September 26, 2008


Against all the odds this is an extremely winnable election for the GOP, Uncertain Times (Andrew Kohut, 9/25/08, Pew Research Center)

In every recent election the public has accurately picked the winner by this time in the cycle. But not this year. Two weeks ago when we asked voters to put aside their own preferences and make a prediction, 39% said McCain would win and exactly the same number chose Barack Obama. Four years ago in September, the race was close, but by a 60%-to-22% margin voters thought President Bush would be re-elected.

In 2000 at this time, voters believed Al Gore would win. But they changed their minds by late October and picked George W. Bush. In 1992 and 1996, boxcar majorities (61% and 75%, respectively) thought Clinton would win.

So do House Republicans pass the plan and prove the validity of the McCain narrative or kill it and spend the next few years in the wilderness?

Gut Check (Steven Pearlstein, September 26, 2008, Washington Post)

Now let me tell you something very simple and very important: You can try to prevent a financial meltdown or you can teach Wall Street a lesson, but you can't do both at the same time. [...]

[[W]e need to act quickly. The financial situation is now downright scary. Don't look at the stock market -- that's not where the problem is. The problem is in the credit markets, which are quickly freezing. I won't bore you with technical indicators like Libor and Treasury swap spreads, but if you talk to people who work these markets every day, as I have, they report that the money markets are in worse shape than they were last August, or even during the currency crises of 1998.

Banks and big corporations and even money-market funds are hoarding cash, refusing to lend it out for a day or a week or a month. Even the best companies are having trouble floating bonds at reasonable rates. And the shadow banking system -- the market in asset-backed securities that ultimately supplies the capital for most home loans, car loans, college loans -- is almost completely shut down.

People are so nervous, and there is so much distrust, that all it would take is one more hit to trigger the modern-day equivalent of a nationwide bank run. Financial institutions would fail, part of your savings would be wiped out, jobs would be lost and a lot of economic activity would grind to a halt. Such a debacle would cost us a lot more than $700 billion.

Third, the latest proposal hammered out between the Treasury and Democratic leaders won't cost anywhere near $700 billion unless we get a 1930s-like Depression, in which case we'll have much bigger problems to worry about. Depending on how the program is managed, and how things turn out with the economy and the housing market, the best guess is that the government could wind up either losing or making a couple of hundred billion dollars.

Posted by Orrin Judd at September 26, 2008 10:06 AM
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