Want to Cut Your Carbon Footprint? Change the Way You Eat

Most of us probably already know the basic changes we can make in our lifestyles to reduce our impact on the planet's resources and cut our contribution to greenhouse gas emissions. We can recycle, replace our traditional incandescent light bulbs with CFL (compact flourescent light) bulbs, and bike or walk instead of taking the car whenever possible.

But another way we can have a significant impact on our carbon footprint is one we easily overlook: we simply change the way we eat.

Mark Bittman's Food Matters is not just another best-selling “green” consciousness-raising tome. Instead, it presents a simple idea in clear engaging prose that only takes up a little less than half the book. The rest is full of shopping lists, meal plans, and recipes to make it easy for the reader to put the ideas into action. Since Mark Bittman is also a renowned chef and general “foodie,” this section of the food is well worth looking into.

Bittman doesn't argue that you must eat organic or become a vegetarian or only buy locally grown food. His approach is not at all dictatorial. Any change you make towards eating more “whole” foods (an apple, not little tins of applesauce, peanuts rather than a Snickers bar, potatoes rather than chips) anything rather than processed foods will be good for your health, easier on your wallet, and better for the planet.

Food Matters singles out one important destructive dietary trend. As more and more countries, including China, adopt the Western diet with its emphasis on red meat and refined carbohydrates, the world will no longer be able to sustain current practices for raising animals for food (for example, global meat consumption is expected to double in the next forty years).

Factory farms already raise 60 billion of these animals every year in conditions that would have been unthinkable a century ago, but if demand keeps growing at current rates, we will need to raise 120 billion animals a year by 2050, and we will run out of the agriculture land necessary to raise the feed for all these cows, pigs, sheep, and poultry.

It's not just that a heavily meat-based diet is unsustainable, but as Bittman points out, it is also highly consumptive of fossil fuels. “To produce one calorie of corn takes 2.2 calories of fossil fuel. For beef the number is 40: it requires 40 calories to produce one calorie of beef protein,” (26).

Statistics from the Energy Information Administration of the Department of Energy suggest that the average American burns about 530 gallons of gas by driving and about 400 gallons of fossil fuels if that same American consumes an average American meat-based diet.

As Bittman puts it, “If we each at the equivalent of three fewer cheeseburgers a week, we'd cancel out the effects of all the SUVs in the country,” (17).

And raising the meat we love to eat doesn't just consume a whole lot of fossil fuels, it also contributes to the rapid deforestation of the third world as rainforest is burned in Brazil to make way for cattle ranching and sugar production for ethanol, and Malyasia and Indonesia see the destruction of their forests to foster the production of palm oil, another common ingredient in processed food.

To make matters worse, the methane produced by cattle is also a significant part of agricultural greenhouse gas emissions and the huge amounts of manure threaten both water and air quality in many parts of rural America.

Bittman's second nightmare food ingredient also leads back to the production of corn but this time in the form of high fructose corn syrup (HFCS). Most Americans consume HFCS in the form of carbonated soft drinks like Coke, Pepsi, 7-Up and Sprite; as an aside Bittman notes that as a nation we actually consume 7% of our daily calories from soda. Not only does the consumption of sugar in this form tend to generate a greater craving for more and more sugar, but it's believed to be a leading contributor to the rise in Type 2 diabetes, especially among the young.

Now I'm going to follow Bittman's lead in not dictating any particular way of eating. But I do recommend a trip to the library or bookstore to check out Food Matters.

And I will ask my readers: Please consider giving up meat one or two days a week. Or if this is too much, keep the HFCS out of your grocery basket. An apple on your desk, a packet of trail mix in your purse, a refillable water bottle in your car will all go a long way towards keeping you and our planet healthy.

Bon appetit!

Dreaming of Patagonia

with permission, Andres Diaz, Cuernos del Paine, February 2008

I remember vividly when my boyfriend first told me he was “going to take me to the most beautiful place in the world.” At the time, I thought that he was either a hopeless romantic or that he was practicing some great pick-up lines.

A mere six months after our wedding I found myself mentally eating those badly chosen words as I emerged from a dirt road surrounded on both sides by patches of dusty raspberry bushes and dense green foliage to one of the most beautiful vistas I've ever seen, yellow-green fields rolling down to a intensely blue lake with a snow-capped volcano on the opposite shore.

From Vacation Chile 2003-2004

It was my first trip to Chile, and I had to agree with my husband, we had arrived at the most beautiful place I'd ever seen.

However, there was a downside to this discovery of a Latin American Shangri-La. Since my husband's family owns property on the shores of this lake with the incredible view of Volcan Villarrica, I rarely get to go anywhere else when we travel there.

My husband, who has over one million miles of airtime with American Airlines and nearly the same with United, doesn't want to travel when he goes on vacation. He wants to arrive at the most beautiful place in the world and stay there.

I, however, suffer from wanderlust. Since we married in 1987 I have seen the capital of Chile (Santiago), the seaside city of Viña del Mar, the family fundo (farm) on the banks of Lago Villarrica, and not a whole lot else, apart from some sides trip in the lakes region to Frutillar, a German-style village on the shores of Lake Osorno, the exquisite emerald green Lago Todos los Santos, and the port city of Puerto Montt.

But in the back of my mind there has been one part of Chile that holds a kind of magical appeal for me: Patagonia.

Chile is full of places named in the language of the native Mapuche people that roll off the tongue and make you want to see the location that gave rise to such linguistic invention. My favorite is the little town of Panguipulli, which is pronounced “pan-gi (hard “g”)-pu-yee), and means hill of the lion or puma. Set on the shores of Lake Panguipulli, you can see that the residents have a sense of humor about their town's name – the local panaderia sells “Pangui-pan.”

From Vacation Chile 2003-2004

So it's no wonder that Patagonia has held a special appeal for me, one that I felt even before I met my husband and was immersed in Chilean culture. Patagonia is a kind of utopia, a “no-where” land, a place so large and sparsely inhabited that one of the largest volcanic eruptions occurred in the far north of Patagonia in August 1991, and almost no one noticed.

According to the venerable Oxford English Dictionary, there are at least three viable speculations about where the word Patagonia comes from. One of them argues that it derives from the Spanish word patagon meaning “a large clumsy foot,” since the Spaniard Magellan thus named the deep footprints of natives dancing in the sand when he first stopped on the southernmost shores of South America.

A second and more unlikely theory links “Patagonia” to the Incan word, Patac-Hunia, for “mountain regions.”

The third explanation, and my favorite, again links Magellan to the origins of the word but this time attributes it to Magellan's description of some of the natives who were wearing “dog-faced” masks. A popular novel of Magellan's time, Primaleon of Greece, featured a dog-faced monster named Patagon. This was the same text that gave rise to Shakespeare's equation of the native character Caliban with a “puppy-headed monster” in his play The Tempest.

Dick Lutz, author of Patagonia: At the Bottom on the World, points out that Patagonia is referenced with surprising frequency in Western literature, appearing in works by Shakespeare, Lord Byron, Jules Verne, Herman Melville, Sir Conan Doyle, Edgard Allen Poe, and of course, Coleridge's famous poem, “The Ancient Mariner.”

So for me, as a student of literature, and as one long fascinated by the name and the idea of Patagonia, the land at the end of the earth, there could not be a more felicitous intersection of circumstances. In 2010 I am determined that my sojourn in Chile will not be bounded by the shores of Villarrica, however lovely they may be, and I will keep my readers apprised of all that I learn as I read more about and continue to dream of wandering through wilds of Patagonia.

Newspapers: An Endangered Species or an Evolving One?

In the past few weeks, two major dailies ceased to exist in print form. One was The Rocky Mountain News and the other The Seattle Post Intelligencer. The loss of these papers leaves their hometowns with only a single paper to cover local issues. Many other major cities like San Francisco and Detroit, are already in this position, and more cities are likely to join them as local and regional newspapers find it increasingly hard to compete in the world of the 24-hour news cycle and the instant access to breaking news that the Internet provides.

Many fear that the quality of local reporting will suffer as a result, and that the public will find it harder to hold their local officials accountable because they won't really know what is going on in their schools or mayors' offices.
Yet the power of print has faced such doomsaying before and survived, even thrived. Books have not yet been replaced by movies, CDs, videogames, TV, or the Internet, and there are in fact more literate people on the planet in 2009 than at any time in history.

So the market for news is there and growing: the difficulty is how to make room for the news you get on your iPhone and the pleasure of sitting at your local cafe and leafing through pages of newsprint you can hold in your hands.

And more importantly, since newspapers are a business and not a public service, how can they continue to generate enough revenue to survive when so many of us think that just about any content we get off the Internet, we should get for free.

If you take my hometown, Palo Alto, you could say that the newspaper business is thriving. We not only have The Palo Alto Daily News available online and in a paper version, but in the ten years I've lived here, that little paper has been joined by The Daily Post and other variations on the same theme for other local cities. These papers, although a little tabloid-like for my own personal taste, do take on city hall, the local school board, utilities, cable companies. You name the muck; they rake it.

On the other hand, the two major cities I live closest to – San Francisco and San Jose-- have seen their daily newspapers shrivel to a mere shell of their former selves. As Gertrude Stein once said of Oakland, “there's no there there” any more. And both of these papers, The San Francisco Chronicle and The San Jose Mercury News, seem to be caught in a vicious cycle of shrinking ad revenue, shrinking staffs, shrinking content, shrinking readership.

Newspapers need a new business model, and they might find one in the world of non-profits like National Public Radio and the Corporation for Public Broadcasting where your target audience subscribes to content that is ostensibly “free” but at the cost of a nominal membership fee, corporate underwriting, and government subsidy. Surely, if the U.S. government can underwrite the transition to digital TV, it can shell out a little money to keep a free press alive.

A more promising approach is the idea of bundling news content in the same way that database companies have cooperated to provide a whole range of print journals online to public and university libraries. If a user knew that s/he could get the sports page from The Chicago Sun-Times, the editorial page from The New York Times, politics fromThe Washington Post, business reporting from The Wall Street Journal, and local news from their local newspaper, s/he might be willing to ante up for the privilege of getting that information online.

If newspapers were willing to allow users to select a slice of their content and create their own “personal” ideal newspaper, they might find the audience and the advertisers they are looking for.

In any case, newspapers need to think creatively about how to reinvent themselves before they truly become an “endangered” species, and that would leave all of us much poor for the loss.

For other thoughtful commentaries on the possible demise of the newspaper see The New Yorker, and Clay Shirky's "Newspapers and Thinking the Unthinkable."

Let them Eat Cake, and other Musings on the Financial Crisis

Now that public outrage du jour has turned towards AIG bonuses, I've been trying to make sense of what these recent events-- Bernie Madoff's guilty plea, Citibank's surprise report that it finally operated at a profit, and the widening of foreclosure problems into fixed rate mortgages--might tell us about the overall economy.

Are we at the bottom, or still sliding down towards it? Do we need to worry about imminent deflation or long-term hyperinflation? Will the economic stimulus turn out to be too little, too late or too much, too soon? And how do we get any kind of accountability back into our financial system?

Among all the contradictory indications of the past week, one piece of financial reporting stood out for me. Josh Bearman's story of how he started his own Ponzi scheme as a child gave the clearest narrative yet of how a Ponzi scheme works, but it also demonstrated the psychological dimensions of these schemes that keep both the perpetrators and the victims invested in believing in their own lies.

As a third-grader, Josh arrived at a new school where he had no “currency” to let him participate in the market of school lunch trading because his mom believed in “no sugar” lunches. So he started offering kids the promise of a “future security” in return for all the Cheetos, Rice Krispy treats, and other snacks he could get.

He even recorded their names in a book with the items they gave him and told them he would give them slices of a fabulous cake he said his mother baked for him at the end of every school year. As he himself put it, “[B]asically, I developed this sort of derivative lunchroom market for delicious cake futures," (“Sweet Memories Of A Snack Food Financial Scheme,” Planet Money/NPR, March 13, 2009).

Most of the kids bought into the scheme with enthusiasm until one skeptic figured out that there was no way to bake enough cakes to pay for all the food Josh had been enjoying. But Josh himself and the other kids were so invested in the idea of this glorious cake and so afraid of the prospect of admitting that they might have traded all their goodies for nothing that they poured scorn on the skeptic, forcing him to back down.

It was only when adult “regulatory” authorities intervened that Josh's scheme was exposed and Josh himself punished. Still, as Madoff's victims know all too well, there was no getting back their investments: as Josh concludes, “those Cheetos and Nutter Butters, they were never coming back."

A similar dynamic of uncovering explanations that don't add up has dominated reporting on the AIG bonuses. First the public was told that there was nothing federal regulators, or the Treasury Department, or even the new head of AIG could do about these bonuses because they were “contractual obligations.” That may be true, but whoever wrote these contracts was certainly setting up the recipients for a sweet deal.

In fact, the hand-wringing over these contracts rings increasingly hollow as more and more details emerge about the legislative bailout that authorized payments to AIG in the first place.

While the House version had specifically included language to exclude taxpayer payments for these bonuses, the language was reinserted in last minute revisions to the bill. Democratic Senator Christopher Dodd told CNN on March 18th that "he was responsible for language added to the federal stimulus bill to make sure that already-existing contracts for bonuses at companies receiving federal bailout money were honored."

According to Dodd, the request to reinsert the language came from officials at the Treasury Department whom he declined to identify. According to Dodd, they were "afraid the government would face numerous lawsuits without the new language," ("Dodd: Administration pushed for language protecting bonuses," CNNPolitics.com). Dodd himself has received more donations from AIG than any other member of Congress.

So it's not just AIG greed that is responsible for these excessive payouts, but it also appears the either political indebtedness or cowardice or incompetence in our own government has also allowed the greed to continue unabated and unchecked.

In addition to the "our hands our tied" defense, AIG executives also argued that they needed these bonuses for “retention” purposes. Really. The same financial wizards who created the credit default swamps that helped bring on our current economic Armageddon reaped huge rewards for their mischief. Then they allegedly needed these financial incentives in order to stay on because they were the only ones who understood the mess well enough to clean it up.

Apparently, one million dollars per person was not enough for eleven of them who took the money and left anyway.(See The Wall Street Journal, “AIG's Liddy Asks Employees to Give Back Bonuses, 3/18/09). These are the people who are supposedly irreplaceable “top” talent in a market where financial services firms have taken huge hits and let go thousands of highly-qualified professionals.

If you believe that, then I have a couple of slices of cake I'd like to sell you. Just hand over that package of Twinkies first.

Why I Parted Ways with Wells Fargo

A few weeks ago my husband and I found ourselves driving along El Camino Real trying to decide what bank we were going to choose for our new business. We had already tried our credit union, but in this instance they couldn't help us out because they don't offer small business accounts.

So there we were, taking a shot in the dark on one of the brand name banks (or what's left of them). On our left was Bank of America. “No way,” I said, "they're in deep trouble ever since their merger with Merrill Lynch.” On our right was Citibank. “Even worse,” I told him.

Then there was Wells Fargo. “Well, at least it's based in San Francisco, so it's relatively local,” I thought, all the while having the sinking feeling that we really shouldn't rush into this without doing more research.

But my husband was determined that we stop paying business expenses out of our personal accounts so we arrived at the new accounts desk where we met your typical unctuous account manager. After signing mountains of paper work, he finally got around to what I really interested in: fees. “You may see a fee on your account,” he told us, “but just let me know and we'll remove it.”

“Does the savings account bear interest?” I asked and received a blank look. I took that as a “no.”

The first signs of problems appeared when I couldn't get the Wells Fargo account information to download into my Quicken software. The account manager had called my husband to see how things were going even though we'd made it clear that I handled the finances for the new company.

"How do I download my account information?” I asked. He gave me a toll-free number to call. He gave me another toll-free number when I asked about online bill payment. He didn't say anything when I told him a "check card rewards annual fee" had already turned up on our account. The guy was great at giving out numbers and asking how we liked our account but not very good at anything else. Nor were the people on the toll-free line who couldn't even figure out whether Wells Fargo supports downloads into Quicken.

Then the real problems started. I had set up online bill pay, where I admit the instructions said that bills would take two business days to process. Of course, at my credit union, these electronic transfers never take two days since computer transactions are supposed to speed up the whole process of paying bills. Otherwise, we'd still be using snail mail.

But not at Wells Fargo. There a payment that was supposed to take place on the Thursday before the Presidents Day weekend actually took until the following Tuesday to go through, technically two full business days. I had to call my credit card company to reverse the late charge, and I was steamed. “You should schedule these payments a week in advance to be sure they arrive in time,” the customer service person told me over the phone. "Why?" I thought to myself. "Is Wells Fargo still delivering money by stage coach?"

For the privilege of having my bills paid as slowly as possible, I also found out that Wells Fargo was going to charge me $20 a month. Despite the promise of a fee waiver, I was also being charged $20 for the privilege of having a savings account that paid no interest. Plus $35 for a box of checks and $12 for a Rewards Check Card, aka an ATM card, I never asked for or even activated. My Wells Fargo Business Services Package account that was supposed to offer me "greater value that will save you money and time" was certainly not doing either.

The final straw occurred when I received my first statement and noticed the following notice on the last page: “Effective April 1, 2009 the Deposited Items Fee will be $0.50 after 20 free deposited items. Also, the Cash Deposited Fee will be $0.20 per $100 after 5,000 free cash deposited." This was followed by a list of thirteen other fees that were also “changing,” a euphemism for “increasing.”

For a moment I could not believe what I was reading. Wells Fargo was going to charge me money for giving them my cash?

I immediately emailed the account manager who had been so eager to find out how much we liked our new Expanded Business Services Package. Why are we going to have to pay to deposit funds?” I wrote. “I have never in my life paid any institution to give them my money."

I received no response, either by email or telephone, and a few days later I told my husband that we were going to close the account.

Getting our money back was no picnic either. The account manager on duty had to check with the bank manager to get permission to close the account. “We shouldn't be charged for the rewards check card since we never used it,” I told her. “I'll have to get the bank manager again in that case,” she responded. I looked at my husband who was already impatient to leave. “Never mind,” I said. “It's not worth the trouble.”

We opened our account with Wells Fargo on January 26th, 2009, and we closed it on March 6th. The experience cost us $87 and some small change.

In the meantime, I had done some research on the Internet and found a local bank that specializes in banking for high tech start-ups. They charge one basic fee per month but waive it for the first year while a business is getting going. So far Silicon Valley Bank has been a pleasure to work with and very responsive to any questions or concerns I've raised.

So what is the moral of my financial tale?

Our brief experience with Wells Fargo points to some of the fundamental problems with big banks in today's world. Not only are these banks “too big to fail,” which means they don't take the pain as well as the gain that of the free market, but they also don't offer small businesses or individual customers any better service in exchange for using a “name brand” company.

Most individuals and most small businesses would be better off going with a local credit union or a local bank that specializes in investing in its community than opening an account at a big "name brand" bank.

Bigger isn't necessarily better in the financial world, and it's not just our government and taxpayers who are finding that out. If I were a customer at Citibank, Wells Fargo, Bank of America, JP Morgan Chase, or Wachovia, I'd be shopping around for an institution that offers real service and doesn't nickel-and-dime away my savings. At the very least, I shouldn't have to pay my bank just for the privilege of depositing my money.

Facing the Fears of another Great Depression: Thoughts on how that Crisis Shaped Generations of My Family

During the past months as the financial crisis in the U.S has deepened, politicans, economists, and pundits have raised the specter of “another Great Depression.” Ben Bernanke's main credential for leading us out of this crisis has rested on his fame as a student of the Great Depression. Barack Obama's major test of leadership is already defined as whether or not he can lead us out of the worst economic downturn since the Great Depression.

But when interviewers actually talk to survivors of the Great Depression, the differences in daily experiences between then and now are sharply evident. Those who lived through the Great Depression speak of difficulties staying warm, or trying to pack nineteen people into a single house, or shipping children off to more affluent relatives because they could not afford to feed them.

Certainly the presence of a safety net in the form of unemployment insurance, food stamps, Medicaid and COBRA means that we are unlikely to see bread lines or tent cities unless things become much, much worse than we can imagine right now.

While many are quick to point out the stark differences in today's financial crisis and the crash of 1929 that turned into the Great Depression: 8-10% unemployment versus 25%, a loss of perhaps 7000 banks between 1930 and 1933 versus an estimated 1000 banks in danger of insolvency now, there is one striking parallel between that time of economic peril and our own.

The Great Depression saw a widespread reduction in the American standard of living that was not reversed until the postwar boom of the late 40s and 50s. Today there is also a widespread expectation among economists and the public at large that most Americans are likely to see their standard of living fall as taxpayers face a national debt that we and our children will be paying for the foreseeable future.

For generations, Americans have worked hard, not just in the hope, but rather in the expectation, that their children would have longer, healthier, and better lives than their own. Until this past year, many Americans in their 20s, 30s and 40s were enjoying a higher standard of living than their own parents, albeit at the cost of increasing debt loads and two-income households. That expectation is no longer a given for larger and larger sectors of the population.

But as I reflect on this prospect of a lowered standard of living, I find myself less afraid of than reflective about the future. In an odd sort of way, I feel a little bit relieved to be facing a reprieve from this endless cycle of expectation, of giving my children a higher standard of living than what they enjoy right now. “Do we have enough?” I ask myself as I also wonder, “Do we really need to strive for any more?”

Unlike most people my age, I am in fact the child of parents who came of age in the Great Depression rather than the great postwar Baby Boom. I was born at the very tail end of that boom, just as my siblings are part of its vanguard.

While I never experienced the hardships that my parents went through in the 1930s, their experiences shaped the way they brought me up and the expectations they set up for me.

I knew that my father, in particular, could not tolerate children who were fussy about what they were served at meals, a hang-over from days when it was the height of rudeness to refuse to eat whatever a family put on the table because it might be the only thing they had to offer a guest.

I felt a great deal of poignancy in finding a letter my mother wrote to her parents when she was a freshman at the University of Michigan in 1934, struggling to pay for books, and hoping that she could sell back her textbooks as quickly as possible to recoup what she had had to expend on them.

Sixteen years old and desperately homesick, she gave up the opportunity to get a college education away from home and returned to live with her parents and attend Wayne State University in her home town of Detroit. What part the family finances played in this decision remains a mystery to me, but the prospect of paying for tuition, room and board must have seemed an enormous expense to my grandparents who had never been to college themselves.

I do know that my father suddenly found himself the head of household at the age of eighteen in 1930 and that he worked very hard to make sure his five siblings went to college, or joined the military, or learned a trade. Even when they were all married and with children of their own, my father never stopped feeling a parental responsibility for his brothers and his youngest sister, Jean.

Since the weight of the Depression fell hardest on those with less education, it made my parents all the more determined to put their own children through college. In two generations my family experienced a huge boost in their standard of living that was almost exclusively due to education. My paternal grandfather arrived at Ellis Island in the 1890s with the expectation of learning a trade, and my mother's father had to leave school after the fourth grade to work to support his family. My parents were the first ones in their families to go to college, and for my siblings and our children, college has been a given.

Because of my parents' experiences during the Great Depression, I knew that our vacations would consist of trips to visit family or camping around the country and would rarely include a night in a hotel. Christmas gifts were plentiful but never included the latest “must have” toy; instead my father enjoyed the post-Christmas sales that helped him get bargain gifts for my January birthday, and once gleefully presented me with thirteen dolls because the sales had been too good to resist.

I remember when one family member came across a sign that said, “Eat it up, wear it out, make it do, or go without,” and told Dad that we had found his perfect motto. We joked about his penny-pinching ways, but his frugality allowed him to put four kids through college and help them get a good start in life.

So when I look at my own children and their friends and see the number of cell phones, iPods, video games etc. that they go through in a year, I find that a certain part of me is pretty much appalled at the materialistic excesses of the average American standard of living. I look around my own home with my kids' closets full of toys and the presence of five computers for three people, and that same accusing finger points right in my own face.

This is not to say that I want the doomsday scenario of another Great Depression to come true. Nor do I want people to lose their homes or their jobs or have to struggle to send their kids to college as a result of the current economic instability.

But it does seem to me that as the American consumers have put the brakes on their spending this year and started once again to increase the collective savings rate, there may be a silver lining in our financial woes.

If we start consuming less, perhaps we may find that we appreciate what have even more. And if our standard of living plateaus with this generation, we may find that we and our children can live quite well without always wanting more and more.

Just as the experience of the Great Depression profoundly affected the way my parents viewed money, today's economic crisis is likely to affect my own family and the ways that my children think about money and their own standard of living. They may find it harder to get a job that pays well or to afford a house, or they may make different choices about what they need to achieve a “good” standard of living.

What I believe won't change are the fundamental values that my grandparents passed on to their children, grandchildren, and great-grandchildren: the importance of education, supporting one's family, and the belief that you pay forward your own good fortune to the next generations. That's a legacy that can get you through the worst of times.

The New "n-word": Nationalization

A number of readers who've commented to me about my recent blog on the financial crisis directed me to the March 3rd interview on NPR's Fresh Air with Simon Johnson, former research director at the IMF and now a professor of entrepreneurship at MIT's Sloan School of Management.

In that interview, Johnson argues forcefully that the United States government should follow the standard IMF formula for dealing with “bad” banks: nationalize them using FDIC intervention, reorganize them, clean them up, and immediately privatize them again.

Paraphrasing what Johnson has written in recent weeks, Terry Gross stated: “If you showed old hands at the International Monetary Fund... the U.S. ledger books, but you hid the name 'United States,' so that they didn't know what country you were talking about, they would all say, 'Nationalize the banking system. That's the solution.'”

Mr. Johnson agreed and in the rest of the interview made a very cogent argument for why such a policy makes the most economic sense as well as warning that the current policy of serial bailouts may only be prolonging the crisis and potentially making it worse.

But Terry Gross also pointed to a central flaw in this “obvious” solution when she drew a distinction between the hypothetical “if you hid the name of the country,” and the reality that this crisis is taking in the world's second largest economy and most powerful nation in the world.

Johnson himself acknowledged the political sensitivity surrounding the crisis when he said that since the United States is the IMF's largest shareholder, that organization doesn't even want to state publicly that U.S. should take the nationalization route.

The resulting paradox is that a temporary nationalization seems to be the sensible, time-tested solution to managing “bad” banks even for a superpower like the U.S. Yet no one dares say so.

Instead, as NPR “Planet Money” reporter Adam Davidson indicated on Morning Edition, “The official word is clear: The Obama administration and Federal Reserve officials say that nationalizing the banks is the wrong choice and that they have no intention of doing it,” (“Obama Administration Could Still Nationalize Banks,” March 6, 2009).

The reasons: 1) Republicans screaming about “socialism” in our banking system, even though the government already owns substantial portions of some of the largest banks like Citibank; 2) Fear that the very mention of the “n-word” will precipitate a run on banks or further devaluation of financial stocks in the stock market; and 3) the fact that many politicians are highly indebted to Wall Street for political contributions and don't want to be in the position of being responsible for their donors losing their jobs.

In fact, Simon Johnson's strongest criticism of the actions the Treasury Department has taken to date focuses on the fact that so many banking executives like Vikram Pandit of Citibank have been allowed to stay in their positions, when a central tenet of cleaning up banks is: First, fire all the top level executives.

However, while the government continues with its official denials of any intentions to “nationalize” failing banks, more and more of those in the financial world expect that behind the scenes, they are taking precisely the kinds of steps that would constitute nationalization in all but name through increasing levels of government ownership of struggling banks.

As one independent analyst, Sean West of Eurasia Group, told Adam Davidson, “The net effect, rather than actually talking in [the] language of nationalization, it's really [that] the government has opened the door to increasing ownership of these banks.” In other words, if the U.S. doesn't dare nationalize the banks openly, it may be setting up “stress tests” that force the banks to ask for such intervention, that is, to “nationalize themselves.”

So even if “nationalization” is the new “n-word” in the political lexicon, the extent of government intervention and government control of banks continues to increase. Taking the standard IMF approach to cleaning up the U.S. banking system may not be politically feasible or even logistically possible since the scale of clean-up required is unlike anything the IMF or FDIC or any regulatory agency have ever seen.

But it seems that whether or not we call it “nationalization,” we the people and our government are ending up owning a lot more of the banking system than we ever bargained for.

Pay Now or Pay More Later: What Can We Really Do about Toxic Assets?

For those of you who still think a “tarp” is something to cover up ugly debris, the government's TARP (Troubled Asset Relief Program) program actually does reflect the literal sense of the word quite well. Although the TARP has been an ever evolving work-in-process since it was first conceived by Hank Paulson in the last days of the Bush Administration, one aspect of it has not changed. TARP still represents the government's best efforts to help the financial industry contain a mountain of largely uncollectible debt. Yet months after the first attempts to bail out the banks, we still don't know just how toxic their "troubled assets" really are.

If you are wondering why the Feds and the Treasury and SuperObama can't just clean up the mess, it's worth taking the better part of an hour to listen to this week's public radio program, This American Life. NPR's Adam Davidson and TAL's Alex Blumberg have produced some of the best reporting to date on the banking crisis (See “Giant Pool of Money” and “Another Frightening Show about the Economy”.)

The most recent segment, “Bad Bank,” explains why we American taxpayers may have no choice but to pay “as much as we can” to redeem debts that bankers made to people with lousy credit and no credible means to pay back their loans. As a researcher from Deutsche Bank, Joe Lavorgna, wrote bluntly in a recent report: “Ultimately, the taxpayer will be on the hook one way or another, either through greatly diminished job prospects and/or significantly higher taxes down the line.” Mr. Lavorgna goes on to suggest that the government should "estimate the highest price it can pay for the various toxic assets on financial institution balance sheets," and then then cough up the funds even at taxpayer expense.("Taxpayer Beware: Bank Bailout Will Hurt").

If this sounds like a holdup note, both the reporters on this story and the economists and bankers they interview agree, it is. The banking industry after all its greed and excesses is basically telling us, “Pay up now, or just pay more later.”

But as one expert in banking crises from the Columbia University School of Business points out, this aspect of the financial crisis is not really new. According to Professor David Beim, history shows that governments have always bailed out the banks because societies can't function without them. He cites the example of a banking crisis in 37 AD that had the Roman emperor galloping back to the capital posthaste with bags of money to give to the bankers who had created the problem by making bad loans. Sound familiar?

Professor Beim notes that this has happened over and over and over again, only not on such a global scale. We'd be in great shape, relatively speaking, if the U.S. were merely Indonesia or Argentina. The IMF could intervene, take over the bad banks, clean things up, and the global economy would keep chugging along nicely. But take a behemoth like the United States with its Bank of America and Citigroup, which together hold over a quarter of all the money in the U.S. banking system, and we face a dilemma of a different order of magnitude.

The problem is compounded by the continuing belief that such dire outcomes “can't happen here” and by the anger of the American public who are still telling politicians to let the bankers take it on the chin even though it could propel the United States into a economic crisis that would make make the Great Depression pale by comparison.

Yet by far the scariest part of this reporting on the state of “bad banks” does not come from tales of people losing jobs or homes or life savings, but rather from a simple graph. According to David Beim, this is the hard data that shows we are not simply facing a housing crisis or a credit crisis but something much deeper and more systemic.

The graph shows that for much of postwar history, the collective debt of the American consumer has always been a mere fraction of our gross domestic product (GDP), usually hovering around 30%, sometimes rising to 50%, but in the last ten years, rising faster and until it reaches a point where the indebtedness of the American people equals GDP. That means 100% of what we owe is equal to 100% of all the goods and services we produce.

That has only happened twice in the last hundred years: in 1929 and now. As a nation we are literally out of room to borrow because we don't have the assets to borrow against. From this perspective, the problem of banks' toxic assets, intractable as it seems to be, is just the tip of the iceberg. We have all been victims of our own collective greed and our collective indifference to consumer borrowing run amuck.

So what can we do? Well, according to the experts we don't have many choices. Thanks to the fiscal irresponsibility of the past decade, we have a war we've borrowed to pay for, and a financial system that deregulation has helped send into a tailspin. And we, as consumers, have gone along for the “free” ride that is proving to be a costly fantasy trip.

We can pay now, or pay more later. And no amount of outrage or denial will change that.