In the long history of this honor, no head of state has ever received the Peace Prize while he has been in the midst of prosecuting, much less preparing to escalate, an active war. This year’s choice raises many questions, starting with: Who is behind the award?
The first point to be made about the awarding of the famed Nobel Peace Prize to U.S. President Barack Obama, in the ninth month of his first term, is that it is not his fault. He didn’t even apply. The second is that when the world accords to select bodies and private interests the power to bestow fame and prestige, it should not be surprised when those decisions go a little awry. They have on several occasions in the Peace Prize department.
Here are some useful facts: The Norwegian Parliament elects five members who select the winner of the Peace Prize, and they serve for a five-year term. The 2009 committee is made up of past politicians –every one of them. There are no academics or scholars permitted to sit on the committee. There are no non-Norwegians allowed. This is a closed shop. A Norwegian closed shop.
Closed, too, is the nomination process. The committee decides which individuals and organizations are permitted to make nominations for the prize. Over the years, an interesting tapestry has emerged. Hitler and Mussolini were nominated. Joseph Stalin was nominated twice. Mahatma Gandhi, one of modern history’s most iconic symbols of peaceful change and non-violence, was nominated in 1937, 1938, 1939, 1947 and 1948. He did not win the prize, nor did nominees Winston Churchill or Franklin Roosevelt. No wonder the prize’s organizers have elevated to the status of state secret who is actually nominated for the award. That information is kept sealed for half a century. So is the controversy that might attend the decision-making. How do you confront fascism and make the world safe for democracy and not win a prize for peace? Only the folks in Oslo seem to know for sure.
On the face of today’s announcement, it would appear that a committee composed of past politicians has been caught up in the euphoria that surrounds one of the most impressive masters of that craft. In doing so, they have broken, likely unmindfully as so often occurs in states of euphoria, an important precedent. In the long history of this honor, no head of state has ever received the Peace Prize while he has been in the midst of prosecuting, much less preparing to escalate, an active war. As he received word of the committee’s decision today, Mr. Obama was about to meet with his “war” cabinet in the White House Situation Room, to examine recommendations to increase troop strength in Afghanistan.
Long before he was nominated for the office of President, we admired and supported Barack Obama. He displayed a unique set of gifts as he aspired to lead the United States, and, by extension, much of the world. His shift to a more inclusive form of global consultative leadership, as distinct from his predecessor’s divisive brand of bullying, is to be applauded and encouraged. But it is this very admiration that compels us to observe that the Nobel Committee would have done him, and the reputation of the honor with which Alfred Nobel entrusted them, a greater service by giving the youthful President more time to accomplish his goals and to present a solid record of achievement. Statements of good intentions, no matter how eloquently espoused, are no match for comforting millions struggling with poverty and disease or ending a war that enflamed the world. Mr. Obama is smart enough to realize that. He is also smart enough to know that such an award can only serve to raise even higher expectations whose outcome depends as much on others as it does on him. Indeed, such early distinction might have a counterproductive effect in a world where jealous egos and petty rivalries can often make a fast meal of genuine progress.
Whatever else it does, the award will encourage others to take a much needed look at who is making these decisions and to question how well the virtues of openness and transparency, which are essential to nearly every other important global institution, are being served.
We suggest that a good beginning for such a review start with an enumeration of the chairman and members of the 2009 committee:
Thorbjørn Jagland (chair, born 1950), member of Parliament, President of the Storting and former cabinet minister for the Labour Party. Member and chair of the Norwegian Nobel Committee since 2009.
Kaci Kullmann Five (deputy chair, born 1951), former member of Parliament and cabinet minister for the Conservative Party. Member of the Norwegian Nobel Committee since 2003, deputy chair since 2009.
Sissel Rønbeck (born 1950), deputy director, Norwegian Directorate for Cultural Heritage (Riksantikvaren), former member of Parliament and cabinet minister for the Labour Party. Member of the Norwegian Nobel Committee since 1994.
Inger-Marie Ytterhorn (born 1941), former member of Parliament for the Progress Party. Member of the Norwegian Nobel Committee since 2000.
Ågot Valle (born 1945), member of Parliament for the Socialist Left Party. Member of the Norwegian Nobel Committee since 2009.
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The world has become accustomed to the idea of an October Surprise. It has happened in politics, in theaters of war and in the economy (see October 1929). But rarely has this phenomenon had the courtesy to actually appear on October 1st, on the dot. That happened on Wall Street today (and on Bay Street in Toronto), where, in the one case, the Dow slipped by more than 200 points, and in the other the TSX plunged by over 300.
It has become common among some strident analysts to declare the recession over and the prospect of a Dow at 12,000, and then at 14,000, easily within reach. Others, and we include ourselves in this camp, have been more skeptical. If we really had the worst recession since the Great Depression, the idea of equity markets so quickly sprinting back to the heights they reached during the subprime bubble seems perplexing. It is a little like someone suffering a massive heart attack and then expecting to win the Boston Marathon 18 months later. On the other hand, if the recession was overly hyped and not really as bad as most of us had feared, the unprecedented torrent of Fed cash and zero interest rates promises to unleash a terrible inflationary toll down the road. Neither scenario seems to be giving much confidence to investors or to the consuming public. And confidence is still the most needed ingredient in any credible plan for economic recovery.
The lesson from today’s surprise is that there is still no end of experts who are happy to be generous with other people’s money – and are determined that neither common sense nor the laws of physics will prevent them from resuming their party and the over-sized compensation that feeds it. They are the risk-oblivious, reality-blind Pied Pipers of their own self-consuming Gilded Age who led us to the brink of the abyss that was so frightening last October. Why would we think they suddenly know the way back to stability this October?
William Safire died this past week. He started in public relations and had a stint writing speeches for Spiro Agnew, Richard Nixon’s corrupt and discredited vice president. But what gained him admiration from well beyond the fringe of the left or the right was his reverence for the English language. He demonstrated that skill in his New York Times columns for over three decades. He was also a living illustration that whatever one’s politics, it is character and personality that ultimately define the individual. Do you touch those around you with a special magic? Do you lift those in defeat and in despair to a higher place, regardless of their political leanings or even their public offences?
In his columns, Mr. Safire took on many interests and causes that frequently belied his avuncular tweed jacket and Hush Puppy attire. Some he hit rather hard. But it was not uncommon to see him later having lunch with the object of his occasional acerbic pen –and footing the bill for the privilege. Why did he do that? “Only hit people when they’re up,” was how he explained it to a Times colleague. It takes an uncommon person to understand where the battle of the office ends and where human compassion begins. Bill Safire was one of the rare gems in that department. He was his own man. He understood the value of words and placed a high value on living a life of meaning.
He will be missed
Even before the current crisis, the Fed was a powerful institution with few rivals for its Kremlin-like curtain of secrecy. Now, it seems fated to acquire even more sweeping powers, with only a few followers of Jeffersonian ideals in Congress seemingly interested or capable of questioning that move.
It is widely held that some public functions are so important that they must operate at arm’s-length from the influences of government and party politics. But, generally, the arm needs to be connected to a body that has its feet planted firmly on the ground. When it comes to the Federal Reserve Board, this anatomical connection is not entirely clear.
Exhibit A (as famed screenwriter Rod Serling used to say about scary things to come) is the apparent rejection by the Fed of a Treasury recommended review of the central bank’s structure and governance. These pages have been advocating that for well over a year, and long before it was proposed that the Fed take on even more sweeping powers.
Exhibit B is the news that the Fed will be given a lead role in overseeing pay packages at banks and in prohibiting compensation schemes that encourage inappropriate levels of risk. But the Fed wants the oversight to come in the form of the ultra opaque bank examination relationship it has with America’s financial institutions, which would effectively shield decisions from public scrutiny.
From its handling of the discount window and details about which banks and institutions are knocking on it to specifics about the Bear Stearns “collateral” it bought up, not to mention its role in the AIG bailout and the billions in payouts it approved to make good on credit default swaps with institutions like Goldman Sachs, the Fed is, and prefers to be, a creature of the shadows of cozy-club decision-making and not of the sunlight that affords transparent scrutiny. It operates in a world that hangs on its every word, yet that word is often issued by fiat, with little consideration shown to notions of public accountability. What banks and Wall Street want, however, is often a different matter. We know little about where the lives of Wall Street titans and Fed governors intersect. But if it is anything like what happens at the New York Fed, as we have noted before, where Wall Street titans are that institution’s governors, there is reason for Main Street to be worried.
As it has handled the crisis of the past year or so –the crisis it never saw coming– the Fed has taken interest rates to zero (for banks; not consumers, where credit card rates are proportionally higher than at any time in human history), smashed open the dams of liquidity, and created a Fed cash-for-clunkers program for broken-down financial assets that has no precedent in the annals of economic thought. In doing so, it has created an artificial market from which Wall Street is the most significant beneficiary, even though it was the principal source of the problems. Its moves to provide everything Wall Street wanted have permitted bonuses and huge pay days to be resumed, with barely an interruption. Outside Wall Street, job losses continue to mount and Main Street still awaits the arrival of the famous Fed-promised trickle-down economy.
Yet for all its power and soon-to-be-added authority, it is by no means clear that the Fed possesses any better vision to see another coming storm down the road, especially one of its own concoction from a combination of zero-interest, swirling liquidity, monetized debt and a floundering U.S. dollar. It is debatable whether it possesses the moral clarity, either. The fact that it was in the room and permitted the outrageous compensation decisions at AIG, and allowed billions to be passed on to other institutions in what could not be a more classic redistribution of wealth had it originated from Moscow in the 1950s, gives reason to doubt the Fed’s capacity to act in any role whatever when it comes to deciding compensation issues.
Even before the current crisis, the Fed was a powerful institution with few rivals for its Kremlin-like curtain of secrecy that cannot be questioned. With the Administration’s package of sweeping financial reforms, the Fed is taking on the trappings, along with the arrogance and the influence, of a fourth branch of government, with only a few followers of Jeffersonian ideals in Congress seemingly interested or capable of questioning that move. This is an institution, like the very bodies it regulates, where the culture needs to change dramatically; governance reforms are an important step in achieving that goal.
We think it would be a most unwise turn in public policy to seek to solve one problem, namely the risk-oblivious and compensation-obsessed Wall Street that produced the worst economic crisis since the 1930s, by creating a transparency- oblivious, secrecy-obsessed Fed with more power to shape the world as it sees it. Its sights, as we have observed before and from these recent examples, rarely extend beyond a few blocks in lower Manhattan.
There is much discussion about whether anything has changed in the culture of Wall Street in this period. Maybe it has, or maybe it hasn’t. But at least in Judge Jed Rakoff’s Manhattan courtroom today, something undeniably did.
Common sense received a well-deserved nod today in a landmark ruling from U.S. District Judge Jed S. Rakoff. The judge rejected the overly cozy settlement struck between the Securities and Exchange Commission and Bank of America. In making his ruling, he expressed skepticism that a public agency should allow shareholder money to be used to shield B of A’s management from more rigorous investigation over the Bank’s takeover of Merrill Lynch. The move was stunning in its departure from the way the courts normally handle SEC settlements.
As the judge astutely noted:
The S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger, and the Bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators…. It is quite something else for the very management that is accused of having lied to its shareholders to determine how much of those victims’ money should be used to make the case against the management go away.
As we said about this case here:
The settlement process between the SEC and securities issuers is part of the old way of doing business involving weak oversight and overly permissive regulation that helped to create the recent market debacle. Far from spurring accountability and transparency, which is generally regarded as a necessary part of financial reform, it allows companies to pay money out of shareholders’ pockets and evade any larger sense of responsibility for what they have done. In this charade, management knows it can try to get away with as much as possible and, if caught, has only to come up with a few million, which becomes another business expense. It is an easy way of creating the impression that the SEC is making progress toward reform and enforcement when it is nothing more than a mere slap on the wrist that perpetuates the culture of always skating close to the edge of the law. That is a culture that needs to change dramatically if the lessons from the market’s meltdown and credit collapse mean anything.
The decision is a poetic present as Wall Street and a still-reeling, bailout-fatigued economy celebrate the first-year anniversary of the collapse of Lehman Brothers and the dramatic weekend that saw the forced Bank of America – Merrill Lynch deal.
There is much discussion about whether anything has changed in the culture of Wall Street in this period. Maybe it has, or maybe it hasn’t. But at least in a federal building in Manhattan today, something undeniably did. Common sense was a rare witness in the courtroom. Judge Rakoff preferred her testimony.
An investing public who should more than ever be interested in the truth and in the morality of how business is run should feel grateful and a little more relieved today.
