

So I’m just home from a road trip – got to give a talk on social media in Irvine, then fly to Chicago and give a talk, then fly to NYC for a convention. I apologize for not having a lot of time to engage on the blog, but it was kinda crazy (albeit fun – I walked from Central park to the Strand Bookstore, which was a major mistake in and of itself…I really shouldn’t be allowed in bookstores without adult supervision, and TG is exploring ways to block all my credit cards as soon as I cross a bookstore’s threshold). OTOH, there will be some interesting blog posts once I’ve read them…

I did check email, though, and had a kind of contentious email exchange with Dave Dayen (the D-Day who was on the radio show with me) as well as Brad Friedman and cohorts. Dave replied on his blog to my comments about Freddie and Fannie, and stated – not that we were disagreeing about analyzing a complex issue – that I was simply lying. Or because exact language seems important to him, that I “fabricated” a quote, which rendered my argument meaningless.

I want to have a longer post later on the meta-issue of the forms of argument enjoyed by folks like Dave and his colleagues on the progblogs, and why I have such immense issues with them and with their politics (since I see political style as being inextricably tied to political substance…).

But let’s address the specifics of the issue first, and see if we can cast a little light where there’s a lot of smoke right now.

From my point of view, the long post he attacks was only marginally about him and his claim. I think that I did him a courtesy by using shorthand not pointing out the obvious fallacies in his exact quote, which I’d hoped to do in person. Sadly, if you listen to the mp3, Brad jumps in and closes off the argument before I can respond to his astounding statement…but since it seems to matter to him…

Dave makes two key points which I take to be the meat of his argument:

1) That I stated that he asked if Fannie and Freddie “made” subprime loans, as opposed to “guaranteed and securitized” subprime loans. Here’s his specific language:

Well, let’s stop right there, because that’s a misstatement of what I actually said. I never said “Did Fannie or Freddie make subprime loans?” I said “Did Fannie or Freddie guarantee or securitize subprime loans?”

2) That Fannie and Freddie followed, rather than made the market – here’s his specific language:

In the first paragraph, you see that Fannie and Freddie were losing market share, and were basically forced into a subprime market that was already created and well underway. In fact, it was their foot in the free market that forced them into that. This weird hybrid of a “government-sponsored entity,” still responsible to shareholders, demanded that Fannie and Freddie chase the market.

Now, Armed Liberal uses the quote of mine he fabricated to “prove me wrong.” But there is a major difference between what I said and what he thinks I said. Fannie and Freddie “made” subprime loans, after the market was in place and the bubble was set (Armed Liberal even quotes a WaPo piece saying that they didn’t get into the market until 2006), but they didn’t guarantee and securitize them. They bought mortgage-backed securities as part of a broader investment portfolio.

There’s much more, go read it if you’re in the mood…but these are what I see as the substantive claims.

What follows is long and detailed, so let me hit the executive summary. D-Day wants to win by collapsing a policy debate, which is inherently about a broad and somewhat ambiguous set of facts, into exact meaning when it suits him and makes a good soundbite. So he wants to make the claim that because there was no Fannie or Freddie-sponsored loan program explicitly called “subprime,” that the credit quality issues that Fannie and Freddie ultimately collapsed from had nothing to do with subprime lending. That’s a complete misstatement of my argument about the role of Fannie and Freddie in the credit crisis, to begin with. And even if I’m playing on his terms, it is factually incorrect. Fannie and Freddie did in fact purchase securities made up from portfolios of subprime loans – lots of them – thereby facilitating the origination of subprime loans just as surely as they facilitated the origination of other kinds of loans. Fannie and Freddie are in the business of guaranteeing andsecuritizing loans – that’s what they do with every loan that comes in the door. So both because they explicitly purchased subprime securities and because they then guaranteed them and resecuritized them via GSE offerings of securities, it’s clear that this is just plain false.

Here’s a quote from a column in the Economist:

The heavy lifting on that side of the argument is done by Frannie’s involvement in the purchase of subprime MBS. This, it is said, provided crucial support to the market, helping it to become the beast that got us in this mess. The smoking gun is this:

Fannie and Freddie bought 25.2% of the record $272.81 billion in subprime MBS sold in the first half of 2006, according to Inside Mortgage Finance Publications, a Bethesda, Md.-based publisher that covers the home loan industry.

In 2005, Fannie and Freddie purchased 35.3% of all subprime MBS, the publication estimated. The year before, the two purchased almost 44% of all subprime MBS sold.

Some 2006 estimates put 15% of Fannie and Freddie’s mortgage exposure as subprime. The existance of a large single buyer of such securities (especially one markets belived could not fail) likely enabled the subprime market to grow in the manner it did.

Yes, there is evidence that GSE’s “guaranteed” subprime loans – they purchased securities made from subprime loans, although they believed they were buying the secure tranche of the security. No, it makes no difference whether you claim they “made” or “guaranteed and securitized” those loans, because all GSE’s do is guarantee and securitize loans. Yes, they did “securitize” these loans, by participating in secondary markets for the securities – as they did for prime and Alt-A securities – and providing liquidity to the loan originators. Yes, they did lower their own standards for loans to what was substantially below historic norms, creating a pool of loans that were not, as a term of art “subprime,” which could very well fit into a broader policymaker’s definition of the same.

Now for some detail. It’s been a while since I took classes in housing finance in grad school, but I think I can explain where he’s off-track pretty easily.

First, the GSE’s (“Fannie and Freddie” is a PITA to type) don’t “guarantee” any loans until they purchase them. Other entities originate them, and then Fannie and Freddie purchase those loans, based on their ‘conforming’ with the GSE’s then-current standards. Because originators know that GSE’s will buy certain types of loans, they set up loan programs designed to churn out mortgages that meet the GSE requirements, and well-run originators sell all or almost all of these program loans to one of the GSEs. Once they do, the GSE’s both guarantee and securitize them.

Here’s liberal economist Tanta, at Calculated Risk:

Fannie and Freddie had about as much to with the “explosion of high-risk lending” as they could get away with. We are all fortunate that they couldn’t get away with all that much of it. It is a fact that their market share dropped like a brick in the early years of this century, except of course for years like 2003, when fixed rates dropped to cyclical lows, refis boomed, and GSE market share shot up again, only to plummet in the years following during the purchase boom.

But they didn’t like losing their market share, and they pushed the envelope on credit quality as far as they could inside the constraints of their charter: they got into “near prime” programs (Fannie’s “Expanded Approval,” Freddie’s “A Minus”) that, at the bottom tier, were hard to distinguish from regular old “subprime” except–again–that they were overwhelmingly fixed-rate “non-toxic” loan structures. They got into “documentation relief” in a big way through their automated underwriting systems, offering “low doc” loans that had a few key differences from the really wretched “stated” and “NINA” crap of the last several years, but occasionally the line between the two was rather thin. Again, though, whatever they bought in the low-doc world was overwhelmingly fixed rate (or at least longer-term hybrid amortizing ARMs), lower-LTV, and, of course, back in the day, of “conforming” loan balance, which kept the worst of the outright fraudulent loans out of the pile. Lots of people lied about their income (with or without collusion by their lender) in order to borrow $500,000 to buy an overpriced house in a bubble market. They weren’t borrowing $500,000 from the GSEs.

Furthermore, both GSEs were major culprits in the growth of the mega-lenders. Over the years they were struggling so hard to maintain market share, they were allowing themselves to experience huge concentration risks. As they catered more and more to their “major partners”–Countrywide, Wells Fargo, WaMu, the usual suspects–they helped sustain and worsen the “aggregator” model in which smaller lenders sold loans not to the GSEs but to CFC or WFC, who then sold the loans to the GSEs. In large measure this was a function of pricing: the aggregators got the best pricing from the GSEs–the lowest guarantee fees, the best execution options–making it more attractive for a number of reasons for small lenders to sell to the aggregators.

The mentality at the GSEs seemed to many of us to have become too focused on letting these “deep pocket” mega-players continue to push the GSEs toward low doc, “near subprime,” interest-only ARMs, low-down loans with iffy subordinate financing, etc. If you were Podunk National, you weren’t going to get a master commitment with the GSEs to sell “fast and easy” doc-lite ARMs with a razor-thin guarantee fee. But if you were HSBC, you got that, and so Podunk either lost market share or made those loans and sold them to HSBC, who sold them to the GSEs. From the GSE’s side it looked like they had the balance sheet and servicer strength of HSBC–or CFC or WFC or BAC or whoever–on the other side of those loan sales. From Podunk’s side it often looked like you could take advantage of the GSEs’ power to keep the mortgage market liquid only by consolidating the gargantuan servicing portfolios of the 800 pound gorillas, whose seemingly endless appetite for higher and higher-risk products made it hard for you to compete with conservative vanilla offerings.

So when he tries to suggest that I somehow weakened his argument when I said that he claimed GSE’s “made” subprime loans – as opposed to Alt-A or prime loans?.- he’s being sophistic or misunderstanding how GSE’s work. In fact, to the extent they “guaranteed” any loans – i.e. they used their credit to lower the interest rates and facilitate liquidity and thereby facilitate other entities originating loans – they clearly guaranteed subprime loans – not the truly crappy 105% of value ‘stated-income’ loans that the mortgage mills in California created (although some of those loans were products created by ‘stacking’ loans, including GSE-conforming first loans), but loans to less creditworthy buyers on properties whose value certainly wasn’t solidly appraised.

Let me take a side bar here before I finish with D-Day’s inane argument.

One claim made by progblogs in defending GSE’s is that those criticizing them want to “blame the credit crisis on loans to poor black people.” And in fact, some right blogs have made versions of that claim – which I hoped I had put a small dent into when I pointed out that the Milken economists (who D-Day accuses me of being “spun” by) presented statistics that put a lie to that claim. It’s more than possible to make loans to less creditworthy borrowers who are middle- or even upper-income. And the pattern of foreclosures that – again – I pointed to in the post that sent D-Day off frothing into the ozone, supports a claim that it was middle-income borrowers in fast-appreciating regions whose loans are tanking, not borrowers in the inner cities. So no, I’m not making the claim that “loans to poor black people” caused the crisis, and the people who are making that claim are as fatuously wrong as D-Day is.

So let’s go to his next claim, that GSE’s didn’t securitize subprime loans. D-Day, you magnificent idiot, that’s all GSE’s do – they securitize loans. If D-Day was willing to do 30 seconds of actual research, he’d have found Fannie Mae’s “Introduction to Fannie Mae” (pdf) document (at their site) where he could have read this:

Our job is to serve America’s housing finance system. Our three primary business units each contribute to this mission, and together serve to increase the total amount of funds available to our lender partners. We make mortgage funding available at all times and under all economic conditions, so lenders all across the country will have funds available for home buyers.

We make funds available to mortgage lenders in two primary ways. First, we purchase mortgage loans from lenders for cash and hold those mortgages in our portfolio. These lenders, in turn, can use those funds to provide mortgage financing for more home buyers. In order to finance the mortgages we purchase along with other business activities, we borrow funds by issuing debt securities in the domestic and international capital markets. We offer our debt products, through dealers, to a diverse group of investors, thereby expanding the total amount of funds available for housing in the United States.

A second way we make funds available is by issuing mortgage-backed securities (MBS) in exchange for pools of mortgages from lenders. These MBS provide lenders with an asset that is typically viewed as more liquid to hold or sell than their whole loan mortgages. Fannie Mae MBS are considered highly liquid investments and are traded through securities dealers. When we issue MBS, we guarantee to each MBS trust that we will supplement mortgage collections as required to make timely payments of principal and interest on the MBS.

I added the emphasis for D-Day.

So, I think it’s fair to say that GSE’s “made” subprime loans – to the extent they “made” any loans at all, and certainly that they gusranteed and securitized subprime loans – because in one way or another, they guaranteed securitized every loan or loan-backed instrument they purchased.

D-Day’s second point would make all kinds of sense if in fact I was suggesting that GSE’s created or were somehow to blame for the subprime market. They weren’t – and I didn’t say they did.

What I did say was that the scale of mismanagement of the GSE’s – which included incredibly high leverage against a loan portfolio systematically declining in quality – combined with the size of the GSE’s and the ability of other institutions to treat GSE securities as cash to take what should have been a one-sector collapse and turn it into a systemic one. That is the “key role” the GSe’s played in the current crisis, and the core insight I took away from the Milken presentation, and if D-Day wants to make an argument about why that’s wrong, I might be willing to keep playing. I’d love to see him try.

But he just needs to pay more attention to be worth debating with. And – maybe – know enough about what he’s discussing to match the tone of absolute certainty with which he bullshits.

And, as a freebie, let me explain to him why I have such a “hard-on” on this issue. We’re going to see increased involvement by the government in finance in the next couple of years as we work through the problems we’re facing now. If that involvement looks like the GSE’s in the last few decades – under both Democratic and Republican oversight – where we have crony capitalism at it’s worst – we’re well and truly f**ked. I’d like us to look carefully at what went wrong with the GSE’s (which again did not include – according to any data that I’ve seen – loans to poor people in inner cities), and make some effort to make sure we don’t do it again.

And as a final, kind of pissy question, was D-Day mistaken or lying – about the point of my post and about the mortgage markets – in his post?
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My friend Patterico has been going through the trials of Job in dealing with managing and hosting his blog, and to make things just absolutely perfect for him, it now appears that his domain may have been hijacked.

You can access his site temporarily at http://70.32.75.225. Please bookmark it and check there for updates.

And think good thoughts for him!!

Propositions 7 and 10 are energy propositions; each of them intends to “do something” about our reliance on fossil fuels. Each of them is too expensive, counterproductive in detail, and overly benefits third parties at the expense of the California consumer – so I’m against them.

Prop 7 mandates that all California utilities purchase 20% of their capacity from renewable energy sources by 2010. In 2000, renewable energy amounted to approximately 11.8% of the electricity production, and in 2006-7, electricity amounted to 25% of the total state energy budget – meaning that renewables amounted to approximately 3% of the state energy budget.

This bill mandates that 20% be from those sources in 2010 – basically in 15 months. So the suggestion is that we will raise the level of renewable energy generated in the state by a fact or of 6x in a little over a year. Even if we say that it’s by the end of 2010, and that it’s a little over two years, it’d ridiculous.

It will lead to a landrush of half-baked energy projects that we’ll pay for in our utility bills for the next 20 years.

I’d firmly support an initiative that did 3 things – set aside funds to restructure the state electricity transmission infrastructure; do environmental clearance and preplanning for two to three nuclear plants; and budgeted funds to bring renewables online subject to certain economic criteria (i.e. seed equity for renewables projects).

This isn’t that initiative.

Prop 10 is the T. Boone Pickens-supported initiative that will provide $5 billion in GO bonds to a) incent consumers to buy NGV and other alt-fuel vehicles; b) provide research grants for energy R & D and education.

Pickens is betting big on natural-gas powered cars. I like NGV’s – they are far greener than my hybrid, for example, and if you’ve ever read Amory Lovins’ “Soft Energy Paths,” they offer a potential roadmap to a hydrogen-based transportation system.

But subsidizing the purchase of NGV’s to help Picken’s investments in the natural-gas business seems like a little much. I do think the state can act in some ways – by subsidizing public natural gas pumping stations as well as the purchase of home devices that compress residential natural gas into CNG. But this seems like a stretch, particularly in a time when the state is having trouble servicing it’s current obligations.

In the wake of the GOP registration fraud arrest, a lot of Republicans are finger-waving at California Secretary of State Bowen and claiming that (as a Democrat) she’s being partisan in her investigation (remember, the local prosecutor has to decide to prosecute). Today, she challenged those claims.

Here’s what she said (h/t PolitickerCA):

Bowen, speaking at a “drive-thru registration” event on the last day to register to vote in the Nov. 4 election, said she’d investigate Mother Teresa if there was reason to think the late Nobel Peace Prize winner was engaged in voter fraud.

“If a complaint is brought against any party, any individual, my office will investigate,” Bowen said.

She also pointed out that in the case of Marc Anthony Jacoby, the decision to arrest and charge him with twice giving an address he didn’t live at on his own voter registration form was up to local law enforcement and the district attorney in Los Angeles County – a Republican.

“I would’ve had to have had a lot of corroboration from a lot of people with no partisan agenda,” said Bowen, a Democrat elected to her current office in 2006.

Disclosure: I know and trust Secretary Bowen.

At the same time this whole issue makes me itch a little. I’m working on a long post, and will be seeing if there’s an interesting open-source research project that we can all do together this November.