A successful bailout? Watch lending between banks (JEANNINE AVERSA, 9/28/08, AP)
The New Deal it is not. The government's biggest economic bailout since the Great Depression is aimed not at relieving unemployment or reforming questionable business practices, but at resuscitating financial markets debilitated by lousy bets on the housing market.
Put simply, the hastily crafted plan lawmakers agreed to in principle on Sunday is intended to revive jittery and fragile banks on Wall Street with enough money — by using taxpayer funds to purchase billions upon billions of their worst mortgage-related assets — so that lending, the lifeblood of the American economy, flows freely again.If it is working, signs will emerge almost immediately in the interest rates on U.S. bonds and in an array of obscure — but crucial — financial benchmarks.
At Debate, Biden Told: Ignore Palin (RUSSELL BERMAN, September 29, 2008, NY Sun)
As Senator Biden prepares to face off against Governor Palin on Thursday night in the campaign's lone vice presidential debate, Democratic strategists have a few words of advice for the lawmaker of Delaware: Ignore the Alaskan.Mr. Biden's 35 years in the Senate dwarf Ms. Palin's single month of experience on the national stage, but Democrats are worried that his penchant for verbal missteps and his occasionally aggressive style could be a liability as he faces only the second woman to serve as a major party nominee for the vice presidency.
"His goal is to ignore Palin and focus on connecting with voters sitting in their living rooms by making clear he is indeed one of them — an uncommon, common man," a Democratic strategist who served as an aide to Vice President Gore during the 2000 campaign, Christopher Lehane, said.
Rescue Tests Bush's Conservative Legacy (JOHN D. MCKINNON, 9/29/08, Wall Street Journal)
President George W. Bush's $700 billion rescue plan for financial markets is prompting widespread soul-searching within the conservative movement.While many Republican lawmakers seek to distance themselves from the plan, or disown it altogether, White House officials hope the heated opposition gradually will cool if the plan works.
Many frustrated conservatives see Mr. Bush's rescue plan, on top of his decision to invade Iraq, as cementing his legacy as a big-government conservative.
To others, it marks his apostasy from conservative orthodoxy.
Signs of trouble seen before Syria bombing: Syria has strained ties to some Sunni Arab countries because of its support for Shiite groups. Troops along Lebanese border may be intended to stop an attack from militants, analysts say. (Borzou Daragahi, 9/29/08, Los Angeles Times)
When Syria deployed thousands of soldiers along its frontier with northern Lebanon this month, some here feared that the Syrians were preparing to retake a country their military had dominated until it was pushed out in 2005.But now, after a bombing Saturday that was the deadliest in Syria since 1986, analysts are wondering whether the troops were defensive, meant to stop an imminent attack from Lebanon-based Sunni Muslim militants inspired by Al Qaeda and sometimes trained in Iraq. [...]
Northern Lebanon has long been a bastion for Sunni radicals, some of them veterans of the Iraq insurgency. Fatah al Islam, a group with Al Qaeda ties, fought the Lebanese army last year in a months-long battle that left hundreds dead.
On Aug. 12, just hours before newly selected Lebanese President Michel Suleiman paid a landmark visit to Damascus, a roadside bomb struck a bus in the northern Lebanese city of Tripoli, killing at least 12 people, 10 of them soldiers of the Lebanese army, which is widely perceived as sympathetic to Syria. Dozens have died in clashes between Sunnis and Lebanon's Alawite sect, which also has strong ties to Syria.
Lebanese scholar Ahmad Moussalli said he told several Syrian officials over lunch in Damascus three weeks ago to expect an attack on their soil. Saturday's bombing, he said, was unsurprising.
"This constitutes payback against Syria because it is anti-Islamist and is against the spread of such Islamism in the north of Lebanon," said Moussalli, a professor of political science and Islamic studies at the American University of Beirut.
Key House GOP Opponent of Bailout Bill Changes Tune (Jake Tapper, September 28, 2008, Political Punch)
I'm told by someone in the room that Rep. Paul Ryan, R-Wisc., ranking Republican on the House Budget Committee and an admired conservative within his caucus, just made what I'm told was a credible argument FOR the bill.Said Ryan of the bill: "It sucks."
But, he said, it has to pass to preserve the free market system and stave off a financial collapse.
MORE (via Jim Yates):
Who's Afraid of a Big, Bad Bailout? (John Mauldin, 9/26/08, Frontline Thoughts)
Flying last Tuesday, overnight from Cape Town in South Africa to London, I read in the Financial Times that Republican Congressman Joe Barton of Texas was quoted as saying (this is from memory, so it is not exact) that he had difficulty voting for a bailout plan when none of his constituents could understand the need to bail out Wall Street, didn't understand the problem, and were against spending $700 billion of taxpayer money to solve a crisis for a bunch of (rich) people who took a lot of risk and created the crisis. That is a sentiment that many of the Republican members of the House share.As it happens, I know Joe. My office is in his congressional district. I sat on the Executive Committee for the Texas Republican Party representing much of the same district for eight years. This week, Thoughts from the Frontline will be an open letter to Joe, and through him to Congress, telling him what the real financial problem is and how it affects his district, helping explain the problem to his constituents , and explaining why he has to hold his nose with one hand and vote for a bailout with the other.
Just for the record, Joe has been in Congress for 24 years. He is the ranking Republican on the Energy and Commerce Committee, which is one of the three most important committees and is usually considered in the top five of Republican House leadership. He is quite conservative and has been a very good and effective congressman. I have known Joe for a long time and consider him a friend. He has been my Congressman at times, depending on where they draw the line. I called his senior aide and asked him how the phone calls were going. It is at least ten to one against supporting this bill, and that is probably typical of the phones all across this country. People are angry, and with real justification. And watching the debates, it reminds us that one should never look at how sausages and laws are made. It is a very messy process.
I think what follows is as good a way as any to explain the crisis we are facing this weekend. This letter will print out a little longer, because there are a lot of charts, but the word length is about the same. Let's jump right in.
It's the End of the World As We Know It
Dear Joe,
I understand your reluctance to vote for a bill that 90% of the people who voted for you are against. That is generally not good politics. They don't understand why taxpayers should spend $700 billion to bail out rich guys on Wall Street who are now in trouble. And if I only got my information from local papers and news sources, I would probably agree. But the media (apart from CNBC) has simply not gotten this story right. It is not just a crisis on Wall Street. Left unchecked, this will morph within a few weeks to a crisis on Main Street. What I want to do is describe the nature of the crisis, how this problem will come home to your district, and what has to be done to avert a true, full-blown depression, where the ultimate cost will be far higher to the taxpayers than $700 billion. And let me say that my mail is not running at 10 to 1 against, but it is really high. I am probably going to make a lot of my regular readers mad, but they need to hear what is really happening on the front lines of the financial world.
First, let's stop calling this a bailout plan. It is not. It is an economic stabilization plan. Run properly, it might even make the taxpayers some money. If it is not enacted very soon (Monday would be fine), the losses to businesses and investors and homeowners all over the US (and the world) will be enormous. [...]
Why do we need this Stabilization Plan? Why can't the regular capital markets handle it? The reason is that the problem is simply too big for the market to deal with. It requires massive amounts of patient, long-term money to solve the problem. And the only source for that would be the US government.
There is no reason for the taxpayer to lose money. Warren Buffett, Bill Gross of PIMCO, and my friend Andy Kessler have all said this could be done without the taxpayer losing money, and perhaps could even make a profit. As noted above, these bonds could be bought at market prices that would actually make a long-term buyer a profit. Put someone like Bill Gross in charge and let him make sure the taxpayers are buying value. This would re-liquefy the banks and help get their capital ratios back in line.
Why are banks not lending to each other? Because they don't know what kind of assets are on each other's books. There is simply no trust. The Fed has had to step in and loan out hundreds of billions of dollars in order to keep the financial markets from collapsing. If you allow the banks to sell their impaired assets at a market-clearing fair price (not at the original price), then once the landscape is cleared, banks will decide they can start trusting each other. The commercial paper market will come back. Credit spreads will come down. Banks will be able to stabilize their loan portfolios and start lending again.
Again, the US government is the only entity with enough size and patience to act. We do not have to bail out Wall Street. They will still take large losses on their securities, just not as large a loss as they are now facing in a credit market that is frozen. As noted above, there are many securities that are being marked down and sold far below a rational price.
If we act now, we will start to see securitization of mortgages, credit cards, auto loans, and business loans so that the economy can begin to function properly.
What happens if we walk away? Within a few weeks at most, financial markets will freeze even more. We will see electronic runs on major banks, and the FDIC will have more problems than you can possibly imagine. The TED spread and LIBOR will get much worse. Businesses which use the short-term commercial paper markets will start having problems rolling over their paper, forcing them to make difficult cuts in spending and employment. Larger businesses will find it more difficult to get loans and credit. That will have effects on down the economic food chain. Jim Cramer estimated today that without a plan of some type, we could see the Dow drop to 8300. That is as good a guess as any. It could be worse. Home valuations and sales will drop even further.
The average voter? They will see stock market investments off another 25% at the least. Home prices will go down even more. Consumer spending will drop. What should be a run-of-the-mill recession becomes a deep recession or soft depression. Yes, that may be worst-case scenario. But that is the risk I think we take with inaction.
A properly constructed Stabilization Plan hopefully avoids the worst-case scenario. It should ultimately not cost the taxpayer much, and maybe even return a profit. The AIG rescue that Paulson arranged is an example of how to do it right. My bet is that the taxpayer is going to make a real profit on this deal. We got 80% of AIG, with what is now a loan paying the taxpayer over 12%, plus almost $2 billion in upfront fees for doing the loan. That is not a bailout. That is a business deal that sounds like it was done by Mack the Knife.
This deal needs to be done by Monday. Every day we wait will see more and more money fly out the doors of the banks, putting the FDIC at ever greater risk. Panic will start to set in, moving to ever smaller banks. Frankly, we are at the point where we need to consider raising the FDIC limits for all deposits for a period of time, until the Stabilization Plan quells the panic.
I understand that this is a really, really bad idea according classical free-market economic theory. You know me; I am as free market as it comes. But I also know that without immediate action a lot of people are really going to be hurt. Unemployment is not a good thing. Losses on your home and investments hurt. It is all nice and well to talk about theories and contend the market should be allowed to sort itself out; and if we have a deep recession, then that is what is needed. But the risk we take is not a deep recession but a soft depression. The consequences of inaction are simply unthinkable.
McCain, Obama may skip bailout vote (CARRIE BUDOFF BROWN & AMIE PARNES, 9/28/08, Politico)
Though McCain took the unusual step last week of threatening to skip the first presidential debate to focus on the crisis, he may not make it back to Capitol Hill to weigh in on the legislation.“It’s impossible to know until the vote has been announced,” McCain spokesman Tucker Bounds said Sunday.
Old is new as team rides rails (Kent Somers - Sept. 27, 2008, The Arizona Republic)
The Cardinals have traveled to games by plane and bus, but it has been more than 50 years since they arrived by train. But that's how they rolled Saturday.The team boarded an Amtrak train in Washington around noon and arrived in Newark, N.J., around 3 p.m. to begin final preparations for their game Sunday against the New York Jets at Giants Stadium.
Linebacker Karlos Dansby munched on a boxed snack of chicken in the dining car as he mused about this new mode of travel.
"The only train I've been on is the little bitty train that goes around the zoo," he said. "I'm glad we're taking this trip. I think it will bring us closer together." [...]
As soon as the players boarded, several of them, led by running back Edgerrin James, renamed a dining car the "party car."
The music and laughter flowed. [...]
The train was still in the station when it was announced that lunch choices were filet and chicken and pasta. And, oh, the man on the intercom said, don't forget the crab cakes, a local specialty.
McCain retracts Palin's Pakistan comments (Emily Sherman, 9/28/08, CNN)
Sen. John McCain retracted Sarah Palin's stance on Pakistan Sunday morning, after the Alaska governor appeared to back Sen. Barack Obama's support for unilateral strikes inside Pakistan against terrorists [...]Saturday night, while on a stop for cheesesteaks in South Philadelphia, Palin was questioned by a Temple graduate student about whether the U.S. should cross the border from Afghanistan into Pakistan.
"If that's what we have to do stop the terrorists from coming any further in, absolutely, we should," Palin said
Lending freezes as anxiety grips capital markets: Credit is so tight, routine transactions have been hobbled. With interbank lending stifled, regulators are worried. (Tom Petruno and Walter Hamilton, 9/26/08, Los Angeles Times)
To many Americans, the scope of the now year-old U.S. financial crisis may be evident only when it shows up in a bad reaction in the stock market. Over the last two days, the market has rallied, yet the credit situation has remained dire."If the Dow goes down 1,000 points, you know exactly what that means," said Michael Darda, chief economist at the investment firm MKM Partners in Greenwich, Conn.
"You'll see it on the news and in your 401(k). It's palpable and understandable. If the credit markets freeze, that hits the economy with a lag, but it's just as powerful, maybe more so."
The economy and banking system run on credit, much of it short-term in nature. Untold billions of dollars change hands each day to fund U.S. banks' operations and the workings of companies and local governments.
If that money stops flowing, the economy loses the lubricant that keeps the gears turning.
In normal times, for example, one bank may have a large need for cash just for a day or two. Other banks may have excess cash and are happy to lend it to peers at relatively low interest rates.
In recent weeks, that back-and-forth flow of credit has been badly hampered as banks increasingly have been unwilling to lend to one another, fearful they won't be repaid if financial conditions worsen.
"What credit really is is trust and faith," said Pimco's Gross. At the moment, he said, "there is no trust, there is no faith."
Why now?
Soaring mortgage defaults and plummeting real estate prices have been rocking the financial system for the last year, resulting in massive loan losses for many banks and other institutions that fed the housing mania earlier this decade.
But the fallout from the mortgage debacle reached epic proportions this month, beginning with the government's takeover of ailing mortgage-finance giants Fannie Mae and Freddie Mac on Sept. 7.
That was followed by the failure of brokerage Lehman Bros. Holdings Inc. on Sept. 14, and the Federal Reserve's rescue of insurance titan American International Group on Sept. 16.
On Thursday, federal regulators seized Washington Mutual Inc. in the biggest bank failure in U.S. history.
And Friday, shares of Wachovia Corp., one of the nation's biggest banks and mortgage lenders, dived 27% as many investors fled, fearing that it could be the next institution to fail.
"This is scary," said 75-year-old Dan Fuss, who manages $110 billion in bonds for investment firm Loomis, Sayles & Co. in Boston. "Right now, when you think this through, any bank . . . is at risk" of the market's instant judgment of which institutions are solvent and which are not, he said.
The Federal Reserve and other major central banks have flooded the global financial system with hundreds of billions of dollars in short-term credit this month, trying to calm nerves and get banks to begin lending to one another again.
But the Fed can't force banks to extend credit, least of all when the most primal of instincts -- self-preservation -- rules the day.
In the last two weeks, fear also has gripped other parts of the credit markets.
Money market mutual funds, for example, normally buy short-term IOUs of companies, financial institutions and municipalities. But the $3.3-trillion money fund business has been upended since Sept. 16, when one of the oldest money funds revealed that it had lost 3% of its principal value because of losses on Lehman Bros. IOUs it held.
That marked only the second time in 38 years that a money fund had suffered a loss. The news triggered record outflows from the sector as nervous investors pulled their cash, which in turn drove many fund managers in recent days to stop buying corporate debt and instead load up on super-safe short-term U.S. Treasury bills.
Other big investors, spooked by what they see happening in the banking system, are shunning long-term bonds in favor of hoarding cash. That has stymied states and cities that need to borrow in the bond market to fund public works projects.
[T]he plan faces fierce opposition from Republicans and Democrats angry at what they say is a taxpayer bailout of Wall Street "fat cats." As the House opened for an unusual Sunday session, lawmakers from both parties rose, one after another, for one-minute speeches denouncing the agreement -- and signaling a continuing struggle as policymakers and their staff work out the final details."This morning we should be very much alarmed," said Rep. Scott Garrett (R-N.J.), addressing taxpayers directly. "Obviously, Washington is not listening to your wishes. Those who used to work for Goldman Sachs will support this deal. . . . Those who have blocked reform in the past will support this deal. I will not support this deal."
Rep. Marcy Kaptur (D-Ohio) railed against the agreement and the Wall Street financiers who would be helped. "These criminals have so much political power they can shut down the normal legislative process," she said.
Rep. Ted Poe (R-Texas) rose to compare the administration's urgings to rush a bailout plan to the pressure exerted on Congress to act after the Sept. 11 terrorist attacks.
"This is the same politics of fear we're hearing from the financial fat cats on Wall Street," Poe said. "Backroom deals trouble me because they usually turn out to be bad deals for America."
The conservative Texan was followed and echoed by the staunchly liberal Rep. Dennis J. Kucinich (D-Ohio), who said, "The $700-billion bailout is driven by fear, not fact."
Tit-for-Tat Kurds Reverse Saddam's 'Ethnic Cleansing' (AFP, 9/28/08)
Aziz was just four years old in 1975 when his family was evicted from Bawaplawi village, near the northern city of Khanaqin, and Arab settlers grabbed their home.Now schoolteacher Aziz is back and has done to the Arabs what they did to him.
"Our homes were taken over by the Arabs without paying us any compensation," Aziz, 37, said at the modest single-storey brick house which he has occupied since the fall of Saddam's regime in 2003.
"We moved in and took any house that was empty. The Arabs who were here had fled."
Saddam's "Arabisation" campaign sought to change the demography of Khanaqin, which originally had a vast majority of Kurds and a smaller minority of Shiite Arabs, Turkmen and Jews.
With the fall of Saddam's regime, the Kurds are back and the Arabs are nowhere to be seen, at least in Khanaqin.
McCain Ready for A Change Of Subject: Credit Crisis Has Given Obama a Distinct Edge (Dan Balz and Shailagh Murray, 9/28/08, Washington Post)
In the two weeks that the Wall Street financial crisis has dominated the political debate, the presidential race has shifted from what had been essentially a dead heat to one in which Sen. Barack Obama has opened up a narrow but perceptible advantage nationally, as well as in a number of battleground states.The burden now falls on Sen. John McCain to reverse the effects of the focus on the economy, and to keep the contest close enough so that a dominant debate performance, a gaffe by Obama or some outside event can shift the momentum back to him.
Although Friday's debate in Oxford, Miss., produced no outright winner, strategists in both parties said the coming weeks, which will include three more debates -- two between McCain and Obama and the third between vice presidential candidates Gov. Sarah Palin and Sen. Joseph R. Biden Jr. -- could be decisive in determining whether the election remains on a trajectory favorable to Obama or shifts back toward too-close-to-call status.
McCain advisers are well aware that the past two weeks have brought a shift in the race, but they say that between now and Election Day, there is plenty of time for the fortunes of the two candidates to change again.
Nuclear Pact With India Gets Approval of House (Glenn Kessler, 9/28/08, Washington Post)
The House overwhelmingly gave final approval yesterday to a landmark civil nuclear agreement with India, putting the Bush administration in reach of a substantial foreign policy achievement.The legislation, which passed 298 to 117, still faces obstacles in the Senate, where it has been approved by the Senate Foreign Relations Committee but several senators have blocked it from coming to the floor for debate. The administration has pressed for final action before Congress adjourns, even though the 2006 bill that gave preliminary approval to the deal called for a much longer period of discussion and debate.
"I urge the Senate to quickly take up and pass this important piece of legislation before their October adjournment," President Bush said yesterday. "Signing this bipartisan bill will help strengthen our partnership with India."
Friend Bruno Behrend will be on "Beyond the Beltway" with Bruce Dumont tonight, Sunday, 7-9 pm EST.
http://www.beyondthebeltway.com/ is the link for a list of stations and it's on XM\/Sirius Radio.
Bruno Behrend
Host - Extreme Wisdom Radio Show
Weekdays 10 AM-Noon on 1220 WKRS
www.extremewisdom.com
Listen Live - http://1220wkrs.com/pages/93518.php
Biden the bumbler (Jeffery T. Kuhner, September 28, 2008, Washington Times)
Mr. Biden has become a national joke. And although late-night comedians are lapping it up at his expense, the Democrat's penchant for silliness raises a very serious issue: How could Mr. Obama have chosen such an irresponsible, vacuous person to be his running mate? Compared to Mr. Biden, Gov. Sarah Palin is the embodiment of mature, seasoned leadership.Democrats have a ready excuse: That's just Joe being Joe. He may be gaffe-prone and loquacious, they argue, but he's substantive on the big issues-especially, foreign affairs. This is false. Mr. Biden is a classic Washington insider: He is full of credentials, sits on numerous panels (including being chairman of the Senate Foreign Relations Committee), and boasts of vast experience. He is impressive on paper; in reality, he is intellectually and morally weak.
He has been wrong on almost every major issue during his last 35 years in the Senate. Mr. Biden is a trendy transnational progressive, who votes the liberal line when it is politically convenient - regardless of the costs to the national interest or in human lives.
Along with congressional Democrats, he voted to cut off support to South Vietnam. This ensured America's defeat, and enabled communist forces to conquer Vietnam. The result was a regional holocaust, in which hundreds of thousands of Vietnamese were slaughtered, the country's Chinese minority was ethnically cleansed, and more than a million citizens were jailed or tortured in Hanoi's gulags. The decline of American influence in Southeast Asia also led to the brutal Khmer Rouge seizing power in Cambodia, and systematically murdering more than 2 million people.
Moreover, Mr. Biden opposed America's anti-communist efforts in Nicaragua, El Salvador and Angola. He voted against Ronald Reagan's military build-up and his Strategic Defense Initiative - pivotal factors in the Soviet empire's defeat.
Mr. Biden's Iraq policy has been erratic and inconsistent.
Egyptian sheik's outburst against Shiites roils Mideast: Sunni cleric Yusuf Qaradawi calls Shiites heretics trying to invade Sunni nations, tapping into anti-Iran anxieties. Shiites express dismay at the remarks amid Iraq war and efforts to forge unity. (Jeffrey Fleishman, 9/27/08, Los Angeles Times)
A popular Sunni Muslim cleric with a television show and a website that churns out religious edicts and dieting tips agitated centuries-old animosities in the Islamic world recently by referring to Shiite Muslims as heretics seeking to invade Sunni societies.The bitter, often bloody, divide between the two main branches of Islam has been an undercurrent since the 7th century, but Sheik Yusuf Qaradawi's vitriol comes at a fragile time, when Sunni countries such as Saudi Arabia and Egypt are wary that the predominantly Shiite nations of Iraq and Iran could destabilize the region. [...]
"Shiites are Muslims but they are heretics and their danger comes from their attempts to invade Sunni society," said Qaradawi, who was quoted in the Egyptian independent daily Al Masry al Youm. "They are able to do that because their billions of dollars trained cadres of Shiites proselytizing in Sunni countries. . . . We should protect Sunni society from the Shiite invasion." [...]
Qaradawi is a prominent moderate cleric, but he has grown skeptical of Shiite intentions. Two years, ago he suggested that Shiites were using the mystical Sufi order of Islam as a cover to penetrate Sunni society. His most recent volleys undercut efforts by Islamic leaders to ease religious tensions, and raise questions about his motivations. Much of the funding for Qaradawi's Qatar-based media enterprises comes from Sunni nations uneasy over Iran's widening influence in the Persian Gulf.
Abul-Fazel Amoee, an Iranian political scientist, said Qaradawi had become an instrument of anti-Shiite propaganda orchestrated by Sunni royals. He said this parallels the "deep rivalry between Saudi Arabia and the Islamic Republic of Iran, and the stage of this competition or ideological battle today is the field of Iraq."
Sectarian differences should "not be handled by exchanging outlandish and fanatical statements. I'm talking about both sides -- Qaradawi and the Shiites," said Abdel Moati Bayoumi, a religious scholar and member of Egypt's Islamic Research Academy. He said divisions between Sunnis and Shiites, which began as a fight over succession after the death of the prophet Muhammad in the 7th century, would weaken Muslim states and serve foreign interests.
Battle of Bajaur a crucial test for Pakistan (AFP, 9/28/08)
A massive battle with Islamist militants in a remote Pakistani tribal region is proving to be pivotal to the country's fight against Al-Qaeda and the Taliban, officials say.The six-week army operation in the remote region of Bajaur on the Afghan border is suspected to have sparked furious extremists into bombing the Marriott Hotel in Islamabad just over a week ago, they say.
While Waziristan has captured most of the headlines about Pakistan's tribal belt in recent years, the military says Bajaur is where it faces the stiffest resistance since joining the US-led "war on terror" in 2001. [...]
"This is at the centre," said Major General Tariq Khan, head of the paramilitary Frontier Corps force, which is leading the fighting.
The operation should be completed in another month and a half, Khan told reporters, but added: "If we do not take any action it will become an independent agency spreading out terror in all directions."
McCain as the Alpha Male (David S. Broder, September 28, 2008, Washington Post)
It was a small thing, but I counted six times that Obama said that McCain was "absolutely right" about a point he had made. No McCain sentences began with a similar acknowledgment of his opponent's wisdom, even though the two agreed on Iran, Russia and the U.S. financial crisis far more than they disagreed.That suggests an imbalance in the deference quotient between the younger man and the veteran senator -- an impression reinforced by Obama's frequent glances in McCain's direction and McCain's studied indifference to his rival.
Whether viewers caught the verbal and body-language signs that Obama seemed to accept McCain as the alpha male on the stage in Mississippi, I do not know.
Bailout plan makes strange bedfellows: The financial crisis and the proposal to address it with billions of taxpayers' dollars have exposed deep fracture lines in both political parties and have fostered some unusual alliances. (Tom Hamburger and Peter Wallsten, 9/28/08, Los Angeles Times)
[T]he crisis exposed sharply different outlooks among Republicans who consider financial markets and big corporations the main engines of the U.S. economy, for example, and those whose sympathies are closer to small business, as well as conservative purists who see government intervention in the marketplace as an intolerable violation of basic principles.For the Democrats, those who consider strong financial markets vital to the United States and its place in the global economy found themselves at odds with others who identify more with working Americans and nurture a long-standing distrust of Wall Street.
In both parties, that meant that some of the hottest reactions against the $700-billion plan came from core constituencies. [...]
Obama has gone further on the specifics than McCain, rankling some Democrats and labor advocates by suggesting that a proposal to ease bankruptcy provisions as a way to help homeowners -- an approach that is anathema to many Republicans -- does not belong in the final bailout plan.
"It's not a secret that Obama's closest advisors come from Wall Street," snapped Dean Baker, an economist who advises labor and community activist groups in Washington. "He has decided to run a low-risk campaign from the center, and that's what we are seeing here."
Because of their shared indignation at the idea of taxpayers bailing out the financial industry, some Democrats find themselves sharing common ground with conservative Republican activists, who fear their party too is bowing to pressure from Wall Street.
One result is that dissident liberals and conservatives have been reaching out to each other. "There's a lot of people in their conference who are not thrilled with the plan . . . and they are looking for options," said Rep. Jeb Hensarling (R-Texas), chairman of the Republican Study Committee.
"The different factions of the Republican Party have always been held together around the basic understanding that we were going to keep the government out of people's business," said Matt Kibbe, president of FreedomWorks, a conservative advocacy group.
"I'm afraid that McCain is making the same mistake."
Such comments about McCain and the criticism of Obama over the bankruptcy issue reflect the risks of getting involved in the crisis, but their efforts have also drawn praise from some participants.
"Both McCain and Obama are playing a significant role" moving a deal forward, said Rick Hohlt, a prominent Republican lobbyist representing banking and other interests. "Both candidates are perceived as change candidates who are anti-Washington."
Those credentials are important to win over skeptical Republicans and Democrats, he said.
GOP lawmakers credit McCain with working quietly Friday and Saturday to coax some of those skeptics into supporting a deal of some kind. On Saturday, McCain worked from a call list of at least 20 lawmakers, aides said -- and some lists even included skeptical Democrats.
"He understands what the House Republican concerns have been and has been helpful in moving the bill in that direction," said Rep. Adam H. Putnam (R-Fla.), a member of the House GOP leadership. "But he has done so in a low-key, under-the-radar way that doesn't defeat the larger purpose."
Putnam, who received a phone call from McCain on Saturday morning, said both McCain and Obama have, in the end, helped push lawmakers closer to a deal.
"I thought the most helpful thing they can do is come together and detox this town to essentially give their blessing to a bipartisan deal," Putnam said.
"It appears that that's what they have done."
Lawmakers Reach Accord on Huge Financial Rescue: Vote is Imminent on $700 Billion Bailout Plan (Lori Montgomery and Paul Kane, 9/28/08, Washington Post)
A senior administration official, who requested anonymity to speak freely about the plan, said both sides had made significant concessions to achieve compromise. The Bush administration has agreed to accept a number of Democratic demands, including:· The money would be dispersed in segments, with Paulson receiving $250 billion immediately, $100 billion upon White House certification of its necessity and the final $350 billion only after Congress has been given 15 days to object.
· Firms participating in the bailout would be required to grant the government warrants to obtain nonvoting shares of stock, so taxpayers can benefit if the companies return to profitability.
· Firms taking advantage of the bailout would be required to limit compensation for senior executives, with especially severe limits on "golden parachutes" at failing firms. The compensation limits will be enacted primarily, but not solely, through the tax code by reducing tax deductions for firms that pay executives more than $400,000 a year.
The administration also agreed to Democratic demands that the financial services industry should help pay for the program. Under the agreement, the president would be required to propose a fee on the industry if the government has not recovered its money through sales of the assets within five years.
Democrats also made a number of concessions, abandoning demands that bankruptcy judges be empowered to modify home mortgages on primary residences for people in foreclosure. They also agreed not to dedicate a portion of any profits from the bailout program to an affordable housing fund that Republicans claimed would primarily assist social service organizations that support the Democratic Party, the official said.
Meanwhile, House Republicans won a major victory, persuading negotiators to include a provision that would require the Treasury Department to create a federal insurance program that would guarantee banks and other firms against loss from any troubled asset, the official said.
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Could the bailout turn a profit for taxpayers?: Some economists say the mortgage-backed securities the Treasury wants to buy from crippled banks could rise in worth when market unfreezes. 'The devil is in the details,' says one expert. (Michael A. Hiltzik, 9/28/08, Los Angeles Times)
[S]ome economists say that the mortgage-backed securities the Treasury proposes to buy from crippled banks have been so beaten down in price that taxpayers could actually profit once the market for these securities -- now virtually nonexistent -- unfreezes."It's entirely within the realm of possibility that we'll make money on this deal," says J. Bradford DeLong, professor of economics at UC Berkeley.
DeLong observes that several government bailouts of the past have ended up in the black, including the 1994 rescue of the Mexican peso. The U.S. government eventually recorded a $500-million profit on its share of Mexico's $50-billion international loan package.
Of more immediate relevance, the government's takeover of stricken insurance company American International Group may have already produced a paper profit, and could produce more gains as AIG's asset portfolio is sold off or recovers its value.
"Very senior people in charge of asset portfolios on Wall Street have said they are envious of the terms the government imposed on AIG," DeLong says. "They think the Fed's going to make a fortune." He conjectures that the $700-billion bank bailout could yield somewhere between a $100-billion loss and a $100-billion gain.
Paulson has also endorsed requiring banks that sell troubled assets to the government to give some sort of equity warrant, so that taxpayers can share in profits once those institutions recover financially.