What you learn in France

One does not have to be in Europe very long to realize that civic culture has not deteriorated here nearly to the extent that it has (and, apparently, will) in the United States. Not only is the public transport vastly superior, but the level of discussion of public affairs is much more sensible. Two things have particularly brought the difference home to me: a documentary film on the financial crisis in the United States, of all things, which my wife and I saw near the Sorbonne, and a few days' reading of the leading Paris newspaper, Le Monde.

The documentary, Cleveland vs. Wall Street, seems to have been made by a French director during the last year, based upon ongoing events. It seems that, at the end of 2008, the city of Cleveland, several of whose neighborhoods had been devastated by the failures of subprime mortgages, decided to sue the leading Wall Street banks. (The upkeep on abandoned properties alone is running into tens of millions of dollars.) According to the movie, the banks have managed to keep the case from coming to trial as yet, but the filmmakers, with the cooperation of both parties, managed to stage a mock trial in a Cleveland courtroom, complete with a judge, distinguished counsel, and a randomly selected jury. I would guess that the parties agreed (especially the banks and their counsel from New York) because they thought the trial would be good practice for the real thing. The staged trial seems to have lasted at least a week or so, and was edited down to two hours.

The witnesses were worthy of Balzac (whom I am reading) or Zola. They included several lower-middle class breadwinners who were about to lose their homes, having taken out successive mortgages of two to three times the real value of the house. They included a very impressive city councilman who explained just how neighborhoods had been devastated. Three witnesses, however, were particularly interesting. The first was a tall, well built black man in his thirties, who admitted that some years ago he had abandoned his former job, dealing drugs, to become, in effect, a mortgage salesman. Using some of his old contacts, he knocked on doors to find people who could be persuaded to apply for subprime mortgages. There were, he said, papers to fill out giving financial data, but even though many of his customers had had credit probelms in the past, the banks never checked them. He denied ever telling his clients to submit false data on their income, although he admitted that others had done it. And he explained that he was paid an immediate 10% of the loan, in cash, whenever a deal was closed. Like many modestly educated people, he spoke somewhat slowly, but very clearly, and said exactly what he meant to say. I wished that the plaintiff's counsel had asked him to compare his two professions--I am sure the answer would have been very interesting--but if he did, the answer didn't make the final cut.

The second witness who caught my eye was a computer geek who had gone into the financial world in the 1980s, designing highly specialized programs. As he has explained in print (I'm sorry I didn't write down his name), during the last ten years, he applied his talents to meeting the needs of the big New York banks who securitized subprimes He wrote a flexible program that could, as he put it, generated exactly the security, with exactly the date of maturity and the rate of return, that the buyer wanted. He was the critical witness, I thought, because his testimony left no doubt that there was a direct line, no matter how cleverly concealed, from the offices of Goldman Sachs, Lehman Brothers and the rest in New York through their "independent" mortgage brokers and into the neighborhoods of Cleveland and elsewhere. He obviously felt badly about his role in the crisis and I can see why, but I'm sure some one else would have played it if he had never existed or devoted his life to some other pursuit.

The third witness of particular interest was Peter Wallison (as goole just told me), who had been both White House Counsel and general counsel to the Treasury Department in Republican Administrations and is how the leading financial policy expert at the American Enterprise Institute, a job which he performs, apparently, while living in the ski resort of Snowmass, Colorado. The plaintiffs' counsels were very worried about his potential impact on the jurors, and one of them, who had seen him in action, said he could convince them that the world was flat. I don't think he did, but he tried. Patiently, but in a tone that suggested to me that even he didn't really believe what he was saying, he explained that the government's programs designed to encourage lower-income people to own their own homes had distorted the housing market, and that this was the real source of the problem. It was not clear from the editing whether his cross-examiners had really done his testimony justice. Certainly they should have asked him exactly what government program allowed individuals to take out three successive and increasing mortgages on the same piece of property, a story we had heard at least twice.

I will not describe the jury deliberations or the jurors' decision. I was ashamed, frankly, that I had to come to Paris to see this movie or even to know that it existed. Not only has it never been released in the United States, but as far as I can make out, this blog post will represent the first time that any American has written anything about it for his fellow citizens. Yet I am glad that Frenchhmen and Frenchwomen took on the task, because I continue to believe that the Atlantic world is a political unit whose different members have always had a great deal of influence on one another's politics. The United States created modern democracy in the 18th century, kept it alive in the Civil War era and encouraged the major European nations to make big steps towards it, and created the modern welfare state under the New Deal. Now we have fallen behind the Europeans in many ways, and we need them to hold out some hope.

Which leads me to Le Monde. What struck me the most about the various issues I read this week was the remarkable coverage of foreign countries. I learned, for example, that the authoritarian government of Belarus has fallen out with its Russian protectors, and that Moscow apparently would like to see a change there. I learned about a somewhat disturbing referendum this weekend to change the Turkish Constitution, one in which the voters have to cast ONE yes or no ballot on about twenty-five different changes. I read an interesting account of a meeting Valdimir Putin convened in Sochi, the Russian resort town, of foreign experts, in which he defended Russian authoritarianism and the continuing role of the Russian state in the economy. I honestly don't know where I could go in the American press--certainly not to the New York Times--to get that kind of information. It is another indication of how unlikely it is that the United States can maintain its role in the world. With fewer and fewer qualified diplomats and less and less information about foreign lands in the public domain, our influence seems bound to decline--at least for some time to come. Thankully, the spectacle of our economic and political state, to which I will return next week, will not inspire any one to copy us any time soon.