Let's talk about Leskov and making love

Leskov is the neglected 19th century Russian writer. Surely he links Gogol to Bely. Surely Lady Macbeth from Mtsensk is one of the finest stories ever written. You don’t believe me? Read this paragraph. Katerina Lvovna, the Lady Macbeth, and her lover, her husband’s servant, Sergei, well known as the village Don Juan, are discussing the imminent arrival of the husband, who has been away on business. The discussion takes place in the back yard, “on a carpet spread under an apple-tree in blossom.” At first the two have tea, then Sergei pouts, then Katerina pouts, then they make up.

“An old clerk who slept in the shed heard through his sound sleep how the silence of the night was broken by whispering and soft laughter, as though mischievous children were conferring together how best to make fun of an old man; then came roars of laughter and merriment as though saucy mermaids were tickling somebody. All this came from where Katerina Lvovna, bathed in moonlight and rolling on the soft carpet, played and frolicked with her husband's young clerk. And the white flowers kept falling, falling, from the old apple-tree until at last they ceased to fall. In the meantime the short summer night had passed, the moon hid itself behind the steep, high roofs of the warehouses and stared more and more wanly at the earth; from the kitchen roof came a piercing feline duet; this was followed by spitting and angry snorts after which two or three tom-cats crashed noisily from the roof on to a heap of boards nearby.”

How can one do justice to a paragraph like this? Already, we have in the back of our mind a notion of trees, fruit, a man and a woman in a garden. We begin first with old age and we end with the squabbling of cats in heat. At the very center of the paragraph is a superfluity. The white flowers do not merely fall – they “kept falling, falling”. What role is played by this extra “falling”? In a sense, that extra “falling”, that luxurious fall of the blossoms, that impossible shower of blossoms on the lovers, is linked more to the sin, the fall, the sex, the series of betrayals that mark the story, than any description of copulation. Fucking and falling, falling – what happens here is both sense and music. It is in the music, the repetition of falling, that the fantastic, the saucy mermaids, beast and human, are released. Shklovsky, in The Theory of Prose, writes:

“Art is not a march set to music, but rather a walking dance to be experienced or, more accurately, a movement of the body, whose very essence is to be experienced through the senses.”

This satisfies me a bit – but only a bit, because is it true that the whole body moves? Does not this falling move the tongue? To write prose – to really write prose – is to feel a distant but distinct sensation in your tongue. Some, doubtlessly, write prose outloud – although we are so used to reading in silence that, when a movie shows a writer writing, he never writes out loud. To present what is written, the soundtrack imposes a voice-over. A more imaginative film director might simply supply what happens when, deep in the tongue, a quiver is felt. The words would be sounds, heard as though from underground, and not fall into the distinct semantic shape that is so confidently assumed by the voice. There would be an entangled murmur. This is the wind that blows over the page, and blows, even, over the page on the computer screen. And what does the tongue do, on this night when the apple blossoms are falling, falling? The tongue and the lips of the lovers touch, taste each other, like saucy mermaids they tickle each other. They lean upon the stronger sensation, but that sensation, that culminating chord of sex, is coaxed out of the smaller sensations, the pick up sticks of touches, touches. The extra fall is the real fall – there is this luxury in loving, or rather in making love, in the heartfelt surface of love, where all is sense and nonsense at once.

ps - of course, I know that the falling, falling is English, but - as a reviewer in the Slavic and Eastern European Journal recently noted of a new translation of Lady Macbeth - Leskov's prose is saturated with repetitions - which are silently erased in the new translation. So I stand by the larger spirit of prose that I am invoking, here.

the zona salutes our heros of freedom on the tenth anniversary of the fall of the wall

Via Felix Salmon, I notice that today is a day to be celebrated. No, not Veterans Day. Ten years ago today, the wall came tumbling down – that horrible wall between commercial and investment banks. Two brave freedom fighters, Larry Summers and Senator Phil Gramm, led the charge for freedom, free enterprise, under the heart stirring slogan, “government is not the solution”. The next year, these two mousketeers of market equilibrium, the ownership society, and making the credit flow (at up to 30 percent per annum) like water for the poor! also brought down the horrendous regulations on mortgage lenders that strangled them like Laocoon’s sons were strangled by the sea snake.

Let it not be said that the struggle wasn’t tough. They faced a woman! O typical, broody women – this one, Brooksley Born, was simply an economic illiterate. Far from wanting to set us free – all of us, every last member of the country club – she nattered on about how collapsing the distinction between investment banks and commercial banks, backing up commercial banks with U.S. money, and allowing investment banks to play trillion dollar games with derivatives was somehow – this is the kind of naïve, housewife vocabulary she used… wrong. Women just don’t understand the important things, so luckily she was railroaded, and it turned out good for everybody! The Rolling Stones has a where are they now survey that does your heart good:

"Today marks a decade since the repeal of Glass-Steagall Act, the Depression-era safeguard that prohibited the commingling of commercial and investment banks. The deregulation gave rise to all-in-one financial behemoths like Citi, ushered in the too-big-to-fail era, and nearly toppled the global financial system.

The hubris expressed during the signing ceremony at the Old Executive Office Building ten years ago today will make you throw up in your mouth a little."

Dickenson reports on the bipartisanship shown at a ceremony in which both Clinton and Phil Gramm got to speak. Gramm’s words, in particular, pierce my heart with arrows of great joy:

In the 1930s, at the trough of the Depression, when Glass-Steagall became law, it was believed that government was the answer. It was believed that stability and growth came from government overriding the functioning of free markets. We are here today to repeal Glass-Steagall because we have learned that government is not the answer. We have learned that freedom and competition are the answers. We have learned that we promote economic growth, and we promote stability, by having competition and freedom. I am proud to be here because this is an important bill. It is a deregulatory bill. I believe that that is the wave of the future. And I am awfully proud to have been part of making it a reality. (Applause.)

And, as Dickenson reports, Gramm has ridden the wave of the future into making millions at UBS bank. A bank that deigned to let the government be the answer just a teensy weensy bit last year, when it got a 52.9 billion dollar government bailout. Noblesse oblige!

Others at the ceremony have benefited enormously from freedom freedom freedom too! Larry Summers we all know and love. But how about Gary Gensler, then treasury undersecretary, now head of the Commodity Futures Trading Commission – Brooksley Born, with her sheer ignorance of economics (defined as the science of putting as much money as possible into the pockets of the people who have as little morals as possible), was certainly not going to be invited back under King Summers! Another personage mentioned by Dickenson was a woman – cause, heck, some of the ladies do get with the program. Look at that there Wendy Gramm, the distinguished Senator's wife, who did so much for Enron. This one, another undersecretary of the Treasury, Linda Robertson, distinguished herself with an outstanding trajectory through the naughties, first as an Enron lobbyist (o frabjous day!), and now a senior advisor at the Fed!
…
So much for the fact that in country club, there’s no such thing as failure. Turning now to another product of the naughties, a liberal hawk who seemed to be consulted about Iraq every other day in the NYT, and who wrote numerous articles gravely sussing out the situation for the New York Review of Books, Peter Galbraith: Peter had a big day today. We learned that as he was ‘advising’ the Kurds and helping free the ever more free Iraqis, devising a constitition that enshrined humanity and federalism, particularily federalism, in our colony, he was also – an eager American and a go getter! – devising a little oil advisory company. And his work is paying off, as – through an absolute coincidence having to do with the provisions he helped put into the Iraqi constitution – he stands to gain 100 million dollars. Not bad! The country club breeds strong men – o, and sometimes the ladies too! – who have the guts to shed their own blood, figuratively, seat, figuratively, and tears, ever so figuratively, while all around are, well, being blown up, driven from their homes or tortured to death. The half a million Iraqi dead, and the two million refugees, may seem like a big thing today – but we are talking 100 million big ones, baby!
Interestingly, the NYT article said not word one of the way he was vetted for writing numerous op eds in the NYT editorial section. Was his byline, officer, Porcupine Group? Did they tell us this was a, to put a nasty word on it, war profiteer? No. Admittedly, his last name helped. Actually, I admit it kills me a little – I love his father and brother, and the one time I interviewed Peter, he seemed most obliging.
Hark, later in the day, an editorial note did appear:

“On Thursday, a news article in The Times reported on the ties between Peter W. Galbraith, a former United States ambassador, and a Norwegian oil company that operates in the Kurdistan region of Iraq. According to the Times article, Mr. Galbraith "received rights to an enormous stake in at least one of Kurdistan's oil fields in the spring of 2004.
Since that time, Mr. Galbraith has written several opinion articles for the Op-Ed page in support of Kurdish independence and security. These articles should have disclosed to readers that Mr. Galbraith could benefit financially from an independent Kurdistan that would not have to share oil revenues with Iraq.
Like other writers for the Op-Ed page, Mr. Galbraith signed a contract that obligated him to disclose his financial interests in the subjects of his articles. Had editors been aware of Mr. Galbraith's financial stake, the Op-Ed page would have insisted on disclosure or not published his articles.”

Which is placed below his Galbraith’s stirring call to have American soldiers fight and die to protect his investments:

“Seeing as we cannot maintain the peace in Iraq, we have but one overriding interest there today — to keep Al Qaeda from creating a base from which it can plot attacks on the United States. Thus we need to have troops nearby prepared to re-engage in case the Sunni Arabs prove unable to provide for their own security against the foreign jihadists.

This would be best accomplished by placing a small “over the horizon” force in Kurdistan. Iraqi Kurdistan is among the most pro-American societies in the world and its government would welcome our military presence, not the least because it would help protect Kurds from Arab Iraqis who resent their close cooperation with the United States during the 2003 war. American soldiers on the ground might also ease the escalating tension between the Iraqi Kurds and Turkey, which is threatening to send its troops across the border in search of Turkish Kurd terrorists using Iraq as a haven.”

Oh. Peter Galbraith was one of Kerry's main advisors about Iraq in 2004. Bipartisanship, that is what this is all about - a handshake among oligarchs across the aisle not to take their eye off the ball - no matter how many lives it costs. The ball, of course, is their predatory wealth.


But such is life in an empire run by a corrupt and blind oligarchy. Bad for you, and bad for your children – even if you live on the other side of the world.

A writer's secret

The lives of certain writers seem to be radiate out from anecdotes that only make sense on an anagogical reading, framed by a theology of the unknown God. Kafka and Gogol are supreme exemplars of this type.

In Donald Frame's The Creation of Nikolai Gogol, he writes that the opening of The Selected Passages from correspondence with Friends - a work that always been considered not only the worst thing Gogol ever wrote, but a sort of catastrophe, as though Gogol had gone senile -- Gogol said "he had prepared as a posthumous gift to his fellow countrymen ... 'the best of all things that my pen has produced... My composition entitled, 'A Farewell Tale'. It would reveal to them 'if only in part the strict secret of my life and the most sacred heavenly music of that secret.' He was reserving publication, he explained in a footnote, because what would have significance after a writer's death has no sense during his lifetime. "A Farewell Tale" was apparently never written - and Dostoevsky did not hesitate to brand Gogol's references to it as vran'yo (prevarication). Gogol, he suggested here and elsewhere, was an early version of his underground man. It was 'that same underground man which made Gogol, in a solemn testament, speak of a final tale which had sung itself out in his soul - and which in reality did not exist at all." Dostoevsky goes on to suggest that when Gogol began writing his testament he may not even have known he was about to mention a 'final tale.'

Dostoevsky's suggestion is in itself a masterpiece. And what writer, meditating on fiction, does not sometimes shudder at the childishness of make believe, the shamefulness of daydreaming, judged from the height of maturity? But that undermining of everything is countered by another - the moment you promise to tell the truth - only then do you see that the truly juvenile, shameful, and impossible task is complying with this promise. Even making the promise, which is made and has to be made everyday by every sentient, sane human being, is, when considered from the writer's perspective, a farce. The more solemn it is, the more whimsical it is. There's every chance that you will die tonight before you can even begin tomorrow to do what you promised yesterday. Not only that, but who made yesterday's promise? A person in such and such circumstances. That person no longer exists, in as much as those circumstances have shifted. Nail the promise by swearing on a book, swearing before a courtroom or a minister, and it turns from a wish into the most ludicrous lie that you have to surround, like a spoiled child, with infinite distractions. It is then that the unconscious, everybody's devil's advocate, will make other promises suddenly come into your mind. You grab your pen and you write one of them down - ah, this is just how to continue, to lend the right atmosphere to things! Now the words begin to flow!

That was a very, very cruel thing to mention. In what he said about Gogol, Dostoevsky spilled every writer's secret. Bastard.

Tolstoy's three deaths

Tolstoy’s story, “Three Deaths” (1858), has been condescended to by his greatest critics. This is what Bakhtin wrote:

“This work, not large in size but nevertheless tri-leveled, is very characteristic of Tolstoy’s monologic manner.

Three deaths are portrayed in the story – the deaths of a rich noblewoman, a coachman, and a tree. But in this work Tolstoy presents death as a stage of life, as a stage illuminating that life, as the optimal point for understanding and evaluating that life in its entirety. Thus one could say that his story in fact portrays three lives totally finalized in their meaning and in their value. And in Tolstoy’s story all three lives, and the levels defined by them, are internally self enclosed and do not know each other. There is no more than a purely external pragmatic connection between them, necessary for the compositional and thematic unity of the story.”

Shkhlovsii contrasted the story with what he and the formalists regarded as the exemplary Tolstoy story, Kholstomer, about the death of a horse.

“The young Tolstoi was rather naïve in the way he constructed his parallel structures. Inn order to work out the theme of “dying”, that is, in order to illustrate it, Tolstoi felt it necessary in ‘The Three Deaths” to carry out three subthemes: the death of the mistress of the house, the death of the peasant, and the death of the tree. The three parts of the story are connected by a specific motivation: the peasant is the lady’s coachman, and the tree is chopped down to serve as a cross on the peasant’s grave.”

Bakhtin, of course, is setting up his game, with Tolstoy on the one side and Dostoevsky, that great unfinalizer, on the other. Dostoevsky’s characters, with their open, dialogic natures, may die, but cannot be summed up. Their emblematic moments tend to end badly. The body of saintly Father Zosima, in The Brothers Karamazov, gives off a vile smell of decay. In the Devils, Stepan Verkhovensky actually stops being a clown and a stooge at the end, and becomes a tragic Lear. Whereas, in Bakhtin’s view, Tolstoy’s finalized characters all end, like Ivan Illych, tied up in the sack. The three deaths, in Three deaths, conform to this pattern, in his view. What’s in death’s sack is what life is.

Shkhlovskii, perhaps Tolstoy’s greatest critic and much more sympathetic to what Tolstoy is doing, looks at Three Deaths as a sort of sketch for Tolstoy’s better work, in which the device of which he is a master, ostranie – estrangement, making strange – and the devices he has inherited from the folk tale and skaz deeply structure the overall vision. Estrangement is surely a thrust against finalization. Tolstoy, on this reading, is like Ezekial, down in the valley of the bones: “And he said unto me, Son of man, can these bones live? And I answered, O Lord GOD, thou knowest.” It is not for him to say yeah or nay to the Lord’s question.

Or, to take another stab at answering Bakhtin – yes, he is correct that Tolstoy does look at his characters from the ‘optimal’ pont of death; but this is not the same thing as finalizing them. Death is, of course, a leveler in Three Deaths. The very title, with its quantitative modifier, projects a certain radical equality into the story, the equality of the scythe that lops off the stalks of wheat regardless of their height. In the Christian sense, death is a tremendous leveler – for he who is first in the social world is still last, in that he will die. Death is not simply loss to others – it is an imminent, shaping loss to oneself, which is already in the midst of every gain. Ultimately, this is the reason death is on the side of making strange – if and when it becomes familiar, all the social ties are snapped.

Tolstoy’s contemporaries – particularly Grigor’ev - noted the accusatory force in the title. But Tolstoy, as a writer, threw them off, and still disconcerts us, because, for all his sense of death, he is a great describer of the animal life. His descriptions are not cold disavowals of sensual pleasure – Tolstoy obviously enjoys strong tastes, strong excitements, white bosoms, military glory, and physical strength. One has a sense that he is blindsiding the reader by being at once so intensely attuned to the sensual thrill and so aware of its annulment in death. This comes out most strongly when he writes about the life of women, who he can’t help but judge from his sensualist’s view, and who he then turns around and blames for arousing this feeling in him. It is the familiar demonic gesture of patriarchy, but made, here, with Tolstoy’s narrative genius. Still, the general point, whether it is the death of the petty aristocratic woman in Three Deaths or the death of Ivan Illych is that the sensual pleasures in which the happiness of life consists are, from the point of view of the absolute loss of death, nothing at all. Everything is built, every labour is made, in order to gain these sensual moments – and they are all naught.

But the latter is not an easy thought to keep in mind, as, after all, it may not be true. For death too can be looked at from the sensual moment – and from that moment, what is it? O Lord thou knowest – that is, it is an unknown for the individual, but one thing is known -- it is merely the end of me. There’s a great communist element in sensual enjoyment, and life is not a possession at the nerve ends, at the skin, in the mouth and stomach, coming out of the ass. It is something like a flood, a broad sweep, which tugs and carries the lonely and deluded me, who thinks he is doing all the work .

The estranging shock in Three Deaths is that the final death counts as much as the death of the noblewoman or the peasant:

“The ax rang more and more frequently; the white chips, full of sap, were scattered upon the dewy grass, and a slight cracking was heard beneath the blows. The tree trembled with all its body, leaned over, and quickly straightened itself, shuddering with fear on its base. For an instant all was still, then once more the tree bent over; a crash was heard in its trunk; and, tearing the thicket, and dragging down the branches, it plunged toward the damp earth. The noise of the ax and of footsteps ceased. The warbler uttered a cry, and flew higher. The branch which she grazed with her wings shook for an instant, and then came to rest like all the others their foliage. The trees, more joyously than ever, extended their motionless branches over the new space that had been made in their midst. The first sunbeams, breaking through the cloud, gleamed in the sky, and shone along the earth and heavens. The mist, in billows, began to float along the hollows; the dew, gleaming, played on the green foliage; translucent white clouds hurried along their azure path. The birds hopped about in the thicket, and, as if beside themselves, voiced their happiness; the juicy leaves joyfully and contentedly whispered on the tree-tops; and the branches of the living trees slowly and majestically waved over the dead and fallen tree.”

Although Bakhtin writes of this death as external to the other two, it isn’t quite true – the axe rings out because of a promise that the noblewoman’s coachman made to the dying peasant, in exchange for that peasant’s new boots. The promise was to put a cross on his grave, and the tree is to be measured and cut up into that cross. And the smallest reflection will tell you that one couldn’t just go out and cut down a tree in Russia – those trees were property, and they were being felled to feed industry The indebted nobility in Russian novels are always selling forested land. There’s a cash nexus connecting tree, peasant and noblewoman – as Stiva, Anna Karenina’s brother, well knew.

Of course, Bakhtin is right that the tree’s death – a silent fall, which briefly disturbs the birds, which go back to their singing, just as the trees spread their branches in the sun – gains its artistic power from being in contrast with, paralleled by exterior to, the peevish end of the noblewoman and the humble end of the peasant. Here again, things are arranged in such a way that we have two paths we can follow to Lady Shirkinskaya’s death. One would go through Tolstoy’s usual, incredible irritation with women. Their voices, their pleas, their bodies – everything irritates him. And that irritation trembles through the death scene like a barely suppressed anger:

“The sick woman dropped her head in token of assent. "O God! Pardon me, a sinner," she whispered.The cousin went out, and beckoned to the confessor. "She is an angel," she said to the husband, with tears in her eyes. The husband wept. The priest went into the sick room; the old lady still remained unconscious, and in the room beyond all was perfectly quiet. At the end of five minutes the confessor came out, and, taking off his stole, arranged his hair."Thanks be to the Lord, she is calmer now," said he. "She wishes to see you."The cousin and the husband went to the sick room. The invalid, gently weeping, was gazing at the images. "I congratulate you, my love," said the husband."Thank you. How well I feel now! What ineffable joy I experience!" said the sick woman, and a faint smile played over her thin lips. "How merciful God is! Is He not? He is merciful and omnipotent!"And again with an eager prayer she turned her tearful eyes toward the holy images.Then suddenly something seemed to occur to her mind. She beckoned to her husband."You are never willing to do what I desire," said she, in a weak and querulous voice.The husband, stretching his neck, listened to her submissively."What is it, my love?""How many times I have told you that these doctors don't know anything! There are simple women doctors; they make cures. That's what the good father said. ... A shopkeeper .... Send for him." ..."For whom, my love?" "Good heavens! You can never understand me." And the dying woman frowned, and closed her eyes.”

On the other hand, the artist in Tolstoy – which sees what the person doesn’t want to see, and writes it down – has already noted the weakness of the husband, his trust in doctors, his indecisiveness. If the woman is querulous, what is this but an almost physical flailing, like that of some drowning person who is being pulled down by the person who is supposed to be saving her? Trapped by her sex – for traveling to Italy, which she thinks will be good for her lungs, is out of the question if her husband doesn’t accompany her, whereas surely, the other way around, he would have gone without his wife without hesitation – she beats everything about her with her tongue. Unlike her husband, she is not, superstitiously, tied up in a belief in doctors – which has more to do with class than with science.

The peasant Feodor’s death, which connects Lady Shirkinskaya’s to the tree’s, occurs on a stove in a hut. And its real effect is not the death itself, but the fact that, dying, the peasant has no use for his new boots, and trades them to the coachman, Seryosha, for the promise of burial and a monument.

I love this part of the story:

"You take the boots, Seryoha," said he, conquering the cough, and getting his breath a little. "Only, do you hear, buy me a stone when I am dead," he added hoarsely."Thank you, uncle; then I will take them, and as for the stone, -- yei-yei! -- I will buy you one."There, children, you are witnesses," the sick man was able to articulate, and then once more he bent over and began to choke."All right, we have heard," said one of the drivers. "But run, Seryoha, or else the starosta will be after you again. You know Lady Shirkinskaya is sick."Seryoha quickly pulled off his ragged, unwieldy boots, and flung them under the bench. Uncle Feodor's new ones fitted his feet exactly, and the young driver could not keep his eyes off them as he went to the carriage. "Ek! What splendid boots! Here's some grease," called another driver with the grease-pot in his hand, as Seryoha mounted to his box and gathered up the reins. "Get them for nothing?" "So you're jealous, are you?" cried Seryoha, lifting up and tucking around his legs the tails of his overcoat. "Off with you, my darlings," he cried to the horses, cracking his knout; and the coach and barouche, with their occupants, trunks, and other belongings, were hidden in the thick autumnal mist, and rapidly whirled away over the wet road. “

There is a tale, a semiotic tale, to tell about boots, gloves, and other things that fit in Tolstoy. Of course, the peasants of Russia were dependent on the cottage industry of boot and shoemakers – no mass produced footwear for them. Boots that fit, well made boots, were naturally beautiful in the eyes of Seryosha. But this joy in a thing fitting is written all over Tolstoy’s work. There’s a reversible semiotic here – the fit of things – for instance, boots that fit the feet – and the grip of things. Good guns, whips, and handles of all kind please Tolstoy. And he likes to see the fit and grip of things in action. When Levin, in Anna Karenina, puts on the ice skates and effortlessly slides over the frozen pond, losing himself in the shapes he makes, this is the ecstasy of fitting. To slip into a groove and fill it and have power over it – this is a part of the sensual life that Tolstoy goes out to. A charge or raid, a dance in a ballroom – movements within a groove, a set pattern, crafted to the power of the mover, were intrinsically beautiful to him.

But of course the boots are Feodor’s boots, and him giving the boots up is a sign of his approaching death. Fitting takes a cruel turn here. What Tolstoy does not like in women is their lack of a tactile sense of grip and fit. Not that this is true of all women – but remember Tolstoy’s greatest heroine, Anna Karinina, dies on a railroad track – dies squashed lying on a thing that is engineered to the most precise fit.

catch 22 in the Zona

Zeks in the Zona, sweating to pay the rent and the mortgage, have had some wonderful reading matter tossed to them this week as they sit before their Zek tvs and watch blue pills (it’s a blue pill!), cars and weak beer dance through the collective dream. For instance, they could have read the wonderful tale from Bloombergs about the supposed “negotiations” over the AIG payout last November. O zeks, do you remember how the Darwinian weeding out of the weak, so beloved of neo-classical economists, unfurled in its natural course back then? Well, of course you don’t, because Darwinian weeding out of the weak is only for the weak! The wealthy don’t have that extra 500 million sitting around to spend it all on dancing girls, no sir. Sometimes, you buy a legislature. Sometimes, you buy a Treasury department. And always, you have the Fed at your back as your friend, with whom you can discuss the finer points of Ayn Rand's philosophy.

But the Fed is subject to its own moods. Although our secretary of the Treasury, Tim Geithner, might look like a weasel, evidently he was feeling more like Santa Claus, all jolly and fat and charitable last November. And so, remarkably, were his friends, the loveable crew of Santa’s helpers that sit on the board of the NY branch of the Fed – upstanding citizens like Stephen Freedman, former chairman of Goldman Sachs but, as we all know well, a patriot and a hero first and foremost, and our beloved Jamie Dimon, a busy man who not only helps direct Fed policy, but also manages JP Morgan – noblesse oblige, you know.


Now, these beauties were confronted with that little problem of AIG last November. A pesky thing. Oh, 150 billion were out there somewhere, being mulched. And the Fed was supposed to devise a rescue plan!

Because this was serious. It wasn’t like, say, this story, from a recent NYT piece about runaways:

“She ran away from her group home in Medford, Ore., and spent weeks sleeping in parks and under bridges. Finally, Nicole Clark, 14 years old, grew so desperate that she accepted a young man’s offer of a place to stay. The price would come later.
They had sex, and he soon became her boyfriend. Then one day he threatened to kick her out if she did not have sex with several of his friends in exchange for money.”

Another tale of the bad choices of the poor! Why, it might break your heart – or cause you to turn the newspaper page – but really, it would just be made infinitely worse if the state intervened to prop up lifestyles like this through yucky welfare. And no doubt this 14 year old doesn’t have the IQ, the smarts, that our heavenly bunch of NY Fed benchwarmers have. They are the cream of the crop, no doubt. So, let us say salut to Nicole and good luck surviving in Zona America, and come back to our exciting tale of the rescue of AIG’s counterparties!

“Beginning late in the week of Nov. 3, the New York Fed, led by PresidentTimothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps -- insurance-like contracts that backed soured collateralized-debt obligations.

…
Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.
The New York Fed’s decision to pay the banks in full cost AIG -- and thus American taxpayers -- at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III.”

It surely was gracious of the Fed to do that. Why, otherwise those counterparties – like, say, Goldman Sachs – might have been left a little temporarily improvident. Luckily, they would never have been forced to have sex with their “boyfriend’s” friends for money. They are too busy creating the wealth that the rest of us Zeks enjoy, God bless em!

So what happened, you might be thinking?

“The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made. Friedman, 71, resigned in May, days after it was disclosed by the Wall Street Journal that he had bought more than 50,000 shares of Goldman Sachs stock following the takeover of AIG. He declined to comment for this article.
In his resignation letter, Friedman said his continued role as chairman had been mischaracterized as improper. Goldman Sachs spokesman Michael DuVally declined to comment.
AIG paid Societe General $16.5 billion, Deutsche Bank $8.5 billion and Merrill Lynch $6.2 billion.”

Now, for those of you who like a little implication with your news, this story is all the more interesting for the clash between the Fed’s version of this transaction and GS’s version. According to the Fed, expecting AIG’s counterparties to take a haircut of 40 percent was impossible, since this would have driven them to the wall:

“Far more money was wasted in paying the banks for their swaps, says Donn Vickrey of financial research firm Gradient Analytics Inc. “In cases like this, the outcome is always along the lines of 50, 60 or 70 cents on the dollar,” Vickrey says.
A spokeswoman for Geithner, now secretary of the Treasury Department, declined to comment. Jack Gutt, a spokesman for the New York Fed, also had no comment.
One reason par was paid was because some counterparties insisted on being paid in full and the New York Fed did not want to negotiate separate deals, says a person close to the transaction. “Some of those banks needed 100 cents on the dollar or they risked failure,” Vickrey says.”

Yet, after pocketing its 12.9 billion, GS has consistently maintained that it didn’t need it. Gee, you think they might then have given it to, say, fourteen year old Nicole – but no, what GS means is that they had counterparties to their counterparties at AIG who, in November of 2008, would have gladly forked out the 12.9 billion to them.

This is truly a story of miracles, a holiday story for the whole family! Much like that Jimmy Stewart one, if we purged the Stewart character and made the hero, oh, some GS ex exec on a Fed branch board. A much better hero all the way around!

The Fed has noticed that their story, per Bloomberg, makes a mockery of GS’s story – and not just a mockery. It is actually against the law for a company to lie about such things at news conferences, as this, for one thing, distorts stock prices. Some sleepy NY attorney general could actually investigate, although the likelihood of anybody investigating is pretty close to zero. Still, newspapers could rattle these cages. So stories have to be aligned. This is from the Washington Post, Friday:

“New York Fed officials explained that the main reason creditors were willing for a time to accept less than full reimbursement was their fear of an AIG bankruptcy. The government's rescue of the company removed that threat and left the company with virtually no way to wrestle concessions from the banks.
"In its negotiations with its counterparties, AIG just didn't have the same bargaining power that it did with the Federal Reserve standing in the background," said Thomas C. Baxter, New York Fed's general counsel. "The only sensible outcome was to give them what they were legally entitled to."

And then there is this:

Yossarian looked at him soberly and tried another approach. “Is Orr crazy?”
“He sure is,” Doc Daneeka said.
“Can you ground him?”
“I sure can. But first he has to ask me to. That’s part of the rule.”
“Then why doesn’t he ask you to?”
“Because he’s crazy,” Doc Daneeka said. “He has to be crazy to keep flying combat missions after all the close calls he’s had. Sure, I can ground Orr. But first he has to ask me to.”
“That’s all he has to do to be grounded?”
“That’s all. Let him ask me.”
“And then you can ground him?” Yossarian asked.
“No. Then I can’t ground him.”
“You mean there’s a catch?”
“Sure there’s a catch,” Doc Daneeka replied. “Catch-22. Anyone who wants to get out of combat duty isn’t really crazy.”
There was only one catch and that was Catch-22, which specified that a concern for one’s own safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn’t, but if he was sane he had to fly them. If he flew them he was crazy and didn’t have to; but if he didn’t want to he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle.
“That’s some catch, that Catch-22,” he observed.
“It’s the best there is,” Doc Daneeka agreed.”

Well, our zek might be puzzled by these events, and even begin to think that something isn’t right. And he would no doubt be confounded further by the history of Citibank, as processed by today’s NYT article about the four times it has had to be rescued by the Government.

This paragraph sets up a nice contrast between apparatchik and zek in this crazy world of small government lovin’ Wall Street, where capitalism is king!

“As a result, the government has handed Citigroup $45 billion under the Troubled Asset Relief Program over the last year. Through the Federal Deposit Insurance Corporation, a major bank regulator, the government has also agreed to back roughly $300 billion in soured assets that sit on Citigroup’s books. Even as other troubled institutions recently curtailed their use of another F.D.I.C. program that backs new debt issued by banks, Citigroup has continued to tap the arrangement.

Citigroup is also one of only two TARP recipients so desperate for capital that they’ve swapped government-issued shares into common stock, diluting existing shareholders. (GMAC, the troubled auto lender that may receive another government infusion, is the other.)

While Citigroup has written down tens of billions of dollars’ worth of mortgages on its books, there are looming problems in its huge credit card portfolio. Of the company’s $1.2 trillion in credit commitments outstanding in the second quarter, $873 billion were credit card lines. A measure of the bank’s efforts to wrestle that problem to the ground is the interest it charges customers: in October, Citigroup raised interest rates on some credit card holders to 29.99 percent.”

30 percent interest. That’s some interest! And in fact, before the law was reformed in the golden days of Reagan, it was charged mainly by men whose assistants carried lead pipes and exacted in-kind late fees. But just as drug dealers, those unheralded entrepreneurs, created business m.o.s that have become standard for big pharma – see your doctor about the blue pill! – so, too, the mafia’s defunct – like e.e. cumming’s buffalo bill. The frontier has been passed and trampled into the ground, and debt slavery, once considered the scourge of peasants, is now just good business. Interest helps us get an x ray of power in America – banks get loans at 2 percent, I believe it is at present, with which they can buy T-notes paying 3 to 4 percent, or loan out money to zeks at 30 - you know how it goes. It’s a meritocracy, baby.

With a few catches.

Marx and Mises sitting in a tree

Of the two von Mises boys, I infinitely prefer Richard to Ludwig. My experience reading Ludwig von Mises is to recoil at each and every page and concept. Yet he did have one view with which I sympathize.

First, a little background. When he was young, Ludwig von Mises wrote a thesis about money that has had an odd career in, of all places, America. Mises was concerned with the fact that, in a perfect free market system, we should have a mechanism that allocates capital very much outside any government diktat, and we should allow the full Darwinian mechanism of selection to operate – failures should not be propped up. Yet, with fractional reserve banking, a snake was set loose in this Eden of Entrepreneurs. Banks could get so big, and they could leverage their assets to such an extent, that instead of nice discrete Darwinian extinctions, we would have mass extinctions. In order to secure themelves, the banks persuaded governments to become insurers of last resort - and at that point, secure from Darwinian morality, banks responded not to the narrow call of survival, but to the rentseekers tremendous trumpet of speculation. In this way, the allocation of capital, instead of being in perfect harmony with the visions of entrepreneurs, was inefficiently skewed to boobytrapped schemes, rigged to pay off to the bank’s management, and to be paid for, when they failed, by the state.

Although the story is longer than this, it about sums up Mises theory.

Now, the first thing we notice about the theory is that all empirical evidence is against it.

Developed economies, with Central banks and bank insurance, were able to loosen up credit not only on the level of business, but also on the level of the individual household. Non-developed countries, on the other hand, lacked that credit capacity. If there is a single determinant of the prospects for development in the twentieth century, it is a developed financial sector. The Soviet Union, de-developing itself, refused to develop a credit system and thus was forced to borrow from abroad and curb even those fields – like computers – in which it had a human capital advantage. It was the lack of credit killed communism as surely as lack of credit (even more than lack of faith in God) drove Raskolnikov to axe the moneylender.

If you read nineteenth century from the economists point of view, you will soon notice that the limits of the worlds of the characters are the limits of their credit lines. That was the world in which Baudelaire and Bloy could find the whole notion of debt diabolical. Not that they were wrong in terms of the general economy – but we live in this world by dickering with the devil.

But there is, still, a core of truth in Mises’s idea. While any developed economy needs a robust credit system, it also needs to put stringent curbs on speculation. Otherwise, the production of real goods and services will soon serve the servants – the speculators – whose only social function is to provide capital for risky enterprises.

Here, then, is where Mises and Marx can join hands: making sure that speculation does not take over industry.

In the U.S., the way speculation has taken over industry is the equities markets. In particular, the discussion of whether the stock of a corporation should, in the aggregate, represent more than its assets was won by the yes side. The progressive Republicans of 1910 were opposed to the idea of what they called watered stock.

I’ve often alluded to the bill, sponsored by Teddy Roosevelt’s partisans in the House and senate, that would have crushed this speculative impetus. To my mind, this is a much more sensible idea than the dissolution of the Federal Bank. It would actually have the same effect – to remove speculative inefficiencies from the economy. I’ve been thinking about this since reading Ian Welsh’s blog.

I made a comment there I will reproduce here:

I’m partial to Theodore Roosevelt’s remedy for curbing the power of the speculators in an economy. The supreme result of Roosevelt’s populism - which went beyond anything else proposed in the U.S. in the 20th century - was a bill , S232, that passed the House in 1911. Here is how it is described by Lawrence Mitchell in the Speculation Economy:

“It would have replaced traditional state corporate finance law by preventing companies from issuing “new stock” for more than the cash value of their assets, addressing both traditional antitrust concerns and newer worries about the stability of the stock market by preventing overcapitalization. But it would have done much more.

S. 232 was designed to restore industry to its primary role in American business, subjugating finance to its service. It would have directed the proceeds of securities issues to industrial progress by preventing corporations from issuing stock except “for the purpose of enlarging or extending the business of such corporation or for improvements or betterments”, and only with the permission of the Secretary of Commerce and Labor. Corporations would only be permitted to issue stock to finance revenue-generating industrial activities rather than finance the ambitions of sellers and promoters. … S. 232 would have restored the industrial business model to American corporate capitalism and prevented the spread of the finance combination from continuing it dominance of American industry.” (137) In Sklar’s account of the Roosevelt era draft, ‘whenever the amount of outstanding stock should exceed the value of assets, the secretary would require the corporation to call in all staock and issue new stock in lieu thereof in an amount not exceeding the value of assets, and each stockholder would be required to surrender the old stock and receive the new issue in an amount proportionate to the old holdings.”

We didn’t put these curbs in place in 1911. Since then, Speculation has become dominant in the U.S. economy. The whole trick of neo-liberalism is to extrude the old social insurance net, which was the great product of the progressive and new deal eras, into the private sphere. In essence, crush the bargaining power of labor, loosen restraints on credit, and tie the median income class directly to the speculative markets.

This has had the effect of creating a politics that is basically about pampering the speculative sector. It is, of course, a disaster for the vast majority of people. And that there was a lively discussion about speculation at all once upon a time - from 1890 to 1914 - has been utterly forgotten. You rarely ever hear a radical nowadays say, why don’t we simply overtunr the system of watered stock? Which, in effect, would mean that if you owned stock in a company, you really owned the company, rather than a financial instrument whose value was solely determined in a secondary market. The simple genius of requiring that the stock would have to equal the outstanding assets, and no more, would shatter the whole system at a blow. It is a system that needs shattering desperately.

republican virtue and equality

The view of equality that was reflected in the first phase of Cold War liberalism could be summed up in a sort of koan: equality is one of the necessary goals towards which any good society strives. At the same time, the failure to attain equality is a necessary structuring principle that makes the good society possible.

Among the canons of Cold War Liberalism, no text was clearer about this double bind than Rawls’ Theory of Justice. In no other area of political philosophy was the difference between Cold War liberalism and its classical predecessors so significant. The experience of the devastating wars of the twentieth century, and the Great Depression, had destroyed the old gentleman’s liberalism for which Hayek pined. In its place was a liberalism that ceded, and promoted, an interventionist state. But, in continuity with the old anti-egalitarian thematic, the CW Liberals saw the danger of perfect equality from two perspectives. From the economic perspective, while conceding the performance of the mixed economies of the developed world, that performance would be endangered if positional incentives were wholly removed from the picture. Thus, the people on the bottom would be peculiarly hurt by a totally equal society, for those were the people who benefited most from the technological innovations of the private sphere. The second danger was political. To maintain equality required some body, some institution, some party. But the enforcers of equality would not only destroy liberty, but would themselves simply recreate inequality in terms of other goods. The administrator whose pay, in a capitalist society, put him well above the wealth of a worker on the assembly line, was matched by the party administrator whose perks and power, in a communist society, permitted him access to a lifestyle far above that of the workers for whom he supposedly spoke.

It is important, nonetheless, that these perspectives on the vicious effects of equality did not annul the idea that a society should strive for equality – rather, they dictated a strategy of indirection. The being in Rawls’ Original Position, here, is doing something similar to the Duke in Measure for Measure, who hides himself in order to deputize another, in the ‘ambush of his name’, to create decorum in the state. And just as the Duke’s more puritanical laws prove unworkable without mercy – that is, without interpretive elbow room, and a consideration of circumstances – so, too, laws that too bind the powerful in the state so as to lower them altogether to the common level will deaden the creative function in the social order.

I make this comparison because in the end, the striving for equality is a form of republican virtue, and the argument for it is based on that virtue.

As we all know, the Cold War liberal consensus fell apart. Its fall was the fall, too, of the ideal of equality. From being an ideal that was expressed in opportunity (always a mooncalf of an idea), it became the target of a prolonged attack in itself. Rather inequality became, if not the open ideal of the neo-liberal thinkers, at least a correlate to the triumph of the most meritorious. The most meritorious, it turned out, were the administrators of corporations, and the investors. What their merit consisted in is that they were rich. In other words, inequality was its own justification. The neo-liberal ideology rescued the old Cold War liberal critique of equality while jettisoning the saving corollary of striving for equality.

Which brings me to a comparison of two very different articles. One is this excellent piece in the London review of Books by David Runciman. It is a review of a blast from the cold war liberal past – The Spirit Level: Why More Equal Societies Almost Always Do Better by Richard Wilkinson and Kate Pickett. Wilkinson and Pickett produce a critique not of the striving for equality that was part of the Cold War order, but of the assumption that the closer a society got to perfect equality, the worse off it would become economically and socially. On the contrary, Wilkinson and Pickett use plenty of cross country analysis to show that, in any number of lifestyle measures, from prevelance of obesity to the size of the incarcerated population, the more equal the society, the better for everyone.

For everyone… that’s the rub for Runciman. He takes up a theme that is familiar to us Foucaultian-Marxy types, a theme that is ignored by the Cold War Liberal position. It is that the positional economy is all about power and its entrenchment. From this perspective, the fiction of the original position is not benign, but blinding. It blinds one to the struggle for power that makes it the case that the wealthy want to be wealthier, and more powerful than, others.

The dark tradition of Republican virtue goes back to Thucydides, and up through Machiavelli, Hobbes and Montequieu. The lesson of all Republics is that they last only as long as their institutions are not hollowed out by private power. Thus, the first duty of the state is to exercise violence against the most powerful private parties. To put it in plain English, we do not tax the rich at a higher rate because we want to use that money for social welfare, or for the poor – we do it firstly in order to make the rich less rich. This, I think is always true. Rawls’ Theory assumes that we have passed a historical point where Republics could be threatened by private parties in this way. The whole of the last thirty years, I think, proves he was wrong.

But the liberal hope lives on that the rich and powerful are, somehow, simply rational actors who, accumulating their goods successfully, want more than anything else to contribute to the social good. Thus, Wilkinson and Pickett argue that even the rich would be better off in more equal societies. Runciman doesn’t buy it:

“This sounds like a knock-down political argument: more equality would give rich people in unequal societies the kind of life chances that even poor people enjoy elsewhere. Who could object to that? It needs to hold for more than just infant mortality, however, and this is where the evidence is shakier. Another area where Wilkinson and Pickett present the data according to social class instead of simply the overall average is literacy scores. But here we find a slightly different story. Finland probably has the best educational system in the world, and disadvantaged Finnish children significantly outperform disadvantaged children in the UK, just as these do better than their counterparts in the US. But it is not the case that rich kids in the UK have worse literacy scores than poor kids in Finland; they simply have worse scores than rich kids in Finland. Moreover, rich kids in the UK have much better literacy scores than poor kids in the UK, because the social gradient is so steep, so the gap between the top and bottom is wider than it is in Finland. Education, unlike infant mortality, is a comparative as well as an absolute good. Parents want their kids to do better than other kids (whereas, one hopes, they don’t need to see other people’s children die in order to enjoy bringing their own safely home from hospital). Inequality in the UK means that rich parents can see their kids doing much better than other kids, even if they are not doing as well as they might if they lived in Finland. So the politics is considerably harder here: you can’t simply say that inequality means we are all suffering together. Instead, it may mean that the poor are doing so badly that the rich aren’t interested in looking at the wider picture. They are focused on making sure they don’t wind up poor.”

Runciman baulks, here, at reading the Will to Power into the entrenching force of great wealth. I myself have no doubt. The reason a person with one hundred million dollars pays a lobbyist to pay off a legislature to make sure that his taxes don’t go up by a million dollars is not from some fear that he will be a poor, bereft fellow with merely 50 million smackers: it is because the money, at that point, is about power. And, in the ceaseless struggle for power in the Republic, when the wealthy aren’t continually attacked in their bases, the poor will be attacked.

Which is the tale told by the second article, this one in the NYT:


“MEDFORD, Ore. — Dressed in soaked green pajamas, Betty Snyder, 14, huddled under a cold drizzle at the city park as several older boys decided what to do with her.
Betty said she had run away from home a week earlier after a violent argument with her mother. Shivering and sullen-faced, she vowed that she was not going to sleep by herself again behind the hedges downtown, where older homeless men and methamphetamine addicts might find her.
The boys were also runaways. But unlike them, Betty said, she had been reported missing to the police. That meant that if the boys let her stay overnight in their hidden tent encampment by the freeway, they risked being arrested for harboring a fugitive.
“We keep running into this,” said one of the boys, Clinton Anchors, 18. Over the past year, he said, he and five other teenagers living together on the streets had taken under their wings no fewer than 20 children — some as young as 12 — and taught them how to avoid predators and the police, survive the cold and find food.”

These are, of course, the Children of the Great Moderation:

“Over the past two years, government officials and experts have seen an increasing number of children leave home for life on the streets, including many under 13. Foreclosures, layoffs, rising food and fuel prices and inadequate supplies of low-cost housing have stretched families to the extreme, and those pressures have trickled down to teenagers and preteens.
Federal studies and experts in the field have estimated that at least 1.6 million juveniles run away or are thrown out of their homes annually. But most of those return home within a week, and the government does not conduct a comprehensive or current count.
The best measure of the problem may be the number of contacts with runaways that federally-financed outreach programs make, which rose to 761,000 in 2008 from 550,000 in 2002, when current methods of counting began. (The number fell in 2007, but rose sharply again last year, and the number of federal outreach programs has been fairly steady throughout the period.)”

It is questionable how far the rot has gone in the American republic. The last thirty years has produced an amazing spectacle of the comparatively poor defending the rights of the ominously rich. A friend of mine, an avid hate radio listerner, has many a terrible thing to say about Obama’s socialism and how it will destroy our system of healthcare. Meanwhile, his brother, who had nothing, just died in the hospital, after accumulating a debt there of at least a million dollars, which nobody in my friend’s family could, or has any intention of paying. The altruistic defense of greed is surely one of the poison plants that signal the collapse of republican virtue.

As for Betty Snyder, her kind have long been targeted by the theologians of power, the economists. I’m reminded of a remark in freakonomics by David Cochrane, the University of Chicago economist, in November of 2008:

“I absolutely love the following excerpt, which better captures what it is like to hang around with Chicago economists than just about any quote I have ever seen:
“We should have a recession,” [John] Cochrane said in November, speaking to students and investors in a conference room that looks out on Lake Michigan. “People who spend their lives pounding nails in Nevada need something else to do.”

Among the things they do is lose their homes and their children, who fall prey to meth and rapists, as par of this wonderful thing – this contrarian ecstasy – that are the wages of the violence of the powerful against the miserable in America.