This morning Paul Krugman gave us a peek into a closed session among bailout negotiators in which Paulson agrees with Nancy Pelosi that bad faith by extremist Republicans-- stoked by a self-serving, opportunistic national disease called John McCain-- is what caused the bailout negotiations to break down. The Mike Pence-led extremists, he reminds us, were first and foremost nihilists with what Krugman termed a "complete nonsense proposal"-- "a holiday on capital gains taxes."
How is that possible? Well, if a party runs on economic nonsense for 25 years, eventually many of its foot soldiers will be people who actually believe the nonsense.
...And after the way the Bushies and their allies double-crossed the Democrats again and again in the aftermath of 9/11-- demand national unity, then accuse you of being soft on terrorists anyway-- there?s no way Pelosi and Reed will do the responsible but unpopular thing unless the Republicans agree to share ownership.
So what we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch.
As a friend said last night, we?ve become a banana republic with nukes.
The financial situation is now downright scary. Don't look at the stock market-- that's not where the problem is. The problem is in the credit markets, which are quickly freezing. I won't bore you with technical indicators like Libor and Treasury swap spreads, but if you talk to people who work these markets every day, as I have, they report that the money markets are in worse shape than they were last August, or even during the currency crises of 1998.
Banks and big corporations and even money-market funds are hoarding cash, refusing to lend it out for a day or a week or a month. Even the best companies are having trouble floating bonds at reasonable rates. And the shadow banking system-- the market in asset-backed securities that ultimately supplies the capital for most home loans, car loans, college loans-- is almost completely shut down.
People are so nervous, and there is so much distrust, that all it would take is one more hit to trigger the modern-day equivalent of a nationwide bank run. Financial institutions would fail, part of your savings would be wiped out, jobs would be lost and a lot of economic activity would grind to a halt. Such a debacle would cost us a lot more than $700 billion.
...[T]his isn't primarily a bailout for Wall Street-- it's an attempt to jump-start certain credit markets that have broken to the point that nobody is buying, driving down prices to the point where they are well below any reasonable estimate of their long-term economic value.
The basic idea is to use special auctions to recreate a market for these securities with many competing sellers and one buyer (the Treasury), so that a credible "market" price can be established. If that price turns out to be below what those securities are now valued at on the banks' balance sheets, then banks will have to take the loss. If the price turns out to be higher, then banks may be able to record gains. The point isn't to bail out institutions that have made bad bets and suffered credit losses, but to provide a buyer of last resort so the market can begin pricing again.
Are there other ways to structure this market rescue? Sure. You could try to deal with the underlying problem by taking additional measures to prevent foreclosures. Or you could create a mechanism for the government to invest fresh capital in troubled banks, in exchange for stock. In fact, both approaches are possible and envisioned under the administration proposal now under discussion. But neither, by itself, is likely to quickly restore confidence in the financial system and relieve the current crisis.
... [I]t is important to give the Treasury secretary and the people he hires a good deal of flexibility in designing and experimenting with the mechanics of this rescue. The reality is that these guys will be operating in uncharted territory, making things up as they go along. That means there are no assurances that any particular approach will work and no assurances that this will be the final solution. It also means that, just as we entrust generals to fight a war, we are going to have to trust the Treasury to find a way out of this crisis.
The Republicans have offered two solutions-- the Paulson plan, which was a complete power and money grab, and now the House Republican plan which is that the solution is to do more of what caused the problem-- deregulate Wall Street and hey, presto, deregulation will fix what's wrong!
So, is the correct solution to compromise the Frank or Dodd bills with more deregulation and more power and money for Paulson and Bush to use however they see fit with no real oversight?
But wait, you say. The Dodd bill and the Frank bill are pretty sucky themselves. That's true, still both are better than Paulson's plan or the absurd House plan of "deregulation will fix the problems caused by deregulation!"
And why are they sucky? Because they started with the Paulson bill and because Frank and Dodd compromised with Paulson all through negotiations.
When put that way it's, I hope, self evident, that the more partisan the solution-- the more things like bankruptcy protection and help for people to keep their houses, and serious taking pieces of companies which are helped out-- all things not in the original Paulson plan and as far as I can tell not in the House Republican plan, are better.
They are partisan ideas. They are democratic ideas. They are in fact progressive ideas.
They are not bipartisan ideas. Republicans don't want people to get bankruptcy protection. They don't want judges to be able to let them keep their houses. They don't want the government to get 10% preferred shares like Buffett got when he bailed out Goldman, whenever the government bails out a company.
Bipartisanship means compromise and compromise with the Republicans on this means a lousy bill. In fact, starting with the Paulson bill is what made the Frank bill so awful, and the Dodd bill is better than the Frank bill because it departs further from Paulson. But because it's still based on Paulson, it still isn't actually a good bill, just a better bill than Frank's or Paulson's.
Gingrich brings a clarity of mind and simplicity of action that is a tonic to a Republican Party that seems uncertain of its core principles and ambivalent about its presidential standard bearer. Even before John McCain announced he was suspending his campaign and riding to the rescue in Washington to find a bipartisan solution to the financial crisis, Gingrich saw the impasse on Capitol Hill as an opportunity to recast the Republican Party on the side of Main Street. "It's very clear that their bias is entirely in favor of the big banks and Wall Street," he says of the Bush administration's $700 billion bailout plan presented by Treasury Secretary Henry Paulson. "This is the decisive moment of defining McCain. If he comes out on the side of the taxpayer, then there will be a McCain wing of the Republican Party that will be dramatically different than the Bush wing."
Gingrich's not-so-subtle message: Bush is irrelevant. It's in McCain's hands as the leader of his party to drastically reconfigure the Paulson bailout or he will suffer the same ignominious political fate as George H.W. Bush. Gingrich put out a statement hailing McCain's eleventh-hour intervention. "This is the greatest single act of responsibility ever taken by a presidential candidate and rivals President Eisenhower saying, 'I will go to Korea'." Eisenhower's pledge was enough to reassure voters that if elected he would find a way to resolve the Korean conflict. McCain's high-octane involvement in the bailout is meant to convey the same sense of stature and leadership, and to provide cover to reluctant Republicans to support a deal that runs counter to everything they thought they stood for.
McCain alone can bring along enough Republicans to make a deal stick. "The Democrats are not going to go out on a limb for an unpopular position and give Bush money five weeks before an election unless Republicans deliver the votes," says Gingrich. "And the Republicans I believe cannot deliver the votes. So they'd better be designing Plan Two because I think Plan One is dead."
Never one to hold back, Gingrich unleashed his views about the original bailout plan in a torrent of words, calling the authority Paulson wants over the financial industry "a bureaucratic dictatorship" that is "outside the law" and will lead to a "20-year bureaucracy of corruption and cronyism." He's sounding the cry of what he calls the Reagan-Thatcher wing of the party, newly energized by a familiar fight against the corporate country-club wing he says is "boxed in by a Goldman Sachs chief of staff and a Goldman Sachs Treasury Secretary," so they're not receptive to alternatives (Paulson and top White House aide Josh Bolton are alumni of the investment house). "If they don't have any better ideas, they should resign, and the president should get a new team."
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The series of informative videos, "Alive in Baghdad" continues.
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Iraqi forces raided a house in the northern city of Mosul, arresting suspects and confiscating weapons and explosives.
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Today, the White House Office of Management and Budget (OMB) released a statement of administrative policy today recommending Bush veto a proposed second stimulus package. The $56.2 billion package, announced yesterday, would extend unemployment benefits for seven weeks, increas food stamp benefits by 10 percent, and provide $50 million for food banks, among other proposals. This afternoon, Senate conservatives successfully blocked the bill, as the motion to proceed won 52 votes, eight shy of the necessary 60.
In the press briefing today, just an hour before the Senate vote, Dana Perino said the White House opposed the measure, specifically citing its extension of unemployment and food stamp benefits as explanation:
PERINO: There’s some elements of the package that have been put forward by Democrats that we do not think would be stimulative to the economy, such as unemployment insurance. The food stamps, we believe we have met the need.
In fact, the tanking economy has left more Americans in need of food assistance than ever, with 28 million Americans expected to receive food stamps this year, “the highest level since the aid program began in the 1960s.” At the same time, the purchasing power of food stamps has declined dramatically.
Alongside unemployment benefits and food stamps, the OMB also objected to a provision increasing infrastructure spending, arguing, “Infrastructure spending is never an effective means to create rapid stimulus.” However, a Center for American Progress study found that two million jobs could be created within two years through robust investment in green energy and infrastructure.
Politics: A strife of interests masquerading as a contest of principles.
The conduct of public affairs for private advantage.
~ Ambrose Bierce (June 24, 1842 - 1914) American Editorialist, Journalist, Author, Satirist
copyright ? 2008 Betsy L. Angert. BeThink.org
Two issues of national import flooded the airwaves on Wednesday, September 24, 2008. On every radio and television station, broadcasters spoke of the economy and the elections. Journalists reported, tonight, the current President of the United States will address the nation, One of the persons who hopes to occupy the Oval Office after George W. Bush departs will not speak directly to the people. For Senator John McCain, the fierce urgency of now is offered as the reason he will suspend his campaign. The Presidential aspirant requested his rival do as he decrees correct, and delay the debates. Whilst an audience estimated to be near one hundred (100) million anxiously awaits word from the self-proclaimed "reformer," John McCain muses his presence in Oxford, Mississippi would be unwise. As Americans have witnessed on the campaign trail, enter one Grand Old Party boy; exit the other. Some suggest the Republican President and the Party nominee are rapturous; they love theatre of the absurd.
In this play, the two performers tap dance. The Republican flit requires the partners to stay separate as much as possible. Solo recitals are routine in a production such as this.
Observers reflect; the duet, John Sidney McCain and George Walker Bush, tango in tandem. History might suggest the pair work hard to limit joint appearances. Neither prefers to be associated with the problems of the other. George W. Bush worries of his base, and John fears he might be linked to the President's follies, least of which is the current economic crisis. John Sidney McCain wishes to be associated with this President's decisions if he can be viewed as the one who swooped in to save the day, to deal with the dilemma as only he can.
As a rule, or in this script, the President and his presumed replacement will share a stage only if convenient. However, if the forces of nature can provide cause for a more remote union, no one will complain, least of all John McCain. In truth, many Republicans were relieved when recent circumstances caused a change in plans. Hurricane Gustav may have brought fear to those in its path. However, for delegates, the storm was reason for silent rejoice. The present fiscal tempest might not be as fortuitous.
When President Bush thought it prudent to remain in Washington during the recent Convention his role was acted out as written. The Commander stood behind the curtain. He was but a vision projected on the screen. For a second he was there. Then, he was quickly gone and forgotten.
That scene was just as advisers prefer. Wednesday night, as the fiscal catastrophe looms, John McCain and the Republican Party may not be as lucky.
In Minneapolis-Saint Paul, the presumed soon-to-be President, Senator John McCain, was on center stage, away from the current Commander-In-Chief, whose policies bring McCain's poll numbers down. Recent realities preclude such a distance. John McCain and his public relations person were forced to consider, what might the candidate do.
The play must go on. The pair need be as players in an Elizabethan comic tragedy. Appearances need be well-choreographed It is essential the actors avoid confusion, The duo is only dynamic if they are not thought of as identical. Each fears that if the public sees one with the other the unmistakable mirror imagine may boggle the mind. Yet, bailouts beckon. The Senator must meet with the present President if he is to be thought of as the solution, the change candidate.
Hence, on Wednesday, September 24, 2008, for a moment each emerged in the vanguard. As Americans tuned into the news, the drama of Presidential politics, past and present, played out. Word was, they would again the following day. The President appealed for a joint session. John McCain and George W. Bush each thought a meeting might work to the benefit of both. Of course, out of a deep respect for decorum, hopeful Barack Obama was also invited.
President Bush exclaims the Big-business Bailout is vital to the economy. Hence, he has pledged to meet With McCain and Obama. It is fascinating to consider, the conference will take place behind closed doors.
The partners in policy will not be photographed together for more than a moment. The fa?ade of a cordial friendship will be maintained. However, the public will be reminded, between the two, there is nothing more than pleasantries. This matter is of massive significance. Main Street could crumble. Wall Street is already in dire straits. If this affair is not addressed immediately the nation could falter; the Capitalist system might fail as all other ventures the President engaged in have.
The people were also told, ten days after the economic emergency became known, George W. Bush would publicly discuss the calamity of currency concerns. Subsequently, within seconds of the first announcement, the potential Chief Executive, John McCain publicized, on Friday night, he, would forego his scheduled appearance at the first Presidential debate.
One mouth opened and another closed. Each action was prompted by a need to emerge as Presidential. Be it in an election or on economic policy, George W. Bush and John McCain share a goal. Each wishes to look at ease and not act as flustered.
The aspirant from Arizona proclaimed, talk of the eminent election, must not preclude the greater quandary; how might America field this fiscal folly. That discussion, Senator McCain reasoned must remain in Washington. The Senator concluded he would suspend his campaign, and fly off to the Hill.
The presumed soon-to-be President said he must speak to the financial alarm sounded well over a week ago. However, the conversation would not be with the American people. Exit, stage East, or is it West Wing
President Bush, on the other hand, "decided" he could no longer hide behind the walls of the White House. If George W. Bush was to preserve his legacy as a Commander in control of the country, must take to the podium once again.
As John McCain departs, George Walker Bush enters. The characters, interchangeable, periodically reverse roles. The desire for change among the electorate necessitates these moves. When President Bush is out of sight, John McCain seeks the limelight.
President Bush chose to be less prominent as the news of fiscal debacle was delivered. Then, the challenger, McCain was very visible. Senator McCain voiced his immense concern immediately. First, as a President might do, Mister McCain assured the public, the "fundamentals were still strong." Hours later, when he realized his evaluation was erroneous, Senator McCain offered a plan. Proudly, and promptly, the confident McCain said, fire the Securities and Exchange Commissioner, Christopher Cox. The distance between the incumbent President and John must be reintroduced to the dance.
John McCain chided his challenger Barack Obama for not being as decisive as he. The Arizona rebel need not compare himself to the secluded stalwart President. Impressed with his own rapid response to a catastrophe, the Senator McCain frequently flaunted; he had not hesitated. Instinctively he shot from the hip, or the lip. Hurriedly John S. McCain suggested what he might do were he in the Oval Office.
However, the impulsive riposte John McCain presented to a frightful financial condition did not calm conventional constituents who are deeply invested in the market and the maverick's image. Indeed, some distinguished fellows such as conservative Columnist George Will trembled at the thought of what a man with the temperament of John McCain might do once secure in his seat on Pennsylvania Avenue.
While the collective consensus among Republicans, as well as Democrats is, it is time for a change, a change in command at the Securities and Exchange Commission did not seem a substantive solution to a problem so profound it affects world markets, Wall Street and Main Street.
Many agree; America can no longer stay the course. The path the Bush Administration took has destroyed our credit and credibility. Nonetheless, the people hoped for a more measured response than the one John McCain offered. This might be the reason the current President decided to step forward again. Perhaps, the previously elected Chief Executive could better explain the monetary menagerie than his prot?g? had.
Certainly, surrogates for George W. Bush had not clarified what seemed an incomprehensible mess, although they tried.
Days ago, the Bush appointees called for a seven hundred billion dollar ($700) bailout. This amount would be in addition to billions loaned to financial institutions weeks and months earlier. Congress heard the arguments. Anxious citizens also tuned in.
Federal Reserve Chairman Ben S. Bernanke testified before the Joint Economic Committee. He warned lawmakers of the "grave threat." Banks, businesses, and the American people might find it near impossible to secure a loan. Economic conditions have deteriorated. Soon the monetary system will be severely hampered. The future is grim. Chairman Bernanke claims Congress must act post haste.
More than a week ago, United States Treasury Secretary Henry Paulson called for the creation of a massive government "war chest." His proposal expressed an immediate need to take illiquid assets off the books of banks and other financial firms. Secretary Paulson, and hence, the Administration he represents, hoped that if Congress, and the American public adopted this strategy credit markets would again be open. For too long now, for increasingly large segments of the business world, the markets have been closed. Financially, mortgage-related debt strangled the free enterprise system.
While the words of those in charge of monetary affairs were audible, the people, even economists, and market experts did not comprehend the specifics. John McCain's statements had not reassured.
The people sought more. The public wanted solace from a situation, they were told, is dire. Yet, tonight countless citizens may have realized neither man could supply the answers the common folk crave.
The idea of bailout burgeoned. The audience became impatient. The viewers, American people, saw no vision. All the electorate became anxious. It had been ten days without a word from the presumed main character, George W. Bush. After word of the economic emergency first emerged, the President was near silent.
The script called for more action. Finally, the declared "lame duck" President would appear. He would publicly discuss the calamity of currency concerns. The persons who produce an image understood without the presence of Mister Bush spectators and speculators were left to wonder; what would be. Might the maverick McCain make a move and assert his decisiveness. The nominee tried to calm fears. He presented a plan. However, these were not enough to alter the downward fiscal spiral.
Therefore, it had to be announced. George W. Bush would again take center stage. President Bush, "decided" he could no longer hide behind the walls of the White House. If George W. Bush was to preserve his legacy as a Commander, in control of the country, he must take to the podium once again.
Subsequently, within seconds of the first announcement, the potential Chief Executive, John McCain publicized, on Friday night, he, would forego his scheduled appearance at the first Presidential debate.
One mouth opened and another closed. Each action was prompted by a need to appear as Presidential. Be it in an election or on economic policy, George W. Bush and John McCain share a goal. Each wishes to look at ease and not act as if they are flustered. Ultimately, they opted for a mere moment the two would stand together as one. It seemed applause would come only through a cooperative effort.
Here we are today, back where we started. The curtain opens. The aspirant from Arizona and the man who now resides in the White House stand together on stage. It is Wednesday, September 24th.
A person of quality who asks to be President, or one who has been selected to serve as our nation's Chief Executive, shows up, speaks to the people, and struggles to share his proposals, disappears, only to arise again. The resurrection, the renaissance, and the reality revealed.
The debate on Friday was to focus on Mr. McCain's perceived strength, foreign policy. Mr. McCain had not planned to devote large blocks of time to debate practice as did Mr. Obama, who was holing up with a tight circle of advisers at a hotel in Clearwater, Fla., on Wednesday, Thursday, and Friday to prepare. Mr. McCain had a preparatory session on Wednesday afternoon at the Morgan Library in Manhattan, but advisers said it had been interrupted by his decision, announced immediately afterward, to suspend his campaign.
The Program Bill . . .
A number of commentators and politicians have noted that the proposed financial bailout is, in[...]
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Trends and Tremors
Right now I'm watching Virginia Representative Eric Cantor (R) tell Wolfe Blitzer that he does not know how McCain stands on either of the two currently proposed economic solutions. His own advisers confirm this:
McCain advisers dispute that account. One said McCain neither endorsed nor explicitly opposed the tentative plan.Anyone who knows something about congressional politics knows that McCain's inability to say what he was in favor of was a major sticking point, if not the sticking point that derailed the initial deal. Had McCain actually wanted to look Presidential and solve this problem, he could have - by lobbying his party to compromise on some sort of deal, instead of stopping the deal (What was that, Mr. Blunt?) after an agreement had been reached. Certainly, Bush and the Democrats would have been willing to compromise.
"All he has done is stand in front of the cameras...We still don't know where he stands on the issues. The insertion of presidential politics has not been helpful."This gave House Republicans the chance they needed to start their revolt -- against the Bush administration, and instead of compromising, they proposed an entirely new plan at the last minute. Again, McCain did nothing (from the same IHT article):
Boehner pressed an alternative that involved a smaller role for the government, and McCain, whose support of the deal is critical if fellow Republicans are to sign on, declined to take a stand.Fast forward to this afternoon, when McCain announced he will be attending the debate. First, this strikes me as odd, given that he originally said he would not debate unless a solution had been reached:
"I am directing my campaign to work with the Obama campaign and the commission on presidential debates to delay Friday night's debate until we have taken action to address this crisis."His staff reiterated that earlier today. And yet, in today's (far-from-reality) announcement about re-joining the debate and re-starting the campaign:
He is optimistic that there has been significant progress toward a bipartisan agreement now that there is a framework for all parties to be represented in negotiations, including Representative Blunt as a designated negotiator for House Republicans. The McCain campaign is resuming all activities and the Senator will travel to the debate this afternoonSo now making 'significant progress' towards a deal qualifies as taking action on the economy? Moreover, while it's true that House Republicans are back at the table, does this really constitute significant progress?
"I'm hoping that we will make progress...we will not agree to a bill that sells taxpayers out to bail out Wall Street.'' - House Minority Leader John BoehnerSo...you've now decided to go to the debate because you made...what progress, exactly? I'll leave it to our readers to answer that question. And one more for you: how is the economy now well enough off that McCain can continue his campaigning even though he has to "rush" back to New York.
"The question of insurance is an option...But the notion that you substitute that for the other is totally unacceptable to Paulson and Bernanke." - Rep. Barney Frank
Ed Gillespie, a senior Bush adviser, said some of the Republican proposals "can be accommodated, possibly."
?I am not restrained from asking questions about the financial crisis...Stay tuned!?Pastors Playing Hardball
A big day for Barack Obama in the daily national tracking polls. For the first time in the long and[...]
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Tracking polls are inherently volatile. But the initial results suggest that McCain's suspension/debate cancellation stunt has been a big bust. [...]
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