town hall

So I listened to the debate last night over the radio rather than watch it. Interesting difference, because to my mind the result of the whole thing was pretty much a-pox-on-both-their-houses. Open up the papers this morning, though, and everybody's calling it for Obama. Very like Kennedy/Nixon in 1960.

Palin's greatest hits

Heading into the VP debate tomorrow night, this makes for a nice recapitulation:



(Of course, she won't end up doing all that badly in the debate. There'll be no opportunity for cross-talk or follow-up, and each question will get a wafer-thin 90-second-soundbyte of an answer. She'll platitude her way through the questions she can't answer, and steer everything else into attacks on Obama/Biden which will leave Joe [a] picking up too many pieces, and [b] unable to fire back at her, as doing so would make him look mean.)


Well. My real reason for chipping in with this post tonight is Couric's question: can you name a non-Roe Supreme Court ruling you disagree with? And Palin can't think of any - good grief. How about the ruling that Dick Cheney gets to keep secret all his deliberations in forming our national energy policy? How about Bush v. Gore?

Of course Mrs. Palin wouldn't take my side on those. So, how about Hamdan v. Rumsfeld? That's the one where our nine largely conservative justices came back saying: You know, Bush Administration, if you're going to snatch up people all around the world, torture them, and incarcerate them for the rest of their lives, then you need to do a little pro forma here. Set up a kangaroo court, announce the reason you're holding these guys, and give 'em an opportunity to claim innocence before routing them back into Bagram, Camp Delta, or one of your east-European CIA black sites. Please? Just for appearances. You're making us look bad.

Now: you know Sarah Palin opposes that. Or she would, if she had heard of it.

But she hasn't heard of it. It's in none of the magazines she reads (you know - all of them?).

--Well then, how about she just names the freaking Dred Scott case? Having completed a middle school education, this Supreme Court decision should ring a bell for her, yes?

And it fits, because what Palin did say was (to paraphrase): "in Ameerica's lahng history, ah, er, you knoohw, Katie, there arr lahts of tiymes peeple might disagreee with the coourt - and the tiymes Iye maeght disagree with 'em arr the tiymes they decided somethin' thaat it's the staeetes' rayght too deecide."

Like - the Dred Scott case. Wherein the Supreme Court argued against the right of the state (territory) of Illinois to emancipate a slave within its borders - because that would undercut the slaveowner's property rights. Talk about judicial activism - and violation of states' rights! This is exactly the sort of thing you would think Sarah Palin should oppose.

But who knows? Maybe she's pro-slavery.

She is a big Bible booster, after all.

Swing states swung?

A post-first-debate Quinnipiac poll released today:

Florida:
Obama: 51
McCain: 43

Pennsylvania:
Obama: 54
McCain: 39

Ohio:
Obama: 50
McCain: 42

But here's the clincher. Peter Brown, the poll's Assistant Director:

"It is difficult to find a modern competitive presidential race that has swung ... so quickly and so sharply this late in the campaign ... McCain has his work cut out for him if he is to win the presidency and there does not appear to be a role model for such a comeback in the last half century."

(...With the usual caveats that the election's a month away, other polls' results vary, and there could always be another 9-11. You never know.)


Post-script: Don't you think it's interesting that only now, as the polls seem to be giving a solid indication that Obama may win this thing with or without their help, that only today does Bill Clinton hit a campaign stop and make a convincing performance on Barack's behalf?

(Oh, no, I would never imply the Clintons would prefer he just lose. But now that he isn't, they sure seem more interested in getting on his good side.)

Post-post-script: Thanks to Jim to directing me to this bit of silliness.

Doomed to repeat

So... five years ago we decided to ignore what we as a nation had learned from painful experience, and repeat our involvement in Vietnam.

This year, we've decided to go in for a redo of the Great Depression.

Next year - it's the Civil War all over again, baby.

How long till this is happening in Cedar Rapids?

Or wherever.

CEO murdered by mob of sacked Indian workers.

What goes up

Well. McCain does seem to be slipping this week. He's had a number of odd gaffes - "the fundamentals of our economy are sound" is just the start of it. Somehow (ie, raw confusion?) he plans as president to refuse meeting with the Prime Minister of Spain. And he was against government regulation of our financial markets before he was for it. He was against bailing out AIG before he was for it. And this week we hear he's opposed to excessive CEO pay, which he (a) would have no control over as president, and (b) he's long benefited from in the form of campaign contributions. But in an effort to stay consistent on this anti-corporate-fat-cats issue he just discovered Monday afternoon, McCain has banished one of his chief campaign surrogates, former Hewlett-Packard CEO and $42-million-golden-parachute-recipient Carly Fiorina. To be fair, however, he didn't ban Ms. Fiona for being a "corporate fat cat", but rather for sticking her foot in her mouth on MSNBC Tuesday and saying neither Palin nor McCain is competent to perform the kind of bang-up management job she herself did at HP (ie, its stock value halved during the time she served there).

[And good riddance. Fiorina was a formidable talking head - she quite beat the crap out of Obama's surrogate Claire McCaskill last Sunday on This Week.]

And so as McCain flounders around looking for a public way to address the financial crisis, Obama is doing a reasonable-to-mediocre job of the same - which in relative terms isn't half bad. In all, he seems to be effecting a very calm, cool reovertaking of McCain from behind this week, as the Palin bubble deflates rather than bursts.

To be sure, Obama isn't delivering the kind of bash-'em-upside-the-head-with-violent-rhetoric sort of thing that would make me personally happy. But then again he would never have gotten where he is in life if he had anything like my personal rhetorical preferences (bombast and semicolons).

The first debate's a week from tomorrow. We'll have learned a lot more about how things are settling in by then.

Rough week ahead

So

(#1) The economy continues to unravel, and

(#2) If Obama hasn't reassumed the offensive by the end of the week, then I'm about ready to write him off. That is - this thing isn't over, but he's let it slip far too far.

Hillary in 2012, anybody? Yahoo. Maybe she can get us out of the war (by which I mean the one we'll be in with Russia by the end of a McCain term).


And now I offer:

More information on (#1):

So here's a bit of US economic history for you (wheeeee!):

As part of the New Deal in 1938, the Roosevelt Administration created the Federal National Mortgage Administration, or FNMA, or - cute-ized for your delectation - "Fannie Mae". The purpose of the organization was to support and stimulate the secondary mortgage market.

Whazzat?

Well, mortgage-lending is dicey for the lender, and not just because some borrowers will default (though that's part of it). Borrowers like to take out their mortgages over a long period of time (30 years) at a fixed interest rate, whereas interest rates fluctuate in the economy as a whole - meaning that from time to time, a bank will almost certainly find itself collecting less in mortgage payments than it owes out to its depositors in interest.

That won't work. And so the secondary mortgage market was created, in which bundles of mortgages are sold out in little pieces as bonds. It spreads the risk around. More importantly, the cash that banks raise to furnish their mortgages is owed back to the bondholders at a fixed rather than a variable interest rate (because those are the terms of the bonds). Therefore the banks are better assured of a profit, and likelier to lend. Everybody's happy.

Where Fannie Mae comes in is to insure this particular bond market. It guarantees payouts to bondholders in the case of defaulted mortgages, funding itself as it goes by skimming a percentage on all such bonds it's guaranteeing. Later on, Fannie also became involved in the direct purchase of mortgage bonds and of mortgages themselves.

Now in 1968, as the story goes, LBJ was looking for a way to cook the books and make Vietnam appear less expensive than it was. Fannie Mae was under a huge amount of debt which it was using to hold these Mortgage-Backed Securities. Since Fannie's debt was causing the federal balance sheet to look bad at the same time that it (Fannie) was earning damn good money, Johnson decided the clever thing to do was to sell off the organization as a private, shareholder-owned entity: a Government-Sponsored Enterprise which remained backed by a line of federal credit, as well as being exempt from taxation and from SEC oversight (some deal for those shareholders, huh?).

A little later on, in 1970, Freddie Mac was created (that is, the Federal Home Loan Mortgage Corporation, or FHLMC... which really doesn't suggest "Freddie Mac" to my ear, but there you go) to at least give Fannie some competition in a market it essentially monopolized.

Okay: so that's what those two ridiculously-named organizations are all about, since nobody seems to have a clue (I didn't myself until I looked it all up this morning).

Fast-forward to the recent past. Fannie and Freddie are huge, with combined assets bigger than any US bank, and obligations totaling about half the amount of the national debt (owed to whom? Why, China, of course). Fannie and Freddie aren't subject to the kind of public reporting other publicly-traded companies are, and we (the public) are theoretically on the line to back them with hundreds of billions of dollars in bailout cash should something go wrong.

What could go wrong?

Well, in 2003 the SEC and Justice Department uncovered an accounting scandal at Freddie Mac involving $4.7 billion of discrepancies; three of its top executives were fired. But that was small potatoes.

Enter the subprime mortgage crisis. It began after deregulation (read: "Republicans" *) allowed complex and unregulated new investment instruments to appear on the market which hid the riskiness of the mortgages that backed them. This is referred to as "financial innovation".

And it jump-started a vicious circle. "Subprime" mortgages - made out at high or variable rates to underqualified borrowers - began appearing more attractive to banks who were now better able to pass on the risk to the secondary mortgage market. Which brought more and more risky borrowers into the primary market. Which drove up the price of real estate. Which made folks think risky mortgages were even safer to issue, since real estate values kept on increasing, yielding plenty of new capital to back the loans. Which meant even riskier loans got issued. Etc.

And on and on it worked - until it didn't. An at-first moderate drop in home prices caused a wave of foreclosures, dumping houses back onto the market and further reducing real estate values. Suddenly all kinds of people were left with mortgages worth much more than their homes. And as lenders became gun-shy, the ensuing credit crunch drove up interest rates, including on the Adjustable Rate Mortgages with which many of these homes had been financed. That is - the mortgages keep getting more expensive as the houses become worth less and less. It's still happening as we speak.

Large investment banks like Bear Stearns and other institutions like AIG, found themselves holding onto all sorts of bad mortgage money squirreled away in these very innovative new investment instruments. And, therefore, many of these institutions are now tanking. The federal government is left puzzling their way through a bailout of Fannie Mae and Freddie Mac, while this morning Lehman Brothers went under, and Merrill Lynch has sold itself off to Bank of America for $50 billion ($10 billion less than the debt it holds).

Bear Stearns, Lehman Brothers, and Merrill Lynch are three of the "big five" independent American investment banks: for the moment, only Goldman Sachs and Morgan Stanley remain. In the world of commercial banks, Washington Mutual appears poised to go under (this article gives some interesting background on the now-vanished legal distinction between investment and commercial banks - a distinction also created to help get us out of the Great Depression). How many of these companies are going to die in the next several months? Who knows?

And how much are we going to have to pay to save Fannie Mae and Freddie Mac? Unclear, but whatever it costs, we'll have to fork it out. Not only because these institutions are "too big to fail", and would send world-depression-sized shockwaves through the global economy - but also because Fannie and Freddie are sitting on a mountain of borrowed cash from China. If we (America) don't service that debt and service it with a smile, then we're going to have trouble continuing to borrow all the money from China which we are currently using to pay for our gasoline, consumer electronics, lead-painted toys, poisoned toothpaste and dog food, and hundred-year occupation of Iraq.

The hell if I know where the whole thing leads from here, although the word "recession" is rather hard to keep out of any possible description of it. But I hope we can take away the lesson from this story that this is what happens when you deregulate markets. Just in case anybody didn't already get that message from the Enron thing a few years ago.

Which, apparently, many didn't.

Capitalism - like, for instance, fire - is a wonderful thing. But it's got to be managed.


* Particularly former Texas Senator, erstwhile McCain campaign adviser, current financial-industry lobbyist, and noted bastard Phil Gramm.


More information on (#2):

Will this help?



Who knows? A bit, I guess. All I know is that there needs to be a lot more where it came from.