The Obfuscation Report

Dave Lindorff: Hang Onto Your Wallet! The Government is About to Rescue Us
Submitted by BuzzFlash on Fri, 09/19/2008 - 2:15pm. Dave Lindorff

When the financial markets started coming undone earlier this week, the Treasury Secretary and the Federal Reserve stepped in, and with $85 billion of our money (actually our children's money, since they borrowed it from China and Saudi Arabia), bought foundering AIG, the world's largest insurance company, and assumed its colossal pile of crap debt.

That didn't help, and the stock market crashed further, falling to levels not seen in three years. Banks, meanwhile, stopped lending, figuring to just hold onto their money and try to weather the crash. The U.S. Treasury and the Fed stepped in again, this time pumping nearly $300 billion more of our money into foreign money markets, and getting European and other governments to do the same in an effort to get the credit markets open again and to stop the stock market swoon. That was on top of some $700 billion already spent on bailouts.

It didn't work. Thursday, the markets continued to fall, well into the afternoon, and it looked like another seriously down day. But then Treasury Secretary Henry Paulson came up with a new idea. He said he and the Bush Administration were considering setting up a new agency to assume all the bad debt of the banking sector -- meaning all those bad loans they made, and that they lured unsuspecting consumers into taking out, by way of deceptive marketing techniques and outright fraud.

Note that we're talking about perhaps half a trillion dollars here -- of our money again. And remember, much or even most of this money will never get repaid, and we're talking about money that could have funded reduced class sizes in every school in America, a national healthcare system, a crash R&D program into non-carbon energy and (not or) a strengthened Social Security and Medicare program.

The drones in the Democratic Party leadership in Congress immediately jumped on the bandwagon, with House Speaker Nancy Pelosi (D-CA) urging her charges to act quickly to get some kind of a bill out there to facilitate the bailout, which could cost anywhere from $600 billion to $1 trillion, by most estimates.

The thing to remember here is that this is not a rescue of the little guy (though the Democrats say their rescue plan, when it appears, will include some kind of relief for people unable to pay their mortgages). Don't hold your breath. Odds are those people facing foreclosure will still be unable to pay their mortgages, and besides, there's no way there will be relief for the majority of homeowners who aren't missing their mortgage payments, but who are struggling mightily to meet them each month.

Primarily, who gets helped by this enforced taxpayer largesse are the fat cats who own all the stock in these financial institutions, all the executives who pay themselves outsized salaries each year for their lousy management records, all these hotshot traders who make the deals that later turn sour, long after they've run off to another job taking their bonuses with them.

We ordinary people, who live from check to check, will feel the pain of this "rescue" in the form of higher taxes in coming years, and in a devalued dollar -- because you can bet that all that money they're printing, and all that added debt they're piling on to the mountain of debt already out there is going to make the rest of the world pretty queasy about holding onto dollar-denominated debt, or about buying any more of it.

When you hear a banker say he's going to help you, it pays to hang onto your wallet. When you hear a politician say he's going to help you, hang onto your wallet. If they're both saying the same thing, and especially if one of them is the head of the Federal Reserve Bank, then you better really hang on tight.

Not that that will do any good.

The real answer to this crisis is, firstly, a massive dose of trust-busting, so that no bank or investment bank or insurance company is so big that its failure becomes a threat to the financial system, and thus the government has to rescue it with taxpayer money, and secondly, a return to the era of Glass-Steagall, when it was illegal for banks to also be in the investment banking business.

All the talk of "efficiencies" and of "better service to the customer" that has been endlessly parroted to justify mergers such as Citicorp and Travelers, or JP Morgan and Chase Bank, or now Bank of America and Merrill Lynch, is fraudulent. Just to give an example, my bank, once known as Willow Grove Bank, a small family-owned institution, was bought by another bank and became Willow Financial. Almost immediately, the staffing levels went down. Recently, the combined entity, which ran into trouble, was bought by another institution, Harleyville Bank. Now there are half as many tellers most of the time. As one teller confided, "Every time we get bought, they lay people off."

Of course they do. That's what mergers always do. To recoup the costs of the merger, management cuts back on service and employment.

The truth is, for all the talk about the efficiencies of bigness, getting a mortgage today isn't any cheaper than it was in the 1950s, when there wasn't even any such thing as a national bank that would be "too big to fail."

The real reason we have mega financial institutions is that mega financial institutions pay mega bucks to managers and make mega donations to the campaign coffers of politicians. They also get to put some of those mega-buck managers into key advisory positions in each administration, Republican and Democratic, to ensure that government polices allow them to get even bigger and even richer -- and to ensure that when they screw it up, they get rescued at the taxpayers' expense.

DAVE LINDORFF is a Philadelphia-based journalist and columnist. His latest book is "The Case for Impeachment" (St. Martin's Press, 2006 and now available in paperback edition). His work is available at www.thiscantbehappening.net.

Barack Obama huddled with his economic advisers on Friday and backed government efforts to prop up a teetering financial system, but he said he would wait to release his own detailed plan to stem the turmoil on Wall Street.

The Democratic presidential candidate praised efforts by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke to rescue endangered financial firms and keep credit markets solvent and said "even bolder and more decisive action" was necessary.

But the Illinois senator said he would not unveil his own specific proposals until government officials and Congress had concluded their work on a broad rescue plan that could cost hundreds of billions of dollars.

"You don't do it in a day. We've got to do it in an intelligent, systematic, thoughtful fashion," he told reporters after meeting his advisers outside Miami.

The tumult on Wall Street has dominated the campaign for the November 4 presidential election this week as Obama and Republican rival John McCain compete to prove their economic leadership and judgment.

Obama said the government must be given broad authority to stabilize the markets, but any rescue plan must also include new oversight and regulations of financial institutions while ensuring public money is replaced as quickly as possible with private assets.

He did not say what he thought the ultimate cost of a bailout would be, but said he did not think it would short-circuit his plans for a middle-class tax cut or other proposals aimed at easing the burden for workers.

ALL-STAR ECONOMIC TEAM

As he talked to reporters he was flanked by Robert Rubin and Larry Summers, former treasury secretaries under President Bill Clinton. Obama also met with former Federal Reserve Chairman Paul Volcker and Laura Tyson, former chairwoman of Clinton's Council of Economic Advisers.

Obama has been scathing in his criticism of his rival's response to the crisis, including McCain's statement earlier in the week that the fundamentals of the economy were strong and his call for a commission to investigate the financial collapse.

McCain said on Friday he would require the Treasury Department to have a specific blueprint for guaranteeing loans, although he did not specify the criteria, and he called for a Treasury group to work to strengthen weak financial institutions before they became insolvent.

Obama said McCain's proposal skimped on the details but he was glad to see they agreed that "at some point we are going to need some institutionalized structure to deal with the underlying problems of bad mortgages and the bad assets that some of these markets have."

"There's going to be a lot of time for us to be in a big argument about how some of these future plans should be structured," he said.

Obama told a cheering crowd in Florida, a key battleground in the November election campaign, that McCain was "in a panic" as he tried to deal with the growing economic crisis.

"At this point he seems to be willing to say anything or do anything," he said.

Paulson plan could cost $1 trillion

30-year deregulation era dies a sudden death

The 30-year era of deregulation came to a sudden and surprising end on Sept. 16.

Late that evening the Federal Reserve extended $85 billion to take an unprecedented 80 percent stake in American International Group in order to save the floundering insurance giant. Less than two weeks earlier, Treasury Secretary Henry M. Paulson Jr. had announced that the federal government was taking over Fannie Mae and Freddie Mac, the colossal mortgage agencies. Suddenly the U.S. financial sector could not survive without government help.

Since the long-ago days when Jimmy Carter was President, regulation has been a dirty word in Washington. Politicians of both parties vied to see how much of the economy they could free from the oppressive yoke of government control. The deregulation movement started when Carter signed the Airline Deregulation Act of 1978. Later, as it spread from energy to trucking to telecommunications to financial services, the rallying cry was the same: Less regulation, more growth.

But the implosion in financial services — until recently seen as the shining example of U.S-style free market capitalism — is the definitive sign that deregulation has lost its allure. In areas ranging from food safety to airlines to trade, increased government supervision is becoming acceptable to business as well as to voters.

"Over the past couple of years, the mood has changed," says Chris Waldrop, director of the Food Policy Institute at Consumer Federation of America. "What's possible has expanded."

Indeed, both consumer and industry groups have come out in favor of giving the Food & Drug Administration stronger authority to monitor food safety. The shift toward reregulation is reflected in the Presidential campaigns. Back in March, Senator John McCain (R-Ariz.) said: "I'm always for less regulation" and referred to himself as "fundamentally, a deregulator." But in a Sept. 16 speech the Republican nominee adopted a far different approach: "Under my reforms, the American people will be protected by comprehensive regulations."

On the same day, the Democratic nominee, Senator Barack Obama, (D-Ill.) who has argued much more aggressively about the need to bolster regulation, stepped up his rhetoric as well: "It's time to get serious about regulatory oversight," he said.

The implication: "We're moving in the direction of more regulation," says Tom Gallagher, who analyzes Washington policy at International Strategy & Investment. "The direction is locked into place; the only question now is magnitude."

That's a big change. Over the past three decades, the U.S. economy has more than doubled in size, and the private workforce has grown by 70 percent. Yet overall, outside the Defense Department, the executive branch employs about the same number of people today as it did in 1978.

What's more, many regulatory agencies in Washington have even shrunk. Since 1977 the budget of the Environmental Protection Agency has fallen by nearly 40 percent in real terms. Financial industry regulation hasn't kept up, either. Despite the vastly increased complexity of the financial sector, the number of employees working at the Federal Reserve, including the regional Fed banks, has decreased since 1990.

Advocates of deregulation in both parties argued persuasively that this decline in the role of government was essential for U.S. competitiveness. The classic case, of course, was financial sector deregulation. Alan Greenspan, as Fed chairman, supported "counterparty supervision," which meant financial institutions would keep close watch on their trading partners out of self-interest. And Robert E. Rubin, as Treasury Secretary under President Bill Clinton, helped repeal the Glass-Steagall Act, which had restricted what commercial and investment banks could do. Moreover, deregulation, in general, was good politics.

Voters generally don't like regulations, says Larry M. Bartels, director of the Center for the Study of Democratic Politics at Princeton University. "The notable exception to that is when people are scared."

Certainly, there have been plenty of scares in the past few years. A series of food poisoning episodes — notably, the salmonella outbreak that sickened about 1,500 people earlier this year — made consumers worry about the safety of the nation's food supply. What's more, it became clear that the Food & Drug Administration had no easy way to trace tainted food back to its source.

Those incidents resulted in a major turnabout in the food industry's view of regulation. It once loved the fact that the FDA didn't have the money or inspectors to scrutinize it. "The reduction in regulation has made things worse, and industry recognizes it," says William K. Hubbard, a former FDA associate commissioner. "I think they really became aware of their vulnerability."

Electric utility deregulation, too, is coming under increasing attack because true competition has been slow in coming. "I don't think there's any question the pendulum is swinging away from deregulation," says Charles D. Gray, executive director of the National Association of Regulatory Utility Commissioners.

One example: The Federal Energy Regulatory Commission was recently granted the authority to mandate the construction of transmission lines. "A lot of the infrastructure issues are not well suited to competition or market opening," says Gray.

The breakdown of the financial markets has left open the question of how much deregulation will be left when the dust settles. "Everyone thought the market had it under control," says economist and financial industry expert Robert E. Litan, vice-president for research and policy at the Ewing Marion Kauffman Foundation Institution. "It was believed by a lot people, even including me."

Not everyone agrees the era of deregulation is over. In energy, voters seem willing to support more offshore drilling. And Daniel Clifton, head of the Washington office of Strategas Research Partners, argues that state and local governments will still have to privatize roads, prisons, and other pieces of their infrastructure. Increasing government control will never be as sexy and politically potent as deregulation once was. But at least for now, reregulation looks like the wave of the future.

Congressional Leaders Stunned by Warnings

WASHINGTON — It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first.

Mr. Bernanke and Treasury Secretary Henry M. Paulson Jr. had made an urgent and unusual evening visit to Capitol Hill, and they were gathered around a conference table in the offices of House Speaker Nancy Pelosi.

“When you listened to him describe it you gulped," said Senator Charles E. Schumer, Democrat of New York.

As Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking, Housing and Urban Affairs Committee, put it Friday morning on the ABC program “Good Morning America,” the congressional leaders were told “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.”

Mr. Schumer added, “History was sort of hanging over it, like this was a moment.”

When Mr. Schumer described the meeting as “somber,” Mr. Dodd cut in. “Somber doesn’t begin to justify the words,” he said. “We have never heard language like this.”

“What you heard last evening,” he added, “is one of those rare moments, certainly rare in my experience here, is Democrats and Republicans deciding we need to work together quickly.”

Although Mr. Schumer, Mr. Dodd and other participants declined to repeat precisely what they were told by Mr. Bernanke and Mr. Paulson, they said the two men described the financial system as effectively bound in a knot that was being pulled tighter and tighter by the day.

“You have the credit lines in America, which are the lifeblood of the economy, frozen.” Mr. Schumer said. “That hasn’t happened before. It’s a brave new world. You are in uncharted territory, but the one thing you do know is you can’t leave them frozen or the economy will just head south at a rapid rate.”

As he spoke, Mr. Schumer swooped his hand, to make the gesture of a plummeting bird. “You know we’d be lucky ...” he said as his voice trailed off. “Well, I’ll leave it at that.”

As officials at the Treasury Department raced on Friday to draft legislative language for an ambitious plan for the government to buy billions of dollars of illiquid debt from ailing American financial institutions, legislators on Capitol Hill said they planned to work through the weekend reviewing the proposal and making efforts to bring a package of measures to the floor of the House and Senate by the end of next week.

Lawmakers in both parties described the meeting in Ms. Pelosi’s office on Thursday night with Mr. Paulson and Mr. Bernanke as collaborative, and that they were prepared to put politics aside to address the needs of the American people.

While Democrats initially said after the meeting that they planned to use the administration’s proposal of a huge rescue effort to win support for an economic stimulus package, they pulled back slightly on Friday morning, saying that their top priority was to help put together the bailout package and stabilize the economy.

But it was clear they continued to examine ways to make clear that the government was stepping up not just to help the major financial firms but also to protect the interests of American taxpayers and families by safeguarding their pensions and college savings, and by preventing any further drying up of consumer credit.

In addition to potential stimulus measures, which could include an extension of unemployment benefits and spending on public infrastructure projects, Democrats said they intended to consider measures to help stem home foreclosures and stabilize real estate values.

Among the potential steps Congress can take include approving legislation to allow bankruptcy judges to modify the terms of primary mortgages — authority that the bankruptcy laws do not currently allow and that the banking industry has strenuously opposed.

But the Democrats said it was too soon to discuss such details, and that they were awaiting a draft of the proposal from the Treasury Department.

“We have got to deal with the foreclosure issue,” Mr. Dodd said. “You have got to stop that hemorrhaging..If you don’t, the problem doesn’t go away. Ben Bernanke has said it over and over again. Hank Paulson recognizes it. This problem began with bad lending practices. Those are his words, not mine, and so this plan must address that or I’ll be back here in front of a bank of microphones at some point explaining the next failure.”

Even before the drafting of the plan was complete, the Bush administration and the Fed began efforts to sell the idea of a huge rescue to potentially skeptical rank-and-file members of Congress. Mr. Paulson and Mr. Bernanke held a conference call with House Republicans to explain their thinking.

Senator Richard C. Shelby of Alabama, the senior Republican on the Senate banking committee, said in a television interview that cost to the government of purchasing bad debt could run to $1 trillion — a potential warning sign since Mr. Shelby is a longtime skeptic of government intervention in the private market.

Until Mr. Shelby was interviewed on Friday morning, officials on Capitol Hill had been careful not to discuss specific figures, though the rescue envisioned by the Treasury Department clearly entails a government appropriation of hundreds of billions of dollars.

Will the bailout work?

Analysis
By Steve Schifferes
Economics reporter, BBC News, Wall Street, New York

The enormity of the financial crisis now engulfing Wall Street has led the Bush administration to abandon its free-market principles and announce a $500bn bail-out package to buy up distressed financial assets.

At the same time, to stem growing panic among individual investors, the Treasury also plans to offer gurantees for the $3.2 trillion in money market mutual funds, which many people had treated as cash.

The rescue plan may still face significant political and financial obstacles.

With Congress set to adjourn next week for the election season, time is short to work out the details of the plan and get it passed.

Congressional leaders, including many key Democrats, had already been considering such a rescue plan, and they indicated quick acceptance of the proposals.

On the sidelines, however, there is deep scepticism on both left and right - with conservative Republicans objecting to any more bail-outs, and many Democrats asking why we should help Wall Street rather than the four million people whose homes are being foreclosed, or repocessed.

And the presidential candidates, who are being left on the sidelines in the negotiations, are also reluctant participants in the process.

Both realise that a sizeable bail-out that commits the Federal government to significant new spending will severely limit their plans - either to cut taxes or to introduce a new health care plan - in the year after the election.

One model being talked about is the Reconstruction Finance Corporation introduced in the 1930s during the Depression. But it should be remembered that in 1933, President-elect Franklin Roosevelt refused to agree a bi-partisan deal with President Hoover to stave off the collapse of the entire US banking system, which shut down completely on the eve of his inauguration.

Who gains and who loses

Among the difficult questions about the rescue plan is how much it will cost the taxpayers, the banks, and the distressed homeowners.

Part of the answer is what price the US government pays for the distressed debt.

If it buys at book value, the banks will have gained and the taxpayer will have taken over the liability.

If, on the other hand, the government buys up the debt at distressed values, the government stands to gain if eventually some of the mortgage debt recovers its value.

And it is not clear how much leverage the US government will get over the banks in return for its investment.

In the 1980s Resolution Trust Company rescue, the government had the power to take over any distressed Savings and Loan bank and close it or sell its assets as necessary. T

his eventually meant that about half of the $400bn rescue package was recovered - but most of the banks closed for good.

It is also unclear how much specific benefits distressed homeowners will get.

The cost to the government could grow if tries to hold off repossessions on the 10% of all US home-owners with mortgages - but getting too tough to make sure everyone pays up could risk making the housing crisis work.

The government already has a plan to grant $300bn in extra mortgage help for households facing foreclosure, but the evidence so far is that the plan (which is scheduled to start on 1 October) was looking still-born, as private sector mortgage holders were resisting taking the 10% loss the government was insisting on.

Long term economic damage

The government hopes that its big new package will restore confidence in the markets and encourage banks to start lending again to individuals and businesses.

Certainly, the prospect of the credit markets seizing up further could have sent the US economy into a tail-spin.

But it is still not clear that the package will be big enough, or implemented quickly enough, to reassure private and commercial investors who are now very worried by the uncertainty over the future of the financial sector.

Tightening of credit for both wholesale and retail borrowers is likely to continue, as markets adjust to the higher risks they perceive.

And while the move might provide temporary relief to the US economy, they also pose some long-term challenges.

The increased borrowing by the government will have to be paid for - and with the growing reluctance of foreigners to hold US debt, it will ultimately mean higher savings, and less spending, for the US economy.

The cost of the rescue could also eventually push up the cost of borrowing as the Federal deficit grows, and thus weaken the long-term prospects for the economy.

And the higher debt could also eventually weaken the dollar, forcing the Fed to intervene to raise rates to prevent a sharp fall.

Although these are big risks, the shattering of confidence is the biggest problem.

And if these measures fail, it will fall to the next president to craft a package to rescue the economy.

by Glenn Greenwald

Palin supports $600 million 'other' bridge project
GARANCE BURKE
September 16, 2008 06:58 AM EST

ANCHORAGE, Alaska — Gov. Sarah Palin may eventually have said "no thanks" to a federally funded Bridge to Nowhere.

But a bridge to her hometown of Wasilla, that's a different story.

A $600 million bridge and highway project to link Alaska's largest city to Palin's town of 7,000 residents is moving full speed ahead, despite concerns the bridge could worsen some commuting and threaten a population of beluga whales.

Local officials already have spent $42 million on plans to route traffic across the Knik Arm inlet, a narrow finger of water extending roughly 25 miles northeast of Anchorage toward Wasilla. The proposal exists thanks to an earmark request by Republican Rep. Don Young, whose son-in-law has a small stake in property near the bridge's proposed western span.

A Democratic council member in Anchorage will try Tuesday to spike the city's sponsorship of the project, which Palin supports with some reservations.

"This is basically an incredibly expensive project that doesn't help commuters, doesn't help create jobs and may drive whales to extinction," said Justin Massey, an attorney advising environmentalists opposed to the proposal. "It is also a project that serves the area where the governor is from, which is near and dear to her heart."

The Knik Arm was one of two bridge proposals in Alaska awarded more than $450 million from lawmakers who requested money for special projects in 2005, when Young chaired the House Transportation Committee. Young, Alaska's 18-term congressman, has said Alaska still lacks basic roads, railroads and bridges that were developed long ago in older and less spacious states.

At the time, Palin's running mate for the Republican ticket, Arizona Sen. John McCain, derided both projects as wasteful. He called Young's highway bill a "monstrosity" that was "terrifying in its fiscal consequences."

"I want no part of this," McCain said in a July 2005 statement. "This legislation is not _ I emphasize not _ my way of legislating."

The governor initially championed the first so-called Bridge to Nowhere, which would have connected the southeastern Alaska town of Ketchikan to its airport on nearby Gravina Island. She later pulled the plug on the project after it became a national symbol of extravagant federal spending.

Palin's record on the Bridge to Nowhere has emerged as a central point of controversy in the campaign over her recent public claims that she had opposed it, aligning herself with McCain's anti-earmarks philosophy.

Palin still supports the second bridge, officially named Don Young's Way in honor of the congressman. She called for a review of the bridge's financing plans and raised concerns about its financial risks for the state. Still, the planning process is marching forward.

"Governor Palin's demand for accountability and transparency around this project is exactly what she has called for across the board to ensure taxpayers' dollars are being used wisely," spokeswoman Maria Comella said.

Dianne Keller, who succeeded Palin as mayor in Wasilla, has said the new $600 million crossing could lower traffic congestion in the fast-growing community. A Federal Highway Administration study shows the project would cut down some area commutes, but could add to others as more people move to the suburbs.

The average commuter trip to work for Wasilla residents is 34 minutes, compared to an average of 25 minutes for the rest of the United States, according to 2000 Census figures, the most recent available.

The bridge is popular with property developers _ including a group comprised of Young's son-in-law, the former legislative director for indicted Republican Sen. Ted Stevens and three others _ who own land across from Anchorage on the inlet's western side.

The National Marine Fisheries Service is evaluating whether the isolated beluga whales that breed and feed in the waterway's strong tides should be listed as endangered under the federal Endangered Species Act. Palin has publicly urged the government not to list Cook Inlet beluga whales as endangered.

Anchorage Assembly members Patrick Flynn and Matt Claman, both Democrats, plan to introduce a proposal to kill the bridge on Tuesday. They argue the money would be better used to set up commuter van pools and fix Alaska's existing highways, some of which are so rutted that cars go skidding off the road.

"She clearly hasn't said 'no thanks' to this particular bridge," Claman said. "If money were not an issue and we had no limits, maybe we'd build a bridge. But this is not a pragmatic or efficient way to spend scarce resources."

Labels: Derp

McCain Barbs Stirring Outcry as Distortions

Harsh advertisements and negative attacks are a staple of presidential campaigns, but Senator John McCain has drawn an avalanche of criticism this week from Democrats, independent groups and even some Republicans for regularly stretching the truth in attacking Senator Barack Obama’s record and positions.

Mr. Obama has also been accused of distortions, but this week Mr. McCain has found himself under particularly heavy fire for a pair of headline-grabbing attacks. First the McCain campaign twisted Mr. Obama’s words to suggest that he had compared Gov. Sarah Palin, the Republican vice-presidential nominee, to a pig after Mr. Obama said, in questioning Mr. McCain’s claim to be the change agent in the race, “You can put lipstick on a pig; it’s still a pig.” (Mr. McCain once used the same expression to describe Senator Hillary Rodham Clinton’s health plan.)

Then he falsely claimed that Mr. Obama supported “comprehensive sex education” for kindergartners (he supported teaching them to be alert for inappropriate advances from adults).

Those attacks followed weeks in which Mr. McCain repeatedly, and incorrectly, asserted that Mr. Obama would raise taxes on the middle class, even though analysts say he would cut taxes on the middle class more than Mr. McCain would, and misrepresented Mr. Obama’s positions on energy and health care.

A McCain advertisement called “Fact Check” was itself found to be “less than honest” by FactCheck.org, a nonpartisan group. The group complained that the McCain campaign had cited its work debunking various Internet rumors about Ms. Palin and implied in the advertisement that the rumors had originated with Mr. Obama.

In an interview Friday on the NY1 cable news channel, a McCain supporter, Senator Orrin G. Hatch of Utah, called “ridiculous” the implication that Mr. Obama’s “lipstick on a pig” comment was a reference to Ms. Palin, whom he also defended as coming under unfair attack.

“The last month, for sure,” said Don Sipple, a Republican advertising strategist, “I think the predominance of liberty taken with truth and the facts has been more McCain than Obama.”

Indeed, in recent days, Mr. McCain has been increasingly called out by news organizations, editorial boards and independent analysts like FactCheck.org. The group, which does not judge whether one candidate is more misleading than another, has cried foul on Mr. McCain more than twice as often since the start of the political conventions as it has on Mr. Obama.

A McCain spokesman, Brian Rogers, said the campaign had evidence for all its claims. “We stand fully by everything that’s in our ads,” Mr. Rogers said, “and everything that we’ve been saying we provide detailed backup for — everything. And if you and the Obama campaign want to disagree, that’s your call.”

Mr. McCain came into the race promoting himself as a truth teller and has long publicly deplored the kinds of negative tactics that helped sink his candidacy in the Republican primaries in 2000. But his strategy now reflects a calculation advisers made this summer — over the strenuous objections of some longtime hands who helped him build his “Straight Talk” image — to shift the campaign more toward disqualifying Mr. Obama in the eyes of voters.

“I think the McCain folks realize if they can get this thing down in the mud, drag Obama into the mud, that’s where they have the best advantage to win,” said Matthew Dowd, who worked with many top McCain campaign advisers when he was President Bush’s chief strategist in the 2004 campaign, but who has since had a falling out with the White House. “If they stay up at 10,000 feet, they don’t.”

For all the criticism, the offensive seems to be having an impact. It has been widely credited by strategists in both parties with rejuvenating Mr. McCain’s campaign and putting Mr. Obama on the defensive since it began early this summer.

Some who have criticized Mr. McCain have accused him of blatant untruths and of failing to correct himself when errors were pointed out.

On Friday on “The View,” generally friendly territory for politicians, one co-host, Joy Behar, criticized his new advertisements. “We know that those two ads are untrue,” Ms. Behar said. “They are lies. And yet you, at the end of it, say, ‘I approve these messages.’ Do you really approve them?”

“Actually they are not lies,” Mr. McCain said crisply, “and have you seen some of the ads that are running against me?”

Mr. Obama’s hands have not always been clean in this regard. He was called out earlier for saying, incorrectly, that Mr. McCain supported a “hundred-year war” in Iraq after Mr. McCain said in January that he would be fine with a hypothetical 100-year American presence in Iraq, as long as Americans were not being injured or killed there.

More recently, Mr. Obama has been criticized for advertisements that have distorted Mr. McCain’s record on schools financing and incorrectly accused him of not supporting loan guarantees for the auto industry — a hot topic in Michigan. He has also taken Mr. McCain’s repeated comments that American economy is “fundamentally sound” out of context, leaving out the fact that Mr. McCain almost always adds at the same time that he understands that times are tough and “people are hurting.”

But sensing an opening in the mounting criticism of Mr. McCain, the Obama campaign released a withering statement after Mr. McCain’s appearance on “The View.”

“In running the sleaziest campaign since South Carolina in 2000 and standing by completely debunked lies on national television, it’s clear that John McCain would rather lose his integrity than lose an election,” Hari Sevugan, a spokesman for the Obama campaign, said in a statement.

At an event in Dover, N.H., a voter asked Mr. Obama when he would start “fighting back.” Mr. Obama, who began his own confrontational advertising campaign Friday, said, “Our ads have been pretty tough, but I just have a different philosophy that I’m going to respond with the truth.”

“I’m not going to start making up lies about John McCain,” Mr. Obama said.

The McCain advertisements are devised to draw the interest of bloggers and cable news producers — but not necessarily always intended for wide, actual use on television stations — to shift the terms of the debate by questioning Mr. Obama’s character and qualifications.

Mr. Sipple, the Republican strategist, voiced concern that Mr. McCain’s approach could backfire. “Any campaign that is taking liberty with the truth and does it in a serial manner will end up paying for it in the end,” he said. “But it’s very unbecoming to a political figure like John McCain whose flag was planted long ago in ground that was about ‘straight talk’ and integrity.”

The campaign has also been selective in its portrayal of Mr. McCain’s running mate, Ms. Palin. The campaign’s efforts to portray her as the bane of federal earmark spending was complicated by evidence that she had sought a great deal of federal money both as governor of Alaska and as mayor of Wasilla.

Ms. Palin has often told audiences about pulling the plug on the so-called Bridge to Nowhere, an expensive federal project to build a bridge to a sparsely populated Alaskan island that became a symbol of wasteful federal spending. “I told Congress, ‘Thanks but no thanks’ for that Bridge to Nowhere in Alaska,” she said this week in Virginia.

But her position was more like “please” before it became “no thanks.” Ms. Palin supported the bridge project while running for governor, and abandoned it after it became a national scandal and Congress said the state could keep the money for other projects. As a mayor and governor, she hired lobbyists to request millions in federal spending for Alaska. In an ABC News interview on Friday with Charles Gibson, Ms. Palin largely stuck to her version of the events.

Disputed characterizations are not uncommon on the trail. At a campaign stop this week in Missouri, Mr. McCain said that Mr. Obama’s plan would “force small businesses to cut jobs and reduce wages and force families into a government-run health care system where a bureaucrat stands between you and your doctor.”

Jonathan B. Oberlander, who teaches health policy at the University of North Carolina at Chapel Hill, said that Mr. Obama’s plan would not force families into a government-run system. “I would say this is an inaccurate and false characterization of the Obama plan,” he said. “I don’t use those words lightly.”