McCain Debates McCain on Supporting Bush

Sarah Palin Competes for Miss Alaska in 1984

Screenshot of this Morning's "McCain Wins Debate Ad" run prematurely in Wall Street Journal

One has to wonder about McCain's honesty in what he's been saying about "getting to Washington" or "missing the debate", if he ran this ad this morning (even by accident) in this morning's WallStreetJournalOnline declaring victory in tonight's debate.. before it happened.

Was he planning on attending already then, even though he said he wasn't?

Did he win before the debate happened?

Was he planning on staying in Washington if it wasn't resolved, even if this ad was already planned and ran by accident?

McCain runs Premature "McCain Wins Debate" ad

From "The Fix", by Chris Cillizza, Washingtonpost.com's Politics blog


McCain Wins Debate

Although the fate of tonight's presidential debate in Mississippi remains very much up in the air, John McCain has apparently already won it -- if you believe an Internet ad an astute reader spotted next to this piece in the online edition of the Wall Street Journal this morning.

"McCain Wins Debate!" declares the ad which features a headshot of a smiling McCain with an American flag background. Another ad spotted by our eagle-eyed observer featured a quote from McCain campaign manager Rick Davis declaring: "McCain won the debate-- hands down."
Here's the screenshot.

The Photo McCain Wanted

By E. J. Dionne Jr.Friday, September 26, 2008; Page A23

John McCain's sudden intervention in Washington's deliberations over the Wall Street bailout could not have been more out of sync with what was actually happening.

He lamented that "partisan divisions in Washington have prevented us from addressing our national challenges." But for days, bipartisanship has been the rule on both sides of this argument. Republicans and Democrats alike were highly critical of President Bush's proposal to inject $700 billion into the financial system. Yet leaders of both parties were trying hard to negotiate an agreement with Treasury Secretary Henry Paulson. That's why they were close to an agreement in principle even before the two presidential nominees arrived for yesterday's White House meeting that McCain thought was so important.

House Speaker Nancy Pelosi and Minority Leader John Boehner normally fight about everything. But on Wednesday they issued a joint statement noting that "working in a bipartisan manner, we have made progress." That was true at least until yesterday's meeting, when Boehner, facing conservative defections, roiled the talks by offering an entirely new proposal.

And if McCain had been following the negotiations closely, he would have known that at times this week, Senate Democrats worried that Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, was too eager for a deal.

Frank did not need McCain to make him bipartisan, and he grumbled before yesterday's White House gathering that it was a mere "photo op." After the meeting, Senate Banking Committee Chairman Chris Dodd (D-Conn.) called it "political theater" that may have stalled an agreement.

Bush himself was uncharacteristically forthcoming with concessions. In his address to the nation, he said he wanted to "ensure that taxpayers are protected." That meant he had acceded to Democratic demands that the government get shares in the firms it rescues. He endorsed oversight mechanisms his administration's proposal had lacked. He accepted an idea his negotiators had resisted fiercely: limiting what the financial titans who got us into this mess could pocket from this rescue.

If you doubt that McCain's moves were about rescuing his candidacy rather than our economy, consider how his proposal to suspend the presidential campaign came about.

McCain had just finished a phone call with Obama on Wednesday in which they discussed a joint statement of principles and McCain broached the idea of suspending the campaign. Obama said he'd think about it, but

McCain didn't give him time. To Obama's surprise, McCain appeared on television shortly after the conversation to announce his unilateral pause in campaigning and a call for postponing Friday's debate. This is bipartisanship?

As for getting the nominees to yesterday's White House meeting, Bush's lieutenants had been in discussions with McCain's people during the day Wednesday. Obama didn't get his invitation from the president until around 7:30 p.m., just an hour and a half before Bush's speech. This was an active intervention by Bush on behalf of McCain to box Obama into the photo op. Again, was this bipartisan?

The simple truth is that Washington is petrified about this crisis and will pass something. There are dark fears floating through the city that foreign investors, particularly the Chinese, might begin to pull their billions out of our system.

Scarier than the bad mortgages are those unregulated credit default swaps that financier George Soros has been warning about. There are $45 trillion of those esoteric instruments sloshing around the global financial system. They were invented as a hedge against debt defaults, but even the financial smart guys don't fully understand their impact or how to price their real value.

Fear is a terrible motivator for careful legislating, but it's a heck of a way to bring about a lot of bipartisanship.

McCain jumped into this game in the fourth quarter. Many of the players on the field, caked in mud and exhausted but determined as they approach the goal line, wonder why this new would-be quarterback has suddenly appeared in their midst.

McCain could yet play a constructive role by rounding up votes from restive Republicans. Oddly, the biggest obstacle to a bill may not be Democrats but Republicans who refuse to go along with their own president. And -- yes, there is an election coming -- Democrats will be wary of going forward unless a substantial number of Republicans join them.

But McCain's boisterous intervention -- and particularly his grandstanding on the debate -- was less a presidential act than the tactical ploy of a man worried that his chances of becoming president might be slipping away.
postchat@aol.com

Drama King to the Rescue

By Eugene Robinson
Friday, September 26, 2008; Page A23

John McCain is rapidly making his temperament an inescapable issue in the presidential campaign. Does the nation really want so much drama in the White House?

McCain's performance in recent days has been, to put it charitably, erratic. In an attempt to show leadership on the financial crisis, he has called Americans into ranks -- long after hostilities began. Meanwhile, back in much-reviled Washington, the generals with cooler heads and a clearer picture of the battlefield are doing their jobs, minus all the histrionics.

Thus far, an objective observer would have to say that Congress has behaved well in the days since Treasury Secretary Henry Paulson delivered a three-page ransom note that said, and I paraphrase, "Give me $700 billion, or I'd hate to see anything bad happen to that nice economy of yours."

Our elected representatives took seriously the urgency of the crisis. They did not fall into partisan bickering. A rough consensus began to emerge: It is important to act expeditiously but not to panic. It is unwise to give this administration -- or any administration -- a blank check with absolutely no oversight, as Paulson had sought. Paulson, the White House or somebody should explain why this plan will work and why some other plan wouldn't work better. And the corporate executives who put their companies at risk and then turn to the government for a bailout should not be rewarded with multimillion-dollar compensation packages subsidized by the taxpayers.


Negotiations between a Democratic Congress and a Republican administration on these and other points seemed to be proceeding at lightning speed, given the usual pace of such things in Washington. But then, for reasons known only to himself, in charged McCain to rescue the unimperiled. Said Rep. Barney Frank (D-Mass.), who has been the lead negotiator for the Democratic majority in the House: "Now that we are on the verge of making a deal, John McCain airdrops himself in to help us make a deal."

At face value, McCain's sudden "suspension" of his campaign and his call to delay the first presidential debate can be seen as pure politics. Lately, McCain has been sliding in the polls, and Barack Obama has been rising. The Wall Street crisis markedly accelerated these trends. Late September is not the time to let your opponent widen his lead.

Changing the subject, which the McCain people have raised to an art form, wasn't an option this time -- the public is hardly in the mood for another Paris Hilton ad -- so the campaign had to try to somehow get out in front of the crisis. Given McCain's initial assessment that the fundamentals of the economy are strong, that wasn't going to be easy.

The solution was to try to make it look as if McCain were leading the heroic effort to save the American way of life. To do this, he had to portray the negotiations over a rescue plan -- which had been making orderly progress -- as stalled and in shambles. "We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved," McCain said, calling on everyone to "temporarily set politics aside."

But in trying to put himself at center stage, McCain managed to insert politics into the situation. The first issue all week on which congressional Democrats and Republicans split along party lines was whether McCain's noisy intervention demonstrated boldness or bluster.

The surest way to derail any prospect of a timely rescue plan would be to have Obama and McCain get involved in the nit and the grit of the negotiations. The reason is obvious: The two major-party presidential candidates would never really abandon the campaign with less than six weeks left before the election. They'd just be shifting it to a venue where it could do maximum damage. The anodyne joint statement from the two campaigns Wednesday highlighting the urgency of the situation was about the most constructive thing Obama and McCain could do, next to staying the hell out of the way.

McCain succeeded in focusing attention on himself, but not necessarily in a good way. Voters may see this not as an illustration of brave leadership but as another example of McCain's "ready, fire, aim" approach to dealing with any crisis. Putting himself at the center of events -- making any situation all about him -- is more than a political tactic for McCain. It's his nature, and I wonder if most Americans won't be unnerved at the prospect of electing a president who's always so ready for his close-up.

eugenerobinson@washpost.com

Letterman React to John McCain Suspending Campaign

Where Are the Grown-Ups?

By PAUL KRUGMAN
Many people on both the right and the left are outraged at the idea of using taxpayer money to bail out America’s financial system. They’re right to be outraged, but doing nothing isn’t a serious option. Right now, players throughout the system are refusing to lend and hoarding cash — and this collapse of credit reminds many economists of the run on the banks that brought on the Great Depression.

It’s true that we don’t know for sure that the parallel is a fair one. Maybe we can let Wall Street implode and Main Street would escape largely unscathed. But that’s not a chance we want to take.

So the grown-up thing is to do something to rescue the financial system. The big question is, are there any grown-ups around — and will they be able to take charge?

Earlier this week, Henry Paulson, the Treasury secretary, tried to convince Congress that he was the grown-up in the room, come to protect us from danger. And he demanded total authority over the rescue: $700 billion to be used at his discretion, with immunity for future review.

Congress balked. No government official should be entrusted with that kind of monarchical privilege, least of all an official belonging to the administration that misled America into war. Furthermore, Mr. Paulson’s track record is anything but reassuring: he was way behind the curve in appreciating the depth of the nation’s financial woes, and it’s partly his fault that we’ve reached the current moment of meltdown.

Besides, Mr. Paulson never offered a convincing explanation of how his plan was supposed to work — and the judgment of many economists was, in fact, that it wouldn’t work unless it amounted to a huge welfare program for the financial industry.

But if Mr. Paulson isn’t the grown-up we need, are Congressional leaders ready and able to fill the role?

Well, the bipartisan “agreement on principles” released on Thursday looks a lot better than the original Paulson plan. In fact, it puts Mr. Paulson himself under much-needed adult supervision, calling for an oversight board “with cease and desist authority.” It also limits Mr. Paulson’s allowance: he only (only!) gets to use $250 billion right away.

Meanwhile, the agreement calls for limits on executive pay at firms that get federal money. Most important, it “requires that any transaction include equity sharing.”

Why is that so important? The fundamental problem with our financial system is that the fallout from the housing bust has left financial institutions with too little capital. When he finally deigned to offer an explanation of his plan, Mr. Paulson argued that he could solve this problem through “price discovery” — that once taxpayer funds had created a market for mortgage-related toxic waste, everyone would realize that the toxic waste is actually worth much more than it currently sells for, solving the capital problem. Never say never, I guess — but you don’t want to bet $700 billion on wishful thinking.

The odds are, instead, that the U.S. government will end up having to do what governments always do in financial crises: use taxpayers’ money to pump capital into the financial system. Under the original Paulson plan, the Treasury would probably have done this by buying toxic waste for much more than it was worth — and gotten nothing in return. What taxpayers should get is what people who provide capital are entitled to: a share in ownership. And that’s what the equity sharing is about.

The Congressional plan, then, looks a lot better — a lot more adult — than the Paulson plan did. That said, it’s very short on detail, and the details are crucial. What prices will taxpayers pay to take over some of that toxic waste? How much equity will they get in return? Those numbers will make all the difference.

And in any case, it seems that we don’t have a deal.

This has to be a bipartisan plan, and not just at the leadership level. Democrats won’t pass the plan without votes from rank-and-file Republicans — and as of Thursday night, those rank-and-file Republicans were balking.

Furthermore, one non-rank-and-file Republican, Senator John McCain, is apparently playing spoiler. Earlier this week, while refusing to say whether he supported the Paulson plan, he claimed not to have had a chance to read it; the plan is all of three pages long. Then he inserted himself into the delicate negotiations over the Congressional plan, insisting on a White House meeting at which he reportedly said little — but during which consensus collapsed.

The bottom line, then, is that there do seem to be some adults in Congress, ready to do something to help us get through this crisis. But the adults are not yet in charge.

McCain Suspends Campaign Under Scrutiny: Here's His Talking Points Memo to His Staff

From The Colorado Independent and JeremyPeltzer (politickerco.com)

As McCain suspends campaign, talking points memo to staff on "how to campaign on suspending the campaign" is accidentally e-mailed to the press.

Oops! Colorado McCain camp sends internal e-mail to reporters

By Ernest Luning, 9/24/08

"TALKING POINTS: SUSPENDING THE CAMPAIGN" includes a list of points the campaing wants emphasized, and includes this warning from McCain staffer Tom Kise:

"Please do not proactively reach out to the media on this."

McCain’s plans to stop campaigning — and a proposal to cancel Friday’s debate with Obama — had already been widely reported Wednesday afternoon.

Still, Kise was surprised at his e-mail snafu, as Pelzer reports:

Told by a reporter that the e-mail had been sent to him and others in the media, Kise said, “F*ck, tell me I didn’t send it to the wrong list.”

Kise said the talking points were meant for McCain volunteers.

Among the document’s “Topline Messaging”:

• To address our nation’s financial crisis, John McCain will suspend his campaign and return to Washington. He has spoken to Senator Obama and informed him of his decision and asked Senator Obama to join him. The campaign is suspending its advertising and fundraising.

Obama spokesperson Bill Burton, clearly, didn’t get Kise’s memo. As TPM reports, Burton challenged the McCain campaign’s assertion that McCain “asked Senator Obama to join him,” saying it was the Obama campaign that first broached the possibility of joint action on the financial crisis:

“At 8:30 this morning, Senator Obama called Senator McCain to ask him if he would join in issuing a joint statement outlining their shared principles and conditions for the Treasury proposal and urging Congress and the White House to act in a bipartisan manner to pass such a proposal. At 2:30 this afternoon, Senator McCain returned Senator Obama’s call and agreed to join him in issuing such a statement. The two campaigns are currently working together on the details.”

Wednesday afternoon, Obama told a press conference he rejected McCain’s unilateral decision to cancel Friday’s debate:

“I believe we should continue to have the debate,” he just said. “I believe it makes sense for us to present ourselves to the American people.”

“Obviously if it turns out that we need to be in Washington, we’ve both got big planes, we’ve painted our slogan on the side of them,” Obama also said. “They can get us from Washington to Mississippi pretty quickly.” The debate is set to take place in Mississippi.

I ghost-wrote letters to the editor for the McCain campaign

I spent a morning in John McCain's Virginia campaign headquarters ghost-writing letters to the editor for McCain supporters to sign. I even pretended to have a son in Iraq.

From Salon, By Margriet Oostveen

Sep. 24, 2008 "You can be whoever you want to be," says an inviting Phil Tuchman. "You can be a beggar or a millionaire. A mom or a husband. Whatever. You decide!"

I volunteer in political campaigns now and then. After a series of outings for Obama and a first mission as a phone banker for John McCain, I returned to McCain's headquarters in Arlington, Va. The offer was too alluring to delay -- they wanted to put me into action as a ghostwriter. Next to commercials and phone banking, writing letters to the editor is the most important method of the McCain campaign to attract voters.

At least that is what's written in the guidelines that McCain campaign worker Phil Tuchman presents to me.

Today he is training six ghostwriters. What on earth is the appeal of McCain for the former Soviet bloc? Last time I was here, an exuberant Polish guy was phone banking next to me. Today, a Russian in yellow suspenders is shimmering at the same table, looking just like an actor who is famous in the Netherlands for star turns as a genius who suppresses his dark side with painstaking self-control.

The assignment is simple: We are going to write letters to the editor and we are allowed to make up whatever we want -- as long as it adds to the campaign. After today we are supposed to use our free moments at home to create a flow of fictional fan mail for McCain. "Your letters," says Phil Tuchman, "will be sent to our campaign offices in battle states. Ohio. Pennsylvania. Virginia. New Hampshire. There we'll place them in local newspapers."

Place them? I may be wrong, but I thought that in the USA only a newspaper's editors decided that.

"We will show your letters to our supporters in those states," explains Phil. "If they say: 'Yeah, he/she is right!' then we ask them to sign your letter. And then we send that letter to the local newspaper. That's how we send dozens of letters at once."

No newspaper can refuse a stream of articulate expressions of support, is the thought behind it. "This way, we will always get into some letters column."

It is the day after Sarah Palin's speech at the Republican convention. Today, she is our main subject. The others are already enthusiastically hammering their keyboards. I am struggling with a tiny writer's block.

"Dear Editor ..."

Phil Tuchman has handed out model letters, and talking points and quotes from Sarah Palin's speech. But whom do I want to be?

Let's loosen up my fingers a little first -- and my principles, too. Am I actually allowed to make up letters? At the moment, it seems to be the only way to demonstrate how this is done in a campaign. So yes. I start practicing attractive sentences about Sarah Palin:

"Her biggest plus to me is that, besides being amazingly smart and qualified, she managed to remain a woman like us. She is the PTA hockey moms. She is the working mothers of special needs children. She is every caring mother of a challenging teenager."

Her pregnant daughter Bristol (17) is not a talking point. A talking point is her son Track (19), who will be deployed to Iraq.

"And most of all, she is just like any mother of a child who deploys to Iraq in the service of this country."

Now we are getting somewhere. I look around. I type:

"My son, too, is there."

Oh god, you liar. Now build up suspense. New paragraph.

"And my heart needs him back safe so much."

Yes, yes. Well done. Another paragraph -- why not? Now let's pump some iron in that mother, for after all, we are not with the Democrats here. Look up the right, patriotic phraseology in the model letters.

"But when I see him again, I also want to see his face glow with pride. Just like the day he told me he enlisted."

Yes, like that. And now full speed in the direction of McCain's plans to continue the war. Sell that war. With a mother's heart.

"That is why Senator John McCain could count on my vote from day one."

But whatever happened to Sarah Palin in this story? I gaze out of the window. This takes 10 minutes. Then:

"With Sarah Palin, I have even more reason to trust in victory. She represents my heart."

Hmm. Does that sound like total doublespeak? Or does it sound like logical reasoning to a McCain supporter? I cannot come up with anything better.

"Sincerely ..." I leave the dots for somebody else's signature.

Does Phil Tuchman want to read it?

Phil bends over my computer screen and reads. This takes a while. I am expecting roars of laughter or to be kicked out. Then he says drily: "I like that. It appeals to the hearts of people. Can you write more letters?"

-- By Margriet Oostveen

also see:
How ghost-writing letters to the editor for McCain works
http://www.salon.com/news/primary_sources/2008/09/24/mccain_letters/index.html?source=newsletter
Salon asked Margriet Oostveen for proof that she had ghost-written letters to the editor for the McCain campaign. Here are the guidelines, talking points, and sample letters she was given.
By Mark Schone

A Simple Question

From me... please read the following articles. They should provide you with varying information on the $700 Billion Bailout using our money.

Henry Paulson wants no Congressional oversight, no need to answer to any courts, no equity for U.S. Citizens for providing all of this money, and.... NO SALARY CAPS FOR CEO's AND WALL STREET EXECUTIVES!

His reason? He's afraid these companies won't participate.

My simple question? If they need this money so badly and so quickly.... why wouldn't they accept those limits on salaries if they're not able to share that risk we're taking?

I may ask a second question. (I know I said I'd only ask one.) If they're not willing to share in equity and risk... and cap their salaries if they're underperforming... DO THEY REALLY NEED THIS BAILOUT THAT THEY'RE ASKING FOR SO QUICKLY?

Where's George?

Wall Street's Man in Washington

By Harold MeyersonThursday, September 25, 2008;

This past winter, when American banks were already scrambling for capital, foreign investors came to their rescue. Last November, the Abu Dhabi Investment Authority put $7.5 billion into Citigroup. One month later, Merrill Lynch sold $4.4 billion worth of new stock to Temasek Holdings of Singapore, and Morgan Stanley sold a $5 billion stake to China Investment Corp. In January, Merrill Lynch issued $6.6 billion of preferred stock to Korea Investment Corp. and the Kuwait Investment Authority, among others.

These far-flung buyers had one thing in common: They aren't private concerns. Each is a sovereign wealth fund, investing its national treasury's money -- its citizens' money -- in an effort to help out the hemorrhaging banks of Wall Street.

But these were not charitable outlays. The citizens of Abu Dhabi, Singapore, China, Korea and Kuwait got something in return for their treasuries' aid packages to American finance. They got stock. They got an equity interest in those banks.

These may not, just now, seem like the shrewdest investments ever made. Still, all those East Asian and petro-state citizens will probably reap some long-term profits if their treasuries hang on to those shares in Bank of America-Merrill, or Citigroup, or Morgan Stanley and Whomever It Merges With.

Which, sadly, is more than can be said for American citizens in the deal that Treasury Secretary Hank Paulson brought down from his Mount Sinai penthouse over the weekend. In Paulson's plan, the American public pours at least $700 billion of its money into purchasing the bad loans on Wall Street's books and gets -- well, it gets the thanks of a grateful Wall Street. It does not get any equity in return. To receive a return for their investment, Americans would have to become Chinese or Kuwaiti or Abu Dhabian; they would have to move to some country that accords a little more respect to the public's claim over its money.

During past financial crises, Americans did get something in return for the assistance their government proffered to Wall Street. As my American Prospect colleague Robert Kuttner has noted, when the Depression-era Reconstruction Finance Corp. (a bipartisan creation -- Herbert Hoover started it and Franklin Roosevelt continued it) poured $35 billion into American banks and corporations, it often became a preferred shareholder in those concerns and appointed members to those companies' boards to oversee their operations. Other quids offset the quos of the Resolution Trust Corp., which handled the savings and loan meltdown in the 1980s.

In Paulson's original proposal, by contrast, the Treasury secretary would write plenty of checks, unconstrained by any balances. Not surprisingly, Democrats in Congress have countered with a set of proposals to subject Treasury to stricter oversight and congressional accountability, to provide more direct relief to beleaguered homeowners, to restrict the pay of executives at companies that dump their bad deals on the Treasury, and to provide the public with an equity interest in the companies that taxpayers bail out. Paulson has reportedly acceded to more oversight and some more help for homeowners but is still defending the rights of CEOs to pay themselves astronomical sums and opposing efforts to give Americans a share of the companies whose bad loans they are assuming.

On one Sunday talk show, Paulson dismissed the idea of reining in top executives' pay. "If we design [the bailout] so it's punitive and so institutions aren't going to participate," he said, "this won't work the way we need it to work."

That depends on your definition of "we," does it not? In recent years, Wall Street salaries and bonuses have soared as investment banks peddled ever more profitable schemes that enabled Americans to take on debt -- an activity of no discernable social utility and, in fact, of some peril, but one that attracted a disproportionate share of our smartest college graduates, who clearly understood where the big money was. Reducing Wall Street's outsized incomes is not only a moral necessity, now that it's the public that will be putting up the funds but a national opportunity to redirect our best and brightest into actual productive enterprise.

There's no indication that Hank Paulson understands that. He is less Washington's man on Wall Street than he is Wall Street's man in Washington. And having endorsed the Street's version of socialism -- the American public picks up the tab for the financial sector's mistakes, no questions asked -- Paulson and the administration and the Republicans remain opposed to the more democratically socialist, or democratically capitalist, proposition that the public should get something for its investment. China, Singapore and the oil emirates cut a deal for their people. Why won't Hank Paulson cut one for his?

meyersonh@washpost.com

Paulson's Panic

By Robert J. SamuelsonWednesday, September 24, 2008; A23

Call it Paulson's Panic. That's both unfair and accurate. It's unfair because Treasury Secretary Hank Paulson didn't create the underlying conditions that led to today's financial turmoil, and the failure for not quelling it is shared by Federal Reserve Chairman Ben Bernanke. But it's also accurate, because as world financial markets verged on panic, Paulson himself panicked. He saw no remedy except a massive bailout: having the government buy up to $700 billion worth of risky bonds.

Historians will judge whether his outsized proposal was necessary, but the notion that its congressional enactment -- assuming that happens -- would magically end the crisis seems like wishful thinking. Americans often delude themselves that all problems can be "solved" if only government would act "boldly." This may be another example.

Contrary to much commentary, Paulson's plan would not be the largest government intervention in the private economy since World War II. That distinction still belongs to Richard Nixon's imposition of wage and price controls in August 1971. True, Paulson would socialize unprecedented amounts of private debt, but

Nixon asserted control over the entire economy. What's fascinating are the possible parallels between the two episodes, starting with a shared irony: Both came from administrations committed to "free markets."

When Nixon declared the wage-price freeze -- a complete surprise because he had consistently opposed controls -- the decision proved "wildly popular," Rice University historian Allen Matusow writes in his book "Nixon's Economy." By one survey, 75 percent of Americans supported it.

"There was widespread public rejoicing that at last the government was protecting the people," Herbert Stein, a Nixon economist, later observed. Consumer price inflation, which had been rising at a 4 percent annual rate, dropped toward 1 percent. People believed that by acting decisively government could outlaw inflationary psychology. It couldn't.

Inflationary pressures built up under the artificial lid of the controls. Moreover, the faulty economic doctrines that produced inflation -- easy-money policies aimed at maintaining "full employment" of 4 percent joblessness -- remained. When controls ended in 1974, inflation exploded to 12 percent. It averaged almost 9 percent from 1975 to 1981. Only the brutal 1981-82 recession, imposed by Paul Volcker's Fed and raising unemployment to 10.8 percent, ended the wage-price spiral.

Paulson argues that relieving banks of dubious mortgage-backed securities will "unclog" the financial system and encourage essential business and consumer lending. Maybe. It's true that these securities, because they cannot easily be valued, have created immense uncertainty. Banks and other financial institutions reduced routine lending to each other; everyone worried that the other bank might be in trouble. Having the Treasury buy these mortgage securities, on which losses have already been booked, might minimize these fears.

The trouble is that fears extend beyond mortgage securities. It wasn't just home mortgages that were bundled up into bonds and sold to institutional investors (pension funds, insurance companies, college endowments).

Auto loans, credit card debt and commercial real estate loans have been similarly packaged, $900 billion worth in 2007. Naturally, doubts about the value of these securities have also increased. "Securitization" may survive, but this lending is already down (80 percent in 2008), reports Thomson Reuters. Credit is tightening across the board; issuance of high-quality corporate bonds is down 22 percent, while riskier "high yield" bonds are down 65 percent.

What we are discovering is that all the complex securities, combined with ever-greater international investment flows, have created a global financial system "so arcane that few people can understand its workings," David Smick writes in "The World Is Curved: Hidden Dangers to the Global Economy." The difference between now and two years ago is that financial managers then thought they understood the system; now they know they don't. Ignorance breeds risk-aversion and fear.

Like wage-price controls, Paulson's plan is no panacea. Banks, hedge funds, private equity funds and others are trying to reduce risk by "deleveraging" -- selling stocks and bonds to raise cash, increase capital and cut their own debt. The rush to cash is a hallmark of financial crises. But what makes sense for one may be ruinous for all. Heavy selling depresses prices; lower prices then increase losses, deplete capital, prompt more selling and heighten fear. At best, Paulson's plan might preempt this spiral by allowing investors to unload their least attractive securities.

But it wouldn't automatically stimulate new lending, revitalize "securitization" or prevent more "deleveraging."

Time is needed. The rescue is being constructed so hastily that it may include all manner of flawed provisions: too much power for the Treasury secretary; authority for bankruptcy judges to modify mortgages. Congress faces a wrenching dilemma, imposed on it by financial markets and Paulson. If it dawdles, it may invite the panic that Paulson has brazenly predicted. But if it acts quickly, it may create a monster whose full implications emerge only with time.

I Come to You, Cashmere Hat in Hand . . .

By Dana MilbankWednesday, September 24, 2008; A03

"I don't like to be in this position, asking for things and, you know, answering to the American taxpayer," Treasury Secretary Hank Paulson informed the Senate banking committee yesterday.

His discomfiture was easily understood.

He left Goldman Sachs two years ago with hundreds of millions in his pocket and an invitation from President Bush to take over the U.S. Treasury. Now, after assuring lawmakers for the past two years that the markets would take care of themselves, he was asking Congress for perhaps $1 trillion in borrowed taxpayer money to bail out his former peers and colleagues on Wall Street. He wanted the money so desperately -- "quickly and cleanly . . . avoid slowing it down . . . immediate implementation . . . urgency . . . immediate need" -- that, if he had any hair, he probably would have set it on fire right there in the Dirksen Senate Office Building.

The senators were none too pleased to receive this panhandler. Though they've collectively accepted more than $33 million from Wall Street and related industries in this election cycle alone, the committee members took turns channeling their inner Huey Longs.

"This massive bailout is not a solution -- it is financial socialism, and it's un-American," fumed Jim Bunning (R-Ky.).

"It does not make any sense; it will reward the banks first, who got us in the financial mess," protested Mike Enzi (R-Wyo.).

The fury of Bob Menendez (D-N.J.) caused his metaphors to collide ("I am not going to be stampeded into rubber-stamping this proposal"), and even the demure Elizabeth Dole (R-N.C.) found the whole thing "infuriating."

Much of this was posturing, of course. Lawmakers, afraid of being blamed for the next Great Depression, have little choice but to give Paulson much of what he wants. But after the Bush administration railroaded them on other emergency measures that later turned out to be problematic -- the Iraq war, the Department of Homeland Security and the USA Patriot Act -- the bipartisan outrage suggests that, this time, Congress will make the administration squirm a bit.

Paulson, a college football star before his ascent on Wall Street, was unaccustomed to squirming, but he did his best. "I share your frustrations; I feel those frustrations," he told the senators. "Again, I'm frustrated the taxpayer is on the hook," he added moments later. He went on to remind them that "some of the frustrations here I share, you know," that "I did not want to find myself in the position of being here asking for these authorities," and that, truth be told, "I hate to be on this side of the table, because this is not something that I ever wanted to ask for." Indeed, said the author of the greatest market intervention in nearly a century, "I've never been a proponent of intervention."

But Paulson's conversion was okay, because the committee members were undertaking their own conversion, to Main Street populism.

"This legislation must be passed to help Main Street, not because the federal government is being held hostage by Wall Street," Enzi posited.

"We've tried to avoid propping up failed businesses on Main Street; we should not prop up failure, malfeasance and avarice on Wall Street," submitted Wayne Allard (R-Colo.).

"The bottom line to me is: How do we make sure that the connection between Main Street and Wall Street is understood?" said Mike Crapo (R-Idaho).

Answered Chuck Schumer (D-N.Y.): "While Wall Street caused the problems we face, unfortunately, if we do nothing, Main Street will also pay a severe price."

"I hope we can give Main Street a good bit more help and attention than we have to date," contributed Sherrod Brown (D-Ohio).

Paulson tried his hand at the Main Street game. "Even some Main Street non-financial institutions -- or, excuse me, some non-financial companies -- have trouble financing their normal business operations," he argued.

But mostly, the secretary stuck to his main point: that if Congress doesn't give him what he wants, and soon, the year will quickly become 1932. "There is a bipartisan consensus for an urgent legislative solution," he coaxed. "We need to build upon this spirit and enact this bill -- enact this bill quickly and cleanly and avoid slowing it down."

This was quite a turnabout for Paulson, who earlier this year had promised that "the markets are going to work." Despite what he modestly termed a "housing correction," he assured lawmakers: "I have confidence in our markets."

Given that track record, lawmakers weren't inclined to be bullied by Paulson's demands for haste. "Speed is important, but I'm far more interested in whether or not we get this right," said Chairman Chris Dodd (D-Conn.).

"I'm very concerned that the express need to pass something now may prevent us from devising a plan that would actually work," agreed Richard Shelby (Ala.), the committee's top Republican.

And Schumer was moved to invoke Greek mythology, using the imagery of sea monsters to analyze the situation. "As we look forward in the week ahead, we face both a Scylla and a Charybdis, dangers on both sides," the oracle of New York said. In Schumer's telling, the Scylla monster represented the danger of not acting. "But there is also the Charybdis, the other danger of acting so quickly that we choose a bad solution," he said.

The noted classicist had planned to ask a follow-up question later, but an appearance on CNBC kept him from returning to the hearing room in time.

"We really do have to go," Paulson advised the committee.

On Wall Street, the stock market resumed its plunge

Dear Iraqi Friends (Thonas Friedman on "the bailout")

By THOMAS L. FRIEDMAN

From: President George W. Bush

To: President Jalal Talabani of Iraq, Prime Minister Nuri Kamal al-Maliki, Speaker Mahmoud al-Mashadani

Dear Sirs, I am writing you on a matter of grave importance. It’s hard for me to express to you how deep the economic crisis in America is today. We are discussing a $1 trillion bailout for our troubled banking system. This is a financial 9/11. As Americans lose their homes and sink into debt, they no longer understand why we are spending $1 billion a day to make Iraqis feel more secure in their homes.

For the past two years, there has been a debate in this country over whether to set a deadline for a U.S. withdrawal from Iraq. It seemed as if the resolution of that debate depended on who won the coming election. That is no longer the case. A deadline is coming. American taxpayers who would not let their money be used to subsidize their own companies — Lehman Brothers, Bear Stearns and Merrill Lynch — will not have their tax dollars used to subsidize your endless dithering over which Iraqi community dominates Kirkuk.

Don’t misunderstand me. Many Americans and me are relieved by the way you, the Iraqi people and Army have pulled back from your own brink of self-destruction. I originally launched this war in pursuit of weapons of mass destruction. I was wrong. But it quickly became apparent that Al Qaeda and its allies in Iraq were determined to make America fail in any attempt to build a decent Iraq and tilt the Middle East toward a more democratic track, no matter how many Iraqis had to be killed in the process. This was not the war we came for, but it was the one we found.

Al Qaeda understood that if it could defeat America in the heart of the Arab-Muslim world, that it would resonate throughout the region and put Al Qaeda and its allies in the ascendant. Conversely, we understood that if we could defeat Al Qaeda in Iraq, in collaboration with other Arabs and Muslims, that it would resonate throughout the region and pay dividends. Something very big was at stake here. We have gone a long way toward winning that war.

At the same time, I also came to realize that in helping Iraqis organize elections, we were facilitating the first ever attempt by the people of a modern Arab state to write their own social contract — rather than have one imposed on them by kings, dictators or colonial powers. If Iraqi Shiites, Sunnis and Kurds can forge your own social contract, then some form of a consensual government is possible in the Arab world. If you can’t, it is kings and dictators forever — with all the pathologies that come with that. Something very big is at stake there, too.

It’s not the stakes that have changed. It is the fact that you are now going to have to step up and finish this job.

You have presumed an endless American safety net to permit you to endlessly bargain and dicker over who gets what. I’ve been way, way too patient with you. That is over. We bought you time with the surge to reach a formal political settlement and you better use it fast, because it is a rapidly diminishing asset.

You Shiites have got to bring the Sunni tribes and Awakening groups, who fought the war against Al Qaeda of Iraq, into the government and Army. You Kurds have got to find a solution for Kirkuk and accept greater integration into the Iraqi state system, while maintaining your autonomy. You Sunnis in government have got to agree to elections so the newly emergent Sunni tribal and Awakening groups are able to run for office and become “institutionalized” into the Iraqi system.

So pass your election and oil laws, spend some of your oil profits to get Iraqi refugees resettled and institutionalize the recent security gains while you still have a substantial U.S. presence. Read my lips: It will not be there indefinitely — even if McCain wins.

Our ambassador, Ryan Crocker, has told me your problem: Iraqi Shiites are still afraid of the past, Iraqi Sunnis are still afraid of the future and Iraqi Kurds are still afraid of both.

Well, you want to see fear. Look in the eyes of Americans who are seeing their savings wiped out, their companies disappear, their homes foreclosed. We are a different country today. After a decade of the world being afraid of too much American power, it is now going to be treated to a world of too little American power, as we turn inward to get our house back in order.

I still believe a decent outcome in Iraq, if you achieve it, will have long-lasting, positive implications for you and the entire Arab world, although the price has been way too high. I will wait for history for my redemption, but the American people will not. They want nation-building in America now. They will not walk away from Iraq overnight, but they will not stay there in numbers over time. I repeat: Do not misread this moment. God be with you.

George W. Bush.

A Bailout or a Bonanza?

By Eugene Robinson
Tuesday, September 23, 2008; A21



The uber-capitalists of Wall Street are all socialists now. Free- market ideology, it turns out, doesn't pay the mortgage. That appears to be a job for, ahem, Big Government.

Let's be clear about why we're facing a crisis that could pull down the global financial system. The irresponsibility of individuals who bought houses they couldn't quite afford pales in comparison with the irresponsibility of the financial wizards who built on those shaky mortgages a towering edifice of irrational faith. Someone in the government should have looked at all those trillions of dollars' worth of mortgage-backed securities and collateralized debt obligations and credit default swaps and demanded that Wall Street prove that all, or even most, of this purported money was real. But we're in the eighth year of the Bush administration; adult supervision left the building long ago.

Now that the whole highly leveraged structure is threatening to fall, some kind of government bailout is necessary and inevitable. But Congress shouldn't approve Treasury Secretary Henry Paulson's $700 billion rescue plan without insisting on some measure of equity and accountability.

See, neglecting such details as equity -- in both senses of the word -- and accountability is what got us here in the first place.

Congress should have learned by now what happens when this administration is given a blank check. Unlike the run-up to the Iraq war, at least this time there's a genuine emergency -- we came within a whisker of a financial meltdown last week, and we're still way deep in the woods. No one thinks that delay is an option.

Not Barack Obama, who introduced legislation in 2006 to address lax mortgage lending and in March proposed a new regulatory framework for the financial markets. Not John McCain, who has been all over the map. Within one week, McCain has gone from saying the "fundamentals of the economy are strong" to declaring that "we are in the most serious crisis since World War II."

But first we need to be convinced that Paulson's proposal -- have the government purchase the bad debt -- is the best thing to do. Not all economists believe it is, although it's true that if you put six economists in a room, they'll come up with seven sharply differing, strongly held points of view about the time of day. Assuming that Paulson's plan is deemed workable, the "details" yet to be worked out involve staggering amounts of money. Hedge funds apparently don't qualify for relief, but what about insurance companies that branched out into exotic mortgage-backed investments? What about foreign banks with big U.S. operations?

Clearly there has to be some definition of just who is covered, and there has to be some oversight. And now that the government has nationalized Fannie Mae and Freddie Mac, who's going to run those still-vital institutions? Who's going to run the giant insurance company AIG, which was effectively nationalized last week?

Maybe Congress can insert a provision that broadly insists on the principle of oversight and leaves the particulars to be worked out later. But it would be unconscionable for Congress to absolve a bunch of wealthy financiers of the consequences of their bad decisions and not do the same for homeowners who showed similarly poor judgment. Paulson has indicated his awareness that this is, indeed, an election year -- and that members of Congress are not eager to go home to their districts and explain why Wall Street's pooh-bahs get to keep their mansions and their yachts while working-class families lose their modest homes.

The more contentious issue is the idea, supported thus far mostly by Democrats on Capitol Hill, that there should be salary caps for executives of companies that take advantage of the government bailout. Paulson complains that this will provide a disincentive for companies to participate in the program -- whatever the program turns out to be -- but it seems to me to be a reasonable idea, and a winner politically.

Why shouldn't the executives who put their companies at risk by making unwise investments pay a price for their lack of prudence?

We can't just let the system collapse -- nobody wins in that event. But I thought one of the fundamental tenets of capitalism was a direct relationship between risk and reward. The Masters of the Universe who created this mess ought to share the pain of cleaning it up.

eugenerobinson@washpost.com

Video Dog: Henry Paulson on How He'll Protect the Taxpayers

Friday Reflection: Rothschilds, Rednecks and John McCain

Form The Sleuth, by Mary Ann Akers, Wash.Post
Posted at 1:28 PM ET, 09/19/2008

Our favorite political story of the week by far was news of John McCain's highly touted endorsement from one Lady Lynn Forester de Rothschild, a "Hillraiser" who chose to support the GOP presidential nominee over Barack Obama, the man who defeated her dear friend Hillary Rodham Clinton in the Democratic presidential primary.

De Rothschild didn't stop making news with her endorsement. Later in the week, the famously wealthy London socialite went on to call those working-class Americans who Obama insulted during the primary "rednecks."

"Barack Obama went and called the people who have guns and cling to their religion bitter," de Rothschild told CNN's Campbell Brown. "The people out - who are the rednecks or whatever - are bitter."

Click here to watch a YouTube clip of milady's redneck riff. When, do you suppose, was the last time Lady de Rothschild knocked back a few Pabst Blue Ribbons with a redneck, perhaps over NASCAR or wrestling?

The GOP presidential campaign made much ado this week over the New Jersey-born Baroness for Hillary crossing over to become an Aristocrat for McCain - in the midst, of course, of the nation's worst financial meltdown since the Great Depression, and as both McCain and Obama are desperately trying to woo middle-class voters hit hardest by the ongoing credit crisis. But hey, far be it from the Sleuth to judge when a presidential candidate should roll out the red carpet for a baroness embracing him with open arms and purse.

Lady de Rothschild's decision to back McCain may have had less to do with loyalty to Hillary than it did in joining the rest of the aristocratic clan she married into.

The Rothschilds lent their name and historic property for a fundraiser held for McCain back in March at the storied Spencer House, which is owned by the famous banking family of England. (Mrs. de Rothschild's husband, Sir Evelyn Rothschild, recently sold his stake in the family banking empire, for a reported $600 million.)

Lady de Rothschild - "the flashiest hostess in London," as Portfolio magazine calls her - says she'll be spending much of her time between now and Election Day campaigning for McCain.

But something tells us we probably won't be seeing as much of milady as she thinks we will. Would she really be the most appealing of McCain surrogates to all those "rednecks" clinging to their 401k plans?

McCain's Elite Backer, she of the ultra-elite, ultra-wealthy Rothschild Banks, calls Americans rednecks

Cash for Trash

Hby Paul Krugman, NY Times
Sept. 22, 2008

Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.

There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.

Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.

So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:

1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.

2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.

3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.

4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”

The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?

Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital.

Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?

The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)

But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.

I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.

But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.

McCain - AGAINST Regulation Before He Was FOR It?

In today's Washington Post
McCain Embraces Regulation After Many Years of Opposition
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/16/AR2008091603732.html
By Michael D. Shear
Washington Post Staff Writer
Wednesday, September 17, 2008


McCain says "The economy is fundamentally sound." Although he sat on the panels that oversaw deregulation. Then he tries to attribute his comment to "the value of American workers."

So he was AGAINST regulation before he was FOR it? And is he NOW pro-union? Let's ask.

If it takes a disaster like this week's financial crisis before he does a 180 on his mistaken beliefs ... what will it take before he changes the McPain joint policy on war?

War with Iraq ("it was the right idea in the beginning... the surge is working"...)
War with Iran ("Bomb, bomb, bomb - bomb bomb Iran")...
War with Russia ("If that's what we have to do, Charlie. We can't blink")

... War with (fill in the blank).

Let's not wait until it's too late on THAT issue, too.

McCain + Palin = McPain

Palin's Religious View

Palin's Pastor Agrees God Punishes Jews Who Don't Convert

John Stewart Annihilates Sarah Palin's Media Surrogates

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Jon Stewart Annihilates Sarah Palin's Media Surrogates Comedy Central Insider - The Comedy Blog fo
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