born live love die

Bush comes on TV and talks about the bailure.  There are books on the mantle in back of him.  One of them was “Lincoln at Gettysburg.”

Has he read it?

Whenever I hear the word ’spin’ relative to politicians, I remember that the common German word for being crazy is ’spinst’, like a witch spins when mad.

McCain just said on Morning Blow with Joe Scarsdale that the deficits rung up by Bush were the responsibility of Democrats.

I’ll see your no vote and raise you $630 billion.

The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.

The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand by $300 billion to $450 billion.

The butt heads on MSNBC are bloviating for the purpose of bloviating.

Lawrence O’Donnell put paid on it.  He said that John Boehner promised 100 votes and then didn’t deliver.  He pointed out that this was a bill from the Republican White House and the Republican Secretary of the Treasury and that the House Republicans wanted it to pass so that they could run against it in November.  They wanted Democrats to pass it.

Pelosi called their bluff by not arm twisting more Democrats into passing it.  The Republicans are talking about Pelosi’s speech, as if that was the key.  That makes them look like a bunch of pissy children.

In the thick of the presidential campaign, the collapse of the deal left Washington buzzing with recriminations. Republicans — from Sen. John McCain’s top economic aide to the House GOP leadership — initially blamed Pelosi, saying her floor speech castigating Bush administration “policies built on budgetary recklessness, on an anything-goes mentality, with no regulation, no supervision, and no discipline in the system” poisoned the atmosphere and invited partisan retribution.

In truth, few Republicans were on the floor to hear that speech, and those who were there showed no signs of discomfort, as they often do. Republican leaders backed away within hours, conceding they never had the votes they had promised.

Right.  They wanted capital gains taxes cut, because they get campaign contributions from people who are concerned about capital gains tax cuts.

The Republicans are pushing for capital gains tax elimination during the current financial mess.  Really?  Do they think they can ride this to victory in November?

There are no capital gains to tax when the paper being pushed on Wall Street is under water.

This is a crappy move by the Republicans.

Everyone is. Posting it.

A lot of the post debate talk has been about how McCain would not look at Obama.  We got it figured out now.  Obama pants’d McCain in the White House.

McCain had a legitimate concern about being saddled with a $700 billion dollar plan to restore liquidity to the market.  It wasn’t clear that $700 billion would be enough.  His contention that his help was needed to resolve the crisis is hollow and transparent by inspection.  He and Obama ended up at the White House along with leaders of both parties in both houses of Congress.  A coalition of House Republicans had the idea that the banking industry should insure itself.  Since the banking industry doesn’t have enough liquidity to float a loan for a cup of coffee, the idea that they would be able to insure themselves is a non-starter.  So, here we are in the White House:

Pelosi said Obama would speak for the Democrats. Though later he would pepper Paulson with questions, according to a Republican in the room, his initial point was brief: We ve got to get something done.

Bush turned to McCain, who joked, The longer I am around here, the more I respect seniority. McCain then turned to Boehner and Senate Minority Leader Mitch McConnell R-Ky. to speak first.

Boehner was blunt. The plan Paulson laid out would not win the support of the vast majority of House Republicans. It had been improved on the edges, with an oversight board and caps on the compensation of participating executives. But it had to be changed at the core. He did not mention the insurance alternative, but Democrats did. Rep. Barney Frank D-Mass., chairman of the House Financial Services Committee, pressed Boehner hard, asking him if he really intended to scrap the deal and start again.

No, Boehner replied, he just wanted his members to have a voice. Obama then jumped in to turn the question on his rival: What do you think of the insurance plan, John? he asked repeatedly. McCain did not answer.

One Republican in the room said it was clear that the Democrats came into the meeting with a game plan aimed at forcing McCain to choose between the administration and House Republicans. They had taken McCain s request for a meeting and trumped it, said this source.

Congressional aides from both parties were standing in the lobby of the West Wing, unaware of the discord inside the Cabinet room, when McCain emerged alone, shook the hands of the Marines at the door and left. The aides were baffled. The plan had been for a bipartisan appearance before the media, featuring McCain, Obama and at least a firm statement in favor of intervention. Now, one of the leading men was gone.

The plan: some political theater.   The politicians were going to come out and wave for the cameras and everybody would be happy.  McCain would be the big winner because he would be able to leave the impression that he actually knew what was going on.

But Obama pants’d him in the meeting.  He spanked McCain in front of everybody.  I wonder if Pelosi or any of the other Democrats knew that he was going to take McCain down.  There is something legitimate here: if McCain wants to run the country, he needs to know how it works.  He doesn’t.  And Obama made that perfectly clear to everyone at the meeting.

I don’t think Obama knew how deeply McCain would react, but he owns McCain and McCain knows it.  It should be noted that the preferred gambling games of the the candidates reflect their personalities.  McCain likes craps.  Just keep doubling down and hope for a miracle.  Obama likes poker.  He reads his opponents and finds an advantage in cards and betting position.  McCain keeps hoping for a chance to go all in and Obama will give him one on terms preferential to Obama.

Brad DeLong had his Wheaties this morning.

Now it s time to go back to three principles. There are three options:

1. Do nothing.
2. Bailout a la Paulson
3. Nationalization a la Sweden 1992

Do nothing was last tried in 1929-1932. The result was called the Great Depression. Let s not do that again. Let s decide between bailout and nationalization.

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.

The Paulson plan would have poured a lot of money into the market by buying up the gambling notes of a bunch of big money players.  They would then be free to start gambling again.  Bad idea, that.

Brad’s plan would provide liquidity and not pay off the gamblers.  It would secure the market for people who really need the market for transactions.

Kevin Drum, now of Mother Jones
QUOTE OF THE DAY….From SEC chairman Christopher Cox:

“The last six months have made it abundantly clear that voluntary regulation does not work.”

Manfully owned up to, Mr. Chairman. Only one thing: you need to change “last six months” to “last ten thousand years.”

The original Paulson plan to use $700 billion to buy derivative securities based on mortgages is dead, thank god.  That was as boneheaded a plan as is possible.  Basically, the original plan was to let a guy who made his fortune in betting for a housing bubble collapse use $700 billion to continue betting.  With no oversight.

The market and financial system needs liquidity and stability.

1) stability: the government should make an organization similar to the RTC that can buy at risk mortgages and hold them to be sold later when the market recovers.

2) liquidity: the government should invest in certain institutions that are viable  but under liquidity pressure.  Those institution which accept a government investment would face stricter rules about management compensation and other issues to ensure that the public received first dollar return on their investment.