McCain Advisors call Palin a "Diva" and a "Whack Job"

Things aren't going so well on the campaign trail for the Alaskan Governor. According to
CNN:

A McCain source says she appears to be looking out for herself more than the McCain campaign.
"She is a diva. She takes no advice from anyone," said this McCain adviser. "She does not have any relationships of trust with any of us, her family or anyone else.
"Also, she is playing for her own future and sees herself as the next leader of the party. Remember: Divas trust only unto themselves, as they see themselves as the beginning and end of all wisdom."

It get's worse. Another top McCain adviser calls her "a whack job."
Meanwhile after Alaska Senator Ted Stevens was convicted accepting bribes, Palin does her statesman speech, leaving out the most relevant parts.
Alternet.org

Alaska Gov. Sarah Palin issued a statement calling it "a sad day for Alaska." In the statement, Palin also declared that the "verdict shines a light though on the corrupting influence of the big oil service company" whose CEO provided many of Stevens' unreported gifts:

The verdict shines a light though on the corrupting influence of the big oil service company up there in Alaska that was allowed to control too much of our state. And that control was part of the culture of corruption that I was elected to fight. And that fight must always move forward regardless of party affiliation or seniority or even past service.

Palin's statement neglects to mention that she also has ties to "the big oil service company," Veco. When she ran for lieutenant governor in 2002, "she gathered $5,000 -- or about 10 percent of her campaign fund -- from Veco officials or their wives," including $500 from CEO Bill Allen.
In 2006, when she ran for governor, Palin ran as a critic of Veco and said that she "didn't want Veco money." But her running mate, Sean Parnell, received two $500 checks from Veco officers during the campaign, including one from Allen. Last month, Palin donated to charity "more than $1,000 in campaign contributions from two Alaska politicians implicated" in the federal corruption probe surrounding Veco.
Palin had accepted the donations from the state legislators, John Cowdery and Bruce Weyhrauch, after their offices were searched by the FBI in 2006. Palin made the charitable donations only after the AP had reported that she accepted the money in 2006.

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What are you going to do with the next 7 days?

Brave New PAC

7 days. That's all the time we have. Just 7 days to alert undecided voters and those who need motivation about how John McCain has voted with President Bush 90 percent of the time. 7 days to tell them about how he has smeared Barack Obama with malicious fear-mongering and race-baiting tactics. 7 days to stress how McCain's temper and his health record secrecy could pose national security risks. 7 days to point out that McCain overplays his POW card each time he's backed into a corner.

What are you going to do with the next 7 days?

Take the 7 videos below and send them, one each day, to all the undecided voters you know and all of your friends in need of motivation. Send along a personal note that conveys the time-sensitive nature of these videos, and tell them to keep spreading them to all the undecided voters they know. And donate $7 to Brave New PAC so we can continue our efforts to create hard-hitting videos like the 7 below.

1. Brave New PAC's new video: McCain's Mavericks: http://www.youtube.com/watch?v=HRImWNXzSHk 3. McCain's Medical Records Must Be Released: http://www.youtube.com/watch?v=DHvJPGnkQxE 5. Former POW Says McCain "Not Cut Out to Be President": http://www.youtube.com/watch?v=_KjsEs46C70 7. And from our friends at MoveOn, Obama's Loss Traced to [Your Friend's Name Here]: http://www.cnnbcvideo.com/taf.html?hp=1

2. John McCain's Rage is a National Security Concern: http://www.youtube.com/watch?v=fAyK-enrF1g 4. McCain's Ads Are Lies. Here's the Video Proof: http://www.youtube.com/watch?v=IH0xzsogzAk 6. McCain's Women's Clinic: http://www.youtube.com/watch?v=K7acdvJegOY

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McCain to Attack Obama for Public Radio Comments from 2001

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This is typical McCain. He's going to try to make hay on an out of context comment that Obama made in 2001. Actually, Obama here acknowledges a conservative belief that change shouldn't come from the courts, but from the community. He says he agrees with McCain. McCain plays to the ignorant. Or maybe HE is the ignorant, doesn't understand the theoretical constitutional legal argument!
Political Punch

On September 6, 2001, then-state senator Barack Obama appeared on a public radio chat show to discuss "Slavery and the Constitution." You can listen to the whole show HERE.
In that show -- WBEZ-FM's "Odyssey" -- Obama discussed the role of the courts in civil rights.
Today, aides say, Sen. John McCain, R-Ariz., will seize on some of those remarks, as hyped by Mr. Drudge.
Obama in that interview said, "If you look at the victories and failures of the civil rights movement, and its litigation strategy in the court, I think where it succeeded was to vest formal rights in previously dispossessed peoples, so that I would now have the right to vote, I would now be able to sit at a lunch counter and order and as long as I could pay for it I'd be okay."
"But," Obama said, "The Supreme Court never ventured into the issues of redistribution of wealth and sort of more basic issues of political and economic justice in this society. And to that extent as radical as I think people tried to characterize the Warren Court, it wasn't that radical. It didn't break free from the essential constraints that were placed by the founding fathers in the Constitution, as least as it's been interpreted, and Warren Court interpreted in the same way that generally the Constitution is a charter of negative liberties, says what the states can't do to you, says what the federal government can't do to you, but it doesn't say what the federal government or the state government must do on your behalf. And that hasn't shifted."
Obama said "one of the, I think, the tragedies of the civil rights movement, was because the civil rights movement became so court focused, I think that there was a tendency to lose track of the political and community organizing activities on the ground that are able to put together the actual coalitions of power through which you bring about redistributive change, and in some ways we still stuffer from that."
A caller, "Karen," asked if it's "too late for that kind of reparative work economically?" And she asked if that work should be done through the courts or through legislation.
"Maybe I'm showing my bias here as a legislator as well as a law professor," Obama said. "I'm not optimistic about bringing about major redistributive change through the courts. The institution just isn't structured that way."
Presumably McCain will go after Obama in ways some on the conservative bloggosphere are today, accusing Obama of calling it a "tragedy" for not venturing into "the issues of redistribution of wealth" -- though Obama's campaign says that's a twisting of his words.
"In this interview back in 2001, Obama was talking about the civil rights movement - and the kind of work that has to be done on the ground to make sure that everyone can live out the promise of equality," Obama campaign spokesman Bill Burton says. "Make no mistake, this has nothing to do with Obama's economic plan or his plan to give the middle class a tax cut. It's just another distraction from an increasingly desperate McCain campaign."
Burton continues: "In the interview, Obama went into extensive detail to explain why the courts should not get into that business of 'redistributing' wealth. Obama's point - and what he called a tragedy - was that legal victories in the Civil Rights led too many people to rely on the courts to change society for the better. That view is shared by conservative judges and legal scholars across the country.
"As Obama has said before and written about, he believes that change comes from the bottom up - not from the corridors of Washington," Burton says. "He worked in struggling communities to improve the economic situation of people on the South Side of Chicago, who lost their jobs when the steel plants closed. And he's worked as a legislator to provide tax relief and health care to middle-class families. And so Obama's point was simply that if we want to improve economic conditions for people in this country, we should do so by bringing people together at the community level and getting everyone involved in our democratic process."
-- jpt

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Correction... Technically, the Empress "Has Clothes"...

McClatchy Washington Bureau

A watchdog group filed a complaint with the Federal Election Commission Wednesday alleging that the Republican Party broke federal campaign laws by buying Sarah Palin and her family about $150,000 in clothes for campaign appearances.
The complaint names as defendants Palin, the RNC, Larson and other operatives associated with the RNC.

Image via Wikipedia

The Federal Election Campaign Act specifically prohibits expenditures for such purposes, the liberal-leaning Center for Responsibility and Ethics in Washington said in its complaint.
The group cited language in the law stating that no donated funds may be converted to personal use if the expense "would exist irrespective of the candidate's election campaign," including a clothing purchase unless it is of "de minimis value."
Murkier, however, is whether the law allows clothing purchases by a party committee, as occurred with the Palin expenses.
Jeff Larson, a Minnesota-based Republican consultant, made most or all of the purchases at high-end chain stores in Minneapolis as the Republican National Convention was ending, according to the Republican National Committee's campaign finance report for September.
He was reimbursed for amounts including $75,062 at Neiman Marcus, $41,851 at Saks Fifth Avenue, $4,902 at Atelier New York, $4,397 at Macy's and $5,103 at Bloomingdale's.
The RNC report said only that the expenditures were for "campaign accessories," but Politico.com disclosed this week that the expenses were for clothing for Palin and her family.
An RNC official, who lacked authorization to be identified, defended the purchases as permissible, because they didn't come from the McCain-Palin campaign.
"Because these accessories were purchased with coordinated funds, they belong to the RNC," the official said. "They will be returned to the national committee at the conclusion of the general election, and in turn directed to charity."
RNC spokesman Danny Diaz said only that the party committee "does not discuss expenses as it relates to strategy."
The center's executive director, Melanie Sloan, called it "ridiculous that RNC would spend $150,000 to outfit a vice presidential nominee and her family at any time," and even more so at a time when many Americans have been hit hard by the sagging economy.
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Tough to believe Greenspan's disbelief

Greenspan expresses shock that investment firms could fall on staff greed. This man is incredibly naive or a bad liar.

Image via Wikipedia

MarketWatch

For a man who was once remarkably hard to decipher, Alan Greenspan is now as clear as an empty Lehman Brothers office. The former Federal Reserve chairman is in full-frontal legacy defense mode, and he's not doing a particularly convincing job.
According to his prepared testimony before the House Oversight Committee, Greenspan lamented that "those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief." Cue up Casablanca, and the "I'm shocked, shocked, to find gambling here," line from the Captain Renault character.
The truth is that the executives at financial institutions had very little interest in protecting shareholder's equity. Sure, they had bonuses tied to stock performance, but awards were distributed annually. And the awards certainly didn't have strings attached that allowed for claw backs due to underperformance or even insolvency.
The bonuses favored gambling on a year or two of outsized gains, just as at Casablanca's Rick's. Another classic line from Captain Renault was: "We mustn't underestimate 'American blundering.' I was with them when they 'blundered' into Berlin in 1918."
And Greenspan was with the world's financial institutions when they blundered, and plundered, into the current mess.

Al Qaeda Endorses McCain

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The Nation: The Dreyfuss Report

The Post today reports that Al Qaeda has endorsed John McCain for president. With seemingly impeccable logic, the cave dwellers -- actually, more likely, Quetta-squatters -- say that by electing McCain, the United States will commit itself to an extension of President Bush's blunders and thus exhaust itself militarily and financially.
Of course, Al Qaeda says that the way it can assist McCain is through a terrorist act that will rally Americans to his side.
Saying that McCain will continue the "failing march of his predecessor," Al Qaeda added:

"Al-Qaeda will have to support McCain in the coming election. ... [We] will push the Americans deliberately to vote for McCain so that he takes revenge for them against al-Qaeda. Al-Qaeda then will succeed in exhausting America."

The quotes came from an AQ-linked website called al-Hesbah and were written by Muhammad Haafid, a longtime contributor to the site.

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Sri Lankan war roils Indian politics

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csmonitor.com

As Sri Lanka's military presses toward the Tamil Tiger rebels' last stronghold, the conflict has begun to send political shock waves through neighboring India.
Ethnic Tamil parties in India disrupted Parliament Tuesday with calls for New Delhi to intervene to stop what some called "genocide against Tamils" in the northern Sri Lankan war zone. The Tamil parties have threatened to withdraw from India's ruling coalition unless Delhi helps put a stop to the fighting or intervenes directly.
Meanwhile, the Sri Lankan military claimed on Tuesday that it had at last broken through a key Tiger trench line in heavy fighting under monsoon rains, reports Reuters. But the military admitted suffering scores of casualties in the process, and a suicide attack on merchant vessels off the northeastern coast Wednesday showed the Tamil Tigers aren't yet a spent force.
Tuesday saw "unruly" scenes in India's Parliament, according to the New Delhi-based Khabrein.info news website, with Tamil MPs interrupting proceedings with shouting, banner-carrying, and walkouts.

The Rajya Sabha [the upper house of Parliament] had to be adjourned till noon after it witnessed angry scenes. Chairman Hamid Ansari's repeated requests to allow proceedings did not make any impact on members. While DMK [a prominent Tamil party] members were shouting slogans and carrying banners reading "Save the Tamils" and "Stop Genocide in Sri Lanka," Left parties members were hitting at Centre for "mortgaging" country's autonomy in the form of nuclear deal with the US.

The Tamil parties have given Indian Prime Minister Manmohan Singh's administration until early next month to take action - after which they will quit his coalition, according to Reuters.
Some observers see cynical politics at work. Writing in Rediff News, columnist TVR Shenoy notes that Parliament is set to be dissolved soon anyway, with national elections due in the next six months, and that Tamil politicians and other coalition allies are raising a fuss to shore up their base and wrest concessions from the ruling Congress party.

Why then are these esteemed gentlemen piling on the pressure on Dr. Manmohan Singh and his party? Very simply, it is a bargaining tactic to wrest more seats out of the Congress in the general election.
The [ruling Congress party's coalition allies] would like the Congress to give something in return if they "sacrifice" their demands. The Congress - and the Indian electorate at large - is expected to politely ignore the fact that the demands are a load of unrealistic bunk that never had a prayer of being realized.
Call it whatever you want, a 'bargaining tactic' or, less politely, 'blackmail'. Let us just hope that the Congress does not take the demands from its "allies" too seriously.

The Tamil Tigers have been waging an insurgency for 25 years to create an independent ethnic Tamil state in northern and eastern provinces in Sri Lanka.
India, the US, and the European Union put the Tigers on their respective terrorist lists. But many among India's Tamil population - particularly in Tamil Nadu state - support or sympathize with the rebels. Others condemn the Tigers, but worry about civilian Tamils in northern Sri Lanka who have been displaced or caught in the crossfire.
Singh has responded to the pressure from his Tamil coalition partners, but only moderately. Last week he urged a political solution to the conflict in Sri Lanka and expressed concern for the estimated 230,000 displaced civilians. But analysts don't expect him to do much more, reports the Associated Press.

India has generally been reluctant to become directly involved in Sri Lanka's internal affairs after a disastrous military intervention in the 1980s that led to the assassination of former Prime Minister Rajiv Gandhi by a Tamil Tiger suicide bomber.

Strategic concerns are also restraining India, according to a commentary in the Daily Mirror, an independent English-language daily in Sri Lanka. While India quietly provides Sri Lanka with equipment and low-key support, rivals China and Pakistan are providing arms for the fight against the Tigers.

For India, too, several geopolitical concerns have prevented it from exerting undue pressure on Sri Lanka. India knows too well that the more it distances from the Sri Lankan government, Sri Lanka would veer towards China, Pakistan, and Iran. Growing Chinese influence in many spheres including infrastructure development, power generation and many development activities in Sri Lanka would no doubt have raised alarm in India.

In a commentary in Frontline, an Indian magazine produced by publishers of The Hindu daily newspaper, B. Muralidhar Reddy writes that the clash between New Delhi's strategic concerns and pressure from Tamil politicians put it in a tight spot.

It is indeed a delicate moment for India. With general elections a few months away and a growing clamor in Tamil Nadu for a more active role by New Delhi to alleviate the sufferings of innocent Tamil citizens, India has to do a balancing act. Colombo understands the Indian predicament and does not want to add to its discomfiture by any rash talk....

The Sri Lankan government, responding to Singh's comments last week, said its fight was solely with the Tamil Tigers, not Tamil civilians. It said its concern for the welfare of Tamil civilians in the north was slowing its military campaign, according to the Agence France-Presse.

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Acorn Update: The Deluge of Hate

The Board Blog - NYTimes.com

Acorn, a non-profit group that advocates for poor and moderate-income people, has unfairly become a high-profile target in the presidential campaign.
Acorn has conducted a large-scale voter registration drive, in the course of which some of its employees filled out some bogus registration forms. Acorn flagged the suspect forms for election officials -- urging that they be investigated -- but still, it is being attacked for perpetrating voter fraud.
In the last presidential debate, John McCain made the stunning assertion that Acorn is "on the verge of maybe perpetrating one of the greatest frauds in voter history." He also insisted that it "may be destroying the fabric of democracy."
Well, that sort of incendiary language has consequences -- as Acorn has been learning. The group's Boston and Seattle-area offices were broken into. (They could be simple break-ins, though the timing is noteworthy.) At least one Acorn employee received a death threat.
Acorn has also been receiving some ugly emails and voice mail messages. The liberal group People for the American Way has collected some of them on its website. Warning before you click through: they are not for the faint of heart.

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McCains would have received $55,000 a year from his capital gains tax cut proposal.

Image by Barrybar via Flickr

Look who says it isn't class warfare.
Think Progress

Last week, Sen. John McCain (R-AZ) proposed temporarily cutting the capital gains tax from 15 percent to 7.5 percent. On Friday, the McCain campaign released Cindy McCain's 2007 tax returns, which show that the McCains made $746,395 in capitals gains last year. A new analysis by Michael Ettlinger, Vice President for Economic Policy at the Center for American Progress Action Fund, reveals that McCain's capital gains cut would have reduced the McCains' taxes by $55,980 in 2007. This is on top of the more than $350,000 that the McCains would have saved due to the Senator's other tax proposals. The Wonk Room has more.

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Colin Powell Pulls No Punches

The LA Progressive

Colin Powell pulled no punches. In his interview on Meet the Press, the former Secretary of State said he found that McCain was unsure of how to deal with the economic problems we are having in this country. Powell also felt that the selection of Governor Palin as McCain's VP was a mistake. See the full interview below.

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Why Does McCain Keep Calling on Joe the Plumber?

The Great Reagan Pyramid Scheme Comes Crashing Down

Informed Comment

The Republican Party that Nixon invented melded the moneyed classes of the Northeast with the white evangelicals of the South. This odd couple went on to simultaneously steal from and oppress the rest of us. The moneyed classes were happy to let the New Puritans impose their stringent morality, since they could always just buy any licentiousness they wanted, regardless of the law. And the New Puritans were so consumed with cultural issues such as homosexuality, abortion, school prayer and (yes) fighting school desegregation that they were happy to let the northeastern Money Men waltz off with a lion's share of the country's resources, consigning most Americans to stagnant wages and increasing debt. The Reagan revolution consolidated this alliance and brought some conservative Catholic workers into it.
These domestic policies at home were complemented by wars and belligerence abroad, which further took the eye of the public off the epochal bank robbery being conducted by the American neo-Medicis, and which were a useful way of throwing billions in government tax revenue to the military-industrial complex, which in turn funded the think tanks and reelection campaigns of the right wing politicians. The Reagan fascination with private armies and funding anti-communist death squads contributed mightily to the creation of al-Qaeda, blowback from which fuelled even bigger Pentagon budgets, spiralling upward and feeding on itself. Terrorism is much better than Communism as a bogey man, since you can just intimate that there are a handful of dangerous people out there somewhere, and force the public to pay over $1 trillion to combat them.

More here. It's worthy of your time.

Afghanistan Taliban becomes stronger in numbers

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BigNewsNetwork.com

The Taliban's strength in Afghanistan has increased by up to 20-30 percent over the past year, according to Major General Jeffrey Schlosser, a top general in-charge of US ground troops in Afghanistan.
In a CBS TV interview to be telecast this Sunday, he said evidence of the increase in numbers was apparent on a base in eastern Afghanistan, near the Pakistan border, which has been hit with rockets and mortars at least 30 times since March, when a major battle took place.
He said the enemy had come much closer to his men in the battle, engaging troops in a firefight near their base.
General Schlosser said his soldiers had never been this close to their enemy in Afghanistan before.
After at least 12 enemy fighters were killed in the skirmish, soldiers found a camera left behind by the enemy that contained images of at least 50 heavily armed enemy fighters, showing details of their training and actual attacks.
It also showed enemy surveillance of US soldiers on patrol.

New intelligence report says Pakistan is 'on the edge'

McClatchy Washington Bureau

A growing al Qaida-backed insurgency, combined with the Pakistani army's reluctance to launch an all-out crackdown, political infighting and energy and food shortages are plunging America's key ally in the war on terror deeper into turmoil and violence, says a soon-to-be completed U.S. intelligence assessment.
A U.S. official who participated in drafting the top secret National Intelligence Estimate said it portrays the situation in Pakistan as "very bad." Another official called the draft "very bleak," and said it describes Pakistan as being "on the edge."
The first official summarized the estimate's conclusions about the state of Pakistan as: "no money, no energy, no government."
Six U.S. officials who helped draft or are aware of the document's findings confirmed them to McClatchy on the condition of anonymity because NIEs are top secret and are restricted to the president, senior officials and members of Congress. An NIE's conclusions reflect the consensus of all 16 U.S. intelligence agencies.
The NIE on Pakistan, along with others being prepared on Afghanistan and Iraq, will underpin a "strategic assessment" of the situation that Army Gen. David Petraeus, who's about to take command of all U.S. forces in the region, has requested. The aim of the assessment -- seven years after the U.S. sent troops into Afghanistan -- is to determine whether a U.S. presence in the region can be effective and if so what U.S. strategy should be.

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The Last Refuge of a Scoundrel

t r u t h o u t by: Robert F. Kennedy Jr., Huffington Post

But if McCarthy-era guilt-by-association is once again a valid political consideration, Palin, it would seem, has more to lose than Obama. Palin, it could be argued, following her own logic, thinks so little of America's perfection that she continues to "pal around" with a man - her husband, actually - who only recently terminated his seven-year membership in the Alaskan Independence Party. Putting plunder above patriotism, the members of this treasonous cabal aim to break our country into pieces and walk away with Alaska's rich federal oil fields and one-fifth of America's land base - an area three-fourths the size of the Civil War Confederacy.
AIP's charter commits the party "to the ultimate independence of Alaska," from the United States which it refers to as "the colonial bureaucracy in Washington." It proclaims Alaska's 1959 induction as a state "as illegal and in violation of the United Nations charter and international law."
AIP's creation was inspired by the rabidly violent anti-Americanism of its founding father Joe Vogler, "I'm an Alaskan, not an American," reads a favorite Vogler quote on AIP's current website, "I've got no use for America or her damned institutions." According to Vogler AIP's central purpose was to drive Alaska's secession from the United States. Alaska, says current Chairwoman Lynette Clark, "should be an independent nation."
Vogler was murdered in 1993 during an illegal sale of plastic explosives that went bad. The prior year, he had renounced his allegiance to the United States explaining that, "The fires of hell are frozen glaciers compared to my hatred for the American government." He cursed the stars and stripes, promising, "I won't be buried under their damned flag...when Alaska is an independent nation they can bring my bones home." Palin has never denounced Vogler or his detestable anti-Americanism.
Palin's husband Todd remained an AIP party member from 1995 to 2002. Sarah can be described in McCarthy-era palaver as a "fellow traveler." While retaining her Republican registration, she attended the AIP's 1994 convention where the party called for a draft constitution to secede from the United States and create an independent nation of Alaska. The McCain Campaign has reluctantly acknowledged that she also attended AIP's 2000 Convention. She apparently found the experience so inspiring that she agreed to give a keynote address at the AIP's 2006 convention and she recorded a video greeting for this year's 2008 convention. In other words, this is not something that happened when she was eight!
So when Palin accuses Barack of "not seeing the same America as you and me," maybe she is referring to an America without Alaska. In any case, isn't it time the media start giving equal time to Palin's buddy list of anti-American bombers and other radical associates?

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Recession? Depression? How Deep, How Far and What Can Be Done?

Image by Renegade98 via Flickr
The rich, Voltaire said, require
an abundant supply of poor.

AlterNet

It was during an earlier economic crisis that Richard Nixon famously said, "we're all Keynesians now." According to those I contacted, that's more true today than at any time in recent history; there's broad agreement in Washington that more government action will be required.
When I asked Galbraith about the prospect of running up large deficits, he responded that today "no serious person" in the economic establishment is a deficit hawk, adding that "it's striking how quickly consensus is moving" in Washington toward the idea that a major bailout of the "nuts and bolts" economy is needed. (Deficit spending to kick-start the economy during a downturn, as opposed to financing tax cuts for the wealthiest or paying for wars of choice, is a tried-and-true policy tool.)
Despite the general consensus among the experts I surveyed that we are almost certainly headed into very rough waters, there was cause for optimism as well, in that most agreed that aggressive and coordinated actions by government could contain the damage. More importantly, the bright spot in this crisis may be (stress on the word may) the blow it deals to the center-right, anti-regulatory paradigm that has guided economic policymakers both at home and in many of the world's capitals over the past three decades.
Of that paradigm, Bello said, "goodbye to all that," adding, "We should not underestimate the sea change that is occurring. Neoliberalism and free-market fundamentalism have been severely discredited, as has globalization." He predicted that "capitalism itself will come under severe questioning, and many will think that regulating or re-regulating it is not enough. I think you will find the same fundamental questioning happening throughout the world." He added, "Radical economics and Keynesian economics will regain respectability, and neoclassical or neoliberal (trickle-down) economics will be delegitimized."
Pollin wrote that he has hope that "the commitment to financial deregulation by mainstream economists and politicians -- Democrats as well as Republicans -- is now dead." He added: "It is time to recognize that unregulated financial markets always have, and always will, cause financial crises. There are no historical exceptions to this observation at all. This point has to be grasped."
According to Baker, the degree to which that point sinks in is an open question. "In principle," he said, "the Wall Street mentality that has dominated the political thinking of both parties should be on the defensive. These guys had it all their own way, and it led to a colossal disaster." But, he added, "in this country, failure doesn't count against you. It will be necessary for progressives to demand an end to Wall Street-driven policy. If there is successful organizing on this front, then it is possible that the next administration will take a very different course. But the Wall Street boys have to be pushed away -- they will not surrender power voluntarily."
Hahnel offered a word of caution, noting that "80 years ago people thought (unregulated) free market finance was dead. If the funeral had a name, it was Glass Steagall (the New Deal-era legislation that made banks choose between issuing mortgages and securities). In 1999 Phil Graham, Robert Rubin and Bill Clinton killed Glass Steagall, signaling the return and triumph of free market finance. Hopefully this crisis will kill free market finance once and for all. 'Never again' is the appropriate response."
He added what was perhaps the most salient point: "I hope this lesson will be the beginning of a larger lesson: The economics of competition and greed does not serve us well."

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Private sector loans, not Fannie or Freddie, triggered crisis

At right, Alan Greenspan. If you want to blame someone for this financial crisis, here is the man.

Image via Wikipedia

McClatchy Washington Bureau

As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.
Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.
Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height vrom 2004 to 2006.
Federal Reserve Board data show that:

• More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.


• Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.


• Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

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Obama Will Be One of The Greatest (and Most Loved) American Presidents

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by Frank Schaeffer, whose father was a famous evangelist, and one of the creators of both the Religious Right and the Pro-Life movement.

Great presidents are made great by horrible circumstances combined with character, temperament and intelligence. Like firemen, cops, doctors or soldiers, presidents need a crisis to shine.
Obama is one of the most intelligent presidential aspirants to ever step forward in American history. The likes of his intellectual capabilities have not been surpassed in public life since the Founding Fathers put pen to paper. His personal character is also solid gold. Take heart, America: we have the leader for our times.
I say this as a white, former life-long Republican. I say this as the proud father of a Marine. I say this as just another American watching his pension evaporate along with the stock market! I speak as someone who knows it's time to forget party loyalty, ideology and pride and put the country first. I say this as someone happy to be called a fool for going out on a limb and declaring that, 1) Obama will win, and 2) he is going to be amongst the greatest of American presidents.
Obama is our last best chance. He's worth laying it all on the line for.
This is a man who in the age of greed took the high road of community service. This is the good father and husband. This is the humble servant. This is the pati ent teacher. This is the scholar statesman. This is the man of deep Christian faith.
Good stories about Obama abound; from his personal relationship with his Secret Service agents (he invites them into his home to watch sports, and shoots hoops with them) to the story about how, more than twenty years ago, while standing in the check-in line at an airport, Obama paid a $100 baggage surcharge for a stranger who was broke and stuck. (Obama was virtually penniless himself in those days.) Years later after he became a senator, that stranger recognized Obama's picture and wrote to him to thank him. She received a kindly note back from the senator. (The story only surfaced because the person, who lives in Norway, told a local newspaper after Obama ran for the presidency. The paper published a photograph of this lady proudly displaying Senator Obama's letter.)
Where many leaders are two-faced; publicly kindly but privately feared and/or hated by people closest to them, Obama is consistent in the way he treats people, consistently kind and personally humble. He lives by the code that those who lead must serve. He believes that. He lives it. He lived it long before he was in the public eye.
Obama puts service ahead of ideology. He also knows that to win politically you need to be tough. He can be. He has been. This is a man who does what works, rather than scoring ideological points. In other words he is the quintessential non-ideological pragmatic American. He will (thank God!) disappoint ideologues and purists of the left and the right.
Obama has a reservoir of personal physical courage that is unmatched in presidential history. Why unmatched? Because as the first black contender for the presidency who will win, Obama, and all the rest of us, know that he is in great physical danger from the seemingly unlimited reserve of unhinged racial hatred, and just plain unhinged ignorant hatred, that swirls in the bowels of our wounded and sinful country. By stepping forward to lead, Obama has literally put his life on the line for all of us in a way no white candidate ever has had to do. (And we all know how dangerous the presidency has been even for white presidents.)
Nice stories or even unparalleled courage isn't the only point. The greater point about Obama is that the midst of our worldwide financial meltdown, an expanding (and losing) war in Afghanistan, trying to extricate our country from a wrong and stupidly mistaken ruinously expensive war in Iraq, our mounting and crushing national debt, awaiting the next (and inevitable) Al Qaeda attack on our homeland, watching our schools decline to Third World levels of incompetence, facing a general loss of confidence in the government that has been exacerbated by the Republicans doing all they can to undermine our government's capabilities and programs... President Obama will take on the leadership of our country at a make or break time of historic proportions. He faces not one but dozens of crisis, each big enough to define any presidency in better times.
As luck, fate or divine grace would have it (depending on one's personal theology) Obama is blessedly, dare I say uniquely, well-suited to our dire circumstances. Obama is a person with hands-on community service experience, deep connections to top economic advisers from the renowned University of Chicago where he taught law, and a middle-class background that gives him an abiding knowledgeable empathy with the rest of us. As the son of a single mother, who has worked his way up with merit and brains, recipient of top-notch academic scholarships, the peer-selected editor of the Harvard Law Review and, in three giant political steps to state office, national office and now the presidency, Obama clearly has the wit and drive to lead.
Obama is the sober voice of reason at a time of unreason. He is the fellow keeping his head while all around him are panicking. He is the healing presence at a time of national division and strife. He is also new enough to the political process so that he doesn't suffer from the terminally jaded cynicism, the seen-it-all-before syndrome afflicting most politicians in Washington. In that regard we Americans lucked out. It's as if having despaired of our political process we picked a name from the phone book to lead us and that person turned out to be a very man we needed.
Obama brings a healing and uplifting spiritual quality to our politics at the very time when our worst enemy is fear. For eight years we've been ruled by a stunted fear-filled mediocrity of a little liar who has expanded his power on the basis of creating fear in others. Fearless Obama is the cure. He speaks a litany of hope rather than a litany of terror.
As we have watched Obama respond in a quiet reasoned manner to crisis after crisis, in both the way he has responded after being attacked and lied about in the 2008 campaign season, to his reasoned response to our multiplying national crises, wha t we see is the spirit of a trusted family doctor with a great bedside manner. Obama is perfectly suited to hold our hand and lead us through some very tough times. The word panic is not in the Obama dictionary.
America is fighting its "Armageddon" in one fearful heart at a time. A brilliant leader with the mild manner of an old-time matter-of-fact country doctor soothing a frightened child is just what we need. The fact that our "doctor" is a black man leading a hitherto white-ruled nation out of the mess of its own making is all the sweeter and raises the Obama story to that of moral allegory.
Obama brings a moral clarity to his leadership reserved for those who have had to work for everything they've gotten and had to do twice as well as the person standing next to them because of the color of their skin. His experience of succeeding in spite of his color, social background and prejudice could have been embittering or one that fostered a spiritual rebirth of forgiveness and enlightenment. Obama radiates the calm inner peace of the spirit of forgiveness.
Speaking as a believing Christian I see the hand of a merciful God in Obama's candidacy. The biblical metaphors abound.=2 0The stone the builder rejected is become the cornerstone... the last shall be first... he that would gain his life must first lose it... the meek shall inherit the earth...
For my secular friends I'll allow that we may have just been extraordinarily lucky! Either way America wins.
Only a brilliant man, with the spirit of a preacher and the humble heart of a kindly family doctor can lead us now. We are afraid, out of ideas, and worst of all out of hope. Obama is the cure. And we Americans have it in us to rise to the occasion. We will. We're about to enter one of the most frightening periods of American history. Our country has rarely faced more uncertainty. This is the time for greatness. We have a great leader. We must be a great people backing him, fighting for him, sacrificing for a cause greater than ourselves.
A hundred years from now Obama's portrait will be placed next to that of George Washington, Abraham Lincoln and Franklin Roosevelt. Long before that we'll be telling our children and grandchildren that we stepped out in faith and voted for a young black man who stood up and led our country back from the brink of an abyss. We'll tell them about the power of love, faith and hope. We'll tell them about the power of creativity combined with humility and intellectual brilliance.
We'll tell them that President Obama gave us the gift of regaining our faith in our country. We'll tell them that we all stood up and pitched in and won the day. We'll tell them that President Obama restored our standing in the world. We'll tell them that by the time he left office our schools were on the mend, our economy booming, that we'd become a nation filled with green energy alternatives and were leading the world away from dependence on carbon-based destruction. We'll tell them that because of President Obama's example and leadership the integrity of the family was restored, divorce rates went down, more fathers took responsibility for their children, and abortion rates fell dramatically as women, families and children were cared for through compassionate social programs that worked. We'll tell them about how the gap closed between the middle class and the super rich, how we won health care for all, how crime rates fell, how bad wars were brought to an honorable conclusion. We'll tell them that when we were attacked again by Al Qaeda, how reason prevailed and the response was smart, tough, measured and effective, and our civil rights were protected even in times of crisis...
We'll tell them that we were part of the inexplicably blessed miracle that happened to our country those many years ago in 2008 when a young black man was sent by God, fate or luck to save our country. We'll tell them that it's good to live in America where anything is possible. Yes we will.

Frank Schaeffer is the author of CRAZY FOR GOD-How I Grew Up As One Of The Elect, Helped Found The Religious Right, And Lived To Take All (Or Almost All) Of It Back.

Moscow calls for anti-US alliance

Image by DG Jones via Flickr

smh.com.au

THE President of Russia has called on Europe's leaders to create a new world order that would minimise the role of the United States.
Confident that a row with Europe prompted by Russia's invasion of Georgia in August was over, Dmitry Medvedev arrived in the French spa town of Evian on Wednesday determined to woo his fellow leaders into creating an anti-US front.
Gone was the kind of wartime rhetoric that saw Mr Medvedev lash out at the West and describe his Georgian counterpart, Mikheil Saakashvili, as a "lunatic". Instead Mr Medvedev spoke of a Russia that was "absolutely not interested in confrontation", and outlined plans for a new security pact to ban the use of force in Europe.
Yet there was little doubt that Mr Medvedev was playing the divide-and-rule tactics of Vladimir Putin, his predecessor and now Prime Minister, by seeking to pit the US against its European allies.
In a speech delivered to European leaders at a conference hosted by the French President, Nicolas Sarkozy, to discuss the international financial crisis, Mr Medvedev sought to show that the US was at the root of all the world's problems. He blamed Washington's "economic egotism" for the world's financial woes and then accused the Bush Administration of taking Europe to the brink of a new cold war by pursuing a deliberately divisive foreign policy.
He also maintained that the US was once again trying to return to a policy of containing Russia.

The most embarrassing part is that Medvedev is right, the US is THE problem in the Middle East and with the World financial crisis! But so is Russia a problem. Putin would have the same sort of influence over the EU if he could. Sarkozy looks like a placater al la Neville Chamberlain.

Judge Orders 17 Detainees at Guantánamo Freed

NYTimes.com

A federal judge on Tuesday ordered the Bush administration to release 17 detainees at Guantánamo Bay by the end of the week, the first such ruling in nearly seven years of legal disputes over the administration's detention policies.
The judge, Ricardo M. Urbina of Federal District Court, ordered that the 17 men be brought to his courtroom on Friday from the prison at Guantánamo Bay, Cuba, where they have been held since 2002. He indicated that he would release the men, members of the restive Uighur Muslim minority in western China, into the care of supporters in the United States, initially in the Washington area.
"I think the moment has arrived for the court to shine the light of constitutionality on the reasons for detention," Judge Urbina said.
Saying the men had never fought the United States and were not a security threat, he tersely rejected Bush administration claims that he lacked the power to order the men set free in the United States and government requests that he stay his order to permit an immediate appeal.
The ruling was a sharp setback for the administration, which has waged a long legal battle to defend its policies of detention at the naval base at Guantánamo Bay, arguing a broad executive power in waging war. Federal courts up to the Supreme Court have waded through detention questions and in several major cases the courts have rejected administration contentions.
The government recently conceded that it would no longer try to prove that the Uighurs were enemy combatants, the classification it uses to detain people at Guantánamo, where 255 men are now held. But it has fought efforts by lawyers for the men to have them released into the United States, saying the Uighurs admitted to receiving weapons training in Taliban-controlled Afghanistan at the time of the Sept. 11, 2001, attacks.
The White House press secretary, Dana Perino, said the administration was "deeply concerned by, and strongly disagrees with" the decision. She added that the ruling, "if allowed to stand, could be used as precedent for other detainees held at Guantánamo Bay, including sworn enemies of the United States suspected of planning the attacks of 9/11, who may also seek release into our country."
Justice Department lawyers said they were filing an emergency application on Tuesday night for a stay from the federal appeals court in Washington.
Judge Urbina's decision came in a habeas corpus lawsuit authorized by a landmark Supreme Court ruling in June that gave detainees the right to have federal judges review the reason for their detention. Speaking from the bench in a courtroom crowded with Uighur supporters of the detainees, Judge Urbina suggested that the government was seeking a stay as a tactic to keep the men imprisoned.
"All of this means more delay," he said with evident impatience, "and delay is the name of the game up until this point." The centuries-old doctrine of habeas corpus permits a judge to demand production of a prisoner, a power Judge Urbina sought to exercise with his order that the men be brought to him.
"I want to see the individuals," he said.
The Uighurs have long been at the center of contentious legal cases because they said they were swept into detention in Afghanistan in 2001 by mistake. They said they were in Afghanistan to seek refuge from China, where the Uighurs, Turkic Muslims, often bridle at Han Chinese rule.
The Bush administration has fought the Uighurs in court for years, contending that their encampment in Afghanistan had ties to a Uighur terror group. Last summer, a federal appeals court ridiculed as inadequate the government's secret evidence for holding one of the men. In the months since, the government has said that it would "serve no useful purpose" to continue to try to prove that any of these 17 men were enemy combatants.
Lawyers for the Uighurs said the men would be persecuted or killed if they were returned to China. The administration said that since transferring five Uighur detainees to Albania in 2006, it had been unable to persuade governments to accept the other 17. Diplomats say many governments fear reprisal by China, which considers Uighur separatist groups terrorists.
The administration insisted during arguments on Tuesday that the courts did not have the power to release the men into the United States.
Judge Urbina, an appointee of President Bill Clinton, underscored the significance of his ruling with repeated references to the constitutional separation of powers and the judiciary's role.
He rejected Justice Department arguments as assertions of executive power to detain people indefinitely without court review. He said that "is not in keeping with our system of government."
More than 40 Uighurs, a few in native dress that included sequined velvet caps, watched in anxious silence. Only when the judge rose to leave the bench did they break into applause.

Thousands of Troops Are Deployed on U.S. Streets Ready to Carry Out "Crowd Control"

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AlterNet

Background: the First Brigade of the Third Infantry Division, three to four thousand soldiers, has been deployed in the United States as of October 1. Their stated mission is the form of crowd control they practiced in Iraq, subduing "unruly individuals," and the management of a national emergency. I am in Seattle and heard from the brother of one of the soldiers that they are engaged in exercises now. Amy Goodman reported that an Army spokesperson confirmed that they will have access to lethal and non lethal crowd control technologies and tanks.
George Bush struck down Posse Comitatus, thus making it legal for military to patrol the U.S. He has also legally established that in the "War on Terror," the U.S. is at war around the globe and thus the whole world is a battlefield. Thus the U.S. is also a battlefield.
He also led change to the 1807 Insurrection Act to give him far broader powers in the event of a loosely defined "insurrection" or many other "conditions" he has the power to identify. The Constitution allows the suspension of habeas corpus -- habeas corpus prevents us from being seized by the state and held without trial -- in the event of an "insurrection." With his own army force now, his power to call a group of protesters or angry voters "insurgents" staging an "insurrection" is strengthened.
U.S. Rep. Brad Sherman of California said to Congress, captured on C-Span and viewable on YouTube, that individual members of the House were threatened with martial law within a week if they did not pass the bailout bill:

"The only way they can pass this bill is by creating and sustaining a panic atmosphere. ... Many of us were told in private conversations that if we voted against this bill on Monday that the sky would fall, the market would drop two or three thousand points the first day and a couple of thousand on the second day, and a few members were even told that there would be martial law in America if we voted no."

If this is true and Rep. Sherman is not delusional, I ask you to consider that if they are willing to threaten martial law now, it is foolish to assume they will never use that threat again. It is also foolish to trust in an orderly election process to resolve this threat. And why deploy the First Brigade? One thing the deployment accomplishes is to put teeth into such a threat.
I interviewed Vietnam veteran, retired U.S. Air Force Colonel and patriot David Antoon for clarification:
"If the President directed the First Brigade to arrest Congress, what could stop him?"
"Nothing. Their only recourse is to cut off funding. The Congress would be at the mercy of military leaders to go to them and ask them not to obey illegal orders."

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Who Caused the Economic Crisis?

FactCheck.org

MoveOn.org blames McCain advisers. He blames Obama and Democrats in Congress. Both are wrong.
A MoveOn.org Political Action ad plays the partisan blame game with the economic crisis, charging that John McCain's friend and former economic adviser Phil Gramm "stripped safeguards that would have protected us." The claim is bogus. Gramm's legislation had broad bipartisan support and was signed into law by President Clinton. Moreover, the bill had nothing to do with causing the crisis, and economists - not to mention President Clinton - praise it for having softened the crisis.
A McCain-Palin ad, in turn, blames Democrats for the mess. The ad says that the crisis "didn't have to happen," because legislation McCain cosponsored would have tightened regulations on Fannie Mae and Freddie Mac. But, the ad says, Obama "was notably silent" while Democrats killed the bill. That's oversimplified. Republicans, who controlled the Senate at the time, did not bring the bill forward for a vote. And it's unclear how much the legislation would have helped, as McCain signed on just two months before the housing bubble popped.
In fact, there's ample blame to go around. Experts have cited everyone from home buyers to Wall Street, mortgage brokers to Alan Greenspan.
Analysis
As Congress wrestled with a $700 billion rescue for Wall Street's financial crisis, partisans on both sides got busy - pointing fingers. MoveOn.org Political Action on Sept. 25 released a 60-second TV ad called "My Friends' Mess," blaming Sen. John McCain and Republican allies who supported banking deregulation. The McCain-Palin campaign released its own 30-second TV spot Sept. 30, saying "Obama was notably silent" while Democrats blocked reforms leaving taxpayers "on the hook for billions." Both ads were to run nationally.
And both ads are far wide of the mark.
MoveOn.org Ad:
"My Friends' Mess"
MoveOn.org Ad, "My Friends"
Narrator: We all know the economy is in crisis, but who's responsible?
McCain: My friends. My friends. My friends.
Narrator: John McCain's friend Phil Gramm wrote the bill that deregulated the banking industry, and stripped the safeguards that would have protected us.
McCain asked Gramm to help write his economic plan.
John McCain's friend Rick Davis lobbied for Fannie and Freddie for years, "defending" them against stricter regulation. And now? He runs McCain's presidential campaign.
And John McCain himself? He's stood by "deregulation" time and time again.
McCain: I think the deregulation was probably helpful to the growth of our economy.
Narrator: And now that the markets are in meltdown? John McCain's friend George Bush wants hardworking Americans to write the biggest blank check in history, bailing out the Wall Street firms and the Washington lobbyists who got us into this mess. Main Street giving Wall Street $700 billion and getting nothing in return? It's outrageous.
Americans shouldn't have to foot the bill for mistakes that John McCain and his friends made.
Narrator: MoveOn.org Political Action is responsible for the content of this advertisement.
Blame the Republicans!
The MoveOn.org Political Action ad blames a banking deregulation bill sponsored by former Sen. Phil Gramm, a friend and one-time adviser to McCain's campaign. It claims the bill "stripped safeguards that would have protected us."
That claim is bunk. When we contacted MoveOn.org spokesman Trevor Fitzgibbons to ask just what "safeguards" the ad was talking about, he came up with not one single example. The only support offered for the ad's claim is one line in one newspaper article that reported the bill "is now being blamed" for the crisis, without saying who is doing the blaming or on what grounds.
The bill in question is the Gramm-Leach-Bliley Act, which was passed in 1999 and repealed portions of the Glass-Steagall Act, a piece of legislation from the era of the Great Depression that imposed a number of regulations on financial institutions. It's true that Gramm authored the act, but what became law was a widely accepted bipartisan compromise. The measure passed the House 362 - 57, with 155 Democrats voting for the bill. The Senate passed the bill by a vote of 90 - 8. Among the Democrats voting for the bill: Obama's running mate, Joe Biden. The bill was signed into law by President Clinton, a Democrat. If this bill really had "stripped the safeguards that would have protected us," then both parties share the blame, not just "John McCain's friend."
The truth is, however, the Gramm-Leach-Bliley Act had little if anything to do with the current crisis. In fact, economists on both sides of the political spectrum have suggested that the act has probably made the crisis less severe than it might otherwise have been.
Last year the liberal writer Robert Kuttner, in a piece in The American Prospect, argued that "this old-fashioned panic is a child of deregulation." But even he didn't lay the blame primarily on Gramm-Leach-Bliley. Instead, he described "serial bouts of financial deregulation" going back to the 1970s. And he laid blame on policies of the Federal Reserve Board under Alan Greenspan, saying "the Fed has become the chief enabler of a dangerously speculative economy."
What Gramm-Leach-Bliley did was to allow commercial banks to get into investment banking. Commercial banks are the type that accept deposits and make loans such as mortgages; investment banks accept money for investment into stocks and commodities. In 1998, regulators had allowed Citicorp, a commercial bank, to acquire Traveler's Group, an insurance company that was partly involved in investment banking, to form Citigroup. That was seen as a signal that Glass-Steagall was a dead letter as a practical matter, and Gramm-Leach-Bliley made its repeal formal. But it had little to do with mortgages.
Actually, deregulated banks were not the major culprits in the current debacle. Bank of America, Citigroup, Wells Fargo and J.P. Morgan Chase have weathered the financial crisis in reasonably good shape, while Bear Stearns collapsed and Lehman Brothers has entered bankruptcy, to name but two of the investment banks which had remained independent despite the repeal of Glass-Steagall.
Observers as diverse as former Clinton Treasury official and current Berkeley economist Brad DeLong and George Mason University's Tyler Cowen, a libertarian, have praised Gramm-Leach-Bliley has having softened the crisis. The deregulation allowed Bank of America and J.P. Morgan Chase to acquire Merrill Lynch and Bear Stearns. And Goldman Sachs and Morgan Stanley have now converted themselves into unified banks to better ride out the storm. That idea is also endorsed by former President Clinton himself, who, in an interview with Maria Bartiromo published in the Sept. 24 issue of Business Week, said he had no regrets about signing the repeal of Glass-Steagall:
Bill Clinton (Sept. 24): Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn't signed that bill. ...You know, Phil Gramm and I disagreed on a lot of things, but he can't possibly be wrong about everything. On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I'd be glad to look at the evidence. But I can't blame [the Republicans]. This wasn't something they forced me into.
No, Blame the Democrats!
McCain-Palin 2008 Ad: "Rein"
McCain Ad, "Rein"
Narrator: John McCain fought to rein in Fannie and Freddie.
The Post says: McCain "pushed for stronger regulation"..."while Mr. Obama was notably silent."
But, Democrats blocked the reforms.
Loans soared. Then, the bubble burst. And, taxpayers are on the hook for billions.
Bill Clinton knows who is responsible.
Clinton: I think the responsibility that the Democrats have may rest more in resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac.
Narrator: You're right, Mr. President. It didn't have to happen.
McCain: I'm John McCain and I approve this message.
The McCain-Palin campaign fired back with an ad laying blame on Democrats and Obama. Titled "Rein," it highlights McCain's 2006 attempt to "rein in Fannie and Freddie." The ad accurately quotes the Washington Post as saying "Washington failed to rein in" the two government-sponsored entities, the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), both of which ran into trouble by underwriting too many risky home mortgages to buyers who have been unable to repay them. The ad then blames Democrats for blocking McCain's reforms. As evidence, it even offers a snippet of an interview in which former President Clinton agrees that "the responsibility that the Democrats have" might lie in resisting his own efforts to "tighten up a little on Fannie Mae and Freddie Mac." We're then told that the crisis "didn't have to happen."
It's true that key Democrats opposed the Federal Housing Enterprise Regulatory Reform Act of 2005, which would have established a single, independent regulatory body with jurisdiction over Fannie and Freddie - a move that the Government Accountability Office had recommended in a 2004 report. Current House Banking Committee chairman Rep. Barney Frank of Massachusetts opposed legislation to reorganize oversight in 2000 (when Clinton was still president), 2003 and 2004, saying of the 2000 legislation that concern about Fannie and Freddie was "overblown." Just last summer, Senate Banking Committee chairman Chris Dodd called a Bush proposal for an independent agency to regulate the two entities "ill-advised."
But saying that Democrats killed the 2005 bill "while Mr. Obama was notably silent" oversimplifies things considerably. The bill made it out of committee in the Senate but was never brought up for consideration. At that time, Republicans had a majority in the Senate and controlled the agenda. Democrats never got the chance to vote against it or to mount a filibuster to block it.
By the time McCain signed on to the legislation, it was too late to prevent the crisis anyway. McCain added his name on May 25, 2006, when the housing bubble had already nearly peaked. Standard & Poor's Case-Schiller Home Price Index, which measures residential housing prices in 20 metropolitan regions and then constructs a composite index for the entire United States, shows that housing prices began falling in July 2006, barely two months later.
The Real Deal
So who is to blame? There's plenty of blame to go around, and it doesn't fasten only on one party or even mainly on what Washington did or didn't do. As The Economist magazine noted recently, the problem is one of "layered irresponsibility ... with hard-working homeowners and billionaire villains each playing a role." Here's a partial list of those alleged to be at fault:
* The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
* Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
* Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
* Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
* The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
* Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
* Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
* Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
* The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
* An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
* Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.
The U.S. economy is enormously complicated. Screwing it up takes a great deal of cooperation. Claiming that a single piece of legislation was responsible for (or could have averted) the crisis is just political grandstanding. We have no advice to offer on how best to solve the financial crisis. But these sorts of partisan caricatures can only make the task more difficult.
-by Joe Miller and Brooks Jackson
Sources
Benston, George J. The Separation of Commercial and Investment Banking: The Glass-Steagall Act Revisited and Reconsidered. Oxford University Press, 1990.
Tabarrok, Alexander. "The Separation of Commercial and Investment Banking: The Morgans vs. The Rockefellers." The Quarterly Journal of Austrian Economics 1:1 (1998), pp. 1 - 18.
Kuttner, Robert. "The Bubble Economy." The American Prospect, 24 September 2007.
"The Gramm-Leach-Bliley Act of 1999." U.S. Senate Committee on Banking, Housing and Urban Affairs. Accessed 29 September 2008.
Bartiromo, Maria. "Bill Clinton on the Banking Crisis, McCain and Hillary." Business Week, 24 September 2008.
Standard and Poor's. "Case-Schiller Home Price History." Accessed 30 September 2008.
"Understanding the Tax Reform Debate: Background, Criteria and Questions." Government Accountability Office. September 2005.
Bianco, Katalina M. "The Subprime Lending Crisis: Causes and Effects of the Mortgage Meltdown." CCH. Accessed 29 September 2008.

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