Book Review: Thoughts on Undiscovered Country

Two related problems afflict Lin Enger’s Undiscovered Country. First, without the Hamlet overlay, the novel feels thin and melodramatic. Jesse, the 17-year-old main character in psychological turmoil over the murder of his father by his uncle Clay (Enger’s Claudius), doesn’t have Hamlet’s depth or intellect. He’s in love with an Ophelia, named Christine in the novel, who’s in danger of being abused by her father. Jesse’s Horatio, Charles, has lost his own father through suicide, which is what everyone except Jesse believes about how his father died. Jesse’s mother, Enger’s Gertrude, has her affair with Clay (she had a relationship with him before marrying Jesse’s father Harold), which of course enrages Jesse. You get the idea. There’s little genuine pathos here but lots of cliché.

Which brings us to the second problem: With this reworking of Hamlet, the author may have contributed to making Shakespeare’s tragedy a cliché. The story of Hamlet and his tale of revenge, psychological turmoil, and indecision remains a powerful one, but like Hamlet’s “To be or not to be, that is the question” — too many repeat or mimic the phrase in all kinds of contexts that serve merely to undermine its power, turning the line itself into cliché — , this book, Edgar Sawtelle, and others may help to cause the same fate for the play. The changes that such authors have to make in rewriting Hamlet may undermine the play itself and leave those who haven’t read the original these skewed, tired versions that can’t stand on their own two feet. Edgar Sawtelle, at least, is several cuts above Undiscovered Country —  its story of Edgar (a mute Hamlet) and his dogs has many solid, original moments and on several levels transforms the play successfully but ultimately fails to deliver the sense of tragedy that Shakespeare delivers.

Enger’s use of cliché abounds. For example, having the first person narrator write a book, in this case as an explanation to his younger brother of what happened years ago in their small Minnesota village, seems stale. S.E. Hinton, among others, used it decades ago in The Outsiders. Jesse’s love interest, Christine, seems well grounded, but her relationship with Jesse seems like just another teen-age romance meant to attract younger female readers. The murdering brother, Clay, plays in a band, a rather hackneyed character device by now. In any event, Enger doesn’t make much of it, but how many novels, movies, plays, etc., do we have to read and see before this stale character trait is put to rest?

Using poetry in novels has a long, worthwhile history, but I get the feeling Enger has taken a personal favorite, Robert Frost’s “Birches,” and exploited it for its cachet. S.E. Hinton, in The Outsiders with Frost’s “Nothing Gold Can Stay,” did something similar, although Enger’s use seems less clumsy and obvious than Hinton’s. Having just heard evidence that seems to confirm his father’s murder, Jesse feels overwhelmed by the burden he carries. He goes out to an old bridge that spans the river, and comments, “I felt spent, used up, exhausted. In English class Bascom had read us a Frost poem about a man out walking in the woods  — a weary man, a man who’s tired of life.” “Birches” isn’t necessarily inappropriate here, but does it really enhance the scene? Enger wants the poem to say something about Jesse’s state of mind — it’s a soliloquy — , and it does, but why use Frost to try to send a message in a reworking of Hamlet? Enger has borrowed heavily here from two authors. Could he not come up with his own original words?

In some respects, Enger has wedded himself to Hamlet to such an extent that when he attempts to depart from it, as with the looking-back device and the different conclusion, his story falls flat. It’s as if the play has ensnared him, and the only way to get out of it is to depart from it at key points, only to undercut any sense of tragedy. By the end of Enger’s novel, I feel no tragic inevitability but, rather, the end of a made-for-TV-movie on Lifetime.

Mark-to-Market: Numbers Don’t Add Up

The Financial Accounting Standards Board (FASB), an independent agency that sets business accounting rules, announced today an accounting change that may temporarily boost markets but in the long run may bring more harm than good. That change subverts mark-to-market accounting rules, which held that the price of a mortgage security, for example, reflect current market value rather than what someone hopes to get for it in the future. In place of these rules, bankers will have the discretion not to disclose declining values in such assets on their income statements, thus allowing them not to write down toxic assets. As a result, banks will no longer, it is claimed, have to hoard capital to offset bad loans, thus helping to thaw frozen credit markets.

The problem with the change in rules is that allowing banks in effect to hide their bad loans makes transparency a bad joke. Lack of transparency in accounting practices helped to cause the savings and loan disaster of the 1980s. A report in McClatchy News today highlights the problem:

During the S&L crisis, government regulators initially eased federal accounting rules for troubled S&Ls, which hid their negative worth and allowed them to make even worse decisions that led to their collapse and an expensive federal rescue.

Last month, members of Congress and banking interests, according to today’s New York Times, pressured the FASB to change the rule and by extension blamed much of the current financial crisis on mark-to-market rules. But it may have been a lack of mark-to-market rules that enabled the housing bubble to expand, allowing banks to overvalue undeserving assets. It seems that FASB bowed to that political pressure in contravention of its own mission:

Serving the investment public through transparent information resulting from high quality reporting standards, developed in an independent, private sector, open due process.

As a commentator on CNBC put it today, this accounting solution is like giving the fire hoses to the arsonists. What’s likely to happen won’t put out any fires and may, in fact, increase their intensity.

The Center Isn’t Holding

The U.S. may not be close to loosing mere anarchy upon the world — yet — , but how much time do we have left before the chaos begins? If last week’s financial news doesn’t impel us closer to a national (global?) breakdown, I don’t know what does. The country is still in a crisis of leadership, from the executive and legislative branches of government to the offices of the corporate community. The more things stay the same in Washington and Wall St., with Democratic arrogance, Republican recalcitrance,  and business tone-deafness, the more leaders will discover that a still divided public is fast becoming ungovernable.

The indignation unleashed by news of A.I.G.’s payment of bonuses to executives who created the derivatives that caused the problem has swamped the message. Administration spokesmen’s inability to explain why the bonuses were inserted into stimulus package legislation has eroded confidence in the administration. Congress, covering its own tracks in the debacle, has proposed a 90% tax on the bonuses. Few take their or the Administration’s espousals of outrage as sincere, and no one understands that if the government demands autoworkers to renogotiate contracts to bail out their firms, why won’t it demand the same of A.I.G. and troubled banks receiving goverment dole?

And all of this takes place on the eve of Treasury Secretary Geithner’s announcement of plans to remove troubled assets from the big banks’ balance sheets, the core problem of the credit freeze. Temporary nationalization of distressed banks that pose a systemic risk seems to have lost its place at the table. Paul Krugman this morning despairs over the details of the plan, suggesting that the Obama administration may be squandering its political capital in a scheme to inflate the prices of toxic assets with taxpayer money to bring in private investment. “But,” says Krugman, “the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt.” Krugman may not have all the details of the plan, but his essential point is that the plan can’t work. If it doesn’t, what happens then?

Obama Administration Takes Over

In case you’ve been out of the country, unconscious, or otherwise occupied in a cave somewhere, Barack H. Obama has taken the oath of office and is now President of the United States. As a supporter of his, I’m gratified that all went off without a hitch.

I found his Inaugural Address sobering. He traced the challenges and problems facing us and said that it would take work and sacrifice to meet them. He’s right. I hope he’s also right that “They will be met.”

We all have an arduous task ahead of us, and it will require action and words. I think this President may be right for the time. He’s leading us, but will we follow? The country still seems divided, though perhaps less so than a few months ago. Significant differences remain, however, in how to get the economy moving again, how to deal with the wars in Iraq and Afghanistan, what to do about energy and climate change, and improving the health care system.

We must deal with these issues soon, but divisiveness may still rule the day.

How Worried Is the Fed?

In a move that surprised many observers for its aggressiveness, the Federal Reserve Board on Tuesday, Dec. 16^th, lowered the federal funds rate, the interest rate at which banks lend to one another, from 1% to a range of 0 to .25%. Many observers had expected a .50% cut, not the .75 to 1.0% cut that the Fed has effected. The lowering of the interest rate points to a Fed extremely worried about the health of the economy going forward.

The Fed also announced other efforts to fight the specter of deflation, using, as it says, “all available tools to promote the resumption of sustainable economic growth and to preserve price stability.” These tools include supporting

the functioning of financial markets and stimulat[ing] the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.

Federal Reserve Building

Together with the interest rate cut, these policies give insight on just how concerned federal officials are about the state of the economy. With job losses increasing, credit still tight, and prices deflating, the Fed wants to pump a flood of liquidity into the system to prevent a disastrous deflationary spiral.

The incoming Obama administration is also promoting an immense stimulus package that will pump even more money into an economy that it and the Fed are trying to reflate. Congress’s cooperation, with Democratic majorities, seems assured, although the defeat in the Senate of the auto bailout bill may portend a willingness on the part of Republicans to be obstructionist if they see political advantage.

The trouble is that if these efforts don’t work, what other ammunition do  the Fed, Congress, and President-elect Obama have left? If the auto companies fail, what will the resulting shock do to the crisis of confidence the economy is in? TARP money for the automakers has yet to be forthcoming (as of this writing), and people generally seem so sour on the automakers, not without reason, that President Bush and Henry Paulson seem reluctant to drink from this cup.

I suppose one could point to the equities market and see a glimmer of hope, but that’s, at this stage, fool’s gold. With the recent volatility of those markets, how can anyone rely upon them?

And even if the Fed and Congress through monetary and fiscal policies manage to reflate the economy, what then? With the world awash in liquidity, a new specter looms: inflation and its attendant risk, hyperinflation.

By the way, lest you think I’m all gloom and doom, Merry Christmas. Look out for the New Year.

Image courtesy of wwarby’s photostream at Flickr and used under license of Creative Commons.

No Bailout for Automakers? Remember Fallout from Lehman Collapse

A refusal to extend $25 billion in bridge loans to Ford, Chrysler, and GM could have catastrophic consequences for the economy similar to those experienced after the failure of Lehman Brothers. In mid-September of this year, you’ll remember, Treasury refused to loan Lehman any capital or to offer a line of credit to any purchaser of Lehman as the Federal Reserve had offered to J.P. Morgan Chase in its purchase of Bear Stearns in March. When Treasury walked away from offering support, first Bank of America and then Barclays walked away. Lehman was doomed. And so, it seems, was the economy. Credit markets tightened; commercial paper contracted; banks refused to loan to other banks, not trusting that they’d be paid back; Bank of America bought Merrill Lynch; Treasury bailed out AIG; and Congress finally agreed to provide another $700 billion to rescue the financial system. Lehman’s failure triggered a crisis in the financial system worldwide. All of this is laid out in The Financial Times in an excellent article entitled “The Lehman legacy: Catalyst of the crisis.”

The U.S. Department of the Treasury

In hindsight, Treasury Secretary Henry Paulson should have offered guarantees similar to those that enabled the purchase of Bear Stearns. If he had done so, perhaps the present liquidity crisis could have been avoided or, at the least, been put off another few weeks or months. Except for giving more time to fix the mess, it’s questionable what putting the disaster off another few weeks would have accomplished. But where are we now? Sinking into a liquidity trap with the possibility of a deflation spiral on the horizon. And if you’re bailing out Bear Stearns and AIG and then pumping capital into a long list of banks from the $700 billion, wouldn’t guaranteeing the capital that Bank of America or Barclay’s would have used to purchase Lehman have been worth it?

Now Secretary Paulson seems squeamish about aiding Detroit, pleading that the $700 billion approved by Congress did not authorize him to rescue the three automakers. The Secretary, however, also isn’t using the money to buy banks’ toxic assets, which was the whole basis of his proposal to Congress to thaw credit markets. Once again, the Secretary hesitates in rewarding companies who’ve miscalculated markets, certainly an understandable apprehension in a free market economy. Moral hazard is not an empty concept.

The problem, however, is that failing to rescue such firms may put the whole system at risk as appears to have happened with the failure of Lehman. Systemic risks may not only inhabit financial firms. In fact, the subsequent credit freeze and lack of confidence has directly affected automakers, foreign and domestic. The purchase of autos requires credit, and banks simply aren’t lending on terms that most people can afford. It’s hard to blame the banks; they don’t have the confidence as yet that they’ll be paid back. But what will happen to confidence if Detroit is allowed to fail?

Be wary of those like Mitt Romney, who advocate the Russian Roulette of Chapter 11 bankruptcy for the three firms. No one likes the fact that the three are being saved from their own faulty decisions of the past, but to allow one or more of them to go under presents a systemic risk that the country may never recover from. The spiral of deflation that could result would be an absolute catastrophe. If you think we’re in a crisis of confidence now, wait until these three go under. You’ll see a lack of confidence in American leadership and institutions that will have worldwide ramifications.

Image of Treasury building courtesy of drstout’s photostream at Flickr and used under license of Creative Commons.