Bailing into the lifeboat

A few weeks back, when I posted about the necessity of raising taxes and cutting spending in order to reign in the national debt, I did not anticipate that the market would force us to take such an enormous step towards insolvency. The bailout proposed by the Bush administration would cost us $700 billion, but many predict that its actual cost, after Congress adds its own trimmings and attempts to include some relief for homeowners in danger of default, will reach $1 trillion or more of money that we don't have. The irony of paying for bad debt with more debt might inspire a grim sort of humor if we weren't in such a big hole already. The plan as initially proposed is completely outrageous, but I have little doubt that Congress will find some way to make it worse.

The fundamental problem is that a mortgage-backed security is not a mortgage. The holder of a mortgage has the right to foreclose on the property (thus recovering real assets) if the loan is not repaid, but the holder of a MBS does not appear to necessarily have this right. The security spreads the risk from a pool of mortgages among a pool of investors; as such, no single investor can be said to "own" a particular mortgage (except in the case that he owns all the securities from a given pool). It's not clear whether the owners of MBS own anything other than debt; it is possible that they do not own the underlying loans. And these are the simplest vehicles assembled from residential mortgages... the real value of more exotic derivatives may be impossible to assess. This has serious implications for the proposed bailout, because there is a very real chance that we taxpayers will end up paying billions of dollars for smoke and mirrors. Before we release one penny from the Treasury for this rescue effort we must ensure that what we purchase with our money will give us a right to the underlying property, as well as the authority to modify the mortgages so as to diminish the default rate. We must not be left holding a bag of air.

The uncertain relationship between the securities and the actual mortgages underscores the unseemly nature of the whole affair. People who did not have the wherewithal to own homes got mortages from unscrupulous lenders who should never have given them out. These mortgages were packaged into vehicles that were treated like gold by credit raters, and then purchased by investors who probably should have known better. Only a fool could have imagined that the housing boom would continue indefinitely. The push by credit providers to make bankruptcy declarations more difficult for individuals had the unexpected side effect of increasing defaults. Holding negative equity on their homes in a plunging market, homeowners simply turned off the lights and walked out. The invisible hand failed to reign in the cascade of short-sightedness, stupidity, and outright malfeasance, and the credit market landed on its head with an audible crunch.

This would be bad enough on its own, but it set off a chain reaction leading to ever more violent flailing on the part of the Treasury department and the market players themselves. Because the securities had been insured, AIG took a hit and needed billions of dollars of government money just to die quietly. The failure of Lehman Brothers left money market funds holding worthless paper; the Reserve Primary Fund broke the buck and skittish investors started to flee. With all business in danger of grinding to a halt because of the shortage, the Treasury insured these investments with the Exchange Stabilization Fund. Because this insurance is not capped, small banks are now worried that panicked customers may move all assets in excess of $100,000 into the money market, leaving them short on cash.

Keating Five member John McCain, long a friend to unscrupulous financiers and enemy to the kinds of regulatory oversight that might have prevented this crisis, has been difficult to pin down on this issue, in large part because his position changes every time the sun comes up. His initial position, that we should stop bailing out financial giants, is understandable and at least has the virtue of being consistent with his free-market philosophy. His later attitude, an acceptance of the reality that these companies must be bailed out in order to protect the investors who acted in good faith, was more realistic. Exposure to the toxic mortgage-based securities put the other assets of these companies at risk, and it would be unconscionable to destroy the investments of good actors as punishment for the deeds of bad actors who had already escaped on golden parachutes.

(In McCain's defense, at least he said something, even if it was insane, and Joe Biden's response tracked a similar trajectory. As for the other presidential candidate, Barack Obama couldn't manage anything better than "I'll get back to you on that." Who will you choose in November: the madman or the slacker?)

Bailing out rich people stinks, but it stinks more when we don't really have any money to do it with. Section 10 of the proposed legislation increases our national debt limit for the fiscal year to $11,315,000,000,000. Given the authority to hit that ceiling, I have no doubt that the Treasury department will do so, meaning that our interest outlay in the next budget will be even higher than previously anticipated. Every new program you've heard politicians mention during this election cycle has just evaporated. The cost of a bailout is a credit crunch on the government, at the worst possible time. I've already proposed the solution to the problem: we must increase income and cut outlays. Otherwise, we're just bailing water from the yacht into the lifeboat. Specifically, the wealthiest Americans must be willing to pay higher taxes, because it is they that benefit most from the financial institutions the rest of us will be breaking the bank to rescue, and it was their exploitation of those markets that got us into this mess.

Of course, I haven't yet gotten to the most malodorous part of the whole proposal. It's bad that we don't know whether what we're buying will be worth anything, and it's worse that we'll significantly increase the national debt to do so. But the really despicable part of the legislation is this:

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

You know, at least with the absurdly-named Patriot Act these Republican pricks had some kind of flimsy excuse for their totalitarian actions. This is sticking a thumb in the eye of Democracy just to show you can. It was a lack of transparency and honesty that got us into this whole mess; we cannot get out of it by spending $700,000,000,000 at the sole discretion of faceless bureaucrats from an abominably opaque and secretive administration. The estimated cost of the Iraq War to date is around $582 billion, a massive number but still less than the amount proposed in this legislation. It defies reason and sense to insulate the choices made with this massive amount of money from oversight and accountability. The very request for opacity suggests that the whole operation is being undertaken in bad faith.

Bernanke and Paulson continue to insist that Congress must act immediately. Nothing in their past behavior, however, suggests that they possess the competence to make this analysis, or the honesty to accurately convey their analysis to the media or to the legislature. Clearly, something must be done, but handing out $700 billion to the same nitwits that got us into this mess, without anything even resembling appropriate oversight, is more likely to bring economic disaster than salvation.

Read the rest...

Where do new enzymes come from?

Biochemists often rave about the great wonders of enzymes, lavishing praise on the prodigious rate enhancements they produce, and their exquisite positioning of functional groups. One can quite reasonably ask how such magnificently useful proteins came into being. One accurate answer, of course, is that after a couple hundred million years evolution can get almost anything right. Another answer is that most enzymes come from other proteins, via a process called gene duplication. The genetic changes that follow one of these duplications turn two copies of one protein into two completely different proteins with diverse activities.

Gene duplication events are infrequent errors of DNA replication or repair. Diploid eukaryotes such as ourselves carry two copies (or near-copies) of most genes as a matter of course, but gene duplications produce extra copies beyond that. In theory, the presence of these extra copies of a gene means that one of them can mutate freely, without the pressure of carrying out its normal job. When it drifts into a useful function, selective pressure is again applied, causing a refinement of the active site to maximize the efficiency of the new activity. The overall scheme looks something like this:

Duplication → Divergence → Refinement

It may seem incredible that a vast diversity of protein structures and activities can arise simply by making copies, even imperfect copies. However, certain quirks of the translation machinery mean that small changes in DNA can amount to enormous changes in a protein's topology. For instance, an insertion or deletion of a single base can cause a frameshift mutation, producing a protein that bears no resemblance to its progenitor despite having only 1 different base pair. Many DNA triplets that normally encode amino acids are only a single base-pair mutation away from becoming a stop codon, truncating a protein and likely changing its structure significantly. Similarly, stop codons can be easily eliminated, producing much larger proteins. In eukaryotes, point mutations near the borders between introns and exons can cause new regions of DNA to be translated into protein. Of course, drastic changes like these mostly just produce useless junk, but occasionally a novel fold or function arises.

More conservative alterations of a gene sequence can still produce significant changes. As I've mentioned before on this blog, some members of the Cro family of proteins have very high sequence identity and yet possess different structures. I also have not yet tired of reminding you that the chemokine lymphotactin has two different structures with a single sequence, either of which can be stabilized into an exclusive fold by a point mutation.

Additionally, research from the lab of John Orban shows that a mere 7 mutations are required to convert the engineered protein GA88 (PDB) into a completely different structure, GB88 (PDB) (1). These proteins were previously shown to have different folds and functions, but the contrast between the high resolution structures (shamelessly stolen figure on the right) is striking. Moreover, the Orban lab has refined this system so that the structural conversion can be effected with only three mutations, rather than seven. What all this research indicates is that the transitions that convert a sequence from one fold into another may be sharper than previously realized; even a relatively small number of fairly conservative mutations may be able to completely transform a protein's structure.

For all that, most new enzymes arising via gene duplication resemble their ancestors in identifiable ways. Often the two proteins perform the same chemical steps, and the novel function amounts to a different substrate specificity. This suggests the possibility of an alternate mechanism of gene duplication, in that a protein could evolve a novel specificity while retaining its original function. Diversifying its activities in this way would probably limit an enzyme's catalytic effect in both reactions, but a subsequent gene duplication event would allow each copy to refine its particular reaction. The scheme would look like this:

Diversification → Duplication → Refinement

The advantage of this model, from an adaptationist's perspective, is that it brings selective pressure to bear at every step. Once a new function has evolved in response to environmental conditions, duplicating the gene may provide an organism a concrete advantage. After duplication, the advantage of separately refining the two activities is obvious.

The two models are not as different as they might seem at first glance, because nearly every enzyme catalyzes two reactions anyway, that is, the forward and reverse reactions of an equilibrium. A "new" activity for a given enzyme can therefore result from something as simple as being targeted to a different cellular compartment or a change in specificity that involves an oppositely-oriented equilibrium.

The most obvious objection to the latter model is that during the period of gene sharing prior to duplication, neither protein function will be very efficient. As a matter of fact, the appearance of a new activity does not always impair an enzyme's ability to do its original job (and indeed can even enhance that activity). Still, because of the exquisite tuning of enzyme active sites we can expect that many modifications to this region will reduce catalytic power. That being the case, how might an organism survive or thrive during the gene-sharing period? The answer, which always seems obvious in retrospect, is to make more of the less efficient enzyme, as was demonstrated in a recent paper by Sean Yu McLoughlin and Shelley Copley (2).

McLoughlin and Copley took a strain of E. coli that lacked an enzyme, ArgC, that is critical for glucose metabolism. They treated these bacteria with a strong mutagen and then picked a colony that grew well on uncomplemented glucose. After showing that these bacteria had developed a novel activity equivalent to ArgC, they isolated the "new" enzyme and found that it was actually an existing enzyme, ProA, which performs similar chemistry. This enzyme had gained the ability to take over the tasks of the missing ArgC, enhancing the rate of that reaction 12-fold. The actual chemistry of these reactions was quite similar, but in gaining the ability to operate on ArgC's substrate, the activity of ProA towards its own substrate was reduced 2800-fold. The bacteria compensated for this by upregulating the production of the enzyme. A second mutation in the promoter region of the gene was helpful, but not necessary, in this respect.

Because enzymes are catalysts, a small increase in protein concentration can result in a significant increase in the availability of the reaction products. Biochemists often say, seeing a 3000-fold reduction in activity, that an enzyme is dead. The reality is that it's just slower, and a living thing can compensate for that in ways not available to an isolated reaction in a test tube. Organisms have shown that they have ways to survive what an enzymologist might see as fatal.

Of course, modern bacteria benefit from a number of well-tuned regulatory and feedback mechanisms that allow them to sense when particular metabolites are running low and to increase the production of proteins that can replenish them. Earlier, more primitive organisms might not have had these expedients available. Could they have survived gene sharing?

Too little is known about early life forms to answer such a question definitively. However, it is interesting to note that one method of making more protein is to make more of the gene. That is, the concentration of a deficient enzyme can be increased via gene duplication. By a fortuitous coincidence, a single mechanism could both enable an organism to tolerate reduced enzymatic efficiency and allow the evolutionary process to independently refine its activities.

It is also worth bearing in mind that just as ancient organisms did not necessarily resemble modern ones, ancient proteins might not have resembled the modern item. The exquisite positioning of functional groups that characterizes modern enzymes requires a rigid fold and contributes significantly to the rate accelerations they produce. However, substantial rate enhancements can still be achieved in the absence of a stiff native state.

One occasional result of mutations is the formation of a molten globule, a protein that lacks a stable fold but still exists in a collapsed state with something resembling a hydrophobic core. Although that doesn't sound particularly useful, many molten globules have enzymatic or other functional activities. Recent computational studies on a molten-globule mutant of Methanococcus jannaschii chorismate mutase suggest that realistically low energy barriers can be achieved by a broader array of structural states in these proteins (3).

Researchers from the lab of Arieh Warshel used a simplified model to sample the conformational space available to the molten globule enzyme (mMjCM) and a stably folded form of the enzyme (EcCM). As you might expect, the lowest-energy conformations are much more diverse for mMjCM than for EcCM. Roca et al. then computed the energy barrier for catalysis for conformations that closely resembled the ideal structure (region I), conformations which had most of the groups in the right general position but were significantly removed from the ideal (region II), and conformations that did not resemble the ideal at all (region III). For EcCM, only structures in region I had energy barriers low enough to plausibly allow catalysis. The molten globule, however, had energy barriers that would allow catalysis in region I and region II. You can see this in the figure below, which I shamelessly stole from their paper: the dotted orange line corresponds to a 16 kcal/mol energy barrier, what they felt to be the largest barrier reasonable for a catalyst. The results for mMjCM are on the left, EcCM on the right.



The upshot of this is that molten globules may be able to maintain catalytic power in the face of structural diversity that causes folded proteins to fail. While the stable fold produces greater rate enhancements (note that EcCM has lower energy barriers), the molten globule tolerates a wider array of structural conditions. Consequently, proteins of this kind may be much more amenable to the addition of new functions. So long as an appropriate orientation of functional groups is reasonably likely, a protein without a rigid conformation can still achieve impressive rate enhancements.

Conceivably, an early molten globule enzyme could have the ability to catalyze several different reactions, switching between the required conformations as needed, without a significant loss of catalytic power to any of them. Duplication of a multi-functional molten globule like this would allow each chemical function to be refined independently, with additional duplications and refinements giving rise to substrate specificity.

The different models of gene duplication each have their own explanatory advantages, and the available evidence suggests that new proteins and enzymatic activities have evolved (even within the last century) using both routes. As this is one of nature's favored methods of generating novel activities, so it is becoming ours. The artificial enzymes recently produced by David Baker's lab were designed onto an existing protein scaffold in what could be taken as a computational mimicry of the gene duplication process.

1. Y. He, Y. Chen, P. Alexander, P. N. Bryan, J. Orban (2008). NMR structures of two designed proteins with high sequence identity but different fold and function Proceedings of the National Academy of Sciences, 105 (38), 14412-14417 DOI: 10.1073/pnas.0805857105

2. S. Y. McLoughlin, S. D. Copley (2008). A compromise required by gene sharing enables survival: Implications for evolution of new enzyme activities Proceedings of the National Academy of Sciences, 105 (36), 13497-13502 DOI: 10.1073/pnas.0804804105

3. M. Roca, B. Messer, D. Hilvert, A. Warshel (2008). On the relationship between folding and chemical landscapes in enzyme catalysis Proceedings of the National Academy of Sciences, 105 (37), 13877-13882 DOI: 10.1073/pnas.0803405105

Read the rest...

Upside down

As a very important source of strength and security, cherish public credit. One method of preserving it is, to use it as sparingly as possible; avoiding occasions of expense by cultivating peace, but remembering also that timely disbursements to prepare for danger frequently prevent much greater disbursements to repel it; avoiding likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertions in time of peace to discharge the debts, which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burthen, which we ourselves ought to bear. The execution of these maxims belongs to your representatives, but it is necessary that public opinion should cooperate. To facilitate to them the performance of their duty, it is essential that you should practically bear in mind, that towards the payment of debts there must be Revenue; that to have Revenue there must be taxes; that no taxes can be devised, which are not more or less inconvenient and unpleasant; that the intrinsic embarrassment, inseparable from the selection of the proper objects (which is always a choice of difficulties), ought to be a decisive motive for a candid construction of the conduct of the government in making it, and for a spirit of acquiescence in the measures for obtaining revenue, which the public exigencies may at any time dictate.

—George Washington, Farewell Address

The next President and Congress of the United States must raise taxes and cut spending.

The last time I checked, the national debt was about $9.6 trillion, but it's probably higher now. The interest on this debt presently amounts to nearly 10% of the federal budget, which admittedly is less than half of we spend on defense, but still easily exceeds $200,000,000,000. According to the Congressional Budget Office, the interest outlay in 2007 could have covered the entire federal expenditure on supplemental security income, child tax credits, unemployment, food stamps, family support, child nutrition, and foster care, with almost enough left over to pay for veteran's benefits. Of course, the magnitude of the debt (and the associated interest payments) will only increase when Medicare and Social Security payments start to exceed revenues. The federal government has run a deficit every year since 2001, and none of the people running for office now have done enough to stop it. Nor do they propose to do enough to stop it.

Instead, our candidates propose hosts of new projects, proposing no financing beyond the sunshine and rainbows that adorn their professionally-coiffed speeches. They shoo away the petty earmarks while the great consumers — Medicare, Social Security, Defense — gnaw the budget to the bone, unmolested in their gluttony. Most candidates who are willing to tax are unwilling to stop spending; most candidates who are willing to cut expenditures also want to lower taxes. Either way is insane, but many candidates want the whole pie: more spending, less taxes, damn the torpedoes, full speed ahead!

It has become almost obligatory, especially among those seeking office for the first time, to blame the present excesses on fat cats in the capital, but simply pointing the finger at Washington doesn't cut it. Irresponsible big spenders do not reach office by magic; they get there because we elect them. This is not a problem of other people in other districts who have bad judgment and choose lousy representatives. This is your problem in your district, and it is a problem because we have failed to do as George Washington asked. A man who tells you that our budget problems can be solved without any pain is either a fool, or a liar who thinks that you are a fool. But when a candidate gets up and acknowledges that taxes must be raised, that favored spending must be restrained, he is hated by an electorate that ought to applaud him for his honesty.

So the politicians lie. They cut taxes and spend more. They raise taxes and outspend that. And all along we grumble and complain about "Washington insiders" and "Beltway bandits". Well, throw the bums out! That's in your power, isn't it? If you're reading this post you have access to the internet. Find out how your congressman voted during his term. Read the text of the bills he voted on. Find out what questions he asked in committee and what speeches he made on the floor. Dig up the things that interest you, no matter how obscure. The behavior of state legislators and other officials is often more difficult to track, but these records exist. You as a voter have a duty to find and evaluate them, because terribly few politicians are honest about their record or intentions. Even if they are inclined to tell the truth, they dare not speak it because we voters are all too happy to punish harsh truths and reward pleasant lies.

Paying down the national debt is a personal obligation. We owe it to our children and grandchildren, our nieces and nephews, not to leave them a country upside down on its loans. More than that, however, it is a patriotic obligation. We owe it to our parents and grandparents, our soldiers and our founders, not to let the country they worked so diligently to build and preserve crumble due to debt and dissipation.

The next President and Congress of the United States must raise taxes and cut spending. Any candidate for any national office who refuses to acknowledge this truth does not deserve your vote.

Read the rest...

Love your Playstation with Odin Sphere

The big news this week belongs to the XBox 360, of course. As the internets knew, like, three weeks ago, all XBox models have a price drop coming on Friday, with the Arcade hardware (note: do not buy the Arcade hardware) dropping to $199, less than the Wii. The standard hardware will come in at $299, a price that is sure to help with sales for the upcoming holiday season. But, maybe you don't have $300 for a next-gen console, or even $60 for a next-gen game. Maybe all you've got is $20 burning a hole in your pocket and a PS2 that needs a good workout. If so, then you just might get your money's worth from this week's "Greatest Hits" re-release of Odin Sphere, a hybrid side-scrolling brawler/RPG from Atlus. That's an excellent deal on one of the most beautiful and interesting games of the last hardware generation.

I've written about Odin Sphere on this page before, discussing both its effective use of the cycle motif (spoilers in that post) and its rather less effective coding. I rarely make a case for a sale on this blog, as I prefer to simply discuss what I feel is going on in terms of story and imagery, but I make an exception in this case because Odin Sphere is, well, exceptional. The quality of the visual presentation cannot be overstated — this is one of those cases in which the game in motion looks better than the screenshots. The soundtrack by Basiscape is just fantastic. This presentation frames a deep and moving story that harkens back to Norse mythology and Wagnerian epics without quoting them so directly that it seems simply recycled.

That said, Odin Sphere is also deeply flawed, beset with terrible framerate reduction in some boss fights and long loading times. The apparent absence of cancels from the combat system exacerbates the frustration arising from the framerate problem. The inventory should have been larger; the recipe systems for food and alchemy should have been better refined. Some of these errors amount to mere niggling annoyances, but others can be quite exasperating. I can see why someone might be dubious about investing $40 or more into a game that puts those kinds of obstacles in the way of its glorious art. And, of course, the dreaded JRPG label probably scared away a few folks too.

A flawed diamond, however, is still a diamond. Odin Sphere's problems mean it will never sit atop the list of best games of all time. It is, however, a compelling story presented with largely enjoyable gameplay and stunning visuals and music. Even if you don't usually like RPGs, that's a combination that's worth 20 bucks.

Read the rest...