And The Mud Continues to Fly…

Yes, it seems as though the best chance Senator John McCain thinks he has is to throw mud, and he has begun the slinging by continuing the nonsensical charges about an association with someone who was a sixties radical that has been debunked in the major press outlets. Meanwhile, those same outlets (Reuters, CNN, New York Times) are reporting a gross abuse of power by McCain’s running mate, Governor Sarah Palin. What’s the chance that he has actually associated with Mrs. Palin? And this is the thing that scares me the most about this Republican ticket. Normally, I could care less about the VP pick. However, as the current VP has demonstrated an unhealthy predilection to abuse his power, I would like to see the practice stop. Worse, McCain is no spring chick. He could actually die in office, and this woman would then be able to continue her perssonal crusades, not from the Governor’s office, but from the Whitehouse.

In the meantime, President Bush is nowhere to be found, except in a sketchy piece in today’s New York Times, in which he told people that it’s a good thing he’s still president and that he wouldn’t have wanted to deal with the economic mess his own deregulation helped create day one in office. The problem with this statement is that he has spoiled nearly everything he has touched: our budget, education, foreign policy, our Constitution & Bill Of Rights, our standing in the world, and many other things. Please let’s hope the damage can be contained by a prompt change of power.

What Caused This Crisis?

I am sure I’m not that different from many others when I ask the simple question, what happened? How did the banks get into such a mess? What didn’t they see, and what regulation failed? Was the reserve ratio that the federal reserve demands too low? Did debt move from regulated to unregulated, and if so, why would that have caused a failure of regulated banks? How is it that the vast amount of debt went unrecorded until recently? And what are we doing wrong now?

The New York Times offers a new insight into what had happened. According to this article, a decision in 2004 by the SEC, headed by William Donaldson at the time, permitted banks to exceed the reserve ratio in their investment houses, and money seemingly flew freely between the two. There was meant to be oversight of the banks’ health at the time, but that oversight never happened.

Why did the banks seek this change in 2004? They did not believe they could compete against the large investment houses with so much money tied up in case of a credit crunch. Put another way, we forgot some of the lessons of the 1920s.

And so it’s now obvious to all. President Bush has not only presided over the worst financial debacle since the Great Depression, but he and his team failed to learn from the mistakes of that era, making him worse than President Hoover, in my book.

What do we need to do to fix the problems? Some of it has already happened. Banks have become very conservative, and perhaps are leaning too far: it’s very hard to tell when the country is teetering on a recession. Some of that conservative nature needs to be codified by reversing the 2004 decision or requiring investment houses to meet the reserve ratio. In order to figure out which we have to question whether or not we can let a large investment house fail. If we cannot, then more regulation is appropriate. One way to split the baby is to require regulation of total assets and debt above a certain number, say the $5 billion talked about in the article.

Sarah Palin is NOT showing up

NPR’s Morning Edition today had a report on Governor Sarah Palin. Apparently she is taking a page from President Bush and carefully controlling media access. In other words: limited interviews, and no press access. What little press she has had has been bad. Between the ongoing investigation and her refusal to release her income tax records, one has to wonder if she really is ready for her current position of governor, much less that of vice president. One also has to wonder why the people of Alaska put up with this sort of behavior.

Say what you will about Senator Biden, either through intent or incompetence, he has a long history from which we can judge (and have). This leads to the first rule of governing: you have to show up, and Sarah Palin is not.

Worse, even when she makes statements they are plattitudes. Telling Americans not to question Israel is as destructive to the democratic process here at home as it is to Israel and her neighbors. We cannnot be an honest broker if we do not question all parties, and that is what the region needs most of all. Even the current administration recognizes the mistakes it has made. These were lessons that ought not to have been learned in office, and we certainly cannot afford for another administration to learn them again.

We need better.

McCain Tactics Wrong

Americans measure both leaders and potential leaders against how they would handle problems of the day. The problem of the day is the crisis on Wall St., and Senator John McCain is violating the first rule of campaigning: he’s not. Now- if he were the chairman of the Federal Reserve, that might make sense on at least two levels, that he would have been central to having caused the mess, and central to clean it up. But he is neither.

He does not want to show up at a debate on Friday night in Mississippi if the crisis is not resolved. Question: what business gets conducted on a Friday night? Practically none. It’s not to say that people can’t work on Friday night, but very little need be done then. Especially by him.

John McCain made his mark on foreign policy and on generally conservative domestic policies. He is not now, nor has he ever been a banker, sat on a banking committee, or promoted policies relating to banks.

This very much reminds me of the time President Carter barricaded himself in the Whitehouse during the Iranian hostage crisis. McCain should expect the same results Carter got.

Please do not applaud

The market had an “Up” day on Friday, now that Congress and the administration have decided that the crisis is so great that it requires what the Wall Street Journal described on Thursday as the biggest bailout since the 1930s. We are now seven years and eight months into the Bush administration, and the comparisons to Herbert Hoover seem most apt. As I mentioned in a previous blog, it was clear that the administration and this president lacked credibility to calm markets simply by words. Opening up the coffers of future tax payers, however, speaks volumes.

While many will applaud the deal that Congress and the administration have put together to stablize the financial industry we have to ask ourselves how we got here in the first place. While Democrats must take some blame for cowering in the face of anti-government rhetoric, it was the Republicans who clearly controlled the agenda. And now we have seen the results.

There are no good ways to manage a bailout- only bad and worse ways. The good way involves not requiring it in the first place. Oversight of the markets has clearly been lax, as we discussed in the oil and food market. Here now is the difference between a Republican and a Libertarian: a Libertarian’s principles dictate that he or she let the financial markets fail. A Republican wants to be re-elected.

So please, no applause for the government’s move. Our children will pay the bill for us.