Monthly Archives: September 2008

Palin Preparing More Material For Tina Fey

Stumped by a slow ball question (what specific newspapers and magazines does she read…), Sarah Palin bluffs and gets defensive about Alaska not being a foreign country (which is beside the point…):

UPDATE:  The rightwing brainiacs at The Corner have figured it out:

The e-mails are coming in. Obviously the governor of Alaska reads. And what it looked liked to me is the governor of Alaska decided she wasn’t going to play along with Couric. Whatever she answered would be scrutinized for the next 24 hours for what she included and left off. So instead she let Katie badger her a little.

And now the ticket is in yet a better position to run against the media.

Who knew a McCain ticket would ever be in a position to do such a thing?

Indeed.  Who knew that Palin would pull the old "I-won’t-tell-you-what-I-read-or-even-give-one-example" ploy.  Confound it!

And the media!  Well, they just fell into her trap!  She’s a genius, I tell ya!

She answers "all of them".  Funny how not one of those many, many newspapers ever mentioned the Bush Doctrine.

God I Hate House Republicans

I really do.

UPDATE: Yeah, some Dems are to blame, too.

But then again, the Democrat side said they would deliver half their caucus, and they over-delivered.  The Republicans needed to do the same, and they failed miserably.

UPDATE #2:  Should the Democrats, who are in majority, just demogogue this situation and write a progressive bill and not wait for Republicans to come to the table?  Krugman considers it.

UPDATE #3:  McCain-Palin senior policy adviser Doug Holtz-Eakin:

"From the minute John McCain suspended his campaign and arrived in Washington to address this crisis, he was attacked by the Democratic leadership: Senators Obama and Reid, Speaker Pelosi and others. Their partisan attacks were an effort to gain political advantage during a national economic crisis. By doing so, they put at risk the homes, livelihoods and savings of millions of American families."Barack Obama failed to lead, phoned it in, attacked John McCain, and refused to even say if he supported the final bill."Just before the vote, when the outcome was still in doubt, Speaker Pelosi gave a strongly worded partisan speech and poisoned the outcome. "This bill failed because Barack Obama and the Democrats put politics ahead of country."

Shorter version: Republicans got their feelings hurt by Pelosi’s speech, so they decided to place the entire economy of the country in jeopardy.

Crybaby

P.S.  Boehner and Blunt just said the same thing — it was Pelosi’s partisan speech that "poisoned the well".

Sweet Jesus.

UPDATE #4:  What exactly was so poisonous about Pelosi’s speech?  And listen to Barney Frank…

UPDATE #5:  Yeah, panic has ensued, and people are stocking up on canned goods for the coming apocolypse.  One of the biggest gainers on the NYSE was Campbell’s Soup

Campbellstock

Looking Good

Here’s one analysis:

The current prediction is Obama 375, McCain 163 with Virginia as the state that puts Obama over the top and West Virginia as the closest state. Obama’s surge in the national polls kicks Missouri and North Carolina over to the blue side. West Virginia is about the only additional state Obama could win unless the McCain campaign gets even worse. If Obama maintains his current national lead, new state polls will eventually show the shift as well. Tip of the hat to pollster.com for the compendium of links to polls.

Obama Base (202 EV): California, Oregon, Washington, Hawaii, New Mexico, Iowa, Illinois, DC, Maryland, Delaware, New Jersey, New York, Connecticut, Rhode Island, Massachusetts, Vermont, Maine

Competitive states, cumulative electoral votes, and new polls:

Wisconsin (Obama +9.5) 212 EV
Michigan (Obama +9.1) 229 EV
Colorado (Obama +8.0) 238 EV
Pennsylvania (Obama +7.8) 259 EV
Minnesota (Obama +7.8) 269 EV
Virginia (Obama +5.2) 282 EV
New Hampshire (Obama +5.1) 286 EV
Nevada (Obama +5.1) 291 EV
Ohio (Obama +4.3) 311 EV
Indiana (Obama +4.2) 322 EV
Florida (Obama +3.2) 349 EV
Missouri (Obama +2.1) 360 EV
North Carolina (Obama +1.9) 375 EV
West Virginia (McCain +1.4) 163 EV
Montana (McCain +6.8) 158 EV

McCain Base (155 EV): Alaska, Arizona, Utah, Idaho, Wyoming, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, Texas, Louisiana, Arkansas, Mississippi, Alabama, Tennessee, Kentucky, Georgia, South Carolina

The poll averages are created by a magic spreadsheet. Self-selected (Internet and mail) polls are ignored; no favoritism is done among the remaining pollsters. Polls are adjusted to today’s conditions by shifting them by the amount of change in the average of Gallup and Rasmussen tracking polls. The weight of polls in the averages decreases geometrically each day such that 7 day old polls have 1/2 weight and 14 day old polls have 1/4 weight. This method is very responsive to recent changes in both state and national polling.

Walk-All-Over-Ya Struggling

I think I’ll make a run on my bank.

UPDATE:  And then there’s this

I’ve received phone calls in the last hour from two economists I respect, one of them Larry Lindsey, the other in a position where he’d prefer not to be named. Both have government experience, neither is alarmist by nature, and they say this:

The huge European bank Fortis is apparently about to fail. The ripple effect on the American banking system could be disastrous, with bank runs, liquidity crises, and stock sell offs possible Monday. Wachovia may well fail next week. As Larry put it, this really will be 1933 soon if we don’t move rapidly to stabilize the banking system.

And here’s the bad news: the current bailout bill, whatever its merits and likelihood of passage, does nothing to address this.

Congress should pass by Monday simple legislation doing two things:

1. Giving the FDIC authority to provide unlimited deposit insurance through the FDIC for transaction accounts in banks.

2. Authorizing the Secretary of the Treasury to provide unlimited protection of principal in money market funds through the Treasury’s exchange stabilization fund.

Quick Late-night Impressions Of The Debate

No clear "winner".

Obama was better on style and demeanor.

McCain was better, especially on the second half, on "points", but Obama was toe-to-toe with him most of the way, and refused to let McCain’s spun "facts" go unanswered.  In a debate largely about foreign policy — McCain’s bailiwick — that might actually be a "win" for Obama.  In fact, McCain’s taunts that Obama "didn’t understand" or was "naive" seemed to fall flat.

Some early polling of undecidedsfrom CBS News:

40% of uncommitted voters who watched the debate tonight thought Barack Obama was the winner. 22% thought John McCain won. 38% saw it as a draw.

68% of these voters think Obama would make the right decision about the economy. 41% think McCain would.

49% of these voters think Obama would make the right decisions about Iraq. 55% think McCain would.

UPDATE:  Ezra Klein writes:

The first poll I saw tonight was CBS’s analysis of 500 undecided voters. In that poll, 40 percent gave the debate to Obama, 22 percent gave the debate to McCain. Then Frank Luntz’s focus group gave it to Obama. Then the GQR focus group gave it to Obama. Then CNN’s poll gave it to Obama. I haven’t seen any poll or focus group that scored it for McCain. So Obama won.

The Problem With The House GOP Proposal

As I understand it, the GOP proposal is that instead of getting an equity share in the companies that have bad debt, we simply insure those bad debts.  The distressed company holding a troubled mortgage-based asset gets a taxpayer-funded insurance policy for the full value of the asset in exchange for a small premium payment.

Of course, this is exactly what the mega-insurer AIG did, and look what happened to them.

All in all, it means that if these distressed companies get back on their feet, the taxpayer does not benefit from the upside (although the companies will).  And if the distressed companies fail, then "we" have to pay the insurance, which will be astronomical, and so we suffer the downside.

Makes no sense, but perhaps I am missing something.

Dems And Reps Reach A Deal “In Principle”

Full text of agreement:

1. Taxpayer Protection

    a. Requires Treasury Secretary to set standards to prevent excessive or inappropriate executive compensation for participating companies

    b. To minimize risk to the American taxpayer, requires that any transaction include equity sharing

    c. Requires most profits to be used to reduce the national debt

2. Oversight and Transparency

    a. Treasury Secretary is prohibited from acting in an arbitrary or capricious manner or in any way that is inconsistent with existing law

    b. Establishes strong oversight board with cease and desist authority

    c. Requires program transparency and public accountability through regular, detailed reports to Congress disclosing exercise of the Treasury Secretary’s authority

    d. Establishes an independent Inspector General to monitor the use of the Treasury Secretary’s authority

    e. Requires GAO audits to ensure proper use of funds, appropriate internal controls, and to prevent waste, fraud, and abuse

3. Homeownership Preservation

    a. Maximize and coordinate efforts to modify mortgages for homeowners at risk of foreclosure

    b. Requires loan modifications for mortgages owned or controlled by the Federal Government

    c. Directs a percentage of future profits to the Affordable Housing Fund and the Capital Magnet Fund to meet America’s housing needs

4. Funding Authority

    a. Treasury Secretary’s request for $700 billion is authorized, with $250 billion available immediately and an additional $100 billion released upon his or her certification that funds are needed

    b. final $350 billion is subject to a Congressional joint resolution of disapproval

Oh, Give It Up Already, Sarah

This one is particularly painful:

COURIC: You’ve cited Alaska’s proximity to Russia as part of your foreign policy experience. What did you mean by that? 
PALIN: That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land– boundary that we have with– Canada. It– it’s funny that a comment like that was– kind of made to– cari– I don’t know, you know? Reporters– 
COURIC: Mock? 
PALIN: Yeah, mocked, I guess that’s the word, yeah. 
COURIC: Explain to me why that enhances your foreign policy credentials. 
PALIN: Well, it certainly does because our– our next door neighbors are foreign countries. They’re in the state that I am the executive of. And there in Russia– 
COURIC: Have you ever been involved with any negotiations, for example, with the Russians? 
PALIN: We have trade missions back and forth. We– we do– it’s very important when you consider even national security issues with Russia as Putin rears his head and comes into the air space of the United States of America, where– where do they go? It’s Alaska. It’s just right over the border. It is– from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to– to our state.

Yikes.  Oh, yeah… as to the bailout she said that reducing taxes has to be accompanied by tax reductions.  It’s buried in here somewhere:

Hmmmm.  That answer reminds me of this….

The Mortgage Crisis Explained

Best explanation ever from a blog Good Math, Bad Path. I’m reprinting it in its entirety.  The title of the post is Economic Disasters and Stupid Evil People:

With the insanity that’s been going on in the financial world lately, a bunch of people have asked me to post a followup to my earlier posts on the whole mortgage disaster, to try to explain what’s going on lately.

As I keep saying when people ask me things like this, I’m not an economist. I don’t know much about economics, and what little I do know, I tend to find terribly boring. And in this case, the discussion inevitably gets political, so I’m expecting lots of nasty email.

Anyway, with that said, I’ve been doing a lot of reading, to try to understand this mess. And I’ll try to explain what I’ve figured out.

The situation is both very complicated and very simple.

The simple version? People made lots and lots of stupid loans that couldn’t be repaid.

Of course, it’s not really that simple.

The mortgage mess is the starting point. If you recall my posts on the mortgage mess, what happened was:

  1. People like buying safe investments.
  2. Historically, mortgages are very safe investments: people will go to incredible lengths not to lose their homes.
  3. Banks realized that they could make lots of money by taking groups of mortgages, and turning them into bonds that they could sell, earning a commission, and passing the risk to whoever bought the bonds.
  4. These bonds became incredibly popular. Lots and lots of people and organizations wanted to buy them.
  5. There aren’t enough good mortgages to put together the number of bonds that people wanted to buy.
  6. So banks started giving out mortgages to people who couldn’t repay them, using elaborate and dishonest schemes to pretend that they were actually not bad mortgages.
  7. The people who got mortgages that they couldn’t repay didn’t repay them.
  8. The banks act surprised: "My god, no one could have predicted that so many loans would default! Whine, whinge, moan, someone come help us!

What’s going on now is directly related to that mortgage mess. A good metaphor for it is that the current situation is like a huge city of skyscrapers built on a foundation of sand; the mortgages are the sand.

What we’ve been seeing over the last couple of weeks is the same basic scam as the mortgage mess, but on an even larger scale. Lending money is a profitable business. Bundling loans into investment vehicles is an incredibly profitable business for producing what appear to be high-yield, low-risk investments.

Naturally, when there’s a big opportunity to make lots of money, there’s a ton of people looking to get in on it. Of course, just like with the mortgages, there’s a limit. Realistically, there’s only a certain amount of money that can be loaned at any time to people who can pay it back. But there was so much money to be made that as the high-quality loans ran out, they started looking for other things that they could wrap up as investments. Of course, since people who buy these kinds of investments are typically looking for something really safe, that means that they can’t just give money out any-which-way; they need to have some plausible way of saying "This is really safe".

And here’s where the stupidity really started kicking in.

How do you take a bunch of loans that might not be repaid, and turn them into something that’s safe? Well, what do you do if you had a lot of money tied up in a piece of property that you could lose in an accident? Like, say, a car or a house? You’d buy insurance!

That’s basically what the investment firms did. They gave out shit loans that any sane person should have known couldn’t be repaid, and then they bough insurance on them to guarantee that at least the principal would be safe.

So who did they buy insurance from? Mostly each other.

Watch Lettermen Tonight

For those following the news today, you know that McCain announced he was suspending his campaign to deal with the economic crisis.  And — oh, yeah — he wants to postpone Friday’s debate with Obama.

The polls today show Obama "breaking the tie" and pulling ahead nationally by 4 points.  He’s also doing well in important swing states.

McCain now trying to postpone the debate is kind of like faking an injury when your team is down in the fourth quarter.

Josh Marshall has it right:

"Bringing the presidential candidates and their press entourages back to Capitol Hill won’t speed or improve the process of coming up with a good bailout deal. It will politicize it. That’s so transparently obvious that it barely requires stating. And of course that is the point."

And of McCain’s announcement, Rep. Barney Frank told a group of reporters outside the House chamber:

The public seems to agree.  A flash poll asked this question:

The first debate between John McCain and Barack Obama is scheduled to take place in two days. Should the debate be held as scheduled? Should the debate be held, but the format changed to focus on the economy? Or, should the debate be postponed?

Held as Scheduled: 50 percent
Held with Focus on Economy: 36 percent
Postponed: 10 percent

Is the right response to the turmoil on Wall Street to suspend the campaigns for president? To continue the campaigns as though there is no crisis? Or, to re-focus the campaigns with a unique emphasis on the turmoil on Wall Street?

Suspend 14 
Continue 31 
Refocus the campaign 48

If Friday’s presidential debate does not take place, would that be good for America? Bad for America? Or would it make no difference?

Good for America 14 
Bad for America 46 
No difference 35

Barney Frank says: "It’s the longest Hail Mary pass in the history of either football or Marys."

Looks like McCain’s attempt to look like a leader didn’t work.

But in suspending his campaign, McCain also cancelled his appearance on the David Letterman show, which taped this afternoon.  He called the Letterman people and said he was suspending his campaign and going back to Washington.

But during the course of the taping, Letterman learned that McCain was actually giving an interview with Katie Couric just down the street.  Dave even cut in to the live interview, according to Drudge, and said, "Hey Senator, can I give you a ride home?" 

Or… just watch the YouTube:

Bailout History

A chart (adjusted for inflation)

Blog_bailout_history

The details.

While I’m at it, I think Markos is right.  These are the things we should be looking at:

What we need to determine the extent of this "crisis":

  1. Transparency. Release the presentation Paulson gave to congressional leaders that supposedly has them all spooked. Give us the data and information, and let outside economists pore over the numbers and reach independent conclusions. The Bushies lie and have zero credibility. We can’t trust anything they say.
  2. Timing. Why the sudden rush, when the administration has been working on this plan for months? Seems more than a little suspicious.
  3. Solution. We don’t know what the problem is, so we really don’t know if this solution addresses that problem. What we do know is that it’s targeted not just at failing institutions, but any old financial firm on Wall Street that wants a piece of our money. Even those that "are very successful banks and investment houses that have done very well". Heck, did I say "on Wall Street"? I almost forgot. Any foreign bank can apply!
  4. Details. Why $700 billion? Why not start off with, say, $75 billion. Is the emergency so dire that Treasury will spend all $700 billion next week? Doubtful. So put in what would amount to a bridge loan until people have had a chance to full understand the magnitude and severity of the problem. If it’s truly as bad as people say it is, further moneys can be appropriated.
  5. Motives. Given that the administration wants to give money to solvent financial institutions, is this just another component of the long-running conservative effort to bankrupt the government to destroy government’s ability to improve people’s lives?
  6. Incentives: The administration is really concerned that solvent banks may not take the bailout, so it has to be as condition-free as possible. Why is the administration desperate to force taxpayer funds into these private Wall Street institutions? If they don’t want our money, everyone wins, best of all, the taxpayers.
  7. Politics. The American people hate this thing, and those approval numbers are only getting worse. Given all the points listed above, whoever votes for this thing, even an "improved" version, will face a world of hurt this November, and if not this year, in primaries and general elections through 2010.

He also points to this:

We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself."

 The 2008 Republican Party Platform, adopted earlier this month

Ahem.

Gas Shortages In NC?

Last week, I went to fill up my gas tank.  The station I pulled into had plastic bags over the "regular" pumps and over the "mid-quality" pumps.  I was stuck buying the "premium" gas.  It was $3.99 per gallon, which was what regular was at in July and August, so I wasn’t that upset.

But around the office, I have heard similar stories — people unable to get gas.

Why is there nothing in the local news about this?  I’ve read there were outages in Nashville and other parts of Tennessee.  Even as far east as Asheville, NC and Western NC.  But not around here.

What’s going on?

UPDATE:  Hmmmm…. apparently there are spotty supply problems throughout the South.  I wish the media would get on this more….

UPDATE:  I found this

The executive director of North Carolina’s petroleum association says consumers should not worry. By the end of the month things should be back on track.

Well, okay.  I’m running low, so I guess I’ll start my hunt on the way home from work….

Effect of Global Warming On Polar Bears

Bad and sad:

The best known consequence of disappearing sea ice in the Arctic is the loss of the polar bear habitat.

"The Arctic sea ice melt is a disaster for the polar bears," according to Kassie Siegel, staff attorney for the Center for Biological Diversity. "They are dependent on the Arctic sea ice for all of their essential behaviors, and as the ice melts and global warming transforms the Arctic, polar bears are starving, drowning, even resorting to cannibalism because they don’t have access to their usual food sources."

Excerpts From Hamlet’s Facebook News Feed

Hamlet48Horatio thinks he saw a ghost.

Hamlet thinks it’s annoying when your uncle marries your mother right after your dad dies.

The king thinks Hamlet’s annoying.

Laertes thinks Ophelia can do better.

Hamlet’s father is now a zombie.

– – – –

The king poked the queen.

The queen poked the king back.

Hamlet and the queen are no longer friends.

Marcellus is pretty sure something’s rotten around here.

Hamlet became a fan of daggers.

– – – –

Polonius says Hamlet’s crazy … crazy in love!

Rosencrantz, Guildenstern, and Hamlet are now friends.

Hamlet wonders if he should continue to exist. Or not.

Hamlet thinks Ophelia might be happier in a convent.

Ophelia removed "moody princes" from her interests.

Hamlet posted an event: A Play That’s Totally Fictional and In No Way About My Family

The king commented on Hamlet’s play: "What is wrong with you?"

Polonius thinks this curtain looks like a good thing to hide behind.

Polonius is no longer online.

[Read more at McSweeney’s]

*****

RELATED:  Study shows that Facebook profiles can be indicators of narcissism.

They Knew This Was Coming?

Buried in a Roll Call article today:

[White House Deputy Press Secretary Tony] Fratto insisted that the [$700 billion mortgage bailout] plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough.

This is troubling.  The $700 bailout plan is being presented to us as an unforeseeable crisis.  But apparently, the Bush Administration foresaw it, although (presumably) not knowing when.  And then they spring their plan on a Friday, insisting on approval by Monday?!?

Something’s afoul, I say….

The Worst Is Yet To Come

Scary thoughts from Billmon:

So think of it this way: What happened last week was a giant run on the bank, with people lining up to get their money back — like that scene in It’s a Wonderful Life, except in cyberspace, not Bedford Falls, and with Ben Bernanke and Hank Paulson, not Jimmy Stewart, standing in the electronic doorway and explaining to people that they their money isn’t in the bank, because it’s been loaned to a hedge fund in London, which loaned it to a Wall Street investment bank, which loaned it to a mortgage banker in Nevada, who stole it and deposited it in a numbered bank account in the Cayman Islands. (OK, so maybe it’s not like that scene in It’s a Wonderful Life — it’s more like the scene where Jimmy Stewart comes back to find he was never born and Mr. Potter owns the whole town. But you get the idea.)

What we saw today, however, was something different: a dawning suspicion among the customers that the bank is paying them off in counterfeit bills.

If this suspicion takes hold and spreads, it could open up broad new avenues for financial disaster.

Read the whole thing

Time To Cash In

Seeing as how the U.S. government is going to spend $700 billion (the cost of the Iraq War) in a bailout "rescue plan", buying up distressed toxic worthless assets from poorly mismanaged investment banks, many individuals are wanting to cash in.

So welcome to www.buymyshitpile.com, and maybe you too can get on the gravy train.  Newsday says the site "captur[es] the spirit of the moment, provides a form for ordinary Americans to offer their various and sundry garbage — broken toys, transistor radios, musty books, smelly tennis shoes — to the Treasury Department." There’s a lot of useless stuff out there, and since the government is buying… why not?

Pileoshit

As Roger Ebert Gone Off The Deep End?

Ebert_blogPeople are wondering what the hell yesterday’s Roger Ebert column was all about.  Entitled "Creationism: Your questions answered", it began this way…

Questions and answers on Creationism, which should be discussed in schools as an alternative to the theory of evolution:

Q. When was the earth created?

A. Archbishop James Usher, working out a chronology from the Bible, calculated in 1654 that the earth was created on the night of October 23, 4004 B.C. Other timetables reach back as far as 10,000 years.

Q. What about oil and coal, which seem to have been generated from ancient forests millions of years ago?

A. They are evidence of a Great Flood about 4,400 years ago, which laid down all the layers of sediment at once. They are nowhere near as old as evolutionists and archeologists say. A fossil claimed to be 200 million years old, found in Nevada in 1917, shows a shoe print.

…and continues in the same vein.  There’s no concluding point.  There’s not a whiff of satire in there, as the "answers" he gives are standard answers from creationists (absurd, yes, but without the additional exaggeration to make it satirical).

It’s puzzling, because in the past, he’s demonstrated himself clearly against creationism:

Yes, there is “creationist science,” an attempt to provide a scientific
footing for beliefs which should be a matter of faith. Creationists say
evolution is “only a theory,” and want equal time for their theories,
one of which is that God created the earth from scratch in six days,
and rested on the seventh.

Evolution is indeed a theory. Creationism is a belief, not a theory. In science, a theory is a hypothesis that has withstood the test of time and the challenge of opposing views. It is not simply somebody’s notion about something. The creationist belief cannot withstand such tests and challenges; it exists outside the world of science altogether.

Maybe he’s having some fun with us….

UPDATE:  Or maybe hacked?

A Good Primer On AIG

Since you now effectively own part of AIG, you might want to know what you’ve bought.  If you’re like me, you’ll have to read paragraphs twice, but this is a workable primer on the whole AIG bailout.

BTW, here’s a very good cartoon slide show on the subprime mess — a subprime primer, if you will.  It’s from May, so it doesn’t encompass the current crisis, but if nothing else, you can see how the subprime debacle leads to widespread ruin throughout the entire financial sector.

Whoa, Whoa, Whoa….

BERNAKE, PAULSON URGE SPEEDY BAILOUT reads the headline right now at MSNBC.

Speedy.  Gotta do it.  Right NOW.

But why?  I find myself influenced by today’s NYT op-ed:

With all due respect to Mr. Paulson, who is widely regarded as a smart and fine man, we need to slow this process down. We got into this mess by handing out mortgages like lollipops to people who paid too little attention to the fine print, who in many cases didn’t understand it or didn’t care about it.

And the people who always pretended to know better, who should have known better, the mortgage hucksters and the gilt-edged, high-rolling, helicopter-flying Wall Street financiers, kept pushing this bad paper higher and higher up the pyramid without looking at the fine print themselves, not bothering to understand it, until all the crap came raining down on the rest of us.

Yes, the system came perilously close to collapse last week and needs to be stabilized as quickly as possible. But we don’t know yet that King Henry’s fiat, his $700 billion solution, is the best solution. Like the complex mortgage-based instruments at the heart of this debacle, nobody has a real grasp yet of the vast implications of Mr. Paulson’s remedy.

Obviously, we need to move fast.  But not so fast that we make a bad situation worse.  And certainly not so fast that we reward those who precipitated this mess in the first place.  When you consider that the people who got us into this mess are largely the people who are now advocating a "no strings attached" bailout, you should err on the side of caution.  Expedited caution.

UPDATE:  Matt Yglesius wonders why Paulson needs all $700 billion this week, since he can’t possibly spend that much even by the end of October.  So why not give him some, monitor how it goes, have a second stimulus later, etc…..

More On The Bailout

(1)  Good post from Ezra Klein explaining five things wrong with it

(2)  Isn’t it amusing how conservative Republicans are suddenly indignant about overreaching executive branch power with no oversight?

(3)  Japan and Europe tell us they won’t go along with our bailouts corporate welfare, and refuse to make their taxpayers finance the corporate mistakes. And Angela Merkel asks an interesting question: if this is so important to do now, why did the Bush Administration refuse to discuss increased financial regulation last year at the G7?

Why Paulson Is Wrong

Look, we all know what is going on.  Paulson is proposing a system wherein profits go to investors, but losses become socialized.  That is NOT what Adam Smith envisioned.  It’s not even capitalism.

Read "Why Paulson is wrong," a two page essay being circulated by Luigi Zingales, the Robert C. McCormack Professor of Entrepreneurship and Finance at the University of Chicago. An excerpt:

When a profitable company is hit by a very large liability, as was the case in 1985 when Texaco lost a $12 billion court case against Pennzoil, the solution is not to have the government buy its assets at inflated prices: the solution is Chapter 11. In Chapter 11, companies with a solid underlying business generally swap debt for equity…If banks and financial institutions find it difficult to recapitalize (i.e., issue new equity) it is because the private sector is uncertain about the value of the assets they have in their portfolio and does not want to overpay. Would the government be better in valuing those assets? No. In a negotiation between a government official and banker with a bonus at risk, who will have more clout in determining the price? The Paulson RTC will buy toxic assets at inflated prices thereby creating a charitable institution that provides welfare to the rich—at the taxpayers’ expense. If this subsidy is large enough, it will succeed in stopping the crisis. But, again, at what price? The answer: Billions of dollars in taxpayer money and, even worse, the violation of the fundamental capitalist principle that she who reaps the gains also bears the losses.

What’s the alternative?  Well, what do we normally do when companies go belly-up?  They file for Chapter 11.

The problem is that going through bankruptcy court takes time.  A looong time.  And the economy doesn’t have that kind of time.

But so what?  Zingales argues that we simply "ram" a restructuring program down the throats of these investment banks.  The government basically forgives the debt — wipes it out — in return for some equity in the companies.  In effect, the government would own parts of these companies as a whole, rather than buying the "toxic" assets of those companies.  And pretty soon (one hopes) the government will recoup its investment (because the debt-to-equity ratio of these companies will go down).  This was done before, in the 1930’s.

The benefit?  Well, it means the taxpayers won’t be burdened with $700 billion in a bailout.  Not that much.

Why isn’t anyone proposing this?  Because Wall Street lobbyists have the hearts and minds of the people in Washington, including Paulson.  Under Zingales’ plan, Wall Street will actually bear a portion of the pain.  And they don’t want that.  The common taxpayer, you and I, don’t have a voice.

UPDATE:  It looks like the Dodd proposal is pretty close to the equity-for-debt "bailout" that Zingales envisioned.  It also has provisions limiting top executive pay and bonuses.

The Nationalizaion Of Mortgage Finance

The latest update is that Paulson is looking to spend $1.8 trillion to bailout and essentially socialize the investment banking industry.

Just to give you an idea about how much money that is, here’s some comparisons, from the 2007 Bush budget.

* Veterans’ benefits at $73 billion
* Education was $90 billion
* Interest on US debt was $244 billion
* Medicare $395 billion
* Defense was $548 billion
* Social Security was $586 billion

Those are billions, not trillions.

In total, the 2007 federal budget was a total of $2.8 trillion.   And now we’re adding another $1.8 trillion.

Where will it come from?  Well, taxes of course.  Either that, or we will increase the deficit tremendously.

Below is a Statement of Principles for the Treasury Proposal from Senator Barack Obama:

  • No blank check. If we grant the Treasury broad authority to address the immediate crisis, we must insist on independent accountability and oversight. Given the breach of trust we have seen and the magnitude of the taxpayer money involved, there can be no blank check.

  • Rescue requires mutual responsibility. As taxpayers are asked to take extraordinary steps to protect our financial system, it is only appropriate to expect those institutions that benefit to help protect American homeowners and the American economy. We cannot underwrite continued irresponsibility, where CEOs cash in and our regulators look the other way. We cannot abet and reward the unconscionable practices that triggered this crisis. We have to end them.

  • Taxpayers should be protected. This should not be a handout to Wall Street. It should be structured in a way that maximizes the ability of taxpayers to recoup their investment. Going forward, we need to make sure that the institutions that benefit from financial insurance also bear the cost of that insurance.

  • Help homeowners stay in their homes. This crisis started with homeowners and they bear the brunt of the nearly unprecedented collapse in housing prices. We cannot have a plan for Wall Street banks that does not help homeowners stay in their homes and help distressed communities.

  • A global response. As I said on Friday, this is a global financial crisis and it requires a global solution. The United States must lead, but we must also insist that other nations, who have a huge stake in the outcome, join us in helping to secure the financial markets.

  • Main Street, not just Wall Street. The American people need to know that we feel as great a sense of urgency about the emergency on Main Street as we do the emergency on Wall Street. That is why I call on Senator McCain, President Bush, Republicans and Democrats to join me in supporting an emergency economic plan for working families – a plan that would help folks cope with rising gas and food prices, save one million jobs through rebuilding our schools and roads, help states and cities avoid painful budget cuts and tax increases, help homeowners stay in their homes, and provide retooling assistance to help ensure that the fuel-efficient cars of the future are built in America.

  • Build a regulatory structure for the 21st Century. While there is not time in a week to remake our regulatory structure to prevent abuses in the future, we should commit ourselves to the kind of reforms I have been advocating for several years. We need new rules of the road for the 21st Century economy, together with the means and willingness to enforce them.

It all sounds good, but Bush is already saying he WON’T support legislation to limit excessive CEO pay, he WON’T bailout homeonwers…

But at least this country is unified on one thing.  In a recent survey, ZERO percent said that the economy was getting better.  When was the last time a survey like that ended up with a zero percent?

National economy

Getting better

Staying the same

Getting worse

Undecided

Sep 2008 13% 82% 5%
Aug 2008 18% 19% 60% 3%
Jul 2008 3% 20% 76% 1%
Jun 2008 7% 18% 73% 2%
May 2008 11% 18% 70% 1%
Apr 2008 8% 14% 77% 1%
Mar 2008 4% 9% 86% 1%
Feb 2008 1% 20% 78% 1%
Jan 2008 8% 22% 64% 6%
Dec 2007 7% 28% 64% 1%
Nov 2007 18% 26% 55% 1%
Oct 2007 8% 18% 69% 5%
Sep 2007 14% 20% 63% 3%

Also, in another question, ZERO percent said that their household financial situation is better.

Call Me Howie

So I sat down at 4:00 pm to play a game of online poker.

$11.00 entry fee for 3,000 chips.  2,907 players in an elimination tournament, which means the later you get eliminated, the more of the prize pool you win.

9 hours and 40 minutes later (yes, 1:40 am) one guy was standing with over 17,000,000 chips.

Me.

I won $15,227.90.

Good, because I have medical bills.

NC: It’s A Tie….

According to Public Policy Polling (pdf):

Democrat Sen. Barack Obama has pulled into a tie with Republican John McCain in North Carolina, according to results released by Public Policy Polling Saturday.

Each candidate has 46 percent and Libertarian Bob Barr had 5 percent.

North Carolina has voted for Republican presidential candidates for the past three decades.

Obama’s standing in the state has improved over the year as more voters are citing concern over the economy as a top issue when deciding who to vote for, according to the PPP.

“The more voters are concerned about the economy instead of things like immigration, taxes and social issues, the better Democrats are going to do in North Carolina” PPP president Dean Debnam said in a press release.

The Reich Proposals

What should Wall Street give up in order to get the blank check from the government (i.e. us, the taxpayers)?  Robert Reich has some ideas I like:

1. The government (i.e. taxpayers) gets an equity stake in every Wall Street financial company proportional to the amount of bad debt that company shoves onto the public. So when and if Wall Street shares rise, taxpayers are rewarded for accepting so much risk.

2. Wall Street executives and directors of Wall Street firms relinquish their current stock options and this year’s other forms of compensation, and agree to future compensation linked to a rolling five-year average of firm profitability. Why should taxpayers feather their already amply-feathered nests?

3. All Wall Street executives immediately cease making campaign contributions to any candidate for public office in this election cycle or next, all Wall Street PACs be closed, and Wall Street lobbyists curtail their activities unless specifically asked for information by policymakers. Why should taxpayers finance Wall Street’s outsized political power – especially when that power is being exercised to get favorable terms from taxpayers?

4. Wall Street firms agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.

5. Wall Street agrees to give bankruptcy judges the authority to modify the terms of primary mortgages, so homeowners have a fighting chance to keep their homes. Why should distressed homeowners lose their homes when Wall Streeters receive taxpayer money that helps them keep their fancy ones?

Chances of any of these happening?  Zero.

McCain Quote Of The Day

He didn’t actually say it today, but I’ll bet he wished he never said it at all:

"Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation."

Yeah.  Good call.  Let’s make the health care industry like the banking industry.  NOT!

Obviously, McCain wrote this piece before this week.  What’s interesting is the phrase "as we have done".  Because all this week, McCain has been blaming Obama for the banking crisis.

The quote comes from a magazine article coming out this month (pdf).

Ezra Klein comments:

This, incidentally, is a pattern. Three years ago, John McCain wanted to turn Social Security over to Wall Street. One month ago, he wanted to make health insurance more like the banking industry. John McCain is a died-in-the-wool deregulator. He’s not going to come out and endorse the financial crisis, but if you press the rewind button for just a moment, and freeze frame right before the collapse, McCain was trying to give Wall Street more responsibility over pensions and paint the basket of deregulatory policies that led to the meltdown as a model for other industries. It’s why his response to the financial crisis has been so tinny and confused: The collapse is directly disproving McCain’s view of the world, and no man can replace a long-held ideology in a matter of weeks.

Josh Marshall:

If the Obama folks are smart — and they are — they’ll ride this one all the way to the election. But among ourselves let’s admit that you could only be surprised by this statement if you were willfully ignorant to what McCain and his key advisors believe. Remember, his top economics advisor is former Sen. Phil Gramm, the legislative architect of the banking and financial services deregulation that led to the current crisis. And his health care proposals are all off-the-rack Heritage Foundation-style initiatives based on the premise that people have too much, not too little insurance.

P.S.  The Saturday cartoons are brutal.  Brutally honest, that is.

North Carolina – The Presidential Race

It looked for a while like NC might become a swing state.  But the Palin-mania did well here, and it looks — right now — like NC is safely in the McCain column.

BUT… not so fast.

Let’s start on August 2, 2008, with the following numbers  of registered voters

Democrats: 2,669,616 
Republican: 1,937,735

And then the week by week additions:

Week  Democratic  Republican

08/09   3,833        709 
08/16   4,354        531 
08/23   2,188        275 
08/30   3,410        688 
09/06   4,851      1,309 
09/13   7,307      2,942 

Going back to the first week of 2008, the two main parties have added the following number of voters:

Democrats +184,113 
Republicans +24,614

That’s encouraging, assuming the enthusiasm for McCain wanes as Election Day gets closer.

Lying As A Stategy

A nice NYT article about McCain’s new "strategy" of lying through his teeth.

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."

***

[Don] 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 media blowback for this McCain’s strategy is relatively strong.  The question is: will people listen?  The McCain camp is betting not (and they’ll probably play the "media is against us" card).  The problem is, it might work.

St. Petersburg Times Uses The “L” Word

Important editorial, not only because it’s on the money, but because it’s in the crucial swing state of Florida:

This nation is facing real challenges on the economy, health care, jobs and the ongoing wars in Iraq and Afghanistan. There are significant differences between how Sen. Barack Obama and Sen. John McCain would address them. But McCain’s recent campaign ads suggest the most vital issues are whether Obama wanted to teach sex education to kindergarten children and whether he derided the Republican’s running mate, Alaska Gov. Sarah Palin, by talking about lipstick on a pig.

McCain’s straight talk has become a toxic mix of lies and double-speak. It is leaving a permanent stain on his reputation for integrity, and it is a short-term strategy that eventually will backfire with the very types of independent-thinking voters that were so attracted to him.

The sex education ad says that Obama supported "comprehensive sex education" for kindergarten children. Graphics then appear with a voice-over saying: "Learning about sex before learning to read?"

The facts: Obama, while a state lawmaker in Illinois, supported a measure to provide older students with age and developmentally appropriate sex education. Younger children, such as those kindergarten-age, would be taught "age-appropriate" things such as how to protect themselves from sexual predators. The legislation was widely backed by the state PTA and the Illinois Public Health Association. Parents could choose to opt out of any instruction for their children.

But in McCain’s campaign playbook, this responsible legislation becomes fodder for a grotesque distortion as a way to instill fear in voters.

As to the lipstick-on-a-pig controversy, McCain’s campaign has purposely twisted the way Obama used that expression in a recent speech in Virginia. A McCain campaign ad claims that Obama was directing an insult to Palin who, during the Republican National Convention, characterized hockey moms like herself as pit bulls with lipstick.

The truth: Obama used the phrase, which he had used before, to attack McCain’s claim that he’ll reform Washington while retaining the policies of President Bush. After using the lipstick-on-a-pig phrase, Obama said, "You can wrap an old fish in a piece of paper called change. It’s still going to stink after eight years."

McCain’s faux chivalrous outrage over Obama’s purported insult is beneath him. He has been a serious public servant willing to say unpopular truths when he thought it best for the country, but he’s more than willing in this election to put his name on campaign lies. The leader who says he would rather lose an election than lose a war now risks losing his reputation in an attempt to win the White House.

One More Time — The Tax Policies

BREAKING DOWN THE NUMBERS
Here’s how the average tax bill could change in 2009 if either John McCain’s or Barack Obama’s tax proposals were fully in place.
MCCAIN OBAMA
Income Avg. tax bill Avg. tax bill
Over $2.9M -$269,364 +$701,885
$603K and up -$45,361 +$115,974
$227K-$603K -$7,871 +$12
$161K-$227K -$4,380 -$2,789
$112K-$161K -$2,614 -$2,204
$66K-$112K -$1,009 -$1,290
$38K-$66K -$319 -$1,042
$19K-$38K -$113 -$892
Under $19K -$19 -$567

Source:The Tax Policy Center

So when McCain-Palin say "He will raise your taxes", they’re only talking about people making $227,000 and over.  For most Americans, Obama will make your taxes lower than McCain will.

Palin Links Iraq To 9/11

The Washington Post reports:

Gov. Sarah Palin linked the war in Iraq with the Sept. 11 terrorist attacks, telling an Iraq-bound brigade of soldiers that included her son that they would "defend the innocent from the enemies who planned and carried out and rejoiced in the death of thousands of Americans."

Uh, Sarah?

The September 11 Commission said there was no link.

The bipartisan Senate report said there was no link.

The CIA said there was no link.

The Pentagon said there was no link.

Even Bush finally admitted that there was no link

Well, Now She’s Just Out And Out Lying

On global warming, this time:

MORE PALIN FUN —  AP reports:

Pressed about what insights into recent Russian actions she gained by living in Alaska, Palin told Gibson, "They’re our next-door neighbors and you can actually see Russia from land here in Alaska, from an island in Alaska."

Riiiight.  And I can look up and see the stars and moon.  That makes me an astronaut I guess.

Stumped

Sarah bluffs her way through a foreign policy question on "the Bush doctrine".  She doesn’t know what it means, even after he gives her a hint.

I’m not sure what makes her a unique politician.  She’s slick! the way she bluffs through that.

Of course, there’s a reason she doesn’t know what he’s talking about.  This is Sarah in December 2006:

"I’ve been so focused on state government, I haven’t really focused much on the war in Iraq."

** UPDATE **  In a piece too long and perfect to truncate, James Fallows explains why Palin’s non-recognition of the Bush Doctrine matters.

She also took the position (somewhat craftily) of A-okaying an unnnnounced strike against terrorists in Pakistan.  Unfortunately, that’s not the same position as McCain — it’s Obama’s position, and McCain has been attacking Obama about that.

Ooops.

Publius sums it up nicely:

You could almost hear her mental gears grinding, trying to retrieve the talking points and forcing them into her answers. Nothing came from her — or if it did, she certainly fooled me. Reagan and Clinton — governors both — would never have appeared that ignorant, largely because they weren’t. They were engaged with the issues of their day and wrestled with them intellectually. Today’s interview reflected an unprepared, uninformed person cast into the spotlight far before her time.

Sorkin To Write Movie About…. Facebook?

How did I miss this?

Screenwriter Aaron Sorkin has agreed to make a film about the founders of social networking site Facebook.

Sorkin, who created US TV drama The West Wing and wrote the Tom Hanks movie Charlie Wilson’s War, has even opened a Facebook account to aid his research.

"I figured a good first step in my preparation would be finding out what Facebook is, so I’ve started this page," he wrote.

He said the project was a joint venture between Sony and producer Scott Rudin.

Sony has confirmed the as-yet-untitled project is in development.

I like Sorkin and I like Facebook, but this sounds like a dull movie.

Where Are The Ashfords?

APM = Ashfords Per Million

Top Countries

Country APM
UNITED KINGDOM 95.51
AUSTRALIA 71.84
NEW ZEALAND 68.67
CANADA 40.8
UNITED STATES 27.76
LUXEMBOURG 8.5
IRELAND 3.77
DENMARK 0.98
BELGIUM 0.86
SWITZERLAND 0.64

Top Regions

Area Name APM
WEST MIDLANDS , UNITED KINGDOM 205.79
SOUTH WEST , UNITED KINGDOM 193.53
EAST ANGLIA , UNITED KINGDOM 185.88
NORTHERN TERRITORY , AUSTRALIA 168.34
WALES , UNITED KINGDOM 154.79
MISSISSIPPI , UNITED STATES 143.45
QUEENSLAND , AUSTRALIA 100.86
LOUISIANA , UNITED STATES 95
OKLAHOMA , UNITED STATES 90.08
AUSTRALIAN CAPITAL TERRITORY , AUSTRALIA 87.94
Top Cities
City
BEMBRIDGE , SOUTH EAST , UNITED KINGDOM
APPIN , SCOTLAND , UNITED KINGDOM
BILSTON , WEST MIDLANDS , UNITED KINGDOM
BAGILLT & FLINT , WALES , UNITED KINGDOM
BATHGATE , SCOTLAND , UNITED KINGDOM
AIKEN , SOUTH CAROLINA , UNITED STATES
ASCOT , SOUTH EAST , UNITED KINGDOM
BILLERICAY , SOUTH EAST , UNITED KINGDOM
ASHFORD & SURREY , SOUTH EAST , UNITED KINGDOM
BACUP , NORTH WEST , UNITED KINGDOM

Source: World Names Profiler

Sick Of Lipstick

Steve Benen gets it right:

When these manufactured campaign controversies come up, there’s a fascinating dynamic in which the various actors play their roles. When it comes to the "lipstick" stupidity, for example, McCain’s job is to push the story, Obama’s job is to dismiss it, and the media’s job is pretend it’s worth talking about. All three know exactly how mind-numbingly foolish this is.

Seriously, we can’t be electing a president this way.  This is ridiculous.

Who do I blame?  The media, mostly.  They’re the gatekeepers of what we talk about (and not talk about).

And I worry about the millions of Americans who actually think this is relevant.  Makes me want to move to another country.