Bill's Big Diamond Blog

Credit Freeze Hits Europe

Credit freeze is paralyzing and dividing Europe over responding to it.

Germans have to bail out Hypo Real Estate again (with over 15B Euros).  

European markets are down over 5% right now.  

Not an auspicious way to start the week…

Regrets On Vice Presidential Questions Unanswered

Now that the economic crisis is on hold for 24 hours or so, we feel ready to while away a few minutes thinking about this week’s favorite reality docu-drama (…no, not Howard Stern’s wedding), the Vice Presidential Debate.  The 90-minute special could have been much more entertaining, but Biden’s handlers coached him to ignore anything remotely worthy of reaction— so as not to appear condescending.  Ifill stayed out of it altogether, and Palin’s strategy of swiveling to prepared index card answers, regardless of the actual question asked, worked well enough to suppress laughter.

I wonder if the single best tactic employed on Palin’s behalf was the pre-debate gaming of referee Gwen Ifill over her book on African American politics.  Ifill took herself out of the debate entirely, never objecting to Palin’s choices to answer questions other than those asked.  Was she reluctant to seem tough on Palin, since Ifill had been accused of bias towards the Obama camp?  We’ll likely never know how much the trumped-up challenge to the moderator’s journalistic integrity threw her.  It did seem, after Jim Lehrer’s repeated insistence on following up unanswered questions in last week’s Presidential debate, rather odd that Ifill let Palin get off with actually announcing mid-debate that she’d answer whatever question she chose, whenever she wanted to— and then proceed to do just that.

Palin’s off the hook now, but the questions still linger about her ability to deal with the sophisticated life and death issues a President routinely handles.  Especially as she runs with a 71 year-old Presidential candidate with a history of melanoma, the Governor's real reactions should have been given more of an airing than we saw Thursday night.  Somewhat entertaining... yes, the debate was that.  Illuminating... not so much.

Bailout Approved, More Pain to Come

Well, we have a huge bailout for Wall Street.  Ta Da.  Now we’ll see if it's worth $700 850 billion.  Probably, Congress needed to approve the package (rather than do nothing), but it's criminal that no better approach was drummed up before now— and it doesn't exactly augur well for the execution of it that there's no clear idea of exactly how it will work.

Paul Krugman speculates in this morning’s Times that more serious intervention may still be ahead of us, unless this Administration discovers a plan, rather than more reactions to more disasters.  It’s hard to imagine, but we will live in hope…

Krugman:

A solution to our economic woes will have to start with a much better-conceived rescue of the financial system — one that will almost surely involve the U.S. government taking partial, temporary ownership of that system, the way Sweden’s government did in the early 1990s…

We also desperately need an economic stimulus plan to push back against the slump in spending and employment. And this time it had better be a serious plan that doesn’t rely on the magic of tax cuts, but instead spends money where it’s needed...

…One thing’s for sure: The next administration’s economic team had better be ready to hit the ground running, because from day one it will find itself dealing with the worst financial and economic crisis since the Great Depression. 

Maverick?

A drinking game... every time Sarah Palin says, “Maverick” (again) tonight, take a pop.  

I wouldn’t be able to type this if I had...

Oh, thank God Joe Biden is finally calling her out on the Maverick thing… I don’t care so much about the debate, but this Maverick thing is killing me!

Senate 74-25 on Bailout, Goodies for All

The Senate has rammed through an top-heavy, 450+ page bailout package, hoping to load up enough goodies to tempt at least 12 House members to switch sides and join them on Friday.  Some new elements of the bill are: insurance coverage for mental health on parity with physical illness coverage (perhaps helpful in getting over the depression caused by losing your job, house?), tax incentives for solar energy (since you can’t afford the electric bill), and small business tax breaks (since we can’t buy the gas to drive to your store).

With these unrelated add-ons and lots of others like $250,000 in FDIC coverage for deposits and a suspension of the AMT for millions of taxpayers, the bailout bill has something for every recalcitrant Representative.  Whether it’s enough to pass the lower house remains to be seen.  Even the lopsided 74-25 Senate vote would have been much tighter had more than a third of its members been up for election this fall, like all members of the House are in just over a month.

Look for the House leadership to do a serious count before allowing a vote to go forward on Friday.  The roll call will only come up if they’re convinced the bill will pass.  After Monday’s punking, don’t expect the Democrats to take the minority’s word for it, either.

"Boogie Man"

“Boogie Man,” playing in New York and Washington and opening this month in theaters around the country, is a documentary well timed to satisfy political junkies this election season. The film profiles the progenitor of contemporary Republican attack politics, Lee Atwater.  Director Stefan Forbes tells an entertaining tale of the campaigner’s life that mixes back-stories, personal grudges, Shakespearean tragedy, and pop commentary with a breezy biography of Atwater’s short, pithy, con-job of a career.

The film is a bit light on Atwater’s personal life, but drills deep into his career.  While it covers the campaigns and conflicts of the consultant’s rise to power, it’s somewhat less satisfying for not answering the psychological why’s of Atwater’s life.  The haunting inner questions about a political operator whose main contribution to American life was perfecting the media smear are left hanging.

The film does take us towards an early household tragedy as a possible explanation for Atwater’s killer instinct, but then veers away from his family life altogether.  Perhaps the kind of access to responsibly answer such questions wasn’t available, or perhaps we don’t always know what makes for the kind of insecurity that leaves a man willing to do anything to please and win for his employers.

Portraying the outward Atwater as a tough and successful campaign manager, the film takes viewers into the blood sport of South Carolina politics where he started out, long before becoming George H. W. Bush’s campaign manager, the ‘creator’ of the infamous criminal, Willie Horton, or mentor and sidekick to a young George W. Bush.  As a high school kid, Atwater apparently first discovered the joy of manipulating politics from behind the scenes by managing the successful campaign of a fictional school candidate.  The rest, it seems, would only change in scale, not in veracity.

In an ironic twist, Forbes also points out that Atwater’s second great passion, playing blues guitar, might have taken him in a radically different direction in life.  The protagonist himself tells a journalist in one clip, wryly, “Yeah, I could have been playing clubs, making, what, $60 a night?” Interestingly, Atwater’s musical pals appear to have found him far more congenial and loyal than his political colleagues ever did, never taking their friend’s day job as seriously as he himself was driven to.  This musical genre and theme makes for a pleasant score to the film as well.  The documentary’s track is almost wall-to-wall blues.

“Boogie Man” has to contend with the necessity of retrospective interviews as its spine, having been made well after the subject’s death, but Forbes peppers them with news clips, culled from political campaigns, as well as little-known speeches and behind-the-scenes finds.  One fascinating archival clip pairs a young, callow George W. Bush, introducing Atwater, sounding like a combination of best friend and class superior, an eerie foreshadowing of today’s Presidency. 

Most of the subjects interviewed comment on Atwater’s ruthlessness.  One exception to the wary friends and enemies is Mary Matalin, who admired the late strategist as “an intellectual” (albeit in the same breath she bestows that moniker on our current President as well).  The rest of his colleagues point mainly to Lee’s manic work ethic, his deft political sleight of hand, and his to willingness to climb over a dead corpse—or to create one—in order to win the next battle.

Atwater’s political victims play major roles in Forbes’ film, including his first opponent and his most famous target, as well as his mentor, Reagan campaign manager Ed Rollins. Rollins is an able and frequent source, having been both employer and road kill for the star pupil who usurped him.  Others, such as Former South Carolina Representative Tom Turnipseed and 1988 Democratic presidential nominee Michael Dukakis, tell their Atwater tales with the reserve of men who still carry the scars of their undoing. Turnipseed manages a laugh about being described as having been “hooked up to jumper cables” by Atwater, who publicized Turnipseed’s college bouts with depression and shock therapy during a brutal congressional campaign.  His expression, however, reinforces his caveat that it wasn’t always funny to have been the subject of derision and public humiliation.

There seems a sort of psychotic distance between the smearing and destroying Atwater did for his clients and the lighthearted man his boyhood mates and musical buddies portray.  The film doesn’t really resolve this dichotomy, but leaves the audience to wonder about the public deeds and a private life unreconciled.

Perhaps the most important service “Boogie Man” provides is its insight into the genesis of contemporary Republican attack politics.  Setting up Atwater as the original puppeteer, who trained Karl Rove and brought up young George Bush, before succumbing himself to a brain tumor at 40, Forbes lays out the way his subject successfully stripped away previous boundaries: the personal lives of candidates, racial prejudice as a rapier, and the use of unwitting media to spread untruths through repetition.  The film hits at the core of an all-too-current brand of wedge-and-smear politics by unpacking the career of its unchallenged creator from the inside out.  It’s worth the price of admission for that lesson alone.

More Bailout Goodies, No New Plans

Clearly, the Swedish experience in a very similar real estate bubble back in the early 90’s isn’t being discussed in any serious parts of Washington as the week unfolds.  George Soros has published an essay espousing a variation on the theme in today’s FT, but so far, I’ve heard nothing to indicate that Democrats are considering a more equitable proposal.  Quite the opposite, in fact.

The Senate is instead moving forward with essentially the same bill that failed in the House on Monday, with more goodies for Republicans attached, especially an exemption for many taxpayers currently paying the Alternative Minimum Tax.  Both presidential candidates are backing a raise in federal insurance on deposits to $250,000, providing another fig leaf for opponents and a reason for depositors to worry less about moving money around.

So the Senate will vote on the bill tonight and then the House will reconsider the bill.  No one’s going to get excited about this bill, but most who are watching the continued freeze in the credit markets hope it passes, regardless of its omissions and the add-ons.  The consensus is not to mess with the 205 supporters and just try to attract 12-15 more votes to avert the abyss.  Most progressive legislators will hold their noses and vote yes again, barring another punk by the GOP.

Pesky Honored

OK, Some Good News… Pesky’s Number Retired

After the catastrophic numbers we’ve been hearing about on Wall Street today, here’s one number we can feel good about.  Red Sox stalwart Johnny Pesky’s number was retired on the last day of his team’s 2008 regular season.  At age 89, after 57 years in the game with his beloved team, Pesky saw his number 6 unveiled on the upper deck of Fenway Park Sunday, just above the right field pole named in his honor.  His eyes got a little misty. 

Ours, too.

Swedish Experience Outlined

The 1992 Swedish bank nationalization plan was carried out under a conservative government, with the participation of the center-left opposition.  Sound familiar?

Details of the plan are outlined in a recent International Herald Tribune article.  The plan was credited with bringing back the health of the Swedish economy after a real estate bubble popped and an ad hoc series of patches didn’t make any headway towards a solution:

The tumultuous events of the last few weeks have produced a lot of tight-lipped nods in Stockholm. And for all the differences between Sweden and the United States, Swedish officials say there are lessons to be learned from their own nightmare that Washington may be missing. Lundgren even made the rounds in New York in early September, explaining what the country did in the early 1990s.

A few American commentators have proposed that the U.S. government extract equity from banks as a price for the bailout they are likely to receive, as Sweden did. But it does not seem to be under serious consideration yet in the Bush administration or in Congress.

That's despite the fact that the U.S. government has already swapped its sovereign guarantee for equity in Fannie Mae and Freddie Mac, the mortgage finance institutions, and American International Group, the insurance giant.

Putting taxpayers on the hook without offering anything in return could be a mistake, said Urban Backstrom, a senior Swedish Finance Ministry official at the time. "The public will not support a plan," he said, "if you leave the former shareholders with anything."

UPDATE-  Economist Joseph Stiglitz's Nation article notes the Scandinavian model's success in the 90's.  Perhaps it's time to revisit the options tossed aside when a deal seemed at hand.

John McCain Saves the Day!

Boy, I was just wondering... where was John McCain's excellent intervention today?  Wasn't he going to personally save this thing?

Bailout Fails: Done Deal Undone... Time for Another Approach?

In the wake of the massive Republican sellout on the bailout deal, it will be hard to put the genie back in the bottle.  Democratic leaders crafted legislation that gave the House Republicans what they demanded: no money for housing programs, no bankruptcy changes to allow judges to adjust mortgages, no automatic equity stake for the American people in return for $700 billion, a meaningless insurance program option, and more control by the Treasury than Democrats were comfortable with. 

What did the Democrats get in return?  Being publicly burned on the floor by the overwhelming majority of the GOP.

Maybe it’s possible to get back ten to fifteen votes for a revote shortly.  Compromise further in an effort to bring in those who caused the problem... Or maybe it’s time to do what many economists say makes more sense in the first place:  employ the Swedish Plan.  Here’s how it might work, explained by Brad DeLong:

Nationalization has the best chance of avoiding large losses and possibly even making money for the taxpayer. And it is the best way to deal with the moral hazard problem.

It might work like this. Congress:

-grants the Federal Reserve Board the power to take any financial firm whatsoever with liabilities and capital of more than $25 billion that is not well capitalized into conservatorship

-requires the Federal Reserve Board to liquidate any financial firm in its conservatorship when it judges that the firm is insolvent (paying off in full or not paying off in full the liabilities of the firm at its discretion), unless

-the Federal Reserve Board finds that preservation as a going concern is in the interest of the taxpayer, in which case Congress

-grants the Federal Reserve Board the power to transform equity stakes in the firm into junior preferred stock at par value and then transfer ownership and custody of the firm to the Treasury

-requires the Federal Reserve to terminate conservatorship if the firm becomes well-capitalized once again.

In addition, Congress:

-grants the Treasury the power to issue up to $500 billion of troubled asset redemption bonds, the proceeds of which are then to be loaned to the Federal Reserve to be used to cover the liabilities of those liquidated firms that the Federal Reserve judges it is in the interest of the taxpayer to have their liabilities paid off in full.

Paulson had his shot. It's time for the Democrats to pass a nationalization in the taxpayers' interest bill and dare Bush to veto it. If he does, then announce that the congress will pass it again the day after the election. And if he vetoes it again, announce that congress will pass it yet again on January 21, 2009.

 

 

McCain-Palin and Lobbyists: Perfect Together

The connections between Rick Davis’ lobbying firm, Davis Manafort & Freedman, Inc. and the McCain-Palin campaign are so extensive that the question isn’t whether Davis has cut his ties, but, according to Josh Marshall, “whether McCain-Palin 2008 and Davis Manafort are even distinct organizations.”  In particular,Michael Isikoff in Newsweek and TPM point to 3eDC, an internet company owned by Davis and his lobbyist partner Paul Manafort as a conduit for funds from McCain.  

For a campaign that’s busy throwing around loose talk about their opponent’s connections with lobbyists, the McCain campaign appears to be beholden to lobbyists from the top down.  The web of Davis’ connections to the mortgage industry and other lobbying clients, both foreign and domestic, are coming clearer even as the NY Times is running a major piece today on his boss’ cavalier casino gambling sprees conducted while heading up the Indian Affairs Committee in the Senate, which oversees casino legislation.  

Done Deal

A deal has been reached (again) on Capitol Hill to bailout Wall Street.  This deal apparently won’t include any foreclosure freeze or allow bankruptcy courts to renegotiate mortgage terms for homeowners.  It also omits an earlier agreement to put 20% of any profits that might accrue from loan repayment towards affordable housing programs.  There’s some mention of encouraging renegotiation of mortgages, but it’s not clear how.

Wall Street will get the $700 billion in three traunches, with oversight but little chance that Congress will withhold any money, since a supermajority will be required to do so.  There’s some equity participation.  An insurance program will be encouraged, without funds, largely to give House Republicans a fig leaf for blowing up the previous deal.  Some limits will be placed on pay for financial executives.

It sounds less good than the first deal, if protecting ordinary people was supposed to be an important element of the plan.  Maybe the elements involving mortgage renegotiation will turn out better than they sound, but how often are we surprised in a good way about the details of such things?

The plan as announced leaves this reader aware of the overwhelming possible cost to the taxpayer, which will be left to the next President to decide how to assess.  If the bailout works, it will limit the damage caused by the credit freeze.  If not, the government will have lost any chance of accomplishing positive change, no matter who is President, for the foreseeable future.

There wasn't much choice.  

Let’s hope this works.

Setting the Bar in the Gutter

In puzzling out why undecideds' impression of Obama’s performance in last night’s debate was so much better than my own, I’m struck by an unintended consequence of the McCain campaign of lies and hyperbole.  

Steve M. points this out over at No More Mr. Nice Blog:

Alas for them, the real Obama is a hell of a lot more impressive than his caricature. He's prepared. He's sharp as a tack. He's gracious but persistent. And he's not a secret-Muslim-whitey-hating-flag-non-pledger.

 If you set the bar in the gutter, don't give your opponent a chance to jump over it, because he'll clear it by a mile.

Paul Newman, 1925-2008

Paul Newman has died after a long struggle with cancer.  The Vice-Chairman of the Newman's Own Foundation issued this statement:

"Paul Newman's craft was acting. His passion was racing. His love was his family and friends. And his heart and soul were dedicated to helping make the world a better place for all.

"Paul had an abiding belief in the role that luck plays in one's life, and its randomness. He was quick to acknowledge the good fortune he had in his own life, beginning with being born in America, and was acutely aware of how unlucky so many others were. True to his character, he quietly devoted himself to helping offset this imbalance.

"An exceptional example is the legacy of Newman's Own. What started as something of a joke in the basement of his home, turned into a highly-respected, multi-million dollar a year food company. And true to form, he shared this good fortune by donating all the profits and royalties he earned to thousands of charities around the world, a total which now exceeds $250 million.

"While his philanthropic interests and donations were wide-ranging, he was especially committed to the thousands of children with life-threatening conditions served by the Hole in the Wall Camps, which he helped start over 20 years ago. He saw the Camps as places where kids could escape the fear, pain and isolation of their conditions, kick back, and raise a little hell. Today, there are 11 Camps around the world, with additional programs in Africa and Vietnam. Through the Camps, well over 135,000 children have had the chance to experience what childhood was meant to be.

"In Paul's words: "I wanted to acknowledge luck; the chance and benevolence of it in my life, and the brutality of it in the lives of others, who might not be allowed the good fortune of a lifetime to correct it."

"Paul took advantage of what life offered him, and while personally reluctant to acknowledge that he was doing anything special, he forever changed the lives of many with his generosity, humor, and humanness. His legacy lives on in the charities he supported and the Hole in the Wall Camps, for which he cared so much.

"We will miss our friend Paul Newman, but are lucky ourselves to have known such a remarkable person."