Yves Smith on AIG-2

I read the WSJ article Yves Smith (YS) mentioned in her 12 November 2008 Naked Capitalism post, "Goldman big winner in government's revised bailout of AIG", link: http://www.nakedcapitalism.com/2008/11/goldman-big-winner-in-governments.html. YS hit the "high" points of the article, hitting the "money" quote, "Yves here. Note the clearly slanted choice of words, 'pry collateral'. Huh?" My only quibble with YS's comments is: she is too kind; writing, "Both roads lead to Goldman". I say GSG is the new Rome, "All roads lead to Goldman. Goldman is under every rock".

We're Safe Now

"The Treasury and the [Fed] issued rules that bar financial companies from processing payments connected to most gambling Web sites, effectively making Internet gambling illegal. ... Democratic lawmakers, the banking sector and elements of the gambling industry have registered opposition to the move", Corey Boles and Jeff Bater at the WSJ, 13 November 2008.

Wonderful, now the "crisis" is solved!

America's Default

"Default is the failure to honour contractual obligations. In the case of debt, non-payment of interest or principal payments due to the lender. The financial impact of default is the loss suffered by the lender. ... Given that in a typcial sovereign default the investor loses 50% to 80% of the value of the investment, the [foreign exchange] losses suffered are not far short of default. Despite 'strong dollar' official policies, a case can be made that the US is in the process of defaulting on its obligations via a systematic devaluation of its currency. ... Lawrence Summers [LS], a former Deputy Secretary of the US Treasury, proudly extolled the merits of the US financial system in a 2001 speech at the London Stock Exchange in the following terms, 'the United States is the only country in which you can raise your first $100 million before you buy your first suit.' He gave short shrift to critics who felt that US financial sophistication was synonymous with financial instability: '[That belief] is observed in inverse proportion to knowledge of these matters.' ... Confidence in US financial markets has suffered. The growth of the network of securitisation and off-balance sheet vehicles--the 'shadow banking' system--without regulatory oversight to the point where it now threatens the financial system has perplexed foreign observers. ... The real reason that the US has actually not experienced a sovereign debt crisis is that it finances itself in its own currency. This means that the US can literally print dollars to service and repay its obligations. ... The dollar's dominance may be coming to an end. ... The artificial nature of the Euro and its long term survival is also problematic. ... Does any of this matter? Walter Wriston, then chairman of Citigroup, opined that: 'Countries don't go broke'. In 1982, shortly after this statement, Mexico, Brazil and Argentina defaulted inflicting near mortal losses on Citibank. ... Max Winkler ... noted [in 1933]: 'The history of government borrowing is really the history of government defaults'," my emphasis, Satyajit Das, 10 November 2008 at http://www.rgemonitor.com/us-monitor/254332/we_interrupt_regular_programming_to_announce_that_the_united_states_of_america_has_defaulted.

I note LS became Treasury Secretary. If I ever took a class with Harvard's LS I would likely have gotten an "F", given my beliefs about financial "sophistication". I have likened the shadow banking system to US "wildcat" banks in the 1800s. Das and I have said many of the same things. Winkler is correct about government defaults. See for example my 4 July 2008 post. As for Wriston, I reviewed his last book on 30 October 2008. Less than favorably. Bonds are "A graveyard for capital", my 2 February 2008 post.

Feds in Motion

"Michael Garcia, the U.S. attorney for the [SDNY], in Manhattan, could resign his position as early as this week and is likely to join a private law firm in New York, say people close to his office. ... Public pressure is growing to increase regulation of financial institutions and find people who may have contributed to the financial crisis. ... The [SDNY] has suffered some setbacks of late. Mr. Garcia's securities-fraud unit recently lost the chance to investigate mortgage investors Fannie Mae and Freddie Mac after the Justice Department have the cases to federal prosecutors in Washington and Virginia, according to a person familiar with the matter. ... Mr. Garcia has been in advanced talks to join the New York office of law firm Kirkland & Ellis. A spokeman for the law firm declined to comment", Amir Efrati at the WSJ, 10 November 2008.

"Tim Johnson has been named acting U.S. attorney for the Houston-based Southern District of Texas, taking over for Don DeGabrielle, who resigned as of last week. ... DeGabrielle annnounced Monday that he has joined the Houston law firm, Fullbright & Jaworski [F&J] to work in international governmental investigations and white-collar defense. ... DeGabrielle's move to [F&J] was not entirely a surprise in Houston legal circles. His own predecessor, the late Mike Shelby, also went to Fullbright when he resigned from the top prosecutor position. 'Mike always spoke highly of Fullbright, making it an easy next step for me, especially after seeing firsthand the support offered Mike while he was ill. Fullbright has assembled a strong white-collar defense team that includes a nucleus of lawyers with whom I have previously worked in the Department of Justice'," my emphasis, Mary Flood at the Houston Chronicle, 11 November 2008.

You didn't think Garcia would hang out his own shingle and file class-actions for plaintiffs did you? Mike, good riddance.

The DOJ revolving door revolves once more. Good riddance to you too, DeGabrielle. Shades of New York's Mary Jo White!

War Story

Roth IRAs became legal to contribute to in 1998. In 1997 I attended a CPA-attorney pension seminar by an actuary in West Los Angeles. At the seminar's end the actuary asked the attendees if they would recommend the new Roth IRAs. He was shocked when 85-90% of the CPAs present stood and denounced Roth IRAs as a scam. Our opinion: we get a new tax law every two years. By the time anyone under about 45 tries to cash in his Roth IRA, it will be taxable one way or another. We CPAs concluded at a minimum, a Roth IRA would reduce one's social security (SS) payments. How? Through "imputed withdrawals" beginning at 70.5. If you had a $500,000 Roth IRA balance, assuming your life expectancy at 70.5 was 27.4 years, divide the $500,000 by 27.4 to get $18,248. Now Uncle Sam does not make this taxable; Unc has the Roth IRA holder report $18,248 to the SS Administration which multiplies it by 25% and reduces your SS payment $4,562. This is not a "tax increase", is it? Or else the Roth IRA would be subject to a 10% "excise" tax on "required mandatory distributions" after 70.5. The only issue we discussed was the mechanics of how Unc would make Roth IRAs taxable and what would be the triggering mechanism to do so. Our guess: once $1 trillion was in Roth IRAs, Congress would see $100 billion coming from the excise tax and lots more from SS reductions. Imagine, some people converted regular IRAs to Roths and paid income taxes to get Unc's promise of future tax-free withdrawls. Hahahahaha! On 3 March 2007, Edward McQuarrie wrote about this possibility at Barron's. Here's a link: http://investment.suite101.com/discussion.cfm/66/45844#message_1.

Anyone investing based on today's tax attributes for anything, be wary. If your tax planner does not discuss the possibility of tax law changes, dump him! Read McQuarrie's article. Be warned: Congress will stop at nothing to seize your money. Welcome to Argentina. Bienvenidos a Arjentina.

Hellacious on CDSs

Hellacious has a 11 November 2008 post about CDSs at Sudden Debt I agree with. Here's a link: http://suddendebt.blogspot.com/2008/11/yes-its-all-about-cds.html.

Bank Accounting

"Deutsche Bank AG, helped by a change in the way European banks book souring assets, posted a profit in the third quarter even as in-house trading bets in the stock and credit markets led to third-quarter losses totaling Euro 1.3 billion ($1.68 billion). ... A change this month by European accounting policy makers allowed banks to move souring loans to their hold-to-maturity books, limiting write-downs that would have resulted from valuing the assets at market prices", Carrick Mollenkamp at the WSJ, 31 October 2008.

"The new chief executive of Royal Bank of Scotland Group PLC said there are no 'sacred cows' when it comes to paring the global bank's balance sheet and reducing its risk as part of a turnaround strategy. ... The bank has hired McKinsey & Co. to advise and weigh each business against a variety of factors, such as returns, risk, market share and customer base", Sara Munoz and Carrick Mollenkamp at the WSJ, 7 November 2008.

"Investors were rattled by [Citigroup's] announcement that it will buy the last $17.4 billion in assets held by its structured investment vehicles, which were among the first casualties when the credit crunch hit last year. ... As Citigroup's stock fell Wednesday, executives instructed traders, financial advisers and other employees to reach out to key clients to reassure them about the company's health. ... Tanya Azarch's, a credit analyst at Standard & Poor's, says the federal government had made a 'broad expression of support.' ... 'As we're watching the deterioration here of the market ... it makes us think that the mark-to-market writeoffs are not over yet,' she adds. Such write-offs, which reflect the dwindling value of assets Citigroup is holding, have already cost Citigroup tens of billions of dollars this year", David Enrich at the WSJ, 20 November 2008.

"The market is losing confidence in Citigroup. In the wake of some planned balance-sheet maneuvers, it isn't tough to see why. ... Largely overlooked in presentation materials released to investors was a disclosure that this quarter the firm would reclassify about $80 billion in assets. Those assets wouldn't have to be marked to market prices. Or they could be be held in way that keeps losses from hitting earnings. ... Mr. Pandit's rationale for the move: The assets could eventually bounce back in value. Investors have heard that one before and don't believe it. If anything, the move has only made investors more skeptical about Citigroup's ability to withstand mounting losses. The bank says its sufficiently capitalized", David Reilly at the WSJ, 20 November 2008.

"With even the largest vessels now vulnerable to pirates, these are dangerous times for shipping. The same goes for financial supertankers such as Citigroup. ... Dozens of new managers have been brought in, some of them old colleagues of Mr. Pandit's from his days at Morgan Stanley. Risk management has been spruced up. Treasury has been centralised, to ensure that capital is allocated more efficiently. ... The big question is whether Citi, which has already raised $75 billion in equity, a third of it from the government, will need more. ... And Citi may yet have to bring a portion of its $1.2 trillion in off-balance-sheet assets onto its books under proposed accounting rules. ... Though the American government would not allow Citi to fail, the idea that it will need further state support, or will need to be rescued by another bank, no longer seems fanciful", my emphasis, Economist, 20 November 2008, link: http://www.economist.com/finance/PrinterFriendly.cfm?story_id=12652263.

"Citigroup hopes the government makes a public expression of confidence in Citigroup that would help reassure clients and customers. Mr. Pandit told employees that Citigroup has 'a fantastic business model.' But executives haven't ruled out a possible sale or breakup of Citigroup if there is no alternative, according to people familiar with the matter", David Enrich at the WSJ, 22 November 2008.

Quoted without comment.

I applaud Royal Bank's move but wonder: what was it doing all along?

Things go from bad to worse at Citigroup. On 7 July 2008 "C" was $17.34; on 20 November 2008, $4.71; a 73% decrease in 4.5 months. Great work $800 million man.

Yes, Uncle Sam will keep Citi afloat, no matter what. I ask the question I've asked before: what kind of cost accounting did Citi have that now it's improving its risk management and capital allocation process? What was its prior management being paid for?

That Citigroup's $800 million man thinks he needs government expressions "of confidence", tells me Citigroup is insolvent. Absent further bailouts, Citigroup is finished.

Citigroup been singing this song for months. See my 7 and 17 July 2008 posts:

http://skepticaltexascpa.blogspot.com/2008/07/citis-800-million-man-speaks.html.
http://skepticaltexascpa.blogspot.com/2008/07/schwartzman-and-mcteer-on-accounting.html.

Mary Jo Rides Again

"On Sept. 25, as the world financial crisis escalated, two of New York's most powerful lawyers met for lunch in a restaurant near Wall Street with a name that recalled happier times: Bull Run. They were Michael J. Garcia, the [US] attorney in Manhattan, and Andrew J. Cuomo, the state attorney general. Both men's offices have histories of moving aggressively against financial fraud, and of vigorously defending their turf when other prosecutors try to compete for their cases. ... First came the bust; now comes the inevitable flood of investigations and possible prosecutions. State and federal prosecutors are looking at a range of companies, from Fannie Mae and Freddie Mac, the mortgage finance companies that were effectively nationalized in September, to Lehman Brothers, the Wall Street bank that collapsed last month in the largest bankruptcy in [US] history. But the crisis is so widespread that there has been another phenomenon--cooperation among prosecutors, especially in New York, where in the past they have not been shy about bumping elbows and sometimes had to resolve conflicts at the highest levels of the Justice Department. ... Two people familiar with the Lehman investigations said the case had been divided among the three offices [Manhattan, Brooklyn and New Jersey] because there were too many avenues of inquiry for any one office to handle. ... The decision to cooperate can be advantageous to prosecutors. Under the arrangement in the swaps investigation between Mr. Garcia and Mr. Cuomo, for example, some of Mr. Cuomo's lawyers would be designated as 'special' federal prosecutors to enable them to participate in secret grand jury proceedings. ... Mr. Garcia's office has said it is looking into whether federal laws were violated, while Mr. Cuomo, with a broader mandate as the state's attorney general, can seek industry reforms, legislation, civil settlements and other remedies. ... Mary Jo White [MJW], who served as [US] attorney for the [SDNY] from 1993-2002 and is now in private practice, said there were risks of intense public pressure 'to put scalps on the wall--"how could something as bad as this happen if nobody did something wrong?"' 'You have to distinguish between arguably bad risk-taking,' she said, 'and someone who has actually violated the law.' ... But for now, the public cooperation between prosecutors, notably Mr. Garcia and Mr. Cuomo, has caught the attention of the legal community, largely because of the history of turf battles involving the [US] attorney for the [SDNY]. ... In 1997, for example, Ms. White, then the [US] attorney, allowed one of [Paul] Shechtman's clients, who had been charged in a securities case by Robert M. Morgenthau, the Manhattan district attorney, to plead guilty to federal charges. That effectively stopped Mr. Morgenthau from pursuing his case. Mr. Morgenthau's office complained, but Ms. White responded that to prosecute the crimes 'under only state law diminshes their seriousness'," my emphasis, Benjamin Weiser and Ben White at http://www.nytimes.com/, 31 October 2008.

"The [SEC] said it won't take disciplinary action against its enforcement chief and others who were criticized in a report by the agency's inspector general [IG]. The clearance of SEC enforcement chief Linda Thomsen and David Nelson, head of the agency's Miami office, came amid a congressional review of the agency's performance in recent years. Recent SEC [IG] reports have highlighted potential issues raised by a revolving door between the government and industry. One report by the [IG] found Ms. Thomsen had improperly released information about an insider-trading investigation involving hedge fund Pequot Capital Management and John Mack, a well-known Wall Street executive. The [IG] concluded Ms. Thomsen improperly relayed information when she told lawyer [MJW], who was working for Morgan Stanley's board and vetting Mr. Mack as a potential chief executive, that there was smoke but not fire in the investigation. ... The SEC's chief administrative-law judge ... said Ms. Thomsen did disclose to Ms. White information about the status of the SEC investigation, but '[t]here are no indications that Thomsen's disclosure was committed maliciously or for gain, or was frequently repeated.' ... SEC [IG] David Kotz said he was 'surprised and disappointed" by the decision", my emphasis, Kara Scannell at the WSJ, 8 November 2008.

Whenever my "favorite" Fed, MJW comes up, I assume I have a "target rich" environment. Hey MJW, get the joke, "target", like "target notice" sent to persons under federal investigation? Just checking. Wouldn't want to overtax your intellect. I remember your using your office in 1997, improperly in my opinion, to derail Manhattan DA Morgenthau's prosecutions, a man I disagreed with from time-to-time, but who I believe to be incorruptible. Unlike the SDNY's AUSAs and US Attorney. MJW, why worry about "scalps" now? What did you do as US attorney for nine years? Had you taken more "scalps" of "persons of consequence" to use Frank Kafka's term, we might not be in this mess today. But had you, you might not be back at Debevoise and Plimpton (D&P). Can one's future employment prospects at "Justice" influence his exercise of "prosecutorial discretion" today? Yes, MJW, we want scalps. How about starting with John Mack (JM)? I'm sure if Mike Garcia's (MG) successor spends even the $9 million spent to prosecute Martha Stewart for nothing, he can find something to incarcerate JM for. No, MJW, we need not distinguish anything. Save your comment for jury closing argument. I say, paraphrasing Franklin Delano Roosevelt, "Investigate and investigate, indict and indict and convict and convict". No deals, no quarter; public jury trials. MJW "allowed" someone to cop a plea instead of letting Morgenthau try the case. Why? Did you protect someone Mary? Come on, don't be shy. Tell us all about it. If so, who? "Diminishes their seriousness?" What does that mean?

What's going on here, given the SDNY US Attorney's office history of questionable, in my opinion, prosecutorial decisions? I surmise MG realized with Bush's approval rating at about 20%, his office had little credibility and he "rented" some from Andrew Cuomo (AC). AC, watch your back when in bed with the "White-Garcia Mob". If you have designs on New York's governorship, following Thomas Dewey, your involvement with this "operation" could end your political career. Why did MG pursue Eliot Spitzer? Why did MG expend federal prosecutorial effort on that? AC, watch yourself and assume nothing in dealing with these characters.

The federal "revolving door" revolves once more. According to her biography at D&P's website, MJW graduated from Columbia Law School in 1974. She was Judge Marvin Frankel's law clerk, then worked for D&P from 1976 to 1978. She was a SDNY AUSA from 1978 to 1981. From 1983 to 1990 MJW was a D&P litigation partner. From 1990 to 1993 she was with the Brooklyn US Attorney's office, 1993-2002, SDNY US Attorney, then back to D&P. "White's practice concentrates on internal investigations and defense of companies and individuals accused of involvement in white collar corporate crime, of [SEC] and civil securities law violations, and of other major business litigation disputes and crises. For her criminal work, she leads a Debevoise team that includes ten former Assistant U.S. Attorneys with extensive experience in major commercial investigations and prosecutions. Ms. White's recent representations of public record include: ... A Special Committee of the Board of Tommy Hilfiger which conducted an internal investigation in connection with a federal criminal investigation resulting in a decision by the US Attorney for the [SDNY] not to criminally prosecute the company. ... Under Ms. White's leadership, the [US] Attorney's Office for the [SDNY], sucessfully investigated and prosecuted numerous cases of national and international significance", my emphasis. Doesn't this give you warm and fuzzy feelings and increase your confidence in the SDNY US Attorney's Office? We don't know who MJW declined to prosecute or why? Do we? I would have liked the SDNY US Attorney's Office to have indicted Tommy Hilfiger, but MJW's biography is apparently a D&P sales tool aimed at prospective clients, "See, Tommy Hilfiger wasn't indicted, you won't be either. Trust us, we have CLOUT where it counts". Is this what D&P is saying? MJW's D&P biography reminds me of Monty Python's Flying Circus, "Snap snap, grin grin, wink wink, nudge nudge, say no more". MJW's D&P team "includes ten former Assistant U.S. Attorneys" I thought, "Hmm, could an enterprising, fearless go-for-broke, politically inclined AUSA with brass cojones use this as an "admission against interest' or a a co-conspirator statement after a James determination? More from MJW's D&P biography, "When [MJW] left her post as US Attorney for the [SDNY] in January, 2002, she was acclaimed for her nearly nine years as the leader of what it widely recognized as the premier US Attorney's office in the nation". By whom? MJW never prosecuted anyone at Kidder Peabody or GE for 1994's Joe Jett debacle did she? Under the most charitable interpretation I can credit, MJW never figured out what happened at Kidder. Under less charitable interpretations, duh.

The SEC is hopeless, top to bottom. An administrative-law judge fined Joe Jett $8.4 million for nothing, my 12 September 2007 post, and Thomsen walks! A travesty. Thomsen knowingly and wilfully released information. That she did not gain, nor did it frequently (how often is "frequently"?) nor maliciously is irrelevant. Isn't it? Suppose one commits a murder. Will he be prosecuted for "only one time"? Is motive an element of crime? I thought mens rea refers to intent to commit the act, not whether or not one intended to break the law by virtue of the act. "Whoever corruptly, or by threats of force, or by any threatening letter or communication influences, obstructs, or impedes or endeavors to influence, obstruct or impede the due and proper administration of the law under which any pending proceeding is being had before any department or agency of the [US], ... Shall be fined under this title, imprisoned not more than 5 years or, ... or both", 18 USC 1505. Could an aggressive AUSA shoehorn MJW's actions into an indictment under this statute? Maybe. I think it's worth a shot. Besides, the peasants would love seeing a former US Attorney and SEC enforcement chief indicted. The SDNY US Attorney's office could turn the trial into a big moneymaker on pay per view. Why not, people pay millions to see pay per view fights? UFC is on pay per view. Why not US v. White and Thomsen? The Las Vegas bookmakers could take bets on which counts would yield convictions. Then on the sentence length. Hundreds of millions could be made.

Wikinvest

I recently received a Wikinvest invitation and saw it works well on Naked Capitalism and Financial Armageddon so added the plug-in.

Sarah Palin-Two Views

"The Palin farce is already the stuff of legend. For a generation at least it is sure to keep presidential historians and late-night comedians in gainful employment, which is no small thing. ... John McCain's choice was not a fluke, or a senior moment, or an act of deperation. It was the result of a long campaign by influential conservative intellectuals to find a young, populist leader to whom they might hitch their wagons in the future. ... After the campaign for Sarah Palin, those intellectual traditions may now be officially pronounced dead. ... In a country susceptible to political hucksters and demagogues, [conservatives like Buckley, Krsitol, Glazer, Moynihan, Himmelfarb, Berger, Kirkpatrick and Podhoretz] studied the passions of democratic life without succumbing to them. They were unapologetic elites, but elites who loved democracy and wanted to help it. ... It's a sad tale that began in the '80s, when leading conservatives frustrated with the left-leaning press and university establishment began to speak of an 'adversary culture of intellectuals.' ... In 1976 Irving Kristol publicly worried that 'populist paranoia' was 'subverting the very institutions and authorities that the democratic republic laboriously creates for the purpose of orderly self-government.' But by the mid-80s, he was telling readers of this newspaper that the 'common sense' of ordinary Americans on matters like crime and education had been betrayed by 'our disoriented elites,' which is why 'so many people--and I include myself among them--who would ordinarily worry about a populist upsurge find themselves so sympathetic to this new populism.' ... They mock the advice of Nobel-Prize-winning economists and praise the financial acumen of plumbers and builders. They ridicule ambassadors and diplomats while promoting jingoistic journalists who have never lived abroad and speak no foreign languages. And with the rise of shock radio and televison, they have a found a large, popular audience that regularly absorbs their contempt for intellectual elites. ... What matters in democracy is that those elites acquire their positions through talent and experience and that they be educated to serve the public good. ... There was a time when conservative intellectuals raised the level of American public debate and helped to keep it sober. Those days are gone. As for political judgment, the promotion of Sarah Palin as a possible world leader speaks for itself", my emphasis, Mark Lilla (ML) at the WSJ, 8 November 2008.

"Because Sarah Palin is not only a conservative, but a Western populist, she is far less amenable to control by the New York-Washington axis of bureaucratic insiders, media commentators and think-tank grandees that dominate the Republican Party elite. McCain's advisers discovered this late in the campaign, when they complained she was going rogue and attacking the Democratic candididate instead of quietly and dutifully following Mr. McCain into genteel defeat. This independence, combined with her huge popularity among the conservative base, means that the Republican East Coast elite knows it has to destroy her now, before she becomes the obvious alternative to a second Obama term. ... It must be understood that the East Coast elite would far rather lose the White House, House and Senate than lose its influence over the Republican Party. ... The social conservative measures such as California's Proposition 8 that conservatives have been told to abandon have nevertheless proven to be popular vote winners even in democratic states, whereas elite-approved measures such as alien amnesty, the foreign occupations and the Wall Street bailouts are hated by Republicans and Democrats alike. It is illogical, bordering on downright insane, to conclude from this that less of the former and more of the latter will result in any improvement in Republican fortunes", my emphasis, Vox Day, 10 November 2008 at http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=80571.

"Among the many wonders to be expected from an Obama adminstration, if Nicholas D. Kristof of the New York Times is to be believed, is ending 'the anti-intellectualism that has long been a strain in American life.' ... During the 1930s, some of the leading intellectuals in America condemned our economic system and pointed to the centrally planned Soviet economy as a model--all this at a time when literally millions of people were starving to death in the Soviet Union, from a famine in a country with some of the richest farmland in Europe and historically a large exporter of food. ... In the 1930s, it was the intellectuals who pooh-poohed the dangers from the rise of Hitler and urged Western disarmament. It would be no feat to fill a big book with all the things on which intellectuals were grossly mistaken, just in the 20th century--far more so than ordinary people. ... How have intellectuals managed to be so wrong, so often? By thinking that because they are knowledgeable--or even expert--within some narrow band of the vast spectrum of human concerns, that makes them wise guides to the masses and to the rulers of the nation. But the ignorance of Ph.D.s is still ignorance and high-IQ groupthink is still groupthink, which is the antithesis of real thinking", Thomas Sowell, 11 November 2008, at http://townhall.com/columnists/ThomasSowell/2008/11/11/intellectuals.

"Strip away the fluffy historical and theoretical camouflage in Mark Lilla's 'The Perils of "Populist Chic"' (Weekend Journal, Nov. 8) and you find a Democratic creed that is simple, arrogant and all too familiar: 'We smart few know what's best for you not-so-smart masses.' ... What this Columbia professor really means in that she isn't Ivy League educated and isn't from New York City. His attack on the current crop of Republican intellectuals implies that his elite Democratic colleagues got it right in their selection of Barack Obama, who both Joe Biden and Hillary Clinton criticized for his lack of judgment and who both said isn't ready to be president", Peter Murray letter to the WSJ, 15 November 2008.

"Prof. Lilla urges conservative intellectuals to 'own up to their elite status and defend the need for elites.' The need for elites? Most of us nonelites are a little down on elites right now after the role they played in the current mortgage crisis and its resulting meltdown of the financial markets and global economy", Robert Smith letter to the WSJ, 15 November 2008.

"The professor who teaches at an 'elite' university that bans the Reserve Officer Training Corps but allows the president of Iran to speak, surely shouldn't be in politics. A saying someone told me a long time ago still holds true: Those who can, do; those who can't teach. I would rather have a tested executive from a nonelite school than an untested elite-school graduate who has never had to manage anything or maintain a balanced budget", Wayne Dettinger letter to the WSJ, 15 November 2008.

"For Prof. Lilla, Gov. Palin's appeal to 'ordinary Americans' is 'populist demagogery' and represents a 'vulgarization all democracy tends toward.' Given this bleak view of our republic from the liberal intelligensia, give me a double shot of Gov. Palin's 'populist chic'," William White letter to the WSJ, 15 November 2008.

"But the academic elite deserve no excuse. There is no clearer example of 'populist chic' than Barak Obama's utterly sophomoric mantra of cosmic change. Yet the eminent Dr. Lilla chooses to leap into the Gov. Palin scapegoat fest as his excuse to trash the entire conservative world view. What is that called: 'chutzpah chic' or just plain cheeky ignorance?", Charles Kiene letter to the WSJ, 15 November 2008.

"In times like these, when conservatives are licking their wounds and trying to figure out what comes next, a helpful framework exists. It starts with a simple, self-evident fact: There is such a thing as elite opinion that is not the same as popular opinion. ... At other times, elites in a democracy have a tendency to get overly bound up with social status and careerism, and there is a premium on conformity. Having the right views, and the right way of expressing such views, becomes an emblem of elite status and a harbinger of career advancement. More and more issues become 'not debatable.' At such times, elite opinion is likely to to see itself as self-evidently superior to popular opinion, and its role toward popular opinion as--shall we say--educative. ... The reason elite opinion makers are set on destroying [Palin] is fear. They sense that like Ronald Reagan, and unlike say, Mitt Romney or Tim Pawlenty, she really, genuinely doesn't care what they think, and for that reason is willing and able to go over their heads and make a strong, direct appeal to voters. ... One of they key characterisitics of elite opinion, particularly at times like the present when it has become so unanimous that it has forgotten what it is to have a real debate, is repetition of the claim that some issues are settled, or no longer subject to serious debate", my emphasis, Jeffrey Bell, 17 November 2008 at http://www.weeklystandard.com/Utilities/printer_preview.asp?idArticle=15785&R=13CD722F23.

ML is a Columbia humanities professor. Professor Lilla, most esteemed sir, in addressing you, I kowtow in the Japanese manner. I, a Sans-culotte am one whom your piece oozes contempt for. I have no special regard for Nobel Prize winning economists' opinions. I've been taught by some, I went to school with one. So? Two were behind Long-Term Capital Management. I think your revulsion at Palin's nomination arises from her being an Ivy League degreeless Sans-culotte. That's it. A Palin's becoming president would be an Ivy League disaster. People would: hold mock funerals in Harvard Square and tear their clothes on 116th Street and Broadway. The wails from Hanover, NH, New Haven, CT and Providence, RI would be so loud they would be heard in Boston and New York! Jim Cramer would yell "short-sell Harvard"! The Ivy League would bemoan its end as "gatekeeper of presidents". Do you believe double Ivy Leaguer Obama a huckster and a demagogue? I do. Feel free to look down on me for this. I saw this "adversary culture of intellectuals" in college in the late 1960s. I ask: why did "conservative intellectuals" take about 15 more years to see it? I ridicule ambassadors and diplomats. So? Learned professor, have you the temerity to call me an ignoramus? You're probably surprised I knew the word and used it properly, aren't you? Have you considered exchanging your current appointment for one at the University of Laputa?

I agree with Day. If Palin had a graduate degree from Princeton's Woodrow Wilson School, or Harvard's Kennedy School, the Republican East Coast Elite would fall all over her. Even Democrats would praise her.

Intellectuals' deception and ignorance can stagger. Many were victims of the USSR's "Potemkin Villages". The NYT's Walter Duranty concealed Stalin's 1933-35 Ukraine famine. The NYT told us Castro was only an "agrarian reformer" among other intellectual fiascos. Follow the current flap over schooling and affirmative action or the Wall Street bailout as opposed to Joe Schmoe's position.

How right you are Mr. Murray.

Yes Mr. Smith.

Dettinger, the good professor knows one thing about Obama, he has two Ivy League degrees and that's all he need know.

White, amen!

Kiene, I agree. I doubt Obama could have survived in my fifth grade class intellectually. Really. But the O-man was Harvard Law Review president. What does that say about Harvard Law School?

I agree with Bell. Palin may become my "Andrew Jackson" in a dress. Imagine Palin arriving at the White House with a pair of flintlocks! Lock and load Sarah! This thought terrifies our East Coast elites. Imagine Palin telling Harvard's faculty, "I don't care what you think. And if you don't like it would you rather look down the muzzle of one of these"? Shocking!