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