Sunday, February 27, 2011

Buying Time During Secession Winter

By the time South Carolina pulled out of the Union, the six other states of the Deep South had scheduled secession conventions of their own, all to take place in January 1861. That gave the newly ascendant Republicans in Congress about a month to contain the damage. "The secession of South Carolina, if it goes no farther, is simply ridiculous" and nothing but a nuisance, observed Maine senator William Fessenden, "but if all the Slave states are dragged into the vortex, the result will be separation."

There was a widespread perception above the Mason-Dixon Line that South Carolina was a special case, a rogue state with a mind of its own. "South Carolina has been surly, sore-headed, and mutinous for more than thirty years," editorialized the Albany Evening Journal. Perhaps the other Cotton states would be more cautious and deliberate in charting their future course. A speech by veteran congressman Alexander Stephens before the Georgia Legislature urging delay gave the nation hope for timely compromise. Indeed, compromise had been the name of the game ever since the Founding Fathers settled on a Constitution, wherein it was written that each slave would count as three-fifths of a person for apportionment purposes. How was that for give-and-take! Point-six for me, point-four for you.

A succession of legislative compromises ever since had desensitized Northerners to break-away threats by Southerners, who, it seemed, had always managed to get their way. This latest talk of secession struck Yankee cynics as just another play by slaveholders for political advantage. There were two reasons, though, why the South might be really serious this time. First, a Republican in the White House would have the prerogative to make appointments to federal offices in Dixie. This would be a way for anti-slavery radicals to infiltrate and agitate, not a pleasant prospect to slaveholders.

The other reason was more personal. The menfolk of the South were damned tired of being denounced by Northern preachers as monsters in the eyes of God. Yankee abolitionists, complained Judge Thomas Jefferson Withers of South Carolina, were insufferable moralizers, full of the belief "that the Earth belonged to the Saints, and that they were the Saints" and slaveholders were the Ain'ts.

The Reverend Theodore Parker of Boston [left] exemplified the puritanical taskmaster scorned by Withers. Parker was the guy who cried from the pulpit, "Humanity is the sin of God," which his congregation usually found to be something of a downer. And there was more where that came from. Parker never apologized for his sermons, valuing "truth over friendship, candor over decorum," and--ominously to Southern ears--"war over any peace that compromises liberty." Admit it, Theo, them's fightin' words. Putting his money where his mouth was, Parker conspired as one of New England's "Secret Six" to funnel cash to arch-abolitionist John Brown. Brown then took the money to the local Wal-Mart to buy guns, cutlery, and some matches and, well, you know the rest.

Parker, Sumner, Brown. Stevens, Wade, Giddings. These were the types, dogmatic and condescending, whom Southern gentlemen loved to hate. John Brown's attempt at violent insurrection at Harpers Ferry was actually not the worst of it. After all, Virginians made sure that J.B. got his. It was the way that Brown was canonized by Yankee literati afterward, even as slaveholders continued to be demonized, that many Southerners found intolerable. Could you blame separatists for their aversion to all things North? Once branded a sadistic, tyrannical, and depraved sexual predator and serial abuser, maybe you would be ready to leave the country, too.

In December 1860 a lame-duck Congress renewed efforts to soothe the South. On the 18th, a Senate Committee of Thirteen was appointed to search for a solution and soon focused on a plan presented by John J. Crittenden of Kentucky [right]. The 73-year-old Crittenden was particularly well suited to the task. He was nearing the end of a long and distinguished career in public service, during which he was twice U.S. Attorney General, once Kentucky's Governor, and off-and-on U.S. Senator ever since 1817. He hailed from a border state sensitive to both sides of the issue of slavery. Who better to save the Union than the political heir of the Great Compromiser himself, Henry Clay? It was Clay's old Senate seat that Crittenden now occupied.

Crittenden recommended adding some clarity to the U.S. Constitution, which neither prohibited nor protected slavery expressly. It was widely accepted that constitutional protections of property rights implicitly barred the federal government from messing with slavery. Crittenden proposed a series of amendments making the implicit explicit. Specifically, Congress could not interfere with slavery where it already existed. Slaveholders would be allowed to take their slaves from one state or territory to another and to cross state lines to recover fugitive slaves. Where recovery of fugitives was prevented by violence or intimidation, Congress would be bound to provide compensation to aggrieved slaveholders and to extract damages from interfering parties. Most importantly, the 36°30' latitude embedded in the original Missouri Compromise would be reinstated, prohibiting slavery in territories north of that line, but not south of it. The settlement would become permanent by exempting the slavery clauses from any future amendment.

The Crittenden Plan seemed to satisfy many Southern concerns. Republicans, however, balked at the solidification of 36°30'. They were ideologically opposed to the extension of slavery to any of the territories. It did not matter to them that, from a practical standpoint, slavery was unlikely to take root anywhere on the Great Plains or in the desert Southwest. It was effectively hemmed in by geography. Implementation of the Crittenden Plan would essentially preserve the status quo, with slavery slowly but inexorably draining southward. The expiration of slavery in America, if left alone, was simply a matter of time.

Despite his campaign rhetoric, President-elect Abraham Lincoln was amenable to letting slavery continue in the Southern states. He knew that abolitionists, preferring Freedom Now to freedom whenever, had not adequately addressed one major question. What was to be done with Negro slaves after instant emancipation? Few Americans, north or south, believed that a whole population of newly freed slaves could be quickly and easily integrated into white society. A couple of Southern states, Maryland and Virginia, had experimented with back-to-Africa resettlement programs in the 1830s. Henry Clay had also favored reverse colonization. Lincoln, a fellow Whig in Clay's time, could think of no better idea.

But compensating slaveholders and deporting blacks required money and willing participants. Both were in short supply. Maybe the existing cultural trend of gradual, voluntary manumission was still the best way. The unquestioned leader among Congressional Republicans, New York senator William Seward [left], appeared to have an open mind. Here was a human-rights crusader who ten years earlier had declared that the Constitution, if construed as protective of slavery, must yield to a "higher law." An 1858 stump speech of his, warning of an "irrepressible conflict" between regions, had further set Southern masters on edge.

Now, as 1860 came to a close, Seward sought to soften his rhetoric. He now referred to slave states as "capital states" and free states as "labor states." On December 22, two days after South Carolina seceded, he gave a speech urging "cool" and "calm" and suggesting that the bonds holding the Union together were as "enduring" as "the passions of men were...ephemeral." In private conversation he likened South Carolina's departure to a teenager's flight from home: impulsive, ill-considered, and likely temporary.

Seward showed the balanced judgment of someone who could have been, perhaps should have been, President. His four years as Governor of New York and twelve years as U.S. Senator far outshone the Railsplitter's thin dossier (a single term in Congress, no executive experience). Seward had been the early favorite to get the Republican presidential nomination at the Party's national convention in May, garnering the most votes (but not a majority) on each of the first two ballots. Intriguingly, he had been considered too radical by some delegates and not radical enough by others, a sign of his pragmatic bent. On the third ballot, Lincoln had become the consensus choice.

Now President-elect, Lincoln had the good sense to bring Seward into his Cabinet as the new Secretary of State. During the winter months between Lincoln's election and inauguration, Seward was actually the better situated of the two to lead the Party through the secession crisis. He was in Washington, serving on the Committee of Thirteen. Lincoln was back in Illinois writing letters. Seward was working his many contacts in the South, looking for ways to ease the tension and slow the pace of events. Lincoln was prodding Republicans by mail to stick with the party platform.

Seward had the ideal temperament to reach across the aisle. He possessed a nimble mind and a zest for companionship and conversation. He nurtured a warm personal relationship with Jefferson Davis [right], the irascible Mississippi senator and slaveholder (who displayed such paternal benevolence toward his own slaves that Yankees, had they known about it, would have stopped their agitating and asked instead where they could sign up). Working with Davis on the Committee of Thirteen, Seward hoped that a workable compromise would stall the secessionist momentum at the upcoming January conventions.

Though a firm believer in states' rights, Davis remained cautious about immediate secession. A new Southern nation, in his view, had to be anchored by Georgia, whose intentions were as yet unknown. Mississippians displayed uncertainty at the polls on December 20 (a pivotal day, as we see in retrospect) when choosing delegates for their January 7 convention. For one thing, the turnout was down 40% from November's presidential election. Of the ballots cast, only 40% were for candidates pledged to Separatism. The remaining votes were split almost evenly between unpledged candidates and Cooperationists (i.e. those insisting on a regional consensus before secession). There was no clear mandate, then, for following immediately in South Carolina's footsteps.

So far, Seward had reason to be optimistic about holding the Union together. But events unfolding in (where else?) Charleston Harbor would quickly complicate everything.

* * * * *


A comment has been left [below] questioning my characterization of the way Jefferson Davis treated his slaves. Those interested in following up can go to this post by a Davis descendant; a useful list of links appears at the bottom.

Quote for the Week, Feb. 27-Mar. 5, 2011

Every election is a sort of advance auction of stolen goods.
--H.L. Mencken

Tuesday, February 22, 2011

Another Day, Another Charge-off

BofA CEO Brian Moynihan
should be worried.

[Bloomberg--Feb. 22] Bank of America Corp., the biggest U.S. lender by assets, almost doubled a goodwill impairment for its credit-card unit to $20.3 billion to reflect increased defaults. The non-cash charge replaces a $10.4 billion impairment booked on the firm's FIA Card Services unit last year.

The writedown shows that the credit-card unit's prospects may have deteriorated more than initially disclosed after the U.S. passed legislation, known as the Card Act, in May 2009 to curb fees and interest-rate increases. In November, the bank said some measures would cut annual revenue by $1 billion, undermining efforts by Chief Executive Officer Brian T. Moynihan to improve returns for investors. The firm yesterday said the act and "deteriorating credit quality" caused the revision. The restatement covers the eight quarters of 2009 and 2010.

"This is another sign that the quality of the bank's consumer-credit book is weaker than what they previously indicated," said Tony Plath, a finance professor at UNC-Charlotte. "It's a huge number, and the way they're disclosing it erodes the bank's credibility. Why are we waiting until 2011 to do an impairment charge for two years ago?"

[Last week Christopher Whalen of Institutional Risk Analytics lambasted both Wells Fargo and Bank of America for sandbagging on unrecognized losses stemming from toxic residential mortgage-backed securities:

WFC and BAC face potentially catastrophic losses from private label RMBS claims from investors and/or insurers. If you look at the double-digit loss experience data on private label RMBS, and then compare this actual experience with the loss disclosure from BAC (WFC has provided none), the two pictures simply do not coincide.]

Now for the mark-down:

Friday (2/18) . . . . . . . . . . . . . . . . . . . . . . Tuesday (2/22)

BofA's stock takes a hit.

Sunday, February 20, 2011

South Carolina's Secession Crisis

Mary Chesnut, Civil War diarist extraordinaire,
and her husband, James Chesnut, Jr., U.S. Senator, 1858-60

Quote for the Week, Feb. 20-26, 2011

A fanatic is one who can't change his mind and won't change the subject.
--Winston Churchill

Thursday, February 17, 2011

"Why Isn't Wall Street in Jail?"

--Matt Taibbi, Rolling Stone

"Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail....

As for President Obama, what is there to be said? Goldman Sachs was his number-one private campaign contributor. He put a Citigroup executive in charge of his economic transition team, and he just named an executive of JP Morgan Chase, the proud owner of $7.7 million in Chase stock, his new chief of staff. 'The betrayal that this represents by Obama to everybody is just — we're not ready to believe it,' says a classmate of the president from their Columbia days....

...these frauds are worse than common robberies. They're crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let's steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy."

Complete article viewable here.

Tuesday, February 15, 2011

Berkshire Hathaway Dumps Bank of America

Buffet to BofA: "Bye-bye."

Bloomberg has reported that Warren Buffett's Berkshire Hathaway Inc. sold the last 5 million shares of its stake in Bank of America Corp. during the quarter ending December 31, 2010, pulling the plug on a four-year investment that saw the bank's common stock lose two-thirds of its value. Disclosure of the exit came yesterday in a regulatory filing that lists the company's largest stockholdings. Berkshire, where Buffett serves as CEO and head of investments, had entered the BofA stake with a purchase of 8.7 million shares in Q2 2007.

"He's closing out a loser," said Jeff Matthews, who wrote Pilgrimage To Warren Buffett's Omaha and whose Ram Partners LP has invested in both Berkshire and Bank of America. "We bought it during the crisis. But its earnings power coming out of the crisis has been reduced." [Editor's note--try eliminated. The bank lost $2.23 billion in 2010.]

Another of the universe's super-investors, hedge-fund manager John Paulson, revealed in his 13-F filing that he sold three times as much BAC as Buffett did in Q4 2010, or nearly 15 million shares. And that was after dumping 30 million shares in Q3. That still leaves him with 123.9 million shares, but 27% fewer than six months earlier.

As of December 31, the MainePERS investment portfolio held 2,544,670 shares of BofA stock, basically unchanged from a year ago. Know when to hold 'em, know when to fold 'em.

Sunday, February 13, 2011

Quote for the Week, Feb. 13-19, 2011

When they call the roll in the Senate, the Senators do not know whether to answer "Present" or "Not guilty."
--Theodore Roosevelt, U.S. President (1901-1909)

Monday, February 7, 2011

Putting the "SC" in Secession

That South Carolina was the cradle of the Confederacy was no accident. Its heat and humidity have always been enough to make people restive and cantankerous. Its largest city, Charleston, was described by a 19th-century visitor from New England as having "the worst climate for unacclimated whites of any town in the United States"--i.e. nice place to visit, wouldn't want to work there. So the hard work of planting rice and cotton fell to Negro slaves, who seemed to tolerate the malaria-infested coastal swamps a bit better. South Carolina's was the blackest population in the mid-century South.

In the forty years leading up to the Civil War, more people moved out than moved in. From 1820 to 1860, South Carolina's white population increased by less than 23%, or barely half a percent annually. Maine's population, by contrast, more than doubled during the same period; the entire country's more than tripled. As historian William W. Freehling has pointed out, only 3.4% of all South Carolinians in 1860 had been born elsewhere, and half of all white South Carolinians born since 1800 had migrated west. Left behind was an insular, hidebound society, stratified and stagnant.

Those of the ruling gentry were defensive and defiant. We have already seen how in 1856 one of South Carolina's congressmen, inflamed by a slur against a colleague, tapped some serious Morse Code upside Charles Sumner's head with a walking stick. When the sluree, Senator Andrew Butler, died a year later, the South Carolina legislature elected one James Henry Hammond to finish Butler's term. Upon arriving on Capitol Hill, Hammond learned that the inmates were not using sticks anymore. "The only persons who do not have a revolver and a knife," he reported, "are those who have two revolvers."

Hammond had served once before in the U.S. Congress, albeit briefly. His first year in the House of Representatives, 1835, had seen a flood of citizens' petitions to Congress demanding that slavery be abolished throughout the nation. A slaveholder himself, Hammond had gained instant notoriety by moving on February 1, 1836, that the House ignore all such petitions. Slavery, he had proclaimed, was "the greatest of all the great blessings which a kind Providence has bestowed upon our glorious region," weeks before resigning from his seat for some R & R in Europe.

Now, in 1857, after twenty years in the political wilderness, Hammond was back in Washington, this time as U.S. Senator. The "gag rules" which he had helped introduce--and which had stifled congressional debate about slavery until 1844--were no longer in effect. Speeches for and against slavery were now
de rigueur. The hot-button issue of the day was whether slavery would be allowed in any of the nation's new territories. In March the U.S. Supreme Court ruled in Dred Scott v. Sandford that only states, and not the federal government, had the power to ban slavery. By this reasoning, slavery was permissible in any territory, and the Missouri Compromise of 1820 was judged to be unconstitutional for seeking to ban slavery anywhere west of the Mississippi River and north of 36°30' , Missouri excepted.

Hammond and other Southerners welcomed that decision. One year later, however, the U.S. House of Representatives refused to endorse a pro-slavery constitution for Kansas. The handwriting was on the wall: no new slave states would likely ever again be admitted to the Union. Even more ominous for slavery's apologists was the rhetoric from Republican candidates in the 1858 elections. Slavery would be not only contained, but also, if radical Republicans had their way, abolished where it had always existed. Hammond parried with rhetoric of his own. In a Senate speech, he stated smugly that Northern extremists "dare not make war on cotton. No power on earth dares to make war on it. Cotton is king."

Maybe abolitionists were not (yet) ready for war, but how about a little more smack talk? On April 5, 1860, Illinois Congressman Owen Lovejoy stood up on the House floor to take on the Slave Power. Lovejoy, who had lost his brother, a newspaper editor, to a lynch mob 23 years earlier, excoriated Southerners for suppressing anti-slavery literature with "violence, outrage, tar and feathers, burning, imprisonment, and the gallows." The extension of slavery would, as a plague, deter settlers. If any new territory were to be inhabited by depraved slaveholders, "leperous, dripping...with disease, no one will go there." Crossing the aisle, Lovejoy defiantly shook his fists at slave-state representatives.

As congressmen glared face to face, South Carolina's Hammond got a charge out of the proceedings. The infamous Sumner beatdown had taken place before his arrival in D.C. That one he had missed. Now he would have a ringside seat for Round 2. This particular confrontation stopped short of blows, but fanned expectations for future fisticuffs on the Hill. Hammond texted, in the fashion of that era, to one secessionist sympathizer to hurry into town to "see the fun." "A great slaughter," he wrote to another, "may occur any day." Oh, and pack a piece when you come.

Two weeks later the National Democratic Party convened in Charleston, of all places, to choose a nominee for President. Arriving during an early-season heat wave, first-time visitors were quickly educated that S.C. without A.C. is no place to B. Public accommodations were scarce, and innkeepers were charging a (Cotton) king's ransom. Hundreds of overnighting delegates had to make do with cots crammed into close quarters. Little more comfort was found in the convention hall itself, which had poor acoustics, making it hard to hear the speakers, and fixed seats on a flat floor, making it hard to see them as well. Debate on the party's platform dragged on for a week. When it was finally voted to reject language more protective of slavery in the territories, disappointed delegates from the Deep South, overheated in more ways than one, walked out. Spectators in the upper-floor gallery cheered when they did. Newly empty seats on the convention floor were decorated with flowers by Charleston's celebrating belles.

The exodus was led by Alabama's delegates. For once, South Carolina, represented by upcountry party stalwarts hopeful of compromise, was not first out the door. Once Mississippi and Louisiana bolted, however, South Carolina's delegates were shamed into following. All week, in the convention and around town, they had been branded by the locals as traitors for not walking the walk. Now the hothouse atmosphere of Charleston had become too much. Georgia alone among the Deep South states stuck around long enough to caucus cooly, but the next day most of her delegates announced their departure as well.

The convention then turned to the task of nominating a presidential candidate. Illinois Senator Stephen Douglas had been the odds-on favorite ever since the 1856 election, but he failed to get the required two-thirds majority in any of the 57 roll-call votes. After three days of fruitless polling and continual jeering from the peanut gallery, the Democrats decided to adjourn. Putting Charleston in the rear-view mirror was more important than nominating a ticket.

Reconvening in Baltimore in mid-June, the party's first task was to decide which delegates would be admitted. Many of those who had walked out of the Charleston convention were back for more, but in the meantime alternative slates of delegates had come forward in some of the Deep South states. After all were sorted and some were seated, Douglas had his nomination on the second ballot. Disqualified delegates from the Deep South, joined in sympathy by most of the other Southern delegates, marched across town to hold their own convention, from which Kentucky's John Breckinridge emerged as the presidential nominee. South Carolina Democrats, having purged the moderates among them, did not participate in either convention.

The split in the Democratic Party opened the door for the Republican candidate, Abraham Lincoln, who would win the 1860 election despite getting less than 40% of the popular vote. He would get no votes in South Carolina, the last remaining state to eschew a popular vote for President. Instead, the state legislature assembled in Columbia, the capital, the day before the national election to assign all eight of South Carolina's electoral votes to Breckinridge. That piece of business taken care of, the legislature remained in session to await the results.

Lincoln's victory on November 6 set off alarms among Southern slaveholders. How far would he go to constrain their "peculiar institution?" They had to decide if they would wait for an "overt act" by the new Administration and, if not, whether they would develop a regional consensus before seceding. In South Carolina, a fringe element agitated for instant action. But Hammond, a rabid separatist during the state's Nullification Crisis nearly thirty years earlier, now counseled caution. He still believed that cotton was king and that the South could protect its own interests within the Union. A revolutionary avant-garde, on the other hand, could be easily crushed.

South Carolina's extremists were willing to take the chance. This was was a time not for a cumbersome pan-Southern convention, but for good old-fashioned patrician leadership. Waiting for popular sentiment to shape events was a fool's game. "Whoever waited for the common people," asked state representative Alfred Aldrich rhetorically, "when a great move was to be made? We must make the move and force them to follow." The day after Lincoln's election, the U.S. District Court in Charleston was effectively shut down when the presiding federal judge and the grand jury foreman resigned.

Hammond considered them "great asses" for doing so. But legislators in Columbia were now emboldened to call a secession convention. On November 9, the state senate voted 44-1 to set the convention date for January 15, a concession to "cooperationists" who wanted extra time to mobilize support in neighboring states. On that same day a delegation of shakers and movers from Savannah arrived in Charleston to help celebrate the opening of a new rail connection between the two cities. The occasion presented a timely opportunity for some after-dinner speeches promising moral support from Georgians should South Carolina decide to secede.

This was the kick that wavering separatists in Columbia needed. The next morning (November 10), Aldrich's House committee amended the Senate bill to move the convention date up four weeks earlier to December 17. The revised bill was reported out of committee and passed by the full House, 117-0, on a second reading. The bill went back to the Senate, where it passed by a lusty 42-0 margin. News of the action inspired one of Charleston's ultras, Robert Barnwell Rhett Jr., to proclaim, "the tea has been thrown overboard--the revolution of 1860 has been initiated."

Hammond's plea for delay had been ignored. Before the day was over, the state's other U.S. Senator, James Chesnut Jr., resigned his seat. Hammond felt pressured to do likewise, which he did the very next day. "It is an epidemic and very foolish," he admitted. "I resigned because Chesnut resigned...What Chesnut and the others resigned for I don't know." Hammond likened the joint abdication to hari-kari, a rather prescient observation.

What followed was less a thought process than a contagion. An election was scheduled in South Carolina for December 3 to choose delegates to the secession convention. Newspapers promoted the new dogma that secession was both inevitable and honorable. There was, in the pages of the Charleston Mercury, "no more doubt of South Carolina's going out of the Union than of the world's turning round. Every man that goes to the convention will be a pledged man--pledged for immediate separate State secession."

To ensure a stacked convention, extremists organized vigilance committees to intimidate candidates and voters alike. These self-styled "guardians of Southern rights," forerunners of the Ku Klux Klan, imposed extrajudicial discipline on politically incorrect whites (Unionists and Cooperationists) and suppressed all gatherings of blacks. It was Code Red in the Palmetto State. "My own countrymen here in South Carolina are distempered," complained James L. Petigru, "...[and] credulous to every whisper of suspicion about insurgents or incendiaries."

Petigru was one of the few remaining Unionists in South Carolina. It was his hope, as it was of other Southern moderates, that the crisis could be resolved without a break-up of the nation. President James Buchanan prayed every night in the White House for the same thing--or at the very least that the shooting would not start until he could get the hell out of Dodge. Alas, Lincoln's inauguration was still three months away.

On the same day that South Carolina was electing delegates to its secession convention, Buchanan delivered his annual message to Congress. Trying to mollify both sides, he pleased neither. He said that no state had a constitutional right to secede, a stance sure to make South Carolinians even more apoplectic than they already were. At the same time, he said that the federal government had no authority to compel recalcitrant states to stay. Disgusted Northerners viewed the vacillation as that of an imbecile.

It was no help whatsoever to Buchanan that certain members of his own Cabinet were undermining his attempts to stabilize the situation. His Secretary of War, a Virginian named John B. Floyd, authorized the sale of 10,000 rifles from the federal arsenal to South Carolina, surely an olive branch if there ever was one. Mindful that the decision might spark controversy, Floyd took care to launder the transaction through a New York banker, proving once again that some things never change. Floyd was soon replaced in a Cabinet shake-up that took out the Secretaries of State and Treasury as well.

December 17, 1860, was a busy day in Columbia. Francis W. Pickens was sworn in as the new governor, having campaigned on the promise "to appeal to the god of battles, if need be, to cover the state with ruin, conflagration and blood rather than submit" to federal authority, which did not quite fit on a bumper sticker, but was kind of catchy all the same. In the same spirit, the secession convention assembled. Completing the trifecta was a local outbreak of smallpox. Rumors quickly spread among the citizenry (confirming Petigru's diagnosis of collective paranoia) that the germs came from a box of contaminated rags shipped from New York. Maybe it was those bankers again.

After the first day, the convention adjourned to Charleston to escape the pox, if not the political miasma. On December 20 the delegates made it official, voting 169-0 to secede and demonstrating conclusively that mindless conformity was the order of the day. Mary Chesnut, the ex-Senator's wife, would write in her diary that South Carolina's radicals "had exasperated & heated themselves into a fever that only bloodletting could ever cure." An ashamed Petigru observed that "South Carolina is too small for a republic and too large for an insane asylum."

Back in the U.S. Senate, Ohio's Benjamin Wade was similarly scornful, dismissing South Carolina as "a small state" that would not be missed. "If she were sunk by an earthquake today," scoffed Wade, "we would hardly ever find it out, except by the unwonted harmony that might prevail in this Chamber." The key for Unionists was to make sure that South Carolina's secession was a one-off, not to be replicated elsewhere in the South. Would it be possible to keep the state in quarantine?

Sunday, February 6, 2011

Quote for the Week, Feb. 6-12, 2011

It's not the notes that make the music, but the space between the notes.
--Miles Davis

Wednesday, February 2, 2011

Banks Get Theirs First

Fed chief to taxpayer: "Sucker!"

"Fed Accounting? Is the Problem Solved?"
--Bob Eisenbeis, Cumberland Advisors


"That small accounting change means that the Treasury – and hence the taxpayer – is now in a first-loss position should the Fed become book-value insolvent as the result of potential losses that might be incurred on asset sales as part of its efforts to absorb the excess reserves previously injected into the financial system...

In normal times, a 6% dividend is paid to member banks out of the surplus account, which is then replenished by retained earnings. Under the new proposal, if earnings are insufficient to cover the 6% payment, dividends can and will still be paid. The accounting change permits the Fed to cover the shortfall by increasing the size of the negative liability account to the Treasury and thereby enables the Fed to maintain the equality of the Fed’s surplus account with its paid-in capital. The Treasury will effectively fund current dividend payments by reducing the amount that it will receive from the Fed out of future earnings."

Complete analysis viewable here.