It figures. The Securities and Exchange Commission nets the federal government about $300 million in fees and fines, after its own expenses), but it is so poorly organized that, according to GAO audits, “basic accounting continually bedevils the agency responsible for guaranteeing the soundness of American financial markets.” Is this what “starving the beast” comes down to?

“It’s almost as if the commission is being set up to fail,” said Harvey L. Pitt, who was S.E.C. chairman from 2001 to 2003 and who now is chief executive of Kalorama Partners.

Dodd-Frank did authorize a doubling of the commission’s budget, to $2.25 billion, over the next five years — without providing the money for it. It also authorized the commission to spend as much as $100 million beyond its operating budget for new technology systems.

Ms. Schapiro said that buying new technology was crucial because it helped to attract specialists in mathematics and financial systems that the S.E.C. needed to help police the rapidly evolving financial markets.

“It’s very hard to attract great people if they think that there’s not going to be the opportunity to use technology to get the job done, which can make us so much more efficient,” she said.

It’s a pity that Edward Wyatt’s story doesn’t offer an explanation of where the SEC’s budget bloat — its funding doubled during the first GW Bush administration. Money isn’t everything; it can’t solve problems by itself, especially if administrators (such as former Chariman Christopher Cox) are not interested in solving them.

In an important development, pepperoni is showing up on artisanal pizzas. Julia Moskin reports.

“Purely an Italian-American creation, like chicken Parmesan,” said John Mariani, a food writer and historian who has just published a book with the modest title: “How Italian Food Conquered the World.” “Peperoni” is the Italian word for large peppers, as in bell peppers, and there is no Italian salami called by that name, though some salamis from Calabria and Abruzzo in the south are similarly spicy and flushed red with dried chilies. The first reference to pepperoni in print is from 1919, Mr. Mariani said, the period when pizzerias and Italian butcher shops began to flourish here.
Pepperoni certainly has conquered the United States. Hormel is the biggest-selling brand, and in the run-up to the Super Bowl this Sunday, the company has sold enough pepperoni (40 million feet) to tunnel all the way through the planet Earth, said Holly Drennan, a product manager.
Michael Ruhlman, an expert in meat curing who is writing a book on Italian salumi, doesn’t flinch from calling pepperoni pizza a “bastard” dish, a distorted reflection of wholesome tradition. “Bread, cheese and salami is a good idea,” he said. “But America has a way of taking a good idea, mass-producing it to the point of profound mediocrity, then losing our sense of where the idea comes from.” He prefers lardo or a fine-grained salami, very thinly sliced, then laid over pizza as it comes out of the oven rather than cooked in the oven.

Our own preference is for prosciutto and no tomatoes. How we miss Loui Loui!

Medieval monarchs quarreled with territorial grandees and local customs to raise armies and taxes in a struggle for state power that it took the French Revolution (and an end of monarchy) to win. Who knows what corresponding trauma will end the conflict between the United States’ laws and the special interests that work hard to neutralize them. Joe Nocera in the Times: 

Arguably, the United States now has a corporate tax code that’s the worst of all worlds. The official rate is higher than in almost any other country, which forces companies to devote enormous time and effort to finding loopholes. Yet the government raises less money in corporate taxes than it once did, because of all the loopholes that have been added in recent decades.

{snip}

The problem with the current system is that it distorts incentives. Decisions that would otherwise be inefficient for a company — and that are indeed inefficient for the larger economy — can make sense when they bring a big tax break. “Companies should be making investments based on their commercial potential,” as Aswath Damodaran, a finance professor at New York University, says, “not for tax reasons.”

A corporation that isn’t paying roughly a third of its profits in taxes is cheating the body politic that nourishes it.

According to Jenna Wortham’s report, the world of online publishing is getting closer to sustaining itself financially — and without advertising. Richard Ziade’s Readability is set to offer apps that distribute micropayments to publishers.

“Asking someone to pay 45 cents to read an article may not be a big deal, but no one wants to deal with that transaction,” he said. Marco Arment, an adviser to Readability and the creator of Instapaper, a service for saving and reading online articles, made a version of his Instapaper app that will essentially be Readability’s mobile component. Mr. Arment said he thought the most likely customers for Readability’s pay service were “online power readers.”

“It’ll be the types who buy print magazines even though the same articles are online for free, just because they want to support the publication,” he said.

“On the Web, it’s not that people aren’t willing to pay small amounts for things; it’s that there is no easy way to pay,” he added. “If a service like Readability comes along and makes it easy, I think people will be willing to pay.”

[snip]

Mr. Benton of the Nieman Journalism Lab said that the interest in these services was driving “an increasing realization among publishers that not all customers are created equal, and some will pay for different experiences without advertisements.”

Jacob Weisberg, the editor in chief of the Slate Group, the online publisher owned by the Washington Post Company, said Slate had not talked to Readability but would “be happy to cash their checks.” Mr. Weisberg added that “if the numbers became meaningful, we’d of course want to negotiate” a deal.

They said it couldn’t be done.

On the vexed subject of “stability,” words of great good sense from Senator John Kerry.

The awakening across the Arab world must bring new light to Washington, too. Our interests are not served by watching friendly governments collapse under the weight of the anger and frustrations of their own people, nor by transferring power to radical groups that would spread extremism. Instead, the best way for our stable allies to survive is to respond to the genuine political, legal and economic needs of their people. And the Obama administration is already working to address these needs.

At other historic turning points, we have not always chosen wisely. We built an important alliance with a free Philippines by supporting the people when they showed Ferdinand Marcos the door in 1986. But we continue to pay a horrible price for clinging too long to Iran’s shah. How we behave in this moment of challenge in Cairo is critical. It is vital that we stand with the people who share our values and hopes and who seek the universal goals of freedom, prosperity and peace.

For three decades, the United States pursued a Mubarak policy. Now we must look beyond the Mubarak era and devise an Egyptian policy.

And a shot of real realism from David Brooks.

First, the foreign policy realists who say they tolerate authoritarian government for the sake of stability are ill informed. Autocracies are more fragile than any other form of government, by far.

In other words, the modern democratic world has no room for junior Kissingers.

Across, the river, in the Little Egypt part of Astoria, the locals exhibit a progressive grasp of American foreign policy.

Today, there are at least 10 mosques in Astoria, several Arabic newspapers and a flourishing cultural scene that is attracting young hipsters from Manhattan. The 2006-2008 American Community Survey found that roughly 14,000 Egyptians were living in New York City, though community leaders say the actual number is higher since some are undocumented.

For some of the Egyptian-Americans of Astoria, who have long prided themselves on their assimilation into American life, the events in Egypt have tapped into divided loyalties. Many expressed support for “Barack Hussein Obama,” revered by many in the Arab world for his outreach to Muslims. But they also chastised him for what they described as his tepid rebuke of Mr. Mubarak and for American hypocrisy in the Middle East in general.

Mr. El Sayed was emphatic that he identified with both the protesters on the streets of Cairo and the man in the White House. “The U.S. has always supported tyrants, look at the shah, look at Saudi Arabia, we even supported bin Laden. So in Egypt we are now playing the same game by supporting Mubarak,” Mr. El Sayed said as he prepared his mother’s recipe for baba ghanouj, a dish of mashed eggplant. “But I would give my life for this country. We Egyptians here are American, and proud of it.”

But others said their patience with Washington was being tested. “Why doesn’t Mubarak appoint Obama, Hillary Clinton and Joe Biden to his new Cabinet since they are the ones who are saving him?” asked Hani Abdulhamid, 30, a filmmaker originally from Aswan, in southern Egypt. “They say he isn’t a dictator because he works for them.”

For those not lucky enough to emigrate to the United States, radical Islamism just might be the only response to American-suppolrted tyrannies.

We applaud Ross Douthat for reminding us how foolish it is to act according to principle in foreign affairs.

The memory of Nasser is a reminder that even if post-Mubarak Egypt doesn’t descend into religious dictatorship, it’s still likely to lurch in a more anti-American direction. The long-term consequences of a more populist and nationalistic Egypt might be better for the United States than the stasis of the Mubarak era, and the terrorism that it helped inspire. But then again they might be worse. There are devils behind every door.

Americans don’t like to admit this. We take refuge in foreign policy systems: liberal internationalism or realpolitik, neoconservatism or noninterventionism. We have theories, and expect the facts to fall into line behind them. Support democracy, and stability will take care of itself. Don’t meddle, and nobody will meddle with you. International institutions will keep the peace. No, balance-of-power politics will do it.

But history makes fools of us all. We make deals with dictators, and reap the whirlwind of terrorism. We promote democracy, and watch Islamists gain power from Iraq to Palestine. We leap into humanitarian interventions, and get bloodied in Somalia. We stay out, and watch genocide engulf Rwanda. We intervene in Afghanistan and then depart, and watch the Taliban take over. We intervene in Afghanistan and stay, and end up trapped there, with no end in sight.Sooner or later, the theories always fail. The world is too complicated for them, and too tragic. History has its upward arcs, but most crises require weighing unknowns against unknowns, and choosing between competing evils.

We wish that America, given its pathetic losing streak since 1945 (and, no, we did not win the Cold War), could lurch likewise.

The Times has taken the nomination of an openly gay lawyer, J Paul Oetken, to the Federal Bench as an occasion to revisit the aborted nomination, last year, of Daniel Alter, a matter that gets more coverage in Benjamin Weiser’s story.

Mr. Alter declined to comment on Thursday, but told The New York Law Journal in October that his nomination appeared to have run into trouble because of “certain false attributions” to him of statements that he denied making.

The Washington Blade had earlier reported that Mr. Alter, while working for the Anti-Defamation League, was quoted in a news service article as recommending against merchants using “Merry Christmas” instead of a more generic greeting and in remarks in a magazine suggesting the group favored legal challenges to the use of “under God” in the Pledge of Allegiance.

Mr. Alter told The Law Journal: “Neither of the quotations attributed to me are accurate or in any way reflect my personal reviews.” The White House has declined to comment on the issue.

Last summer, 66 of his former colleagues in the United States attorney’s office wrote to Mr. Schumer, urging the senator to fight for his nomination.

A fasten-seatbelts warning to Mr Oetken?

The murder of David Kato, in his own home and by someone whom he knew, reminds us that, in Uganda as elsewhere in Africa, homophobia is encouraged and even legitimated by evangelical christianists from the United States.

The Americans involved said they had no intention of stoking a violent reaction. But the antigay bill was drafted shortly thereafter. Some of the Ugandan politicians and preachers who wrote it had attended those sessions and said that they had discussed the legislation with the Americans.

After growing international pressure and threats from a few European countries to cut assistance — Uganda relies on hundreds of millions of dollars of aid — Uganda’s president, Yoweri Museveni, indicated that the bill would be scrapped.

But more than a year later, that has not happened, and the legislation remains a simmering issue in Parliament. Some political analysts say the bill could be passed in the coming months, after a general election in February that is expected to return Mr. Museveni, who has been in office for 25 years, to power.

Surely this dabbling in foreign affairs gives grounds for rescinding 503(c)(1) status.

Thanks to Amy Chua, for making “Mom, You’re One Tough Art Critic” a bit more newsworthy- and less slow-news-day-looking than it is.

Ms. Hanff is always on the lookout for “exceptional” drawings. But this entire batch would soon be archived in the rubbish bin. “I’m not sentimental about those at all,” she said. “It’s my job to avoid raising a hoarder, and I’m leading by example.”

But Elisabeth has been known to fish her drawings out of the trash and present them to her mother. “I’ll say, ‘Oh, thank you,’ ” Ms. Hanff said. “We’ll have a discussion. I’m not callous. But once she turns away, often I’ll toss it out again.”

Elisabeth’s creative work, it should be noted, can be found all over the house. (At this point, her 2-year-old sister, Charlotte, doesn’t claim as much wall space.) Elisabeth started embroidering last year. And her grandmother gave her a grown-up watercolor set. In a vaguely Dadaist spirit, Elisabeth used a floret of broccoli to paint the pointillist color study that hangs in her bedroom.

“I do think my kids are awesome,” Ms. Hanff said. “I tell them how great they are. But we’re not going to build an addition on the back for every piece of crayon art they’ve ever done.”

An addition might be cheaper than years of analysis. (We’re kidding!)

Happy Mozart’s Birthday!

As an unforeseen youth movement rocks Egypt more precariously than any previous opponents of Hosni Mubarak, the United States, stupefied by its fear of the Muslim Brotherhood, risks wrong-footing its relationship with the new régime, largely by hoping that there won’t be one. Mohamed ElBaradei,  a Nobelist and former head of IAEC as well as a champion of liberal reform, expected better of us.   

Dr. ElBaradei, with his international prestige, is a difficult critic for Mr. Mubarak’s government to jail, harass or besmirch, as it has many of his predecessors. And Dr. ElBaradei eases concerns about Islamists by putting a secular, liberal and familiar face on the opposition.

But he has been increasingly outspoken in his criticism of the West. He was stunned, he said, by the reaction of Secretary of State Hillary Rodham Clinton to the Egyptian protests. In a statement after Tuesday’s clashes, she urged restraint but described the Egyptian government as “stable” and “looking for ways to respond to the legitimate needs and interests of the Egyptian people.”

“ ‘Stability’ is a very pernicious word,” he said. “Stability at the expense of 30 years of martial law, rigged elections?” He added, “If they come later and say, as they did in Tunis, ‘We respect the will of the Tunisian people,’ it will be a little late in the day.”

It would have been nice of Sarah Lyall to give us some idea of how long the Labor peers can keep at their filibuster to prevent voting reform in Britain.

“It’s never been like this before, with such a palpable sense of anger,” said Baroness d’Souza, convener of the cross-bench peers, who have no party affiliation. “I believe that if this isn’t resolved quickly, what we’re seeing is the beginning of the unraveling of the House of Lords.”

The bill would trigger a referendum May 5 on whether to change the way election votes are calculated, and it would redraw Britain’s parliamentary boundaries, reducing the number of seats in the House of Commons to 600, from 650. The coalition government wants it, because it would fulfill the Liberal Democrats’ pledge to enact voting reform, and because the Conservatives would benefit from the boundary changes.

Labour is resisting because, while it supports voting reform, it vehemently opposes the redistricting proposal. The measure must become law by Feb. 16 in order for the May 5 referendum to proceed, and Labour is determined to delay the bill so that it misses the deadline.

Much as we detest the sound of chitchat on the street — when we’re not wearing our own sound-blocking Nano, that is — we squarely support the right to bear cell phones. We think that laws intended to “protect” pedestrians from vehicular injury by prohibiting the distraction of music and conversation has it exactly wrong.

But some outdoor exercisers who rely on music for a boost see the proposals as little more than a distraction for law enforcement officials. “Chasing down the runner who has his headphones in instead of chasing down the driver who’s been at the local pub sounds like they’re trying to pick the low-hanging fruit,” said John Wiant, 43, a runner from Newport Beach, Calif.

In Arkansas, an avalanche of criticism on Tuesday led a legislator to withdraw a proposal that would have banned pedestrians from wearing headphones in both ears. Other lawmakers have tried to strike some sort of balance between public safety and the gravity of the offense.

It just occurred to us that, taking the example of Venice, Manhattan’s car-rental business could be consolidated at the Port Authority depots, capturing all inbound private cars. That would clear the island for professional drivers, much like airline pilots. Pedestrians would have nothing to worry about

Behavioral researcher Paula Niedenthal was on the phone with a Russian reporter, talking about her research on facial expressions.

“At the end he said, ‘So you are American?’ ” Dr. Niedenthal recalled.

Indeed, she is, although she was then living in France, where she had taken a post at Blaise Pascal University.

“So you know,” the Russian reporter informed her, “that American smiles are all false, and French smiles are all true.”

“Wow, it’s so interesting that you say that,” Dr. Niedenthal said diplomatically. Meanwhile, she was imagining what it would have been like to spend most of her life surrounded by fake smiles.

No wonder sitcoms are so popular! Actors, at least, know how to fake a real smile.

We are big fans of French finance minister Christine Lagarde — she sounds like a genuine mother superior, someone who really knows how to get things done. Or, failing that, to sound like she does. You can bet that, this time around, the stress test of PIGS banks is going to be substantive, and that there won’t be any loose talk about “harmonization.”

Before the related issue of restructuring the mountain of bad debts at European banks can be addressed, Ms. Lagarde said, European countries need to conduct meaningful tests on the health of their lenders’ balance sheets. Such stress tests have been carried out twice during the current crisis but failed to win investor confidence. Since the last round, published in July 2010, further problems have emerged, notably at Spanish and Irish lenders. The results of the latest tests are expected to be published in June.

“We will test banks in a very comprehensive manner and a more credible fashion than we did last summer,” she said. “We need to improve the overall credibility of the process, and that includes communication, range, scope, a combination of bottom up, top down quality control.”

She argued that in France, at least, there is no sense that taxpayers are losing out as government bail out their banks without asking bondholders to take write-offs, known as haircuts. Paris set up facilities to help its banks in 2008 and 2009, but it was not on the scale of the assistance required in countries like Ireland and Britain. “My taxpayers are quite happy because they have collected fees — or, rather, interest rates — and they haven’t paid anything.” she said, adding that investors in many euro-zone countries had already been losing money without a coordinated restructuring.“Ask the Anglo Irish shareholders if they’ve taken a hit or not,” she said, referring to the debt-laden Irish lender, which has proved an Achilles’ heel for the economy of that country.

Gerritsen Beach seems about as far from our part of the world as it’s possible to go — and still be part of New York City. You can’t get there on a subway, but that’s true of many neighborhoods. There’s a volunteer fire department — I have no idea how unusual that is, but it seems odd. But what gets me is this story, from the blog GerritsenBeach.net, about teenaged hooligans locking patrons in a laundromat that’s owned by a Chinese woman; they do this “at least once a day” for the fun of winding her up. NYPD does not appear to be much of a presence in Gerritsen Beach.

Reading a spate of recent blog entries, however, we came across nothing to do with Tim Stellon’s story about Daniel Cavanaugh, the man behind the blog, and the trouble that he’s in with neighbors who would prefer that the larger world continue to ignore goings-on in their enclave.

At 8:48 the next morning, he posted “No Police Response Despite Massive Damage by Local Teens.” It included more than a dozen photos of the offending youths, along with images of public Facebook profiles. Status updates described pelting the police and breaking bus windows.

Two days later, when the property owners’ association held its monthly meeting, the audience railed against Mr. Cavanagh.

In a video of that meeting posted on the blog Sheepshead Bites, Renee Sior-Cullen — whose son had been shown on Mr. Cavanagh’s blog — said the boy was just a 12-year-old trying to impress his older brothers. Ms. Sior-Cullen also charged that what Mr. Cavanagh did with her son’s Facebook posts was criminal.

“It is illegal for a grown man to take a minor’s post and copy it and repost it,” said Ms. Sior-Cullen, who did not respond to requests for an interview.

Ms Sior-Cullen is worthy of Melissa Leo’s Alice, in The Fighter.

Gretchen Morgenson is shocked, shocked to report that $132 million in “taxpayer money” has been spent on the defense of three former Fannie Mae executives in myriad lawsuits. A stark paragraph in her piece (reeking of editorial insertion) reminds readers that such indemnification of legal expenses is perfectly — if regrettably — normal. It is perhaps too much to expect of a civil servant functioning as an “acting director” to ask Edward DeMarco to rock the bloat.  

Richard S. Carnell, an associate professor at Fordham University Law School who was an assistant secretary of the Treasury for financial institutions during the 1990s, questions why Mr. Raines, Mr. Howard and others, given their conduct detailed in the Housing Enterprise Oversight report, are being held harmless by the government and receiving payment of legal bills as a result.

“Their duty of loyalty required them to put shareholders’ interests ahead of their own personal interests,” Mr. Carnell said. “Had they cared about the shareholders, they would not have staked Fannie’s reputation on dubious accounting. They defied their duty of loyalty and served themselves. At a moral level, they don’t deserve indemnification, much less payment of such princely sums.”

Asked why it has not cut off funding for these mounting legal bills, Edward J. DeMarco, the acting director of the Federal Housing Finance Agency, said: “I understand the frustration regarding the advancement of certain legal fees associated with ongoing litigation involving Fannie Mae and certain former employees. It is my responsibility to follow applicable federal and state law. Consequently, on the advice of counsel, I have concluded that the advancement of such fees is in the best interest of the conservatorship.”

Mary Williams Walsh‘s front-page story about “state bankruptcy” reminded us of the combination of dithering leadership and intransigent special interests that brought the ancien régime to its knees in 1789 (curiously, the first full year of governance under our current Constitution).

House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.

Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.

Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers.

“They are readying a massive assault on us,” said Charles M. Loveless, legislative director of the American Federation of State, County and Municipal Employees. “We’re taking this very seriously.”

[snip]

Many analysts say they consider a bond default by any state extremely unlikely, but they also say that when politicians take an interest in the bond market, surprises are apt to follow.

Public-sector workers versus municipal bondholders: a hardly unimaginable fight that no one seems to want to be bothered to imagine.

We can’t decide if Anthony Tommasini‘s talk of “making the cut” — as he puts together his list of top-ten classical composers — is silly or just plain odious. Here we find him struggling to make a decision about Chopin, about whom he writes very well.

Chopin, the most original genius of the 19th century, is a good example. Striving for greatness was the last thing on his mind. Chopin had his own select list of past greats he revered, topped by Bach and Mozart. And he loved bel canto opera, especially by that melancholic melodist Bellini.

But the Beethoven symphonic imperative that hung over and intimidated his fellow composers meant nothing to Chopin. He did not care about writing large, formal works, certainly not symphonies. Even his Second and Third Piano Sonatas (the First is an early work), though astounding, are completely unconventional. Chopin respected his composer colleagues, but he was not especially interested in their work. He was a pianist who composed. To him there was no distinction between the activities. And he seldom performed piano works by other composers.

Beethoven consciously strove to be great, even titanic, and he thought he was. His legacy is defined by intimidating bodies of symphonies, string quartets, piano sonatas and more, now canonic. How does an individualist like Chopin “rank” in comparison? Chopin’s ethereal nocturnes, poetic ballades, audacious scherzos, aptly titled impromptus and lacy waltzes often sound like written-out improvisations.

It seems to us that Chopin’s success at honoring Bach and Mozart (and Scarlatti) while remaining outside the shadow of Beethoven is reason alone to place him in the pantheon — a pantheon built to honor however many great composers there are, not an arbitrary “top 10.”

A former national security adviser on China, Kenneth Lieberthal, when asked by the Times about the results of the meetings between Presidents Obama and Hu, said that it was pretty much all rhetoric. ““But at least new rhetoric is better than nothing.”

Both leaders should also reap domestic political benefits from their meeting. Mr. Hu’s enhanced stature, American analysts say, should help him tamp down political forces that have driven a more aggressive foreign policy and hamstrung relations with the United States and China’s Pacific neighbors in the last year.

Mr. Hu and China’s prime minister, Wen Jiabao, “realize this assertiveness based in the last year on nationalism and the belief that the U.S. is declining has gotten them into deep trouble,” said Joseph S. Nye Jr., the dean at the Kennedy School of Government at Harvard and a State Department and Pentagon official in the Carter and Clinton administrations. Mr. Nye was in Washington for a luncheon with Mr. Hu at the State Department. “They think a summit which could be played as a success can give them ammunition to quiet down this rumbling below in the ranks.”

For his part, Mr. Obama comes away from the visit with a new reputation for toughness in his China policy, something that is likely to please conservatives and some liberals alike.

“Area President Whistles Happy Tunes.”