The Obfuscation Report

MORE OF JOHN MCCAIN'S KABUKI THEATER
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John McCain 'undermining' bail-out to lift campaign

Talks Implode During a Day of Chaos; Fate of Bailout Plan Remains Unresolved

By DAVID M. HERSZENHORN, CARL HULSE and SHERYL GAY STOLBERG

This article was reported by David M. Herszenhorn, Carl Hulse and Sheryl Gay Stolberg and written by Ms. Stolberg.

WASHINGTON — The day began with an agreement that Washington hoped would end the financial crisis that has gripped the nation. It dissolved into a verbal brawl in the Cabinet Room of the White House, urgent warnings from the president and pleas from a Treasury secretary who knelt before the House speaker and appealed for her support.

“If money isn’t loosened up, this sucker could go down,” President Bush declared Thursday as he watched the $700 billion bailout package fall apart before his eyes, according to one person in the room.

It was an implosion that spilled out from behind closed doors into public view in a way rarely seen in Washington.

By 10:30 p.m., after another round of talks, Congressional negotiators gave up for the night and said they would try again on Friday. Left uncertain was the fate of the bailout, which the White House says is urgently needed to fix broken financial and credit markets, as well as whether the first presidential debate would go forward as planned Friday night in Mississippi.

When Congressional leaders and Senators John McCain and Barack Obama, the two major party presidential candidates, trooped to the White House on Thursday afternoon, most signs pointed toward a bipartisan agreement on a grand compromise that could be accepted by all sides and signed into law by the weekend. It was intended to pump billions of dollars into the financial system, restoring liquidity and keeping credit flowing to businesses and consumers.

“We’re in a serious economic crisis,” Mr. Bush told reporters as the meeting began shortly before 4 p.m. in the Cabinet Room, adding, “My hope is we can reach an agreement very shortly.”

But once the doors closed, the smooth-talking House Republican leader, John A. Boehner of Ohio, surprised many in the room by declaring that his caucus could not support the plan to allow the government to buy distressed mortgage assets from ailing financial companies.

Mr. Boehner pressed an alternative that involved a smaller role for the government, and Mr. McCain, whose support of the deal is critical if fellow Republicans are to sign on, declined to take a stand.

The talks broke up in angry recriminations, according to accounts provided by a participant and others who were briefed on the session, and were followed by dueling news conferences and interviews rife with partisan finger-pointing.

Friday morning, on CBS’s “The Early Show,” Representative Barney Frank of Massachusetts, the lead Democratic negotiator, said the bailout had been derailed by internal Republican politics.

“I didn’t know I was going to be the referee for an internal G.O.P. ideological civil war,” Mr. Frank said, according to The A.P.Thursday, in the Roosevelt Room after the session, the Treasury secretary, Henry M. Paulson Jr., literally bent down on one knee as he pleaded with Nancy Pelosi, the House Speaker, not to “blow it up” by withdrawing her party’s support for the package over what Ms. Pelosi derided as a Republican betrayal.

“I didn’t know you were Catholic,” Ms. Pelosi said, a wry reference to Mr. Paulson’s kneeling, according to someone who observed the exchange. She went on: “It’s not me blowing this up, it’s the Republicans.”

Mr. Paulson sighed. “I know. I know.”

It was the very outcome the White House had said it intended to avoid, with partisan presidential politics appearing to trample what had been exceedingly delicate Congressional negotiations.

Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate banking committee, denounced the session as “a rescue plan for John McCain,” and proclaimed it a waste of precious hours that could have been spent negotiating.

But a top aide to Mr. Boehner said it was Democrats who had done the political posturing. The aide, Kevin Smith, said Republicans revolted, in part, because they were chafing at what they saw as an attempt by Democrats to jam through an agreement on the bailout early Thursday and deny Mr. McCain an opportunity to participate in the agreement.

The day seemed to hold promise as it began. On Wednesday night, Mr. Bush had delivered a prime-time televised address to the nation, warning that ”our country could experience a long and painful recession” if lawmakers did not act quickly to pass a huge Wall Street bailout plan.

After spending Thursday morning behind closed doors, senior lawmakers from both parties emerged shortly before 1 p.m. in the ornate painted corridors on the first floor of the Capitol to herald their agreement on the broad outlines of a deal.

They said the legislation, which would authorize unprecedented government intervention to buy distressed debt from private firms, would include limits on pay packages for executives of some firms that seek assistance and a mechanism for the government to take an equity stake in some of the firms, so taxpayers have a chance to profit if the bailout plan works.

“I now expect we will indeed have a plan that can pass the House, pass the Senate, be signed by the president, and bring a sense of certainty to this crisis that is still roiling in the markets,” said Robert F. Bennett, Republican of Utah, a member of the banking committee.

He made a point of describing that meeting as free of political maneuvering. “It was one of the most productive sessions in that regard that I have participated in since I have been in the Senate,” Mr. Bennett said.

But a few blocks away, a senior House Republican lawmaker was at a luncheon with reporters, saying his caucus would never go along with the deal. This Republican said Representative Eric Cantor of Virginia, the chief deputy whip, was circulating an alternative course that would rely on government-backed insurance, not taxpayer-financed purchase of mortgage assets.

He said the recalcitrant Republicans were calculating that Ms. Pelosi, Democrat of California, would not want to leave her caucus politically exposed in an election season by passing a bailout bill without rank-and-file Republican support.

“You can have all the meetings you want,” this Republican said, referring to the White House session with Mr. Bush, the presidential candidates and Congressional leaders, still hours away. “It comes to the floor and the votes aren’t there. It won’t pass.”

House Republicans have spent days expressing their unease about a huge government intervention, which they regard as a step down the path to socialism.

Mr. Smith, the aide to Mr. Boehner, said the leader had directed a group of Republicans a few days ago to see whether they could come up with alternatives that relied less on tax funds in providing the rescue package; that led to Mr. Cantor’s mortgage-insurance approach. He said Mr. Boehner thought Mr. Cantor’s idea should be taken into consideration in the talks.

At 4 p.m., Mr. Bush convened his meeting at the White House; Mr. McCain had already met with House Republicans to hear their concerns. He later said on ABC that he had known going into the White House that “there never was a deal,” but he kept that sentiment to himself.

The meeting opened with Mr. Paulson, the chief architect of the bailout plan, “giving a status report on the condition of the market,” Tony Fratto, Mr. Bush’s deputy press secretary, said. Mr. Fratto said Mr. Paulson warned in particular of the tightening of credit markets overnight, adding, “that is something very much on his mind.”

Mr. McCain was at one end of the long conference table, Mr. Obama at the other, with the president and senior Congressional leaders between them. Participants said Mr. Obama peppered Mr. Paulson with questions, while Mr. McCain said little. Outside the West Wing, a huge crowd of reporters gathered in the driveway, anxiously awaiting an appearance by either presidential candidate, with expectations running high.

Instead, the first politician to emerge was Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, waving a sheet of paper that he said detailed his own concerns. “The agreement,” Mr. Shelby declared, ”is obviously no agreement.”

Friday morning, on the CBS morning program, Mr. Shelby said, “Basically, I believe the Paulson proposal is badly structured.”

“It does nothing basically for the stressed mortgage payer,” he said, according to The A.P.

The House Republicans’ revolt shocked Democrats; the Senate majority leader, Harry Reid of Nevada, said later that he was under the impression that Mr. Boehner had been a strong advocate for moving forward with the Paulson plan.

Mr. Frank, who attended the White House meeting, was shocked as well. “We were ready to make a deal,” Mr. Frank said later.

At 8 p.m., an exasperated Mr. Frank walked back to the Rules Committee room on the second floor of the Senate side of the Capitol, with a pack of reporters on his heels. He was headed for another late-night meeting with Mr. Paulson and many other lawmakers to see whether they could restart the negotiations — and ward off a Friday morning bloodbath in the markets.

Ms. Pelosi told reporters that she was open to considering ideas proposed by the House Republicans. And Mr. McCain and Mr. Obama both said they held out hope that a deal could be reached soon.

At the White House, Mr. Bush was holding fast to the approach that Mr. Paulson has championed.

“In case there’s any confusion,” Mr. Fratto, the deputy press secretary, wrote in an e-mail message. “The president supports the core of Secretary Paulson’s plan.”

Elisabeth Bumiller contributed reporting.

"The logistics that we are already suggesting here, not having enough troops in the area right now. The... things like the terrain even in Afghanistan and that border between Pakistan and Afghanistan, where, you know, we believe that-- Bin Laden is-- is hiding out right now and... and is still such a leader of this terrorist movement. There... there are many more challenges there. So, again, I believe that... a surge in Afghanistan also will lead us to victory there as it has proven to have done in Iraq. And as I say, Katie, that we cannot afford to retreat, to withdraw in Iraq. That's not gonna get us any better off in Afghanistan either. And as our leaders are telling us in our military, we do need to ramp it up in Afghanistan, counting on our friends and allies to assist with us there because these terrorists who hate America, they hate what we stand for with the... the freedoms, the democracy, the... the women's rights, the tolerance, they hate what it is that we represent and our allies, too, and our friends, what they represent. If we were... were to allow a stronghold to be captured by these terrorists then the world is in even greater peril than it is today. We cannot afford to lose in Afghanistan." - Sarah Palin

For Video of Sarah Palin answering the question see:

When John McCain held an unexpected news conference mid-Wednesday afternoon he addressed the current economic crisis with direness previously unseen. His campaign would be suspended, he told reporters, in order to work on the bailout legislation in Congress. The debate scheduled with Barack Obama on Friday night, he added, could be postponed.

Observers, critics, even fellow Republicans, were left wondering: where did this sense of urgency come from? After all, it was this past Sunday that McCain hinted on 60 Minutes that he would support the bailout -- "we have to stop the bleeding" -- only to express deep criticisms on Monday and then admit he hadn't even read the three-page proposal on Tuesday.

"I have not had a chance to see it in writing," said the Senator. "I have to examine it."

The move permeated with political opportunism: an attempt by McCain to grab the leadership mantle he did not own and divert attention from poll numbers that were plummeting. Indeed, on Wednesday morning a Washington Post-ABC poll had McCain trailing Obama 52 percent to 43 percent among likely voters. The internals were even worse: 54 percent of white voters with economic anxiety favored Obama.

So McCain changed the script, announcing his imminent departure from the campaign trail. And Democrats in Congress were left (somewhat angrily) scratching their heads.

"We're trying to rescue the economy, not the McCain campaign," said Rep. Barney Frank.

"I'm delighted that John is expressing himself on this issue," said Chris Dodd, chairman of the Senate Banking Committee. "I have heard form Obama numerous occasions these last couple days. I have never heard from John McCain on the issue... I'm just worried a little bit that sort of politicizing this problem, sort of flying in here, I'm beginning to think this is more of a rescue plan for John McCain and not a rescue plan for the economy."

McCain's mixed messaging on the bailout proposal was not just bizarre. It was emblematic of his actions the entire week. Indeed, the Senator has been all over the map when it comes to addressing the current situation. When the market crisis originally surfaced, McCain - now infamously - was the one to declare that the fundamentals of the economy were strong. Later he would call the situation the worst since World War II.

Watch a compilation of McCain clips on the financial crisis:

Even his actions on Wednesday seemed either oddly calculated or at conflict with the image he was trying to present. It was, in fact, Obama who first proposed to form a unity front in addressing the issue, calling McCain at 8:30 in the morning to discuss the issuance of a joint statement. The call went unreturned for six hours. McCain's campaign would later claim he was huddling with economic advisers. But during that time he made a scheduled stop with Lady Lynn de Rothschild, a high society New York Democrat who recently endorsed his campaign. Rothschild did not return repeated request for comment.

At 2:30 the two candidates finally connected and agreed on the idea of a co-authored declaration of principles. But by the time Obama got back to his hotel room, McCain had already declared his campaign's suspension. If the idea seemed impromptu, it surely wasn't. The website PolitickerCO posted talking points that aides to the Arizona Republican had sent to one another to help manage the candidate's newly stated position.

And then, after McCain told late night host David Letterman that he could not make his scheduled appearance on his show because of urgency of the situation, he still managed to swing by CBS Evening News with Katie Couric, much to Letterman's dismay. That interview, a spokesperson for the station told the Huffington Post, had been arranged shortly after McCain had temporary halted his campaign - a curious move for a candidate who was asking his opposition to drop everything and get back to Washington with him.

"Clearly there was news today," said a spokesperson for the station. "We asked for an interview and he said yes."

In fact, the Senator is still scheduled to appear at Bill Clinton's Global Initiative event in New York on Thursday, before heading to D.C.

In essence, at the same time McCain was warning of the danger of inaction, he himself was not moving with haste. And there is some question - bordering on concern - about the role he would actually play once back in Congress. As one Senate staffer told the Huffington Post: "McCain's little gambit really runs the risk of mucking up the works, maybe even delaying a deal. This is complex stuff, he's had zero involvement so far."

And yet, by the time McCain arrives on Capitol Hill the contours of a bailout proposal may already be in place. On Wednesday evening, President Bush hinted that he was ready to acquiesce on several principles of the proposed legislation - to the enthusiasm of Obama. In the House of Representatives, meanwhile, Rep. Barney Frank declared that Democrats had reached an agreement on a plan and had the votes to pass it.

McCain, for all the dramatics, could prove irrelevant.

"We are pleased to report we are making bipartisan progress on a rescue proposal for our financial markets," said Chris Dodd and Sen. Chuck Schumer in a joint statement. "During these discussions, we have received significant cooperation and constructive feedback from the other side of the aisle -- with one notable exception. Apart from his unproductive criticisms made from afar, we have heard nothing from Senator McCain on these critical issues. Now is certainly not the time for him to inject presidential politics into these delicate discussions."

It took John McCain 10 days to go from saying our economy is strong to claiming that we're facing the greatest economic collapse since the Great Depression.

It's now so urgent that we must not have a debate on Friday between the two men who will be most responsible for cleaning up this mess come January.

If John McCain wasn't so close to winning this thing, his campaign might make a really funny "buddy" picture. It's that much of a joke.

But the bottom line is that this guy could still win. That's a seriously fucking sobering thought.

Hugs and Kisses,

The Punisher.

by Bob Cesca

There are several reasons why Senator Obama is enjoying a double-digit lead in "honesty and trustworthiness" (47 percent to 36 percent according the new ABC News/Washington Post poll). First, Senator Obama doesn't, you know, lie to the American people every damn day. Second, Senator Obama didn't vote with the dishonest, corrupt Bush administration 90 percent of the time.

But one of the main reasons why the nation appears to be lining up against Senator McCain's insanely obvious lack of integrity could be because his very serious and mavericky campaign strategy can be described in four simple words:

Blurt Out Random Crap.

"Crap," in this context, is defined as everything from lies to weasel-words to inexplicably weird nonsense. And it seems like Senator McCain does this a lot. So much so that we can only conclude that it's intentional.

The goal: Get McCain on record saying something no matter how ridiculous. This way, he can hit the stump later and boast that he said something with regards to scary stuff in the news. I said something [that didn't make any sense and was probably a lie] and Senator Obama didn't say anything [also a lie]! And whenever he's accused of routinely blurting out random crap, Senator McCain trucks out the old punishment theorem: If Senator Obama had only agreed to the town halls, I wouldn't be selling-out the last shreds of my honor or integrity just to get elected. Can't you see? Senator Obama turned me into a hack, dammit!

First thing that pops into his head. Is it truthful? Doesn't matter. Sex education for kindergarteners, for instance. "Palin sold her jet on eBay," for instance. Does it even make sense or is it just a bunch of words strung together to form a sentence? Who cares. "President Putin of Germany," for instance. "Delivering bottled hot water to dehydrated babies," for instance.

I'll admit that the latter category is more fun to document. However, the lying is especially infuriating -- and maybe that's the idea -- piss off the liberals. But it can't be helping with independents and undecideds who are discovering quite rapidly that the mythology of "John McCain" doesn't match the real-life John McCain. The Real McCain is rapidly coming into focus for those in the middle. McRage. McLiar. McPanderer. McIncompetent. McBush. And the Obama campaign only needs to tweak these frames. After all, the McCain campaign is doing all of the heavy lifting by itself.

And as we witnessed with the Zapatero episode, as soon as Senator McCain blurts out random crap, his staff scrambles onto the stage with pronouncements and excuses so as to make it seem as if McCain meant to say what he said -- a routine which only serves to compound the farcical nature of it all.

So it comes as no surprise that the McCain-Palin strategy on the economic crisis is to -- that's right! -- blurt out random crap.

All along and without regard to the actual status of the economy, Senator McCain has blurted out the well-known talking point "the fundamentals of the economy are strong." Why? Because that's the Bush Republican position. Those exact words. And shortly after President Paulson announced his bailout plan when it appeared as if we were on the verge of a complete meltdown, Senator McCain, in the most Pavlovian sense, couldn't help himself and -- WHOOPS! -- he said it again. Why? Because that's what he always says about the economy.

When he was immediately and appropriately called out for being a doof, he blurted out that everyone in the world misunderstood him. The "fundamentals," he claimed, meant "the workers." In other words, American workers are strong. What the hell does that have to do with the status of the economy? Does it mean the workforce can lift heavy things -- like factory equipment that's being shipped to China? How does one quantify worker "strength" as an economic indicator? Even if a crazy economist somewhere includes the morale of the workforce as a fundamental of the economy, the McCain campaign clearly overlooked the reality that we've lost 1.75 million jobs this year and unemployment spiked to 6.1 percent two days after Sarah Palin's overrated acceptance speech. Not strong, McCain. Bad! But, then again, he really didn't mean "the workers" in the first place anyway.

When this failed, he blurted out something about averting the impending economic meltdown by convening a government commission, ostensibly to study the urgent crisis and perhaps issue a recommendation sometime in the future. Decisive!

When that didn't work, he called for the firing of the head of the SEC, Chris Cox, even though Phil Gramm, the author of McCain's economic plan (pre-crisis), is also responsible for the Gramm-Leach-Bliley Act of 1999 -- a piece of legislation which, along with Reaganomics and Alan Greenspan's love of all things bubble-shaped, is directly responsible for this present mess. Phil Gramm. A man who said that the economic crisis is mostly a figment of our whiny imagination. A man who could be our next Treasury Secretary and steward of the economy. Hire him, but fire the other guy. Because that'll somehow help. Oh, Magoo.

It's worth noting that while that idea was failing, Senator McCain inexplicably called for the firing of the head of the Federal Elections Commission, Donald F. McGahn II. Poor McGahn II. Minding his own business, and suddenly McCain's on television calling him out for screwing the economic pooch.

When that failed, Senator McCain rolled out one of his most egregious lies to date, claiming that Senator Obama, of all people, has been directly responsibility for the crisis. Why? Because the former CEO of Fannie Mae, Franklin Raines, once talked on the phone with someone associated with the Obama campaign. Like 16 months ago. And that somehow makes Raines a close economic advisor. Never mind that Rick Davis, McCain's campaign manager, was on the Freddie Mac payroll as recently as a couple of weeks ago.

Which leads us to Senator McCain blurting out that no-one on his staff is associated in any way with Freddie Mac and Fannie Mae.

What's next, McCain campaign? A Mogwai ate a sandwich after midnight; morphed into a Gremlin; then caused the economic crisis? Or will it be Marty McFly's sports almanac screwing up the space-time continuum? Or will it be Reverend Wright putting a curse on the banks? Whatever is next is bound to be crazier than what's already been said.

And now -- wait. What's this? As I wrap this up, it's being reported that Senator McCain wants to delay the debates so he can focus on the economic crisis. Oh, and now he wants to suspend campaigning. What's next, McCain? Suspending the election?

So what will a McCain administration economic policy look like? From the lack of foresight and leadership we've witnessed so far, we can assume that McCain might choose a new economic policy totally at random, depending on how saucy he feels from minute to minute. "I'll have a muffin with my Egg Beaters, and replace Bernanke with that hooplehead who weedwacks the knoll." Two minutes later... "Hey Phil, we don't need the Nasdaq anymore. Kill it." Two minutes later... "My God! What have I done! Quickly -- nationalize the paintball industry! Go!"

One thing is for sure. Expecting a workable solution to this economic meltdown from a man as knee-jerk, dishonest and incomprehensible as John McCain would be an exercise in national self-destruction. He doesn't have anything real to say, and what he does say, he can't sell. He simply can't do the gig. A vote for McCain-Palin is absolutely a vote for the end of America as we know it.

Jesus, McCain is a fucking piece of work. Obama calls him to suggest they issue a joint statement on the crisis. Six hours later McCain agrees. Then immediately sends out a statement saying he's suspending his campaign to resolve the crisis. That is a dick move.

Story Below:

NEW YORK — Republican John McCain said Wednesday he wants to delay Friday's debate with Democratic rival Barack Obama and temporarily put aside their partisan campaign to resolve the nation's financial crisis.

McCain's announcement came after the two candidates held private talks about joining forces to address the Wall Street meltdown. The Obama campaign said the Democrat initiated the talks, but McCain beat Obama to the punch with the first public statement calling for the two to rise above politics in a time of crisis.

McCain said the Bush administration's plan seemed headed for defeat and a bipartisan solution was urgently needed.

McCain said he would put politics aside and return to Washington Thursday to focus on the nation's financial problems after addressing former President Clinton's Global Initiative session in New York. McCain said he had spoken to President Bush and asked him to convene a leadership meeting in Washington that would include him and Obama.

"It has become clear that no consensus has developed to support the administration's proposal," McCain said. "I do not believe that the plan on the table will pass as it currently stands, and we are running out of time."

McCain said he has spoken to Obama about his plans and asked the Democratic presidential nominee to join him.

Obama's campaign did not immediate say whether he supported a delay of the debate or would also stop campaigning.

The Obama campaign said in a statement that Obama had called McCain around 8:30 a.m. Wednesday to propose that they issue a joint statement in support of a package to help fix the economy as soon as possible. McCain called back six hours later and agreed to the idea of the statement, the Obama campaign said. McCain's statement was issued to the media a few minutes later.

"We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved," McCain said. "I am confident that before the markets open on Monday we can achieve consensus on legislation that will stabilize our financial markets, protect taxpayers and homeowners, and earn the confidence of the American people. All we must do to achieve this is temporarily set politics aside, and I am committed to doing so."

McCain's statement was an effort to show leadership on an issue that has spread economic fears across the country and overshadowed the presidential campaign just six weeks from Election Day. The economy has not been McCain's strongest suit, and his move was an attempt to turn it into an opportunity to show he's the candidate of bipartisanship and action. Recent polls showed Obama with an advantage with voters in handling the economy.

The move put Obama in a bind. Rejecting the idea would allow McCain alone to appear above politics, but agreeing to suspend campaigning and the debate could make Obama look like he's following McCain's lead.

McCain said if Congress does not pass legislation to address the crisis, credit will dry up, people will no longer be able to buy homes, life savings will be at stake and businesses will not have enough money

"If we do not act, ever corner of our country will be impacted," McCain said. "We cannot allow this to happen."

McCain also canceled his planned appearance Wednesday on CBS' "Late Show With David Letterman" program.

A senior McCain adviser, Mark Salter, said the campaign would suspend all advertising and campaign events until a workable deal is reached on the bailout proposal _ but only if the Obama campaign agrees to do the same.

Three Times is Enemy Action

by Devilstower

Sun Sep 21, 2008 at 06:03:41 AM PDT

Labels: Bank Robbery

Bernie Sanders Op-Ed: The Middle Class Must Not Be Forced to Bail Out Wall Street Greed -- 09/21/2008

For years, as a member of the House Banking Committee and now as a member of the Senate Budget Committee, I have heard the Bush Administration tell us how “robust” our economy was and how strong the “fundamentals” were. That was until a few days ago. Now, we are being told that if Congress does not act immediately and approve the $700 billion Wall Street bailout proposal these “free marketers” have just written up, there will be an unprecedented economic meltdown in the United States and an unraveling of the global economy.

This proposal as presented is an unacceptable attempt to force middle income families (and our children) to pick up the cost of fixing the horrendous economic mess that is the product of the Bush Administration's deregulatory fever and Wall Street's insatiable greed. If the potential danger to our economy was not so dire, this blatant effort to essentially transfer $700 billion up the income ladder to those at the top would be laughable.

Let us be clear. If the economy is on the edge of collapse we need to act. But rescuing the economy does not mean we have to just give away $700 billion of taxpayer money to the banks. (In truth, it could be much more than $700 billion. The bill only says the government is limited to having $700 billion outstanding at any time. By selling the mortgage backed assets it acquires -- even at staggering losses -- the government will be able to buy even more resulting is a virtually limitless financial exposure on the part of taxpayers.) Any proposal must protect middle income and working families from bearing the burden of this bailout.

I have proposed a four part plan to accomplish that goal which includes a five-year, 10% surtax on the income of individuals above $500,000 a year, and $1 million a year for couples; a requirement that the price the government pays for any mortgage assets are discounted appropriately so that government can recover the amount it paid for them; and, finally, the government should receive equity in the companies it bails out so that when the stock of these companies rises after the bailout, taxpayers also have the opportunity to share in the resulting windfall. Taken together, these measures would provide the best guarantee that at the end of five years, the government will have gotten back the money it put out.

Second, in addition to protecting the average American from being saddled with the cost, any serious proposal has to include reforms so that we end the type of behavior that led to this crisis in the first place. Much of this activity can be traced to specific legislation that broke down regulatory safety walls in the financial sector and allowed banks and others to engage in new types of risky transactions that are at the heart of this crisis. That deregulation needs to be repealed. Wall Street has shown it cannot be trusted to police itself. We need to reinstate a strong regulatory system that protects our economy.

Third, we need to address the needs of working families in this country who are today facing very difficult times. If we can bail out Wall Street, we need to respond with equal vigor to their plight. That means, for example, creating millions of jobs through major investments in rebuilding our crumbling infrastructure and creating a new renewable energy system. We must also make certain that the most vulnerable Americans don’t freeze in the winter or die because they lack access to primary health care.

Finally, we need to protect ourselves from being at the mercy of giant companies that are "too big to fail," that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement, and even the illegal conduct of these companies' executives.

These are the last days of the Bush Administration, the most dishonest and incompetent in modern American history. It is imperative that, at this important moment, Congress stand up for the middle class and for fiscal integrity. The future of our country is at stake.

---

Labels: What the Fuck?

Obama, Not McCain, Shows Steady Hand in Crisis: Albert R. Hunt

Commentary by Albert R. Hunt

Sept. 22 (Bloomberg) -- For the first time since 1932 a presidential election is taking place in the midst of a genuine financial crisis. The reaction of the candidates was revealing.

John McCain, railing against the ``greed and corruption'' of Wall Street, won the first round of the sound-bite war. He came out with a television commercial on the ``crisis'' early on Monday of last week, and over the next three days gave more than a dozen broadcast interviews. He and running mate Sarah Palin would reform Wall Street and regulate the nefarious fat cats that caused this fiasco.

It was a great start. It then went downhill as he stumbled over his record of championing deregulation, claimed the economy was fundamentally strong, and flip-flopped over the government takeover of American International Group Inc.

For his part, Barack Obama didn't come across as passionately outraged and wasn't as omnipresent or as specific.

More revealing, though, was to whom both candidates turned on that panic-ridden morning of Sept. 15, and how the messages evolved before and after that day.

McCain called Martin Feldstein, the well-known Republican economist and Reagan administration adviser, John Taylor of Stanford University, who served in President George W. Bush's Treasury and Carly Fiorina, once the chief executive officer of Hewlett-Packard Co.

Obama called former Federal Reserve Chairman Paul Volcker, and former Treasury Secretaries Robert Rubin and Larry Summers.

It was a mismatch.

Towering Volcker

Feldstein, for all his intellect, was ineffective in the Reagan administration; then-White House deputy chief of staffDick Darman cut him out of important action. Volcker, first at the Treasury and then as chairman of the Federal Reserve, was a towering figure in every way.

Taylor is a well-regarded academic. In four years as undersecretary of the Treasury, he left few footprints. Summers, as both deputy secretary and secretary, left a lot.

Fiorina is smart and quick; to put it charitably, Rubin will forget more about financial markets than she'll ever know.

When it comes to governance, and either Democrat Obama or Republican McCain will inherit this miserable financial mess, the best guide is who they talked to, what they said, where they've been, and how knowledgeable they are.

Obama's record and earlier speeches belie some of his more populist rhetoric. Yet they also suggest, as do his advisers, a much more activist government role than is likely under a McCain-Palin administration.

Comfortable With Subject

Obama called for the overhaul of the financial-regulatory system and tougher enforcement well before this past week's traumas.

Detached observers who watched him last week, especially in a Bloomberg Television interview, were taken by how conversant and comfortable he was on the subject, despite his thin record. Few detached observers came away with that impression watching the Arizona senator.

Much of the re-regulatory fever focuses on the Federal Reserve and any new agencies created to clean up the fiasco. Central, however, will be a more vigorous Securities and Exchange Commission, or whatever holds that investor-protection function.

McCain displayed a sudden interest in the SEC last week when he demanded that Chairman Chris Cox be fired. When his campaign was asked if the senator had ever criticized the current commission's performance before, they failed to respond.

All For Obama

Tellingly, three former SEC chairmen, a Democrat, Arthur Levitt, and two Republicans, David Ruder and Bill Donaldson, have endorsed Obama. Levitt is a board member of Bloomberg LP, the parent company of Bloomberg News.

Donaldson, who was tapped by Bush to head the SEC, says Obama called him last year about the financial-regulatory problems. He has never heard from McCain.

``Obama has been talking about the need for better financial regulation well before this crisis hit and has done some real thinking about it,'' says Donaldson, a lifelong Republican. ``McCain comes across as someone who suddenly realized changes have to be made.''

There is a case for McCain: it's if you believe in less regulation, that the government should get out of the way and let the markets work their will.

No `Real Understanding'

``I don't think anyone who wants to increase the burden of government regulation and high taxes has any real understanding of economics,'' McCain said this spring at an Inez, Kentucky, town hall meeting, where he also declared ``the fundamentals of our economy are good.''

Until recently, he repeatedly invoked Ronald Reagan's calls for less regulation. He voted for the 2002 Sarbanes-Oxley corporate-governance regulations -- then last year said he regretted that vote.

McCain isn't averse to some regulations. He has strongly championed a greater federal role in campaign finance, tobacco and boxing. In each case, he saw a clear villain -- special- interest money, a tobacco product that puts profits ahead of lives, and unscrupulous boxing promoters.

There has been little evidence that prior to last week he ever put financial firms in this category. Although he assailed excessive corporate compensation last week, McCain has opposed a tepid House-passed bill that would give corporate shareholders the right to cast a non-binding vote on compensation of top executives.

Turning to Gramm

The person he has turned to most for counsel on such matters is his ex-Senate colleague Phil Gramm. Gramm is a political Gordon Gekko, a brainy economist with a Darwinian view of markets and public policy.

It's not easy to remember what the financial world looked like 10 days ago much less 10 months ago. Decisions that will be reached after this election will be the most important since the 1930s.

Obama, as more than a few Democrats are complaining, hasn't been as quick, sharp -- or demagogic -- as they would like. McCain has been beset by deeper difficulties: an inchoate and inconsistent message that seems to reflect political exigencies more than principled convictions.

On the financial crisis, last week belonged to Obama.

(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)

Wall Street Leads the Socialist Revolution
The Fake Free Market and the Meltdown of the American Economic System
by John Kelley, 20 September 2008

Sometimes being able to say, “I told you so.” doesn’t feel good at all. As long ago as three years ago I along with a few financial experts (namely economists Nouriel Roubini of New York University and Paul Krugman) were predicting this financial meltdown, based on the arcane and convoluted treatment of debt instruments as commodities. Unlike these scholars, I didn’t even get it through the esoteric study of economics; I read it day in and day out in the New York Times, the Wall Street Journal and a variety of internet sites. Not exactly a secret if you were paying attention, yet most of the pundits exclaim shock and surprise at what Krugman predicted as the “great unraveling.”

The deregulation of a financial system based on greed took on full speed as the Bush administration did away with the safeguards implemented by Franklin Roosevelt after Wall Street robbed the public with delusional greed leading to the great depression. After 9-11 hit the economy hard, the Bush administration loosened regulation and pumped billions into the economy (essentially printing money) to prop up the economy and avoid a needed correction, further exacerbating the problem.

The financial elites sent lobbyists with bushels of money to influence congress to lower taxes on the rich, create higher debt with fees and usury level interest rates for average borrowers. They grabbed worker savings by shoving employees out of traditional retirement plans and creating new forms of indentured servitude by tightening bankruptcy laws. The result was the greatest “redistribution of wealth” in the history of this country.

This was supposed to result in massive capital infusion by the investment class in research, production, more jobs and all the wonderful benefits trickle down economics was supposed to yield. Unfortunately as history points out, when the very rich get even more money then they need, they are just like everyone else. Excess income is treated as gambling money, speculative investment that will bring higher returns because you already have so much you won’t miss it if you loose it.

This initially caused too much money to pursue to few “high return” investment products creating an ever inflating market bubble. The market was inflated further by fed policy that lowered interest rates to big banks, encouraging rich investors to basically double down on their bets, borrowing heavily to finance even bigger bets on the arcane financial instruments they were creating. The CEO’s, board members and top management used this artificial boom to pocket millions in salaries and stock options.

Now that the delusion of creating wealth out of paper shuffling is over, the thieves on Wall Street point to the victim’s bad judgment in taking their offers as the culprit. Workers who were achieving the highest level of productivity in the history of the planet were subjected to falling wages while corporate profits reached record levels. Cold calling, emails and letters coaxed consumers with more offers then a military recruiter to a high school senior, all done with government blessing.

Squeezed consumers, faced with the most sophisticated onslaught of advertising and enticement ever conceived, went into debt creating a negative savings rate. The debt was then packaged and sold as an amazing new array of “innovative financial products”.

The great masquerade of the “free market economy” was no such thing. It was a strategic and purposeful tilting of the rules towards the rich and powerful and away from the common welfare. It was in fact the much feared redistribution of wealth, only upwards.

Now that the chickens have come home to roost, the same folks who were robbed in the process will now get to pay the tab for those who robbed them. Somewhat akin to making the victim of a robbery paying restitution to the robber because he gambled away the money he stole.

What will happen to those who created this mess, the get rewarded of course. Daniel H. Mudd, the departing head of Fannie Mae, will get $9.3 million in severance pay, retirement benefits and deferred compensation not counting the $12.4 million he has already pocketed since becoming CEO in 2004. Richard F. Syron, the departing chief executive of Freddie Mac, will get $14.1 million, on top of the $17.1 million in pay and stock option gains since 2003. Ya gotta love such a system if you’re at the top.

Republicans Demand Socialist Intervention

What currently hides behind the label of the free enterprise system is actually a merger of corporate power and government. The argument that any assistance to workers and small business would be socialism is the most laughable argument on the face of the earth while nationalizing (socialism for the rich) the debt of American corporations.

The reality is that state communism and corporate fascism are not different except in name only. In state communism the state is the corporation, in fascism the corporation is the state. The opposite of both “pure” Communism and Capitalism is a mixed economy that provides a safety net and educational tools for workers and small business while allowing true free market principles that reward productivity and punish foolish speculation.

Instead what is proposed by Henry Paulson, our Treasury Secretary, is a get out of jail free card for the robbers including his former employer Goldman Sachs. What would be more productive is to fine the thieves the amount of their pocketed loot, send them to jail and invest the two trillion in tax dollars in education, healthcare, disability, retirement and infrastructure.

Killing the wounded

How do the Republicans promise to fix the situation? They want to streamline the financial system (i.e. more deregulation), lower corporate tax rates (2/3rds of the corporations don’t pay any taxes now, no matter what the rate is.) and take the bad debt off the books of the criminal companies and give them to the taxpayer. In other words nationalizing the debt, who thought the Republicans, would lead the charge in a socialist revolution? Of course the relief is only for members of the state capitalist party (Corporate Democrats & Republicans).

While they compare it to the Resolution Trust Corporation that dealt with the Savings & Loan Crises (you might want to look up John McCain and the Keating five) it is not comparable. First the amount of debt is staggering (at least TWO TRILLION DOLLARS) when compared to the S&L crises.

Second, instead of taking over the institutions and selling off their assets to pay the debt, this time we are going to take just the debt. Every man, woman and child in the country will shoulder a minimum of an extra $2,000 of national debt. Like the old centralized government of the Soviet Union, the party members keep the assets and tell the working class you will now have to work harder for the good of the state, the corporate state that is.

If workers lose enough to take to the street against this unprecedented theft by the privileged class they will use the fear of “chaos and anarchy” in the streets to justify authoritarian repression to control those rebellious ones who object to being robbed with a pen.

Meanwhile the economic pundits are telling average Americans to have faith, buy while stocks are low and that the government will make a big profit of their purchase of the bad debt. If that’s true why aren’t private investors buying it up like ice after a hurricane?

Killing the Messengers

While Paulson and the other corporate hacks talk about the problem being based in the mortgage market, other experts who predicted right caution that is just the tip of the iceberg. In addition to the mortgage based securities, the junk bonds issued by the leveraged buyout specialists, credit derivatives (like those issued by AIG) and inflated values of commodities will undermine the whole American economic system.

As the true costs of the bail out rises for the unknown government commitment to take on the debt of those “to big to fail”, federal debt will skyrocket over the $9 trillion Bush has already stacked up. The increased debt will be paid by printing more dollars which allows repayment with dollars worth less than borrowed but creating inflation because of its lost value to purchase goods and services. Decreasing production, falling wages and inflation equals stagflation.

To hide the fact that they couldn’t even see the bottom of the abyss Paulson and the wizards of Wall Street came up with a plan to rescue themselves, hide how worthless these stocks, derivatives and junk bonds really are. You prohibit short selling. Telling the public those who bet on stocks falling were the cause of the problem, they were blamed the short sellers for “crashing companies”.

The truth is short sellers provide an indicator of a products real worth, which they bet is much lower then advertised. Borrowing the stock they actually buy it when it drops to the price they predicted, pocketing the difference. The positive side of short selling is they must purchase the product at that lower price they predicted. The forced buying of the product many times prevents the value from going even lower, putting the brakes on a sell off.

Many traders are now saying there is nothing to indicate what the market will do; trading is purely a speculation on what the government does next not the market value of any product. Those complex financial products now being akin to the old fake missiles the Soviet Union used to put around to convince the Americans they were really powerful, Paulson and friends hide the true amount they’ve dumped on the American public.

The best part of being rich and powerful is you don’t have to pay for your mistake. The government plan gives them the incentive of continuing their bad behavior, much like bailing the alcoholic out of jail and dropping him off at the nearest bar. Meanwhile millions of working taxpayers will lose their homes, jobs, healthcare, businesses, retirement funds and any chance for higher education. The simple fact is that corporatists in both parties took a federal surplus and turned it into the greatest public debt in history and took a vibrant national economy and bankrupted it. John McCain promises more of the same.

How bad could it get? We could end up a third world country where a very few control most of the wealth while the rest are pitted against each other for survival. Stephen Mihm of the New York Times quoted economist Roubini referring only to the bad mortgage debt when it was estimated to be $600 billion, as saying, “Even if it’s closer to a trillion, we’re not even a third of the way there. We have a subprime financial system, not a subprime mortgage market."

Labels: Wall Street Extortion