Audit Notes: dethroning DeMarco, the cult of disruption, China trade

The FT reports Obama plans a big housing policy change if re-elected

The Financial Times’s Shahien Nasiripour reports that the Obama administration is quietly telling activists that it will replace Fannie Mae/Freddie Mac regulator Ed DeMarco if the president is re-elected.

DeMarco is the Bush administration holdover who has blocked the president’s (belated) plan to reduce mortgage principal to help keep borrowers in their homes, remove some of the drag on the economy, and save the government money. Republican obstructionism has been a big part of preventing this, naturally, but failing to recess-appoint someone else is an administration own goal.

In 2010, Senate Republicans opposed Mr Obama’s choice to replace Mr DeMarco and have since said they would be unwilling to support other candidates who support principal reduction schemes. Administration officials have argued there are few qualified candidates willing to take the demanding position. Some borrower advocates have argued that the White House has kept Mr DeMarco in office in part because it provides the administration with an easy excuse when questioned about why they have not done more to prevent millions of home seizures.

But in the past few weeks, Obama administration officials - including Gene Sperling, director of Mr Obama’s national economic council, and Jon Carson, director of the White House’s office of public engagement - have told Democratic groups that they hope to oust Mr DeMarco in the coming months, most likely by replacing him via an appointment while Congress is not in session, according to people familiar with the matter.

What took so long? One of my big questions in this post a couple of weeks ago was why Obama hadn’t replaced DeMarco. Its answer doesn’t wash: The administration says it couldn’t find anybody to take the job. It’s hard to believe that’s true unless it wasn’t trying very hard.

— Read this interesting Paul Carr rant at Pando Daily on the cab app Uber and “The creepy, dangerous ideology behind Silicon Valley’s Cult of Disruption.”

Uber’s business is a mobile app that connects cab drivers with fares and promises no more running around in the rain and snow with your hand up trying to get back to Brooklyn. Problem is, it’s illegal for yellow cabs in New York to pre-arrange fares, and Uber’s business almost certainly violated the law.

Uber, however, does not profit from compromise. Kalanick is a proud adherent to the Cult of Disruption: the faddish Silicon Valley concept which essentially boils down to “let us do whatever we want, otherwise we’ll bully you on the Internet until you do.” To proponents of Disruption, the free market is king, and regulation is always the enemy.

The pro-Disruption argument goes like this: In a digitally connected age, there’s absolutely no need for public carriage laws (or hotel laws, or food safety laws, or… or…) because the market will quickly move to drive out bad actors. If an Uber driver behaves badly, his low star rating will soon push him out of business…

The truth is, what Silicon Valley still calls “Disruption” has evolved into something very sinister indeed. Or perhaps “evolved” is the wrong word: The underlying ideology — that all government intervention is bad, that the free market is the only protection the public needs, and that if weaker people get trampled underfoot in the process then, well, fuck ‘em — increasingly recalls one that has been around for decades. Almost seven decades in fact, since Ayn Rand’s “The Fountainhead” first put her on the radar of every spoiled trust fund brat looking for an excuse to embrace his or her inner asshole…

And there’s the rub. Given their Randian origins, we kid ourselves if we think most Disruptive businesses are fighting government bureaucracy to bring us a better deal. A Disruptive company might very well succeed in exposing government crooks lining their pockets exploiting outdated laws, but that’s only so the Disruptor can line his own pockets through the absence of those same laws.

It’s a rant, as I said, so it goes a little over the top. But he’s on to something there. For more on the libertarian underpinnings of the tech revolution watch Adam Curtis’s “All Watched Over by Machines of Loving Grace”:

— Dean Baker says Paul Krugman is partly wrong to say that Chinese currency manipulation is “an issue whose time has passed”:

… it is important to remember that China is a fast growing developing country. Ordinarily such countries are expected to run large trade deficits. The idea is that capital can be better used in fast growing countries like China than in slow growing wealthy countries. Since capital will get a higher return in developing countries, we expect capital to flow from rich countries to poor countries. The flow of capital would imply a trade deficit for developing countries. Effectively this trade deficit would allow developing countries to sustain consumption levels even as they build up their capital stock.

China, along with many other fast developing countries, is running a large trade surplus. This is not sustainable…

The other part of this story is that we really have no choice about seeing the dollar fall, especially for those ferocious deficit hawks who want to see the United States balance its budget. It is an accounting identity that the trade surplus is equal to net national savings. This means that if we have a trade deficit, net national saving is negative. There is no way around this fact. The deficit hawks may not like it, in the same way that they may not like 2 plus 2 being equal to 4, but there is nothing they can do to change it.

If we have negative national saving, then either we have a budget deficit (negative public saving) or we have negative private saving, or some combination. At the moment, we have a large budget deficit that corresponds to our trade deficit. How could we have negative private saving?

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum. Tags: , , , ,