Category Archives: Economics

Kagan’s right: Security trumps all

38 Replies

Frederick Kagan has it exactly right in today’s Wall Street Journal: "Security Should Be the Deciding Issue." An excerpt:

As the scale of the economic crisis becomes clear and comparisons to the Great Depression of the 1930s are tossed around, there is a very real danger that America could succumb to the feeling that we no longer have the luxury of worrying about distant lands, now that we are confronted with a "real" problem that actually affects the lives of all Americans. As we consider whether various bailout plans help Main Street as well as Wall Street, the subtext is that both are much more important to Americans than Haifa Street.

One problem with this emotion is that it ignores the sequel to the Great Depression — the rise of militaristic Japan marked by the 1931 invasion of Manchuria, and Hitler’s rise to power in Germany in 1933, both of which resulted in part from economic dislocations spreading outward from the U.S. The inward-focus of the U.S. and the leading Western powers (Great Britain and France) throughout the 1930s allowed these problems to metastasize, ultimately leading to World War II.

Is it possible that American inattention to the world in the coming years could lead to a similarly devastating result? You betcha.

A couple of things to note: Mr. Kagan doesn’t express a preference for either Obama or McCain. Of course, folks likely to vote for McCain are more likely to agree with him that security overrides such considerations as the economy. Democrats love it when the economy is the one thing on the table; just ask James Carville. And of course, I’ve had arguments with bud here about the relative importance of foreign affairs vs. the domestic economy. He thinks the economy is everything, and to me it’s less important (not to mention simply being something I hate to spend time talking or thinking about, because it has to do with money).

And, yeah — I trust McCain more on national security. At the same time, I don’t think Obama would be all that bad. Yes, he continues to insist upon being wrong about Iraq. But I think he has calculated that he has to be consistent there; his views on the rest of the world aren’t nearly as MoveOn.orgish.

But set all that aside, and the main thing I’m saying here is that I agree with Mr. Kagan: For us we turn inward fretting over our pocketbooks at the expense of ignoring our proper role in the world would be extraordinarily dangerous. Yeah, we can do both. But not the economy at the expense of international security.

Obama should back single-payer again, and do it NOW

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Assuming we’re all agreed that Barack Obama is going to be the president, there’s one thing I wish he’d go ahead and do right now: Return to his onetime support for a single-payer health care system.

As you know, I came to two conclusions awhile back:

  1. That only a single-payer plan would solve our country’s problems paying for health care. Anything short of that just further complicates the problem. We miss the mark by talking all the time about the "uninsured." It’s the majority of us who ARE covered, but increasingly can’t afford our health care bills anyway, who are the much greater problem. We need to eliminate the for-profit middlemen in the equation.
  2. The only way we’ll get single-payer is for someone to RUN for president on that platform and win convincingly. If Obama (or, to stretch a point, McCain) announced AFTER getting elected that he wanted a single-payer system, Congress would tell him to go fly a kite. The private insurance industry — folks like my old friend Joel Wood — have WAY too much juice on the Hill for a president to make than happen unless he has a clear electoral mandate to do it.

As I wrote in December of last year:

    And the operative word is “bold.” Why? Because unless we start the conversation there, all we might hope for is that a few more of the one out of seven Americans who don’t have insurance will be in the “system” with the rest of us — if that, after the inevitable watering-down by Congress. And that’s not “reform.” Actual reform would rescue all of us from a “system” that neither American workers nor American employers can afford to keep propping up.

A lot of people have high hopes for Obama changing this country for the better. There is no more dramatic way he could do so than to win after coming out for a REAL health care solution.

No, he’s not going to do that. He’s way too cautious, far too deliberate. He sticks to his game plan. He’s not going to rock that boat now. If I thought I could convince him — and thought he could win — I’d urge McCain to do it. As we know, he’s far more willing to throw the dice (can you say, "Sarah Palin"?). But he’s never shown any interest in single-payer. But as Hillary Clinton pointed out back before the S.C. primary, Obama used to be for it, before he was against it.

But I wish he would. I think he’d still win, and then he could do some real good on this, our most important domestic issue.

Holding my breath

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Sometimes as I’m making my way through the scores, often hundreds, of e-mails I get in a day, I sometimes wonder who the people sending me some of these press releases think is going to be interested?

An example:

Economists Grade Presidential Candidates
A to F on 10 Issues Vital to Women
 
Audio Press Conference This Thursday, Oct. 23

A network of more than 40 economists from across America have graded McCain and Obama on 10 issues vital to women, from taxes to retirement security and pay equity. 

Noting the importance of economic issues in a time of financial crisis, the report finds the candidates’ stands on several issues give valuable insights into how they would handle the crisis.  The report card also gives an overall composite grade.

AUDIO PRESS CONFERENCE

Economists’ Policy Group for Women’s Issues

THURSDAY, OCTOBER 23

1 PM EASTERN TIME

SPEAKERS
Professor Nancy Folbre, Chair.  University of Massachusetts Amherst; staff economist, Centre for Popular Economics; author Family Time: The Social Organization of Care and Who Pays for the Kids?; MacArthur fellowship for pioneering work in economics.
Professor Randy Albelda.  University of Massachusetts Boston; Vice-President, International Association for Feminist Economics; coauthor Glass Ceilings and Bottomless Pits:  Women’s Work, Women’s Poverty and Unlevel Playing Fields:  Understanding Wage Inequality and Wage Discrimination. 
Professor Robert Drago.  Pennsylvania State University and University of Melbourne;  co-founder and chair of Take Care Net; past president, College and University Work-Family Association; moderator, Workfam newsgroup; past Senior Fulbright Research Scholar; author of four books, including Striking a Balance, and over 70 articles.
Dr. Lois B. Shaw.  Senior consulting economist, Institute for Women’s Policy Research; previous research positions, U.S. General Accounting Office and Ohio State University’s Center for Human Resource Research; co-editor Warm Hands in Cold Age: Gender and Aging.
     # # #

I mean, I saw the headline and actually scrolled down to satisfy my extremely low level of curiosity as to what a group of feminist economists or whatever choose to say in connection with such a publicity stunt. And if I weren’t a blogger always on the lookout for the offbeat, I wouldn’t even have done that.

Then I saw that they were merely trying to whet my appetite for something coming up on Thursday.

Come ON, people! Who is going to put this on a calendar and tune in two days from now??? Who is sitting there thinking, Golly, I wonder which candidate will get the higher grades?

Today’s drop in the Dow: 733 points

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bud wants to talk about the stock market today, so here you go:

NEW YORK — Despair over the economy sent Wall Street plunging again Wednesday, propelling the Dow Jones industrials down 733 points to their second-largest point loss ever. Stocks fell on a combination of disheartening economic data, including a big drop in retail sales and a Federal Reserve report that said tight credit conditions are hurting businesses across the country.

The government’s report that retail sales plunged in September by 1.2 percent – almost double the 0.7 percent drop analysts expected – made it clear that consumers are reluctant to spend amid a shaky economy and a punishing stock market.

The Commerce Department report was sobering because consumer spending accounts for more than two-thirds of U.S. economic activity. The reading came as Wall Street was refocusing its attention on the faltering economy following stepped up government efforts to revive the stagnant credit markets…

Me, I just get tired of the same stuff over and over. Stock traders must have the attention span of goldfish. Seems to me we already decided there was going to be a bad recession, and that the unemployment rate was going to go up, and consumers were unlikely to spend (because, if they’re like me, they ain’t got no money, not because they’re "reluctant"), and credit would be really tight at least until the rescue money started circulating around.

But the guys on the stock market seem to wake up every morning and go, "What? Bad financial news? I had no idea! Let’s all panic!"

And that gets tiresome.

Wall Street’s worst week ever

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Wall_street_wart2

Well, the stock market had its worst-ever week. But you knew that this morning, didn’t you? This just confirms it.

Those hammerheads need to calm down. Somebody take them out for a good time this weekend or something, OK? Improve their outlook on life. Buy them a lot of beers, or whatever they drink. Get them… I mean, introduce them to some companionship of the opposite sex or something. Or turn a hose on them.

Somebody besides me do it, I mean. Those people drive me crazy; I don’t want to get anywhere near them.

Wall_street_wart

No G.I. Joe with the kung-fu grip!

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As Billy Ray Valentine would say, they are once again panicking out there. When I looked at my Treo while I was still at breakfast this morning, the market was down another 660 points, to below 8,000.

I remarked to my friend Jerry, who knows way more than I do about financial matters, that it made no sense for people to be selling at a loss when everyone knows that the rescue plan hasn’t been implemented yet, and was never supposed to have been felt before several weeks had passed. He said he assumed it was because of automatic trading.

But the idea of setting a "sell" order for a LOW price seems counterintuitive to me. I have, in my extremely limited experience, set a number for when my stock got UP to a certain price, but why look forward to LOSING money?

Yes, I know that practical people think in terms of cutting their losses, but that is exactly my problem. I’ve never done that. When I would play touch football as a kid, I never wanted to punt. I didn’t care if it was 4th down with my back to the goal; I was still going to go for the score.

You may say the punters are wiser than I. But look at where their wisdom is taking the country.

Tell me why I don’t like Mondays

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Well, those whacky folks on Wall Street had another bad day, with the Dow as much as 800 points down at one point, and the close below 10,000. Here’s the AP version:

NEW YORK — Wall Street suffered through another extraordinary and traumatic session Monday, with the Dow Jones industrials plunging as much as 800 points – their largest one-day point drop – before recovering to close with a loss of 370. The catalyst for the selling, which also took the Dow below 10,000 for the first time in four years, was investors’ growing despair that the spreading credit crisis will take a heavy toll around the world.

Investors have come to the realization that the Bush administration’s $700 billion rescue plan and steps taken by other governments won’t work quickly to unfreeze the credit markets.

That sent stocks spiraling downward in the U.S., Europe and Asia, and drove investors to sink money into the relative safety of U.S. government debt. Fears about a global recession also caused oil to drop below $90 a barrel….

Guess we can’t blame this one on Gresham Barrett and the other naysayers on the rescue plan, huh?

Everyone seems to be settling in for a long, tough time, regardless of what Washington does or doesn’t do.

We’re used to business not being good in the newspaper biz. Looks like a lot of other folks are going to be joining us, which I assure you gives me no joy.

Harris Pastides spoke to Rotary today and talked about the budget cutbacks he’s had to do since he became USC president two months back. He noted that more cuts are coming unless retailers have a bang-up Christmas season, which he indicated he doubted would happen — and no one in that room full of business types offered to disagree with him.

By contrast, Barrett LIKES this bill — the one with all the fixin’s

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Earlier this week, we had on our op-ed page, all ready to go, a piece from gubernatorial wannabe Gresham Barrett about how keen he is on nuclear power. That was all well and good, but it was neither here nor there (I can keep the pretentious figures of speech coming all day) when it came to the issue of the moment, which was as that piece was being put on the page, Mr. Barrett was stepping out as the only member of the S.C. delegation to vote against the bailout, I mean rescue, bill.

Seemed sort of, well, off-topic to me. So I pulled the piece (you’ll see it online Saturday) and got Cindi to ask his office for a column explaining his vote. They expressed interest, and the next day we held space on the page past our deadline, but it didn’t show. Which was a shame because it would have run the same day as this editorial, which would have given you a sort of point-counterpoint on the subject.

It never did show. But today I get this via e-mail:

Barrett Releases Statement on Upcoming Vote concerning Economic Recovery Plan

Washington, DC – Congressman Gresham Barrett (SC, 3) released the following statement regarding the vote on the updated economic recovery package expected on the House floor tomorrow:

“Today we are faced with what Warren Buffet called an ‘economic Pearl Harbor’ that includes the ugly reality of an across the board credit freeze.  The ability for companies to meet payroll and fund activities is threatened, and let’s be clear I’m not talking about Wall Street businesses, but 3rd district employers.  Whether it is a small business that may have to close its doors, or major corporations employing thousands of my constituents, jobs are at risk.  If Congress does not act the effects will be serious for American small business, families and consumers. 

“Monday’s bill relied purely on government activity failing to consider fundamental free market principles that I believe must be part of any solution. I was aware of the gravity of the situation then as I am now, but was optimistic that working with relevant parties and my constituents through the legislative process we could produce a better bill.  This legislation contains proven free market principles like tax relief and regulatory changes that will move our economy forward helping to mitigate the pain on Main Street.  While this bill continues to contain a number of provisions that I oppose, I believe we are at the end of the legislative process and action is required.” 
     ###

OK, so he understands it’s an "economic Pearl Harbor," but he didn’t feel like shooting back at the Mitsubishis on Monday. Now that the plan’s been beefed up with lots of fixin’s, so it’s not $700 billion, but $810 billion — more than I make in a year, for those keeping score at home — he likes it. Of course, he covers himself on that, with his airy "While this bill continues to contain a number of provisions that I
oppose, I believe we are at the end of the legislative process and
action is required."

So glad we’ve got your permission now, Gresham. Can we get on with the saving-the-country thing? Thanks.

‘Bailout’ vs. ‘rescue’

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This is weird. I knew I liked the way both Obama and McCain think in a lot of ways — that’s why we endorsed both of them in January. But I didn’t know I was synched with them to this degree…

I wrote, for tomorrow’s paper, an editorial on the House’s appalling failure on Monday. As I did so, I made a conscious decision to refer to the rejected plan as a "rescue," not a "bailout." I hadn’t done that before. It’s just that in the process of thinking through what ought to happen, it occurred to me that whatever the Congress eventually passes, it’s no good if it’s just a "bailout;" it needs to be a rescue.

After I was done with the piece, I checked the wires to see what the presidential candidates had said since earlier this morning. Way down in the AP roundup story, I found this quote:

"The first thing I would do is say, ‘Let’s not call it a bailout. Let’s call it a rescue," McCain told CNN. He said "Americans are frightened right now" and political leaders must give them an immediate solution and a longer-term approach to the problem.

Then I saw this separate story:

RENO, Nev. (AP) — Democratic presidential candidate Barack Obama on Tuesday called for Americans to get behind attempts to salvage a $700 billion rescue plan for the financial sector, saying that if Wall Street fails ordinary people will also be hurt.

"This is no longer just a Wall Street crisis. It’s an American crisis, and it’s the American economy that needs this rescue plan," Obama told about 12,000 people at a rally at the University of Nevada at Reno.

Obama said Congress should put aside politics — he didn’t mention GOP rival John McCain by name during his remarks — and should act on the legislation quickly.

"To the Democrats and Republicans who opposed this plan yesterday, I say: Step up to the plate and do what’s right for this country," he said. "And to all Americans, I say this: If I am president of the United States, this rescue plan will not be the end of what we do to strengthen this economy. It will only be the beginning."

You’ll notice that not just Obama, but the AP, was using the new official word.

So it looks like everybody got the memo. Except there was no memo. This is the kind of thing that makes disaffected people think the media — and political leaders, who after all communicate through the media — are conspiring. But it just happens.

Which was stupider — Pelosi’s speech, or the Republican reaction to it?

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Dem_leaders

Reading through various accounts of the breakdown in Washington yesterday, I kept running across the fact that some Republicans blamed a speech by Nancy Pelosi at the outset of the voting for so many Republicans voting against the bailout plan. And sure enough, it was pretty awful:

$700 billion. A staggering number. But only a part of the cost of the failed Bush economic policies to our country. Policies that were built on budget recklessness. When President Bush took office, he inherited President Clinton’s surpluses — four years in a row, budget surpluses, on a trajectory of $5.6 trillion in surplus. And with his reckless economic policies, within two years, he had turned that around.

And now eight years later, the foundation of that fiscal irresponsibility, combined with an anything goes economic policy, has taken us to where we are today. They claim to be free market advocates, when it’s really an anything goes mentality. No regulation, no supervision, no discipline. And if you fail, you will have a golden parachute, and the taxpayer will bail you out.

Those days are over. The party is over in that respect. Democrats believe in a free market. We know that it can create jobs, it can create wealth, it can create many good things in our economy. But in this case, in its unbridled form, as encouraged, supported, by the Republicans — some in the Republican Party, not all — it has created not jobs, not capital, it has created chaos.

One has to ask, what the hell was the woman thinking? After days of leaders of both parties struggling to come up with a deal that could pass the House, she talks like that as the voting starts? Was she trying to make it fail? Did she think the only problem at that point was that she needed to get the more angry, partisan Democrats to vote for it, and they needed to be whipped up? What?

Or was it just the usual — that people who live by partisanship just don’t even notice themselves when they say stuff like this; it just comes out?

I don’t know, but I do know this — that’s a lousy excuse for Republicans to use to vote against it, because, as Barney Frank put it, their feelings were hurt. No, the Speaker should not have said those things. But if this was the plan that Republican negotiators had agreed was the thing to do, you don’t just throw that out because somebody on the other side spouts a bunch of foolishness. The economic health of this nation is not a tool for you to express your displeasure with your opponents’ rhetoric.

Just disgusting all around. Every time I look at this situation, I just get more and more disgusted. I realize that’s not a particularly constructive reaction, but that’s the one I have.

Gop_leaders

Biggest one-day Dow drop in history (nice going there, Washington)

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Wall_street_wart

Robert was finishing up a late-breaking cartoon for tomorrow (combining the Friday night debates with the collapses in Washington and New York today), and he mentioned he’d heard that the Dow had its biggest one-day drop in history today.

I said nah — it was bad, but not that bad. He was right; I was wrong. Turns out that was the GOOD news. Other indexes did worse than the Dow.

Here’s the WSJ version. The NYT version sugarcoated it a little, saying it was the biggest drop "in two decades" (I haven’t checked their math). And here’s the AP version:

By TIM PARADIS – AP Business Writer
NEW YORK — Wall Street’s worst fears came to pass Monday, when the government’s financial rescue plan failed in Congress and stocks plunged precipitously – hurtling the Dow Jones industrials down nearly 7 percent. The almost 780-point decline was the largest one-day point drop ever for the index.

The percentage declines for the Standard & Poor’s 500 and Nasdaq composite indexes were even larger. And credit markets, whose turmoil helped feed the stock market’s angst, froze up further amid the growing belief that the country is headed into a spreading credit and economic crisis.

Stunned traders on the floor of the New York Stock Exchange, their faces tense and mouths agape, watched on TV screens as the House voted down in midafternoon the administration’s $700 billion plan to buy up distressed mortgage securities. Activity on the floor became frenetic as the "sell" orders blew in.

The Dow told the story of the market’s despair. The blue chip index, dropped by hundreds of points in a matter of moments, and by the end of the day had passed by far its previous record for a one-day drop, 684.81, set in the first trading day after the Sept. 11, 2001, terror attacks.

The selling was so intense that just 162 stocks rose on the NYSE – and 3,073 dropped.

It takes an incredible amount of fear to set off such an intense reaction on Wall Street, and the worry now is that with the rescue plan’s fate uncertain, no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover….

Nice going there, Washington. Nice leadership. Got any more tricks up your sleeves? You hammerheads…

Wall_street_wart2

All SC members voted for bailout, except Barrett

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The "how they voted" on the collapsed bailout plan is pretty simple: Every S.C. member of the U.S. House voted FOR the bailout, except Gresham Barrett.

Here’s his explanation (short version: It’s about him and his ideology.):

Washington, DC – Congressman Gresham Barrett (SC, 3) delivered the following remarks regarding his concerns with the level of government intervention and lack of free market principles included in H.R. 3997, the Financial Stabilization Package:

"First off, I want to commend my colleagues, especially Minority Leader John Boehner, Roy Blunt, Eric Cantor, and Ranking Member Spencer Bachus, for their work in improving this bill.  However, after careful – and agonizing – consideration, I cannot support H.R. 3997 and will be voting no.

"I understand the need to act and I understand the urge to act quickly. We must restore the flow of credit. I firmly subscribe to the belief that “Main Street” and Wall Street are inextricably linked.  Instability in the financial markets leads to instability in taxpayers’ personal accounts and their personal funds.  Meanwhile, that capital that flows through our financial markets is vital to the continued success of our businesses, large and small.  We should all agree that a failure of our credit markets would be an enormous catastrophe, and the government does have a role in ensuring that the financial markets function soundly.

"At the same time, we cannot allow the American taxpayers to become the insurance policy for financial decisions that did not turn out as planned.  Whether you’re talking about someone from South Carolina who took a mortgage they couldn’t afford or a Wall Street banker who financed that loan, we see just how important personal responsibility must be to American society, and I fear that this legislation erodes that accountability – and the freedom that comes with it. 

"Unfortunately, our government is in debt.  And we are in a lot of debt, both as a government and as a nation.  In fact, this whole crisis is built around debt, where too much bad debt has caused an inability to get new credit – otherwise known as debt.  My daddy always told me that you can’t borrow your way out of debt, and he was right.

"There are other reasonable options that we should explore to help the markets heal themselves and that would not burden our country under even greater mounds of debt.  I was pushing for a plan that would use more free market principles such as a suspension of the capital gains tax and incentives for repatriation of earnings, o help spur economic growth by helping all Americans whose retirement accounts are invested in the stock market, or who own a house, or a business and jump start the flow of funds back into the system.

"There is no doubt that we find ourselves in a precarious situation and people are angry, rightly so.  I am angry.  But we must not allow this anger to cloud our judgment, and make choices that will divide our country. This is not a matter of Wall Street versus Main Street.

"But when it becomes time to vote on this bill, I will be voting no. I understand my colleagues for their reasoning, and I am confident that we all want to do what’s best for the country. But, because I believe so strongly in the principles of the free market and the belief in freedom, I will be opposing this bill.  My fear is that today the government will be forever changing the face of the American free market."

       ###

What I have not seen yet is any indication whether Mr. Barrett had any notion whether the bailout would actually fail on account of him and the others voting "no," or did he just intend to make a gesture? When I hear more on that, I’ll pass it on…

Bailout deal collapses, and so does Wall St.

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Remember way back this morning when all those "leaders" of both parties in Washington had worked out a bailout deal. Well, never mind:

WASHINGTON — The House on Monday defeated a $700 billion emergency rescue for the nation’s financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive into recession without it. Stocks plummeted on Wall Street even before the 228-205 vote to reject the bill was announced on the House floor.

Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite howls of protest from their constituents back home. Despite pressure from supporters, not enough members were willing to take the political risk just five weeks before an election.

Ample no votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill.

But just in case you’re now thinking that politicians are a bunch of jumpy, lily-livered cowards who can’t be relied upon to be cool in a crisis, take a look at what’s happening on Wall Street:

NEW YORK — Fear swept across the financial markets Monday, sending the Dow Jones industrials down as much as 705 points, after the government’s financial bailout package failed to survive a vote in the House.

As the vote was shown on TV, stocks plunged and investors fled to the safety of the credit markets, worrying that the financial system would now keep sinking under the weight of failed mortgage debt.

"Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that," said Chris Johnson president of Johnson Research Group. "This isn’t a market for the timid."

While investors had some worries that the vote would be close, many on Wall Street appeared to believe it would ultimately pass. The proposal wasn’t been seen on the Street as a panacea for the deepening problems in the financial sector that have led to the failure of Lehman Brothers Holdings Inc. and Washington Mutual Inc. and the forced sale of Merrill Lynch & Co. and Wachovia Corp. – and that still pose a threat to many other banks.

The markets turned highly volatile as it became clear the measure wouldn’t find the necessary support. The Dow regained ground then fell back again, trading down 524.88, or 4.71 percent, to 10,618.25. At its low, it was down 705.06, not far from its previous record for an intraday drop, 721.56, set during the first trading day after the Sept. 11, 2001, terror attacks. Still, in percentage terms, the decline remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression.

Broader stock indicators also tumbled. The Standard & Poor’s 500 index declined 74.52, or 6.14 percent, to 1,138.75, and the Nasdaq composite index fell 139.00, or 6.37 percent, to 2,204.34.

The Federal Reserve declined to comment on the market’s decline.

With Wall Street in turmoil, the yield on the 3-month Treasury bill fell to 0.32 percent from 0.87 percent on Friday. That showed that investors were prepared to get meager returns on an investment as long as it was secure. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent from 3.84 percent late Thursday.

Investors also faced other worries about the banking system. Wachovia became the latest big bank to be rescued from its overwhelming bad mortgage debt, agreeing to a Federal Deposit Insurance Corp.-brokered buyout of its banking operations by Citigroup Inc.

Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the U.S. to Europe and other markets.

"Things are dying and breaking apart while they sit there and vote on this thing," he said.

So nice going all around, fellas. Ya bunch of feckless twits…

Earning that first piece of plastic

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By BRAD WARTHEN
EDITORIAL PAGE EDITOR
Credit used to make sense to me, and now it doesn’t. Here’s the way it once worked, according to my sepia-toned memories:
    When I got out of college in 1975, I went to work for The Jackson Sun in West Tennessee as a copy editor for the lordly sum of $130 a week. That’s $6,760 a year. After a three-week trial period I got a $15-a-week raise, which was quite a thrill at the time. I was married, my wife was in graduate school, and our first child would arrive about a year later.
    My first week, a woman who also worked on the copy desk, taking me under her wing, told me her husband worked at one of the banks, and to contact him if I needed help in that line. As it turned out, I did soon need a loan to pay for a used Vega (yes, I know, a bad call there).
    After the baby came, we decided we needed a credit card to help us through the weeks when my pay (by then $160!) didn’t meet the necessities. So I went to see Paul at the bank, but he said I couldn’t get one until I had established more of a credit record. The car loan helped, and so did the fact that we paid the hospital for the baby in installments. But that wasn’t enough to get a BankAmericard.
    Paul suggested I go to Sears, because they’d give a credit card to anybody. So I did (after which we rewarded Sears’ faith in the proletariat by buying most of the children’s clothes, and all tools and appliances, from there for years to come). Once I produced my Sears card at the bank, I got my “real” credit card.
    My wife, who handles the accounts and pays the bills at our house, now curses the day that piece of plastic came into our house — she has told me more than once in the past week, and apparently will keep telling me until it sinks in, that at our current rate of payment, we will not live long enough to pay off our credit card debt, according to all the actuarial tables or something like that (in one ear, out the other).
    But back then the card was helpful, and actually earning the privilege of having one seemed a sort of milestone. I was now someone deemed worthy of credit.
    In the intervening years a lot has changed. For instance, the Sears card morphed into a Mastercard that I no longer use (under threat of bodily harm) because the usurious rate is high even for a credit card, but that I carry in my wallet for sentimental reasons: It still says “member since 1976.”
    That’s a distinction that wore off long, long ago, though. Today, on the rare occasions when I get to the mail before my wife does, there is always at least one offer of a new credit card, and usually more than one. My children have been getting those come-ons at our house since they entered their teens. Even with all of them moved out, they still come. And my wife still throws them away.
    But that’s credit cards. Let’s talk mortgages.
    My understanding of mortgages does not extend beyond the explanation offered by George Bailey in “It’s a Wonderful Life,” which Robert Ariail lampoons in his cartoon today. Here’s the original dialogue:

    No, but you’re… you’re, you’re, you’re thinkin’ of this place all wrong, as if I had the money back in a safe. Th-th-the money’s not here… why, your money’s in Joe’s house, that’s right next to yours, and in the Kennedy house, and Mrs. Maitland’s house, and, and a hundred others…. Why, you’re lending them the money to build, and then they’re gonna pay it back to you as best they can, now what’re you gonna do, foreclose on them?

    That I understand. And while my mortgage might not be with ol’ George down the street, I did take it out with a very nice person in an office that I could go to and ask questions later if I needed to. But before long my mortgage and yours got bundled up with a thousand others and turned into a financial product that greedheads would buy and sell back and forth across the country as though the biggest contract I’ll ever enter into were merely another drop in a barrel of oil.
    Meanwhile, mortgages were being extended as casually and promiscuously as those credit card solicitations, without regard to the buyers’ ability to pay back, which eventually, as near as I can make out, led to this bizarre situation in which the president of the United States went on the TV last week to tell us that if we don’t come up with $700 billion in one quick hurry, we’ll all soon be living in Pottersville instead of Bedford Falls.
    Apparently, this happened in part because as a nation we decided that everybody ought to have a mortgage, whether they could afford one or not. That sounds really nice and egalitarian and everything. It also sounds just like the arguments I hear from the payday lending industry — that they have to exist because everybody needs to be able to take out loans, and you don’t want to be all paternalistic and tell them they can’t afford it.
    But I’m of the paternalistic school, I guess, if that’s what you want to call it. For years, I was on the local Habitat for Humanity board, and we didn’t sell those houses to just anybody. We made sure that while the families were low-income enough to need our service, they had enough income to make their payments. We provided counseling. We required that they pile up sweat equity by working to build other people’s houses before their own foundation was laid.
    Those hurdles existed to keep the unwary from getting into debt over their heads, just as Paul’s bank once required certain demonstrations before I could have that card.
    And now, apparently the whole nation is being sucked into a vortex of bad decisions chasing each other ’round and ’round.
    And to me, that just doesn’t make sense. But that’s because I don’t understand credit. Not anymore, anyway.

Go to thestate.com/bradsblog/.

Scattered thoughts on the debate

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First, I’ll refer you to video from the panel discussion last night, where you will find Joshua Gross and others offering their thoughts.

I was wiped out last night, and didn’t stick around to talk to folks after the discussion ended a little before midnight. Long day. I hope folks didn’t think I was rude, but I’d been fighting a cold and had no resources left. I’d told everyone at the start that I was just there to observe; it was the newsroom’s show.

On my way out I did run into our own Norm Ivey, who was there sporting an Obama ’08 T-shirt. You can see some of Norm’s recent comments on this post, and this one, and this one.

As I said last night from my Treo, I don’t think this was a debate that changed any minds — although Norm raised the interesting point that the candidates were speaking to voters who hadn’t paid attention until now, and that on that score he thought McCain did better. I can’t say, because I wasn’t looking for that while I watched.

Nor do I have an overall observation or theme. I thought each candidate exhibited some strengths and weaknesses, as follows:

McCain strengths:

  • Having been right about the Surge. There’s so much more to that than the fact that by sending those extra troops, and using them properly, we created a stituation in which we can start talking about drawing down and leaving behind a stable Iraq. It goes to the core fact that McCain was right, and Bush was wrong, for four years before the president finally got rid of Rumsfeld and switched to a strategy that would work. This narrative (and so many other things) gives the lie to the Democrats’ "McCain equals Bush" nonsense. It communicates that he won’t give up on our nation’s commitments, or let American blood be spent for nought. And it shows he knows the differences between approaches likely to work, and those not to.
  • The constant reminders of his long experience with these issues. The answer he gave to the "bomb, bomb Iran" remark was his best moment. He gave the history of his judgments of major decisions involving the deployment of our military, from being against sending the Marines to Lebanon in 83 to backing Clinton on Bosnia in defiance of many in his party. It strongly suggested the thought, "Oh, yeah — and Obama just got to the Senate…"
  • His long-held opposition to earmarks and wasteful spending, and clear willingness to use his veto and the bully pulpit to fight it. Lehrer was irritating with his constant hammering on "if the bailout passes, what will you give up," but McCain gave the best answer.
  • The reminder that he and Biden pushed through the 9/11 commission, again in spite of the Bush administration.
  • His answer on the initial economic question, emphasizing how encourage he was that Democrats and Republicans were working together finally, made Obama’s answer about "failed policies" of Republicans look petty.

McCain weaknesses

  • One overrides all others, and he did it repeatedly and intentionally — his condescending references to Obama "not understanding" issues. Obama is a smart man, but even if he weren’t, McCain’s constant attempts to put him down would have been unseemly, and beneath him. Yes, I believe there are some things Obama "doesn’t get," but that’s not a gentlemanly way of putting it, and I’m betting it created a lot of sympathy for Obama. Most of all, it was inconsistent with the sort of man McCain is — he is usually deeply humble and gracious to those who disagree with him (something that I think is all the more admirable because of his natural temper; he has chosen to be mild in disagreement, and it speaks well of him). This was artificial and offensive, and whoever talked him into taking this approach should not be listened to again.
  • As we knew already, he is not as smoothly articulate as his opponent. He lost himself in his sentences a number of times, particularly toward the end, and that did him no good.

Obama strengths

  • His argument that Iraq has sapped our resources to the point that we can’t "project force" where we need to elsewhere in the world. Yes, Democrats have long said this in regard to Afghanistan, but he took it beyond that. This remains the strongest argument that critics of our involvement in Iraq have, and he used it well, doing an excellent job of distancing himself from those in his party who are reflexively against ANY military action, and that’s something he has to do to be credible as a candidate for commander in chief.
  • Beyond exhausting the military, he also made a good argument that Iraq has enabled and strengthened Iran — a familiar argument, but he presented it well.
  • His gracious acknowledgment of the courageous leadership McCain showed in standing up to the administration on torture. The normal Democratic position is that McCain "caved" on the issue, and is no better than Bush. That’s a deeply unfair characterization, and Obama showed himself to be above that.
  • More articulate, as always (see "McCain weaknesses").

Obama weaknesses

  • Continuing to be wrong on the Surge, and not acknowledging it, hurts him with everyone else except his base. Trouble is, that base will go nuclear if he acknowledges it. (The thing is that logically, he could still assert it was wrong to go INTO Iraq, but that the Surge was the thing to do.) The "worked beyond wildest expectations" earlier helped, but McCain turned that against him well, noting that it was no surprise to HIM.
  • Probably no one else noticed this, but when he tried to excuse his failure to hold hearings on Afghanistan (a weakness in itself), he said that’s not the practice on the committee chaired by his veep candidate. That made me fully realize, in a way I hadn’t before, just how upside-down the ticket is in terms of qualifications — the number two guy on the ticket is the number one guy’s CHAIRMAN. If I had been McCain, I might have succumbed to the temptation to point out the irony.
  • This is a silly one, but the "professor" was much in evidence in his pedantic insistence on trying to pronounce foreign names and terms the way natives of those countries might, but doing it with such an obvious American accent (the bad guys in Afghanistan were the "Tollybon," said as only an English-shaped tongue could say it). Maybe you couldn’t hear it; it’s something from my childhood when I lived in South America and was bilingual — even though I can hardly speak it now, hearing other gringos try to be SO proper in their pronunciation and fail still grates on my ear.

Yeah, I know — I gave McCain more strengths, and Obama more weaknesses. But each item does not have equal value, and overall, I think they came out even. That’s bad news for McCain, because the subject of most of the debate was his personal area of strength, and he needed to clearly win this one.

I don’t think he did that, but then I can’t speak for all independent voters.

Here’s the agreement some Republicans say doesn’t exist

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Talk about wild and crazy — multiple GOP leaders are going around saying there IS NO agreement on the bailout, even as The Wall Street Journal posts the text of the "Agreement on Principles" on the Web.

Here’s the latest from AP:

BC-Financial Meltdown,23rd Ld-Writethru/1127
Eds: UPDATES with details. Multimedia: An interactive on Wall Street’s financial meltdown, illustrating market conditions that led to the crisis, is in the _business/lehman_meltdown folder. Moving on general news and financial services. AP Video.
Tentative meltdown deal: Bush, McCain, Obama meet
By JENNIFER LOVEN and JULIE HIRSCHFELD DAVIS
Associated Press Writers

WASHINGTON (AP) _ President Bush and the two men fighting to succeed him joined forces Thursday at a historic White House meeting on a multibillion-dollar Wall Street bailout plan, aiming to stave off a national economic disaster. Key members of Congress said they had struck a deal earlier in the day, but its future was unclear.

The tentative accord would give the Bush administration just a fraction of the $700 billion it had requested up front, with half that total subject to a congressional veto, Capitol Hill aides said. But nothing appeared final. Amid several signs that conservatives were balking, Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the White House and said the announced agreement "is, obviously, no agreement."

Both of Congress’ Republican leaders, Rep. John Boehner and Sen. Mitch McConnell, issued statements saying there was not yet an agreement.

Democrat Barack Obama and Republican John McCain, who have both sought to distance themselves from the unpopular Bush, sat down with the president at the White House for an hourlong afternoon session that was striking in this brutally partisan season and apparently without precedent. By also including Congress’ Democratic and Republican leaders, the meeting gathered nearly all Washington’s political power structure at one long table in a small West Wing room.

"All of us around the table … know we’ve got to get something done as quickly as possible," Bush told reporters, brought in for only the start of the meeting. Obama and McCain were at distant ends of the oval table, not even in each other’s sight lines. Bush, playing host in the middle, was flanked by Congress’ two Democratic leaders, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid.

No one else spoke, and all the visitors left the White House without talking to a huge media group gathered outside.

Hours earlier, private talks on Capitol Hill ended with the announcement that an agreement in principle had been reached on a financial rescue package — though changed from what the Bush administration proposed last weekend by near-daily concessions to demands from the right and the left.

Under the deal among key lawmakers, the Treasury secretary would get $250 billion immediately and could have an additional $100 billion if he certified it was needed, an approach designed to give lawmakers a stronger hand in controlling the unprecedented rescue. Aides described the details on condition of anonymity because they were not authorized to speak publicly.

The plan’s centerpiece still is for the government to buy the toxic, mortgage-based assets of shaky financial institutions in a bid to keep them from going under and setting off a cascade of ruinous events, including wiped-out retirement savings, rising home foreclosures, closed businesses, and lost jobs.

A group of GOP lawmakers circulated a less government-focused alternative. Their proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the government purchase the assets. Rep Eric Cantor, R-Va., said the idea would be to remove the burden of the bailout from taxpayers and place it, over time, on Wall Street instead.

Among other changes agreed to by the congressional negotiators was a limit on pay for executives of bailed-out financial institutions and an equity stake in rescued companies for the government.

Despite the Republican outcry, Banking Chairman Chris Dodd, D-Conn., and Republican Sen. Bob Bennett, among others, said the negotiators from Congress and the administration had arrived at a deal that could win approval. Other key lawmakers said that after days of bare-knuckles negotiations there was little of note left to resolve.

Wall Street showed its pleasure — before the negative Republican comments started piling up. The Dow Jones industrials closed some 196 points higher, though that was down from larger gains earlier in the day.

Previous presidents have occasionally consulted with and briefed those campaigning to assume their jobs, but there have been no bipartisan joint meetings of Thursday’s magnitude in recent memory. Former President Reagan had planned an October 1987 White House reception with the six GOP presidential candidates, for instance, but canceled the meeting because of the Wall Street crash.

The White House timed the extraordinary meeting to fit candidates’ schedules — and to convene after the close of stock markets.

Despite the national prominence of Bush, McCain and Obama, none has been deeply involved in this week’s scramble to hammer out a package.

But the developments on the Hill lent fresh purpose to the session: providing encouragement — and political cover — for lawmakers of both parties to accept a plan. It is expected to come up for votes in the House and Senate quickly, perhaps within days, so that lawmakers can adjourn to campaign for their own re-elections.

Any pitch by Bush, Obama and McCain would be no easy sell.

All lawmakers are returning to home districts packed with constituents angry that they are being asked to foot the bill to bail out Wall Street’s rich guys when they and their neighbors are suffering the effects of ballooning mortgages and tightening credit. This means Obama and even the increasingly marginalized Bush could have sway with their joint resolve.

McCain, in particular, was being leaned on by Democrats and fellow Republicans alike to deliver GOP votes, as some conservatives are in open revolt over the astonishing price tag of the proposal and the heavy hand of government that it would place on private markets. Placating them enough to bring them in line could be a tall order for the Republican presidential nominee who has a checkered relationship with the right wing of his party.

Layered over the White House meeting was a complicated web of potential political benefits and consequences for both Obama and McCain.

McCain hoped voters would believe that he rose above politics to wade into successful, nitty-gritty dealmaking at a time of urgent crisis, but he risked being seen instead as either overly impulsive or politically craven, or both. Obama saw a chance to appear presidential and fit for duty, but was also caught off guard strategically by McCain’s surprising gamble in saying he was suspending his campaigning and asking to delay Friday night’s debate to focus on the crisis.

___

Associated Press researcher Judy Ausuebel contributed to this story from New York.

Bipartisan bailout deal reached

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Maybe this did turn out to be our fiscal 9/11, pulling Democrats and Republicans together to act in the interests of the country rather than their respective parties. If so, kudos all around. We’ll no more later in the day after the historic confab at the White House with congressional leaders and both presidential candidates.

For now, here’s what The Wall Street Journal is reporting.

Here’s The New York Times version.

And here’s AP’s:

WASHINGTON (AP) — Key Republicans and Democrats reported agreement Thursday on an outline for a historic $700 billion bailout of the financial industry, but there was still resistance from rank-and-file House Republicans despite warnings of an impending panic.

"I now expect we will, indeed, have a plan that can pass the House, pass the Senate, be signed by the president and bring a sense of certainty to this crisis that is sill roiling in the market," Sen. Bob Bennett, R-Utah, said as members of both parties emerged from a two-hour negotiating session.

Negotiators planned to present the outline at a White House meeting later Thursday with President Bush and the rivals to replace him, Republican John McCain and Democrat Barrack Obama.

"We’re very confident that we can act expeditiously," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman.

Not everyone in the closed-door talks was as optimistic. Rep. Spencer Bachus of Alabama, the only House Republican in the bargaining meeting, stopped short of saying he agreed with the other lawmakers on an imminent deal.

"There was progress today," said Bachus, the senior Republican on the House Financial Services panel.

Later, he issued a statement saying he was not empowered to strike any deals and there was "no agreement other than to continue discussions."

Both houses’ Republican leaders, Rep. John Boehner and Sen. Mitch McConnell, also issued statements saying there was no agreement.

Still, the White House called the announcement "a good sign that progress is being made."

"We’ll want to hear from (Treasury) Secretary (Henry) Paulson and take a look at the details. We look forward to a good discussion at the meeting this afternoon," said Tony Fratto, the deputy White House press secretary.

A Treasury spokeswoman said the proposal was being reviewed there.

On Wall Street, stock prices were up late in the trading day, but not by as much as earlier in the day.

The core of the plan proposed by the administration just a few days ago envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession.

Obama and McCain called for a bipartisan effort to deal with the crisis, little more than five weeks before national elections in which the economy has emerged as the dominant theme.

McCain on Wednesday asked Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown. Obama said the debate should go ahead.

Congressional negotiators said Thursday there were few obstacles to a final agreement, although no details of an accord were immediately available.

"There really isn’t much of a deadlock to break," said Rep. Barney Frank, D-Mass, chairman of the House Financial Services Committee.

But there were fresh signs of trouble in the House Republican Caucus. A group of GOP lawmakers circulated an alternative designed to attract private money back into the credit markets with less government intrusion.

Under that proposal, the government would provide insurance to companies that agree to hold frozen assets, rather than purchase them directly as envisioned under the administration’s plan. The firms would have to pay insurance premiums to the Treasury Department for the coverage.

"The taxpayers haven’t done anything wrong," said Rep Eric Cantor, R-Va., adding that rather than require them to bear the cost of the bailout, the alternative "pretty much puts the burden on Wall Street over time."

Boehner, R-Ohio, the minority leader, was huddling with McCain on the rescue. When asked whether the GOP presidential nominee could corral restive Republicans to support the plan, Boehner said, "Who knows?"

Bush told the nation in a televised address Wednesday night that passage of the package his administration has proposed was urgently needed to calm the markets and restore confidence in the reeling financial system.

House Speaker Nancy Pelosi, D-Calif., said Bush’s agreement with Democrats on limiting pay for executives of bailed-out financial institutions and giving taxpayers an equity stake in the companies cleared a significant hurdle.

It was not immediately clear how lawmakers had resolved differences over how to phase in the unprecedented cost — a step demanded by Democrats and some Republicans who want stronger congressional control over the bailout — without spooking markets. The idea of letting the government take an ownership stake in troubled companies as part of the rescue, rather than just buying bad debt, also has been a topic of intense negotiation.

Frank told The Associated Press Thursday both elements would be included in the legislation.

Bush acknowledged Wednesday night that the bailout would be a "tough vote" for lawmakers. But he said failing to approve it would risk dire consequences for the economy and most Americans.

"Our entire economy is in danger," he said.

Should Friday’s debate be postponed?

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McCain wants to postpone Friday night’s debate until a bipartisan consensus can be reached on the bailout plan. Obama wants to go ahead. Both are meeting with President Bush Thursday.

Should they debate the next night? What do you think?

Here’s a story on the subject:

The economic crisis and raw politics threatened to derail the first presidential debate as John McCain challenged Barack Obama to delay Friday’s forum and unite to help Washington fix the financial mess. Obama rebuffed his GOP rival, saying the next president needs to "deal with more than one thing at once."

The White House rivals maneuvered Wednesday to claim the leadership role in resolving the economic turmoil that has overshadowed their campaign. Obama said he would proceed with his debate preparations while consulting with bailout negotiators and Treasury Secretary Henry Paulson. McCain said he would stop all advertising, fundraising and other campaign events and return to Washington and work for a bipartisan solution.

"It’s my belief that this is exactly the time when the American people need to hear from the person who, in approximately 40 days, will be responsible for dealing with this mess," Obama said at a news conference in Clearwater, Fla. "It’s going to be part of the president’s job to deal with more than one thing at once."

But McCain said they must focus on a bipartisan solution as the Bush administration’s $700 billion bailout proposal seemed headed for defeat. If not, McCain said ominously, credit will dry up, people will no longer be able to buy homes, life savings will be at stake and businesses will not have enough money to pay workers.

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

President Bush invited both candidates to the White House on Thursday, along with congressional leaders, in hopes of securing a bill to rescue the economy. Bush took the unusual step Wednesday night of calling Obama directly to invite him, White House press secretary Dana Perino said. An Obama spokesman said the senator would attend.

In a joint statement Wednesday night, the candidates said the country faces "a moment of economic crisis," and called for political unity to solve it because "the jobs, savings and the prosperity of the American people are at stake." Both said the Bush plan was "flawed."

"We cannot risk an economic catastrophe," they said. "Now is our chance to come together to prove that Washington is once again capable of leading this country."

Sen. Lindsey Graham, McCain’s representative in debate negotiations, said McCain will not attend the debate "unless there is an agreement that would provide a solution" to the financial crisis. Graham, R-S.C., told The Associated Press that the agreement would have to be publicly endorsed by Obama, McCain, the White House and congressional leaders, but not necessarily given final passage by the House and Senate.

Asked whether the debate could go forward if McCain doesn’t show, Obama spokesman Robert Gibbs said: "My sense is there’s going to be a stage, a moderator, an audience and at least one presidential candidate."

The gonads of the economy

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Did that headline grab you? Thought it might. It was suggested by some of the language I’ve read in the last day or two as writers struggle to explain just why Wall Street’s investment banks are so critically important that the SecTreas says we have to ditch capitalism in favor of a $700 billion gummint bailout.

George Will, in today’s column, calls financial services " the commanding heights of America’s economy." OK, maybe so.

But I had to object to the main leader in The Economist this week, which proclaimed that "Finance is the brain of the economy." It goes on to explain that "For all its excesses, it allocates resources to where they are productive better than any central planner ever could."

OK, but brain? I don’t picture it as being that high in our anatomy. It’s more like the gonads, driving us on with a remorseless libidinal beat, like Snoop Dogg in "Old School" chanting "make money-money, make money-money-MONEY…"