TIME

Remembering James ‘Jim’ Brady

The former White House press secretary died earlier this month

Ronnie and I could tell there was something special about Jim Brady, who died Aug. 4 at 73, from the moment we met him. He had a certain twinkle in his eye and a way of letting you know that he knew what he was doing and everything would be all right. He had a zest for life that was infectious. He loved to hear or tell a good story, laughed easily, could see the silver lining in even the darkest cloud and made the best chili in town!

When it was time to be serious, Jim was. Often, in a three-piece suit, notebook and pencil in hand, Jim was at Ronnie’s side, listening intently, brow furrowed in concentration, taking detailed notes so he could brief the press on whatever had transpired. And when Jim gave advice, Ronnie and I listened, because we knew that he had the best instincts in town.

It broke Ronnie’s and my heart that Jim and Sarah were forced to face such adversity [after he was seriously wounded during the 1981 assassination attempt on President Reagan]. But they never complained. Jim was a patriot. He loved his country and was proud to serve. Ronnie insisted that Jim remain his press secretary, because it was the right thing to do and the White House just did not seem complete without Jim. He and Sarah became dear friends. I miss Jim and pray for Sarah.

Reagan is a former First Lady and the widow of President Ronald Reagan

TIME Economy

Last Tango in Buenos Aires

Argentina’s debt snarl tells us how risky the global financial system still is

There’s a legal adage that goes, “Hard cases make bad law.” A recent U.S. court ruling against Argentina, which pushed the country into a new technical default on its sovereign debt, is a case in point. In 2001, Argentina defaulted on $80 billion worth of sovereign debt, the bonds that a country issues to raise money. It had to restructure, just as Greece had to more recently, and over the years, some 93% of creditors went along with the cut-rate deals, taking “exchange” bonds that paid 30¢ on the dollar. But some, like Elliott Management, the hedge fund started by Wall Street titan Paul Singer, held out. Tens of millions of dollars in legal fees later, Elliott won its case.

U.S. federal judge Thomas Griesa ruled earlier this summer that unless Argentina paid creditors like Elliott and other holdouts 100% of their claims, it couldn’t pay anybody else either. Paying Elliott in full would mean that, contractually, the country would also have to pay everyone else in full too–a $29 billion commitment. The case is full of gnarly legal and financial issues. But what it tells us is dead simple: the world financial order is still far too complex and opaque.

It’s tough to cry for Argentina–or the hedge funds. Elliott says Argentina’s claim that it has been victimized by “vulture funds” is a populist political strategy to drum up support for President Cristina Fernández de Kirchner’s flagging party. “Argentina isn’t a poor country. It’s a G-20 nation,” says Jay Newman, Elliott’s Argentina-portfolio manager. “It’s chosen for political reasons not to negotiate a fair settlement with us or more than 61,000 other bondholders.” Certainly no one would argue that the Argentine government is a paragon of best practices; Argentina, which had the same per capita GDP as Switzerland in the 1950s, has defaulted eight times.

Then again, the vultures haven’t done so badly either. Many bought bonds postdefault for pennies on the dollar. Now they are eschewing an already rich return for a regal one, while setting a precedent that could make creditors reluctant to cooperate when nations default in the future. “This has become a morality play which has given rise to a host of new legal problems,” says Jonathan Blackman, the Cleary Gottlieb partner defending Argentina. Both sides are waging an ugly media war complete with ad campaigns, as thousands of other creditors and financial institutions around the world nervously await the final result.

The Argentine crisis says three important things about the global economy. First, the balance between creditors and debtors has shifted. As data from the McKinsey Global Institute (MGI) show, there’s more debt globally than there was before the 2008 financial crisis. But now, the largest portion of it consists of public-sector debt. “Debt in the economy is like a balloon,” explains Susan Lund, a partner at MGI. “When you squeeze it out of one place, it grows in another.” With the rise in public debt comes a greater risk of sovereign defaults, which can wreak havoc on the global economy. (Remember the euro crisis?)

Second, the global economy is becoming more fragmented. The fact that a federal court in New York City ruled in favor of the holdouts is a sign that the global economy is splitting along national and ideological lines: British courts tend to go with majority rule in sovereign cases, and local markets have any number of other ways of handling sovereign-debt deals. The BRIC nations, aside from increasingly cutting their own trade deals, have set up a new development bank, which may become a source of capital for countries like Argentina if they remain shut out of the Western credit markets. That could give Russia and China more leverage over, for example, Argentina’s natural resources. (The country has the world’s second largest shale-gas deposit.)

Finally, the case shows how much work remains to be done in making our financial system more transparent. In addition to establishing a single standard for sovereign default, we desperately need to make complex security holdings more visible. Academics like Joseph Stiglitz say Elliott Management actually stands to benefit from an Argentine default, since nearly $1 billion worth of credit-default swaps exist on the country; that’s insurance that will pay out now that Argentina has defaulted. While the Elliott subsidiary that went to court against Buenos Aires says it holds no such swaps, the hedge-fund firm as a whole doesn’t disclose trading positions, and the swaps holdings of individual companies aren’t public record. They should be. Knowing exactly who stands to gain–or lose–from fiscal turmoil that can affect all of us could help make the right fixes at least a little more apparent.

TO READ MORE BY RANA FOROOHAR, GO TO time.com/foroohar

TIME Iraq

An Evil That Must Be Stopped

ISIS is the most serious threat to American interests in a decade. Why we must counter it

Ryan Crocker, who probably knows the Middle East better than any other living American diplomat, recently cut to the chase about the situation in Iraq. “This is about America’s national security,” he told the New York Times. “We don’t understand real evil, organized evil, very well. This is evil incarnate. People like [ISIS leader] Abu Bakr al-Baghdadi have been in a fight for a decade. They are messianic in their vision, and they are not going to stop.”

We’ve been in the fight for more than a decade too. It began as a proportionate attempt to retaliate against those who attacked America on Sept. 11, 2001. We successfully ousted the Taliban government that supported Osama bin Laden in Afghanistan, but Osama and many of his top aides escaped. The war against al-Qaeda should have continued as a targeted special-forces operation, but the flagrantly disproportionate Bush-Cheney invasion of Iraq changed all that … and the Obama surge in Afghanistan didn’t help much, either. Suddenly we found ourselves locked in the middle of civil wars in both countries (or perhaps I should say “countries”). The President was right to extricate our combat troops from those futile fights.

But the rise of the Islamic State in Iraq and Syria (ISIS–or the Levant, ISIL, if you prefer) has changed the game again. Terrorism has a new name, and now, for the first time, it has a well-organized, well-funded, well-armed military with the ability to take and perhaps hold territory. There have been reports of al-Qaeda elements linking up with the Islamic State. There are reports of hundreds of would-be jihadis from around the world joining ISIS, including dozens from the U.S. ISIS is considered so extreme that Ayman al-Zawahiri, the leader of al-Qaeda’s central command, has condemned it. The Islamic State is metastasizing and committing mass atrocities with astonishing ferocity. It aspires to attack the U.S. and will, no doubt, soon attempt to do so. This is a threat we cannot ignore.

Yes, we’re sick of war, sick of the region and particularly sick of Iraq–but, as seemed clear in the days after 9/11, and less clear since, this is a struggle that is going to be with us for a very long time. It doesn’t need to be the thunderous, all-consuming fight that the Bush-Cheney government made it out to be. It will require a strategic rethink of who our friends and enemies are in the region. We may find that Iran is part of the ISIS solution rather than part of the problem–a problem that Saudi Arabia’s support for Sunni extremism helped create. We may even find ourselves on the same side as Syria’s disgraceful Bashar Assad: ISIS is the greatest threat to his continued rule.

There are real dangers here. We don’t want to take sides in what may well become a cataclysmic regional war between Sunni and Shi’ite. We don’t want to become the “air force of Shi’ite militias,” as former CIA director David Petraeus has said. The best way forward would be to work through a reconstituted Iraqi government, led by newly appointed Prime Minister Haider al-Abadi. But we’ve seen the danger of arming the Iraqis in the past; those arms are now being used against us by ISIS. In the best-case scenario, al-Abadi builds a government that wins back the trust of Iraq’s Sunnis, but that won’t happen overnight.

In the worst-case scenario, the U.S. military would have to fight the Islamic State from a Kurdish base; support for the peshmerga forces is essential. Any direct U.S. military action should be measured and proportionate–an insinuation rather than an invasion, taken in concert with allies who are capable of sophisticated covert operations. This time, as opposed to 2003, more than a few of the regional players on both sides of the sectarian divide want our help in the war on ISIS. The President may hope that he can keep U.S. involvement at current levels–air strikes and the presence of 800 special operators on the ground, who are mostly scouting the enemy and working up new targeting sets. But no one should be surprised if we find ourselves on a slippery slope toward more violence. There will be no escaping this fight, unfortunately.

There has been endless debate about who “lost” Iraq and Syria. Even Hillary Clinton and Barack Obama are squabbling about it. We don’t have the luxury of wasting time or political energy on that now. There is not a politician, policymaker or journalist who hasn’t been wrong about Iraq at some point. What’s needed is a clear and united sense of national purpose … as clear and united as it was on Sept. 12, 2001. Our war against al-Qaeda-style extremism isn’t over; it may have only just begun.

TO READ JOE’S BLOG POSTS, GO TO time.com/swampland

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