The more I learn about these people who Obama called his friends and with whom he made professional alliances, the more angry I get. I have no idea what the best way will be to channel those feelings in a constructive manner after the election. A wait and see honeymoon period is out. All I know for now is that I see Barack Obama as a dangerous person.
Dangerous in the following way, I assume that his past radical alliances were the by-product of an intelligent and opportunistic young black man using the tools which were available to him. Ayers knocked at his door [or vice-versa], not the Chamber of Commerce. The people whom he was trying to reach related to Rev Wright. Acorn, not the Bank One corporation, needed legal help.
But how much do we wish to 'gamble' on our assumptions that those relationships were based more on opportunism than conviction? Do you believe that we really get to know candidates during campaigns? I think most of my fellow citizens, think they have a sense of Obama and that he is no radical, while some may hope he is. That's fine, but given Obama's record, no one can claim that that belief is grounded in his actions. It's an assumption based on a political campaign. Since all political campaigns are designed to achieve a result, rather than to allow voters a greater insight to the candidates true thoughts, that's not enough for me.
I didn't think this way a few days ago. A few days ago, while I was always going to vote for McCain, I saw a type of political justice in Republicans losing the White House. But not to a candidate who is, at best, comfortable with anti-Americanism.
[Post-post - Oct 12] - No surprise that Charles Krauthammer makes the case better than me. But I was pleased to read that it was a similar argument:
Obama is not the first politician to rise through a corrupt political machine. But he is one of the rare few to then have the audacity to present himself as a transcendent healer, hovering above and bringing redemption to the "old politics" -- of the kind he had enthusiastically embraced in Chicago in the service of his own ambition.
Second, and even more disturbing than the cynicism, is the window these associations give on Obama's core beliefs. He doesn't share Rev. Wright's poisonous views of race nor Ayers' views, past and present, about the evil that is American society. But Obama clearly did not consider these views beyond the pale. For many years he swam easily and without protest in that fetid pond.
Until now. Today, on the threshold of the presidency, Obama concedes the odiousness of these associations, which is why he has severed them. But for the years in which he sat in Wright's pews and shared common purpose on boards with Ayers, Obama considered them a legitimate, indeed unremarkable, part of social discourse.
Do you? Obama is a man of first-class intellect and first-class temperament. But his character remains highly suspect. There is a difference between temperament and character. Equanimity is a virtue. Tolerance of the obscene is not.
All articles referenced are copied in full at end of post. --------------------------------------------------------------------------------- October 10, 2008 A Question of Barack Obama's Character By Charles Krauthammer
WASHINGTON -- Convicted felon Tony Rezko. Unrepentant terrorist Bill Ayers. And the race-baiting Rev. Jeremiah Wright. It is hard to think of any presidential candidate before Barack Obama sporting associations with three more execrable characters. Yet let the McCain campaign raise the issue, and the mainstream media begin fulminating about dirty campaigning tinged with racism and McCarthyite guilt by association.
But associations are important. They provide a significant insight into character. They are particularly relevant in relation to a potential president as new, unknown, opaque and self-contained as Obama. With the economy overshadowing everything, it may be too late politically to be raising this issue. But that does not make it, as conventional wisdom holds, in any way illegitimate.
McCain has only himself to blame for the bad timing. He should months ago have begun challenging Obama's associations, before the economic meltdown allowed the Obama campaign (and the mainstream media, which is to say the same thing) to dismiss the charges as an act of desperation by the trailing candidate.
McCain had his chance back in April when the North Carolina Republican Party ran a gubernatorial campaign ad that included the linking of Obama with Jeremiah Wright. The ad was duly denounced by The New York Times and other deep thinkers as racist.
This was patently absurd. Racism is treating people differently and invidiously on the basis of race. Had any white presidential candidate had a close 20-year association with a white preacher overtly spreading race hatred from the pulpit, that candidate would have been not just universally denounced and deemed unfit for office but written out of polite society entirely.
Nonetheless, John McCain in his infinite wisdom, and with his overflowing sense of personal rectitude, joined the braying mob in denouncing that perfectly legitimate ad, saying it had no place in any campaign. In doing so, McCain unilaterally disarmed himself, rendering off-limits Obama's associations, an issue that even Hillary Clinton addressed more than once.
Obama's political career was launched with Ayers giving him a fundraiser in his living room. If a Republican candidate had launched his political career at the home of an abortion-clinic bomber -- even a repentant one -- he would not have been able to run for dogcatcher in Podunk. And Ayers shows no remorse. His only regret is that he "didn't do enough."
Why are these associations important? Do I think Obama is as corrupt as Rezko? Or shares Wright's angry racism or Ayers' unreconstructed 1960s radicalism?
No. But that does not make these associations irrelevant. They tell us two important things about Obama.
First, his cynicism and ruthlessness. He found these men useful, and use them he did. Would you attend a church whose pastor was spreading racial animosity from the pulpit? Would you even shake hands with -- let alone serve on two boards with -- an unrepentant terrorist, whether he bombed U.S. military installations or abortion clinics?
Most Americans would not, on the grounds of sheer indecency. Yet Obama did, if not out of conviction then out of expediency. He was a young man on the make, an unknown outsider working his way into Chicago politics. He played the game with everyone, without qualms and with obvious success.
Obama is not the first politician to rise through a corrupt political machine. But he is one of the rare few to then have the audacity to present himself as a transcendent healer, hovering above and bringing redemption to the "old politics" -- of the kind he had enthusiastically embraced in Chicago in the service of his own ambition.
Second, and even more disturbing than the cynicism, is the window these associations give on Obama's core beliefs. He doesn't share Rev. Wright's poisonous views of race nor Ayers' views, past and present, about the evil that is American society. But Obama clearly did not consider these views beyond the pale. For many years he swam easily and without protest in that fetid pond.
Until now. Today, on the threshold of the presidency, Obama concedes the odiousness of these associations, which is why he has severed them. But for the years in which he sat in Wright's pews and shared common purpose on boards with Ayers, Obama considered them a legitimate, indeed unremarkable, part of social discourse.
Do you? Obama is a man of first-class intellect and first-class temperament. But his character remains highly suspect. There is a difference between temperament and character. Equanimity is a virtue. Tolerance of the obscene is not. --------------------------------------------- Read more!
I had a mild mannered friend once almost get into a fight at a disco with another guy who claimed he was a model. When he told our group what had happened, we were bewildered. 'What!, who cares what he said,' we informed him in graphic language. 'He's got acne scars,' our friend pleaded in defense of his behavior.
Some lies we can ignore, some are offensive. Some lies which we initially ignore, become harder to do so and eventually become offensive. This is what I think is developing with Obama in regards to Ayers. Whether it ends up offensive or just an example of a tolerated lie is still to be decided.
The common sense interpretation of how the Obama / Ayers relationship developed is that Obama knew who Ayers was--former domestic terrorist, current activist--but was not so personally offended by those acts that he would have passed up a good professional opportunity. Politically, he knew that Ayers operated with Mayor Daley's blessings in Chicago. In effect, if he was good enough for Hyde Park and Daley, he was good enough for Obama. So no big deal, just another good connection for the rising political star. Fast forward to presidential campaign.
The unknown candidate, having survived one radical association in his past, Rev Wright, decides that he cannot afford two. So he lies about what he knew and when he knew it. No one actually believes that Obama didn't know who Ayers was or that he was just 'a guy in the neighborhood.' That's important because there is no plausible middle ground here for partisans to hide behind.
Bill Clinton told that a lie about smoking pot and 'not inhaling.' That was a lie which people felt they could ignore, and eventually even ridicule. The Ayers lie was settling into the tolerated lie category. But the Obama campaign made a bad strategic mistake by going down the road of 'he didn't know Ayers was a terrorist.' Obama would have had to be an idiot not to have know. Then today, it got personal. The son of one of Ayers' intended victims issued a statement.
When I was 9 years-old the Weather Underground, the terrorist group founded by Barack Obama’s friend William Ayers, firebombed my house. Barack Obama has dismissed concerns about his relationship with Ayers by noting that he was only a child when Ayers was planting bombs at the Pentagon and the U.S. Capitol. But Ayers has never apologized for his crimes, he has reveled in them, expressing regret only for the fact that he didn’t do more.
While Barack Obama once downplayed his relationship with Ayers, today his campaign took that deceit one step further. Barack Obama now denies he was even aware of his friend’s violent past when, in 1995, Ayers hosted a party launching Obama’s political career. Given Ayers’ celebrity status among the left, it’s difficult to believe. The question remains: what did Obama know, and when did he know it? When did Obama learn the truth about his friend? Barack Obama helped Ayers promote his book in 1997, served on charitable boards with him through 2002, and regularly exchanged emails and phone calls with him through 2005. At what point did Barack Obama discover that his friend was an unrepentant terrorist? And if he is so repulsed by the acts of terror committed by William Ayers, why did the relationship continue? Any honest accounting by Barack Obama will necessarily cast further doubt on his judgment and his fitness to serve as commander in chief.
To prove my point about how indefensible his position is, watch an Obama spokesman, Robert Gibbs, squirm when asked the same question for 5 minutes; Is it OK to have a professional association with an unrepentant terrorist? He actually makes a mistake in stating that Obama is 'not a judge.' There is no need for Obama to have sullied his non-judgmental Hyde Park sensibilities, Ayers has freely confessed his terrorist activities.
On Hannity & Colmes, Gibbs had to resort to calling Hannity anti-Semitic, rather than answer the same question. Obama must either eventually answer that question, or appear so fearful of it, that he looks weak and guilty. If he chooses that option, the bunker approach, it means that if he tried to deny knowledge about Ayers, it is likely that evidence would surface to contradict him. This is going to be fun to watch.
Check out the Babaulu blog which has a number of useful links on this topic.
[Post-post 10/9] Peter Wehner from Commentary magazine, saw the same interview and draws the same conclusion, asking:
Team Obama’s evasive and clumsy response simply raises additional doubts about its candidate and his past. If there’s a simple explanation to Obama’s past associations, it would be helpful to hear what it is.
All articles referenced are copied in full at end of post. --------------------------------------------- McCain Release on Ayers
ARLINGTON, VA — Today, John M. Murtagh made the following statement on Barack Obama’s relationship with William Ayers:
“When I was 9 years-old the Weather Underground, the terrorist group founded by Barack Obama’s friend William Ayers, firebombed my house. Barack Obama has dismissed concerns about his relationship with Ayers by noting that he was only a child when Ayers was planting bombs at the Pentagon and the U.S. Capitol. But Ayers has never apologized for his crimes, he has reveled in them, expressing regret only for the fact that he didn’t do more.
“While Barack Obama once downplayed his relationship with Ayers, today his campaign took that deceit one step further. Barack Obama now denies he was even aware of his friend’s violent past when, in 1995, Ayers hosted a party launching Obama’s political career. Given Ayers’ celebrity status among the left, it’s difficult to believe. The question remains: what did Obama know, and when did he know it? When did Obama learn the truth about his friend? Barack Obama helped Ayers promote his book in 1997, served on charitable boards with him through 2002, and regularly exchanged emails and phone calls with him through 2005. At what point did Barack Obama discover that his friend was an unrepentant terrorist? And if he is so repulsed by the acts of terror committed by William Ayers, why did the relationship continue? Any honest accounting by Barack Obama will necessarily cast further doubt on his judgment and his fitness to serve as commander in chief.
“Barack Obama may have been a child when William Ayers was plotting attacks against U.S. targets — but I was one of those targets. Barack Obama’s friend tried to kill my family.”
In February 1970 John Murtagh’s father was a New York State Supreme Court justice presiding over the trial of the so-called “Panther 21,” members of the Black Panther Party indicted in a plot to bomb New York landmarks and department stores. Early on the morning of February 21, three gasoline-filled firebombs exploded at their home on the northern tip of Manhattan, two at the front door and the third tucked neatly under the gas tank of the family car. The same night, bombs were thrown at a police car in Manhattan and two military recruiting stations in Brooklyn. A few weeks after the attack, the New York contingent of the Weathermen blew themselves up making more bombs in a Greenwich Village townhouse. In late November that year, a letter to the Associated Press signed by Bernardine Dohrn, Ayers’s wife, promised more bombings.
John Murtagh’s Account Of The Weather Underground’s Attack -------------------------------------------------------------------------------------- This is a rush transcript from "Hannity & Colmes," October 7, 2008. This copy may not be in its final form and may be updated.
SEAN HANNITY, CO-HOST: So with us now is Senator Obama's communication director and senior spokesman, Robert Gibbs. I don't even want — I know you think he won. So there's not — not reason in asking you that.
All right. A lot of what came up tonight seem to be a rehash of what we discussed in the first debate. But going into the debate, the feeling was that, in light of recent comments by Governor Palin that we will be talking about William Ayers tonight.
Now let me ask you a question. How can you fight terrorism when you give speeches with, you sit on a board with, Axelrod says you're friendly with, and you never speak out against William Ayers?
ROBERT GIBBS, OBAMA COMMUNICATIONS DIRECTOR: You see — you had it (INAUDIBLE) until...
• Video: Watch Sean and Alan's interview with Robert Gibbs Related
* Column Archive o Obama Campaign Defends William Ayers Relationship o Former Tennessee Sen. Fred Thompson on Second Presidential Debate o Jack Kemp: McCain Warned of Fannie-Freddie Fallout o Ann Coulter and Pat Caddell on Vice Presidential Debate o Rep. Debbie Wasserman Schultz on VP Debate
Full-page Interview Archive Video o Watch Sean and Alan's Interview Show Info Airs Weekdays at 9 p.m. ET o E-mail Sean: hannity@foxnews.com o E-mail Alan: colmes@foxnews.com o Sean Hannity's Bio o Alan Colmes' Bio o Interview Archive
HANNITY: Wait a minute. Wait, he did blurbed his book, you know?
GIBBS: No.
HANNITY: No, no. Barack Obama did blurb Ayers's book.
GIBBS: Listen to this, do you think — so you think he's guilty by association, right?
HANNITY: No, I would — I'm Sean Hannity, here's my answer. Would never sit on a board with a guy that bombed our Pentagon or our capital. And I want to know...
GIBBS: Can I ask you...
HANNITY: No, wait, wait.
Why does Barack Obama sit on a board with — why did he stay — knowing his past, why would did he be friends with him?
GIBBS: What William Ayers did was deplorable. And when he did it, Barack Obama was 8. And Barack Obama said it was a deplorable act.
HANNITY: Then why would he sit on a...
GIBBS: That's what he said...
HANNITY: Why would you sit on a board with — would you sit on a board that a guy that bombed the Pentagon and wasn't sorry about it?
GIBBS: He sat on a charitable board and a board funded by a conservative Republican and a friend of Ronald Reagan.
HANNITY: Was that poor judgment?
GIBBS: That was Walter Annenberg, I say that was.
HANNITY: Was that poor judgment on Obama's part?
GIBBS: I don't think that's poor judgment at all. I think what Barack Obama has done throughout his career is talk about the big issues that are important.
HANNITY: All right. You're giving me a spin now. I'm asking you...
GIBBS: No, no. Let me ask you one question.
HANNITY: All right, you ask me a question.
GIBBS: OK. Are you anti-Semitic?
HANNITY: Not at all.
GIBBS: OK. On your show on Sunday, you — the show that's named after you, right? The show or the centerpiece of that show was a guy named Andy Martin, right?
HANNITY: I know you're reading it your talking points...
GIBBS: No, no, no, no. I don't have a talking point.
(CROSSTALK)
HANNITY: When I interviewed — hang on a second. I'll answer your question.
GIBBS: Let me do this. Let me do this.
HANNITY: When I interviewed Malik Shabbazz, when I interviewed Al Sharpton...
GIBBS: Right.
HANNITY: When I interviewed all these controversial figures — you see on FOX we actually interviewed people of all points of view whether we agree or disagree.
GIBBS: So...
HANNITY: I — the statement you're about to read...
GIBBS: Yes. Andy Martin called a judge a crooked clammy dude who has...
HANNITY: I totally, completely...
GIBBS: ... a history of lying and thieving coming...
HANNITY: His (INAUDIBLE) a few.
GIBBS: Martin went on to write that he understood better why the holocaust took place, given that Jew survivors are operating as a wolf pack of...
HANNITY: Here's my answer to you, I find those comments despicable. But wait a minute.
GIBBS: But you put him on your show.
HANNITY: We put Malik Shabbazz on the show?
GIBBS: It's the Hannity...
HANNITY: I put Khalid Mohammad on my show?
GIBBS: Why am I not to believe that you are anti-Semitic?
HANNITY: I put — let me...
GIBBS: Why am I not to believe that everybody who works for the network is anti-Semitic?
HANNITY: Here's the answer. Here's...
GIBBS: Because Sean Hannity...
HANNITY: Mr. Gibbs. Mr. Gibbs...
GIBBS: ... gave a platform to somebody who thinks that Jews are...
HANNITY: Mr. Gibbs, I'm a journalist who interviews people that I disagree with all the time that give their opinion. FOX has all points of view. We are allowing you on the program and I don't agree with hardly anything Obama says.
GIBBS: Well...
HANNITY: So here's my — no, I don't need an answer. No, no, I'm going to answer.
GIBBS: I won't — I really wish you wouldn't give a platform to virulent anti-Semites...
HANNITY: Here's - I will tell you this.
GIBBS: ... who said...
(CROSSTALK)
HANNITY: I'll make a deal with you. If Barack Obama admits that what he did by sitting on a board with, giving speeches with, having Ayers, going over to Ayers's house...
GIBBS: You'll admit you're anti-Semitic?
HANNITY: No, no. I will admit to you that — I will tell you that Barack Obama wants to be president. It's poor judgment, it is irresponsible...
GIBBS: Well...
HANNITY: ... and it's reckless to be — let me finish.
GIBBS: No, OK.
HANNITY: ... to be friends with a guy that bombed our Pentagon, was at war with our country, whose motto was to kill our children and kill your parents.
GIBBS: I think it's deplorable that you have put somebody on TV that's anti-Semitic...
HANNITY: And it's deplorable that your candidate for president has not been honest with the American people.
GIBBS: ... and he calls the Jews slimy and understands the holocaust better...
HANNITY: I'm explain — let me finish first.
(CROSSTALK)
ALAN COLMES, CO-HOST: We're on a short time here.
(CROSSTALK)
HANNITY: I'm explaining to you...
GIBBS: I can't believe you would give a platform...
HANNITY: So you don't want me to interview anyone I — only I can interview only people I agree with?
GIBBS: You put your whole show around him, Sean?
HANNITY: Barack Obama...
GIBBS: How am I to believe only that you agree with each and everything that Andy Martin said.
HANNITY: Barack Obama, the president sat in the pew of Jeremiah Wright for 20 years.
(CROSSTALK)
HANNITY: I have one last question. Did Barack Obama ever sit and meet with Louis Farrakhan? Has he ever met with Louis Farrakhan?
GIBBS: I don't know the answer to that.
HANNITY: Will you give us an answer by tomorrow?
GIBBS: Will you get back to me on whether you're anti -Semitic? Or whether you agree...
HANNITY: I'm not anti-Semitic?
(CROSSTALK)
COLMES: Now hold on.
HANNITY: The biggest supporter of Israel, Benjamin Netanyahu blurred my thoughts.
GIBBS: Let me tell you...
COLMES: Hold on.
GIBBS: I don't your Jewish viewers are going to take it very well...
HANNITY: Excuse me. Excuse me.
GIBBS: ... if you put somebody like that on your show.
HANNITY: I am the biggest supporter of Israel.
GIBBS: I think it's bad that you gave him a platform.
HANNITY: And I've got a 30-year history of — on the record of it.
COLMES: Well...
GIBBS: Ask him (INAUDIBLE) friends about what Andy Martin said.
HANNITY: And listen, I'm not friend with a guy that bomb to the Pentagon. I'm not friends with the guy that bombed the capitol and New York...
(CROSSTALK)
COLMES: Let me jump in here for a second, Robert.
(CROSSTALK)
COLMES: Hold on, guys. Hold on.
(CROSSTALK)
HANNITY: Your candidate is friends with a terrorist.
COLMES: Hey, guys.
GIBBS: That's not true.
HANNITY: He sits on a board with a terrorist.
COLMES: Guys, guys, stop it. First of all, he is not anti-Semitic. He's not.
HANNITY: Thank you very much.
GIBBS: Well...
COLMES: He's not anti-Semitic. This game of guilt by association, I disagree with on all fronts. I will defend Sean against anti-Semitism. He's not anti-Semitic. But I also deplore this game of guilt by association.
GIBBS: Sure.
COLMES: The people that sat on this board were also Republicans.
GIBBS: Right.
COLMES: On one of the boards it was a former president of Northwestern University. Walter Annenberg was a Reagan ambassador...
GIBBS: Friend of Ronald Reagan.
COLMES: ... who gave his money.
GIBBS: Right.
COLMES: Who spent — you know so, I mean, this game of guilt by association is ridiculous. And by the way, the Republicans who want to keep putting this fourth — I'll you a chance to respond in a second.
GIBBS: Yes.
COLMES: It's not working, because Barack Obama, the trend is towards Obama. It hasn't worked. The stuff they flung at him, which is now the kitchen sink, is a desperation, desperate act by a desperate campaign.
GIBBS: Here's what I think, Alan — here's what — exactly. This campaign — the John McCain campaign has run out of ideas and they're running out of time.
COLMES: Yes.
GIBBS: I think they realized — the reason they didn't talk about that tonight is because they understand that after two or three days, that attack didn't work.
COLMES: Right.
GIBBS: People are concerned about the economy. They're worried about keeping their job and keeping their home. They'd rather talk about these big issues.
COLMES: Yes. So what I don't understand is, as a tactician, and you work as a tactician, to some regard in the Obama campaign, if you're not winning and things aren't going your way and the narrative you're doing isn't helping your wind, change the narrative.
This isn't helping. Palin — and McCain is allowing Palin to do this. She started doing this.
GIBBS: Well, look, I read in the newspaper, on Monday, the McCain campaign said, every time we talked about the economy, we lose. They don't want to talk about the economy.
COLMES: Right.
GIBBS: But everyday Americans are losing their jobs and their homes and their health care. The American people deserve a debate that focuses on the big issues.
COLMES: Rick Davis of the — of the McCain campaign said this isn't about the issue.
GIBBS: It's not even about issues.
COLMES: The campaign is not about issues. They don't want it to be about issues.
You know things are bad when an economist whose nickname is 'Dr Doom' has been the most accurate about the housing bust and the potential systemic financial meltdown. In a recent interview, Nouriel Roubini explains why the problems in the money and credit markets are not areas which the $700 billion rescue plan are designed to effect. Here is a summary of what he believes is occurring:
A silent run on the uninsured [not FDIC covered] deposits of the banking system and even a run on some insured deposits are small depositors are scared
A run on most of the shadow banking system: over 300 non bank mortgage lenders are now bust; the SIVs and conduits are now all bust; the five major brokers dealers are now bust (Bear and Lehman) or still under severe stress even after they have been converted into banks (Merrill, Morgan, Goldman); a run on money market funds restrained only by a blanket government guarantee; a serious run on hedge funds; a looming refinancing crisis for private equity firms and LBOs)
A run on the short term liabilities of the corporate sector as the commercial paper market has totally frozen (and experiencing a roll-off) while access to medium terms and long term financing's for corporations is frozen at a time when hundreds of billions of dollars of maturing debts need to be rolled over;
A total seizure of the interbank and money markets
His emergency recommendations:
A temporary six-month blanket guarantee on all US deposits (not just those below $250k) combined with a rapid triage between insolvent banks that should be quickly closed and distressed but solvent – conditional on liquidity and capital injections – banks that should be rescued. To stop the silent run on the banking system you do need now such blanket guarantee on all (insured and uninsured) deposit regardless of their size.
Direct lending to the business sector from the Fed via extension of the PDCF and TSLF to the non financial corporate sector. This could include Fed purchases of commercial paper from corporations and other forms of financing of the short term liabilities of the Administration to small businesses secured in appropriate ways.
Have a coordinated 100bps reduction in policy rates by all major advanced economies central bank and, possibly, even some emerging market economies central banks.
Radically redesign the Treasury TARP rescue plan – possibly after its necessary approval today - to make it effective, efficient and fair.
His recommendations in English:
Insure all depositors and determine which banks are salvageable.
Have the government lend directly to corporations. This step was taken by the Fed yesterday.
Have all central banks coordinate a rate cut. This was done on Wednesday.
Change Rescue plan. Government should buy stock in the banks themselves, not just their bad assets. This was done on Friday.
It's good to see that Cuban-Americans have not joined the masses on these bank runs, which is why they remain 'silent runs.'
All articles referenced are copied in full at end of post. ------------------------------------------------------------------------------------- Radical Policy Steps Necessary to Avoid a Systemic Meltdown: Interview with the Council on Foreign Relations Nouriel Roubini | Oct 7, 2008
Here is below the text of an interview with the Council on Foreign Relations; the interview took place on Sunday October 5th but the message and policy recommendations that I proposed to prevent a systemic financial and corporate sector meltdown are still very relevant as the Fed and other central banks are still fiddling while Rome is burning. As discussed in this Global EconoMonitor forum Friday and yesterday Monday radical policy action is urgently necessary to avoid a systemic meltdown and a severe economic depression. The global economy is now already in a recession (as GDP is now contracting in all advanced economies and sharply slowing down in emerging market economies). We need now to take steps avoid a global depression.
9.30am Update: The Fed just announced a plan to start buying commercial paper (both asset backed and unsecured) from financial institutions and corporations. This action follows closely one of the radical policy options that I recommended last week: "Direct lending to the business sector from the Fed via extension of the PDCF and TSLF to the non financial corporate sector. This could include Fed purchases of commercial paper from corporations and other forms of financing of the short term liabilities of the Administration to small businesses secured in appropriate ways. Given the collapse of the corporate CP market and the banking system reluctance to provide loans to the corporate sector (credits lines are being shut down) the only alternative to the Fed becoming directly the biggest emergency bank for the corporate sector would be to force the banking system to maintain its exposure to the corporate sector, possibly in exchange for further Fed provision of liquidity to the banking system. The former option may be better than the latter to deal with the looming illiquidity of the corporate sector. " The action also allows the Fed to provide liquidity to non-bank financial instiutions that issues commercial paper; thus the PDCF has now been also extended well beyond non- bank primary dealers to other non-bank financial institutions that qualify for the new facility. This step also goes in the direction that I recommended last week: "Extension of the emergency liquidity support of the Fed (both TSLF and PDCF) to a broader range of institutions in the shadow banking system, especially those directly providing credit to the corporate sector. The TSLF and PDCF are already available to some non banks (the broker dealers that are primary dealers of the Fed). But two of such broker dealers are gone (Bear and Lehman) and the other three are under stress. Goldman Sachs, Morgan Stanley, the other primary dealers and the banks that have access to the TSLF and PDCF (and discount window) have massively used these facilities in the last few weeks; but they are hoarding such liquidity and not relending it to other banks, to the thousands of the other members of the shadow banking system and to the corporate sector as they need such liquidity and don’t trust any counterparty. Thus the transmission mechanism of credit policy (the non-traditional Fed liquidity lines) is completely shut down now. Thus, on an emergency basis the TSLF and PDCF need to be extended to other non-bank financial institutions, especially those directly providing credit to the corporate sector such as non-bank finance companies and leasing companies."
What still remains to be done - as i suggested last week - is a temporary blanket guarantee of all (insured and uninsured deposits) followed by a radical triage between insolvent banks that need to be shut down rapidly and solvent banks that need to be rescued. While Congress may resist legislation to pass such massive extension of deposit insurance the FDIC can rely on its "systemic risk exception" to provide guarantees to uninsured deposits. This "systemic risk exception" was already used - for the very first time in its historyy - by the FDIC to do the Citi-Wachovia. And yesterday the President's Working Group on Financial Markets made a statement that leaves open the option that "the FDIC will will use its authority and its resources, on an open or closed-bank basis, to protect depositors, guarantee liabilities, facilitate orderly wind downs, mergers, or adopt other stabilizing measures." I.e. both closed banks and still open banks may receive a guarantee of uninsured deposits. It is thus important that the FDIC uses such authority to stop a run on the uninsured deposits of the banking system. Whether the FDIC can use its "systemic risk exception" authority to provide a blanket guarantee of all uninsured deposits or whether the authority allows only to guarantee uninsured deposits on a case-by-case bank-by-bank basis is not clear. But certainly the authority could be used for large and systemically important banks that are at a risk of a run.
Steps to Halt the Slide
Interviewee:
Nouriel Roubini, Chairman, RGE Monitor, Professor of Economics, New York University
Interviewer:
Lee Hudson Teslik, Associate Editor, CFR.org
October 6, 2008
Nouriel Roubini, a professor of economics at New York University and the founder of the financial analysis firm RGE Monitor, has made his name by correctly predicting financial problems. Dubbed"Dr. Doom" by the New York Times Magazine, Roubini correctly warned of the impending housing market bust back in 2006, and, last February, of a rising probability of "catastrophic" financial system failure. At the time, he says, people called him a "lunatic," but his predictions have proven prescient.
In an interview with CFR.org, Roubini says the $700 billion financial bailout package passed by the U.S. Congress last week is unlikely to end the present crisis of confidence in financial markets. The plan, he says, does not get at the "much more urgent problem" of a "generalized run on the short-term liabilities both of the banks, of the non-bank shadow system, and now of the corporate sector." Roubini encourages a multi-pronged policy approach to the crisis, including: 1) coordinated interest rate cuts by all major world economies; 2) a move by the U.S. Federal Reserve to guarantee that it will provide liquidity in the event of any major bank run; 3) increased Fed action to provide short-term liquidity to non-bank actors that lend to corporations; and, if that doesn't work, 4) a willingness to make short-term loans directly to corporations. Roubini adds that despite having predicted much of the present crisis, he has been surprised at the speed at which it has unfolded.
Despite the so-called bailout plan passing the House of Representatives on Friday, there are obviously still some major strains to global financial markets, and it now appears as if commercial paper markets could be seizing up as well. How much of a help was the bailout plan, and where do you think things stand now?
The bill, first of all, in many dimensions is flawed. But leaving aside the flaws of the bill, there is a much more urgent problem that we're facing right now. It is one of a generalized run on the short-term liabilities both of the banks, of the non-bank shadow system, and now of the corporate sector. In the case of the banks, there is the beginning of a silent run on the uninsured debts of the banking systems, which are still over $2 trillion despite the increased deposit insurance. Many institutions in the non-bank shadow financial system are also finding that they cannot roll over their debts. There is a situation of generalized panic and lack of trust in counterparties. And worst of all, at this point, the commercial paper [short-term debt issued by large banks and corporations] to the corporate sector, and other types of funding to the corporate sector, is frozen right now. That can tip a corporation into a situation of defaults. They might not be able to pay interest on maturing debts, they might not be able to roll over maturing debts, and they might not be able to finance their working capital. So we're seeing a generalized liquidity run, and it's something that this bill cannot directly address. It's something that needs to be addressed with different sorts of tools.
What sorts of tools do you recommend? I see you've called for major coordinated interest-rate cuts, on the order of one hundred points across the board, in all major world economies.
That's only part of the solution. It has to do with coordinated rate cuts, but it's not obvious [even after the cuts] that liquidity is going to flow to those who need it. We need to do something slightly more radical than just an interest rate cut. Most likely the Fed will have either to guarantee all deposits on a temporary basis, since that's the only way you can essentially stop a run. But since that requires legislation and it's not obvious that Congress will pass a temporary blanket guarantee, the Fed has to stand ready to provide the liquidity to any bank that needs liquidity. So if there is a run on any bank, the Fed has to increase the money supply by as much as is needed to essentially prevent that particular institution from collapsing. That's the first thing.
The second thing is that the Fed is already, through its own emergency authority, allowed to provide liquidity to non-bank primary dealers that are systemically important. But the money the Fed is giving to the banks and to the primary dealers is not being re-lent to the other financial institutions in the shadow banking system. So the transmission of monetary policy is locked. Fixing that might require the Fed to start extending the PDCF [Primary Dealer Credit Facility], that is the facility that provides liquidity to non-banks, also to other financial institutions like finance companies, leasing companies, and you name it, in a way to provide liquidity to those financial institutions that directly lend to the corporate sector.
And if all that doesn't work, the Fed might be forced to directly liquefy the corporate sector by using its emergency powers to directly lend to the corporate sector, essentially buying commercial paper, providing cash.
Those are all three radical actions, but some combination of all three at this point is necessary. The problem is that once the bill was passed, the stock market reacted negatively both to the passage of the bill in the Senate--on Thursday, equities fell by 4 percent--then on Friday, after the House voted, the Dow fell almost 400 points. So the stock market is not reacting positively, and for the last couple weeks, interbank markets and commercial paper and other kinds of short-term lending in the financial system and the corporate system have come to a freeze. And this particular legislation doesn't have any role in essentially restoring the confidence and the liquidity in interbank and short-term credit markets. And in the short run, in the next few weeks, that's what you need to do. Because that legislation, even if implemented properly, is going to take a few months--if you don't reliquefy the banking system, the shadow banks, and the corporate sector, you'll have a financial meltdown in a matter of two or three weeks. That's much more urgent than anything else.
If we do start to see spillover into the corporate sector, where would you see that starting? Are there specific firms or specific industries that you think are most susceptible?
Now the situation is that even triple-A corporations [corporations with AAA credit ratings, the highest level] cannot roll over [defer payment on] commercial paper at any maturity past overnight. So we're already seeing a situation in which essentially commercial paper is frozen, and even corporations that are going to the banks now to try to draw down on their credit lines are finding that they are being refinanced at much higher rates. So it's becoming very expensive, and it's really squeezing the corporate sector. Unless the government steps in and directly provides liquidity to the corporate sector, I think we'll be in big trouble.
You have said that Goldman Sachs and Morgan Stanley converting themselves to bank holding companies was a "cosmetic" move and that they should be looking to merge at this point to avoid a run on their overnight liabilities. How big of a risk do you see at this point of a run?
They wanted to convert themselves as banks to have a stable base of insured deposits in the same way that brokerages in JP Morgan and Citi[group] have it, and the same way that Merrill [Lynch], being a part of Bank of America, will have it. You're not going to see Goldman Sachs or Morgan Stanley branches on the corner anytime soon. And even acquiring other banks over time, as a way to acquire deposits, is going to take a lot of time. Ninety percent of their borrowing is still overnight; they're leveraged thirty times, and they lend in ways that are illiquid and longer term. So there is a serious risk. Morgan Stanley, over the last ten days, has lost a good third of their hedge-fund clients. So the foundations of what they do are being undermined. Of course the Fed is providing both institutions with mass amounts of liquidity to try to compensate for whatever lack of finances they have, but how much? $100 billion? $200 billion? At some point there has to be a limit. So I think both institutions would be well-advised to do what Merrill did, as a way to avoid ending up like Lehman [Brothers, which collapsed]. Just do whatever to avoid ending up like Lehman is the basic thing, and just converting yourself to bank holding companies is not enough at this point. You really have to merge.
Obviously in many ways this is metastasized into a global crisis, but how evenly spread is the crisis across the globe? We've been seeing some pretty ugly news out of Europe. Which parts of the world are most vulnerable, and which are best buffered?
Certainly European banks are very vulnerable, for a variety of reasons. They bought a lot of the securitized debt, there is a bursting of housing bubbles in the UK, Ireland, Spain, even in Italy, Portugal, and France. There is the beginning of a recession in the Eurozone. The liquidity credit crunch in the United States is negatively affecting liquidity conditions in Europe. Plus European banks are exposed to Eastern Europe, Scandinavian banks are exposed to Iceland, Lithuania, Latvia, and Estonia-which are on their way to a hard landing. German and Austrian banks are exposed to countries in southern Europe like Hungary, the Czech Republic, Romania, Bulgaria, and Turkey-and they all look shaky. On top of all that the Fed at least has been cutting the Fed funds rate aggressively, while the ECB [European Central Bank] was first on hold and then they hiked from 4 [percent] to 4.25. They're going to cut them soon enough, but it's too little, too late. So the Eurozone and the rest of Europe is already in a recession, and it's getting worse, and now it's hit by a liquidity and credit crunch. And there is a crisis of confidence in European banks since several of them now from Germany, to the UK, to Iceland, to other parts of Europe, are now in trouble and need to be rescued. So the European banking crisis is getting severe.
Asia is less affected in terms of banks, even if you've had a couple of problems with banks in Hong Kong and there has been some nervousness there. The impact has been more on the stock market. The real economy is about to start to slow down, and hit Asian financial institutions.
Back in February, you predicted, or at least predicted the possibility, of much of what has happened. What about the way it has actually unfolded has surprised you the most?
I predicted most of these things happening, but what has surprised me the most is the speed at which things have happened. In February, back before Bear Stearns, I wrote this piece in which I said there are a couple major broker-dealers that could go belly-up and that in a couple years there won't be any major independent broker-dealers left, because I knew that their business model at this point was fundamentally flawed. But I said two years. Instead it took literally seven months, for first Bear Stearns to go, then Lehman, then Merrill merged with Bank of America, and now Morgan Stanley and Goldman Sachs have been forced to convert to bank holding companies. At that point people thought I was a lunatic to say two years, but it took seven months. In the last months we've had an acceleration of the collapse of the financial system. We had to go to a $700 billion package, but even that has not restored calm in the stock market, and it has not restored any calm in money markets or credit markets. The last few weeks since the proposal passed, interbank spreads have widened, TED spreads [the spread between interest rates on interbank loans and those on U.S. Treasury bills] have widened, credit spreads have widened, CDS [credit default swaps, essentially a kind of insurance on credit products] spreads have widened, and now there is even a run on commercial paper for corporations. So everything has gotten much worse. There is a generalized loss of confidence like we've never seen before. That was something that even somebody as bearish as myself wouldn't have thought would happen so quickly. --------------------------------------------- Read more!
Miami Herald boxing article by Santos Perez on Cuban boxer Gamboa. -------------------------------------------------------- Knockdown doesn't slow Cuban boxer Gamboa
Posted on Mon, Oct. 06, 2008
BY SANTOS A. PEREZ
Absorbing an early-fight knockdown failed to deter Yuriorkis Gamboa from another quick victory.
Gamboa, a Miami resident and one of the sport's rising stars, withstood a first-round fall and scored a second-round knockout against Marcos Ramirez late Saturday in Temecula, Calif.
''The punch didn't have much of an effect,'' Gamboa said of the shot that sent him to the canvas. ``Once I got hit, I became more aggressive.''
In fact, Gamboa took an illegal elbow to the chin before Ramirez landed a right to the head. The 2004 Olympic gold medalist shook off the knockdown and scored with numerous power punches the following round.
Any dominance Ramirez enjoyed early ended when Gamboa dropped him with a right uppercut in the second. Ramirez soon learned why previous Gamboa opponents usually fail to last the distance.
Although Ramirez reached his feet at the count of eight, Gamboa quickly followed with punishing combinations. Gamboa floored Ramirez again with rights to the body and head.
Ramirez (25-1) failed to beat referee Jerry Cantu's second 10 count, and the featherweight bout ended at 1:41 of the round.
Gamboa is now 12-0 with 10 knockouts since defecting from Cuba in December 2006. Eight of Gamboa's victories have occurred in the first two rounds.
''My career is progressing fast because of my ability,'' said Gamboa, 26. ``I am happy fans have high expectations of me. Up to now I have not disappointed them.''
WAR OF WORDS
Now it is up to Antonio Tarver and Chad Dawson to back up the talk of a recent conference call hyping their light-heavyweight title fight Saturday night in Las Vegas.
Tarver and Dawson exchanged verbal attacks at each other, including the usual accusations of being scared and old.
''You buckle up because you're going to go for a hell of a ride,'' Tarver told Dawson. ``Ever been to hell and back? 'Cause that's where you are going [on Saturday].''
Dawson had his own retorts.
''Bring it man, bring it,'' Dawson said. ``I am going to be locked and loaded. [On Saturday], I am going to get in there and spank him.''
MICCOSUKEE CARD
All-Star Boxing will present its fourth card of the year at Miccosukee Resort and Gaming on Oct. 17.
Former super-bantamweight contender Jorge Lacierva will face Feider Viloria for a regional 122-pound title in the main event.
Featured on the undercard will be South Florida-based fighters Orlando Gonzalez, Lenin Arroyo and Sergio Garcia. For information, call 305-222-4600.
WAIT UNTIL LATER
Raul Marquez's International Boxing Federation middleweight-title fight against champion Artur Abraham on Saturday in Germany was postponed after Abraham fell ill with flulike symptoms the morning of the bout.
The fight has been rescheduled for Nov. 8. Marquez, a 1992 U.S. Olympian and former International Boxing Federation junior-middleweight champion, is promoted by Hollywood-based Warriors Boxing. -------------------------------------------------
The closer to the election we get, I can't enjoy my politics as much as I usually do, since pundit agendas are so disciplined. Everyone on message is no fun. Be on the lookout for Republicans, or conservatives, who who seek to decry the 'tone' of the campaign. In effect, they are OK with losing and just hope to get invited back on the air when Obama wins. Specifically, I am thinking of Peggy Noonan and Mike Murphy. Apparently, the US presidency is not something worth potentially hurting feelings about. Look, Obama has radical allies and his voters are willing to overlook that, it's their prerogative. Just as it is ours to remind them of basic facts and what they willingly swallowed to cast their vote, e.g. 'I never heard Rev Wright say anything controversial' and 'I wasn't aware that Ayers was a terrorist.'
Jay Cost of Real Clear Politics does a good job of analyzing why McCain has no real options other than attacking Obama and why the timing is right.
... the definition of "Barack Obama" is more open to interpretation than other past nominees. The Obama campaign has used this vagueness to great effect. Simply put, because Obama has a slender record, he can be many things to many people. He can be the prophet of a new age to the chi tea crowd in Hyde Park, and a hardy Jacksonian fighter to the black coffee crowd in Youngstown. Politicians have been doing this dance routine for centuries. The fact that Obama's story is hardly conditioned by a paper trail enables him to do this with more facility than most contemporary politicians.
But this does not mean that Obama "is" only who he says he is. His thin record is potentially a double-edged sword because anybody can try to define him. With the mentioning of William Ayers, the GOP has just now begun the process of offering its alternative definition of the junior senator from Illinois. It waited until October because, as I noted last week, anywhere between 20% and 30% of the electorate is now making up its mind. This is the time to begin this process.
Columnist Thomas Sowell goes a step further by drawing a distinction between associations and allies.
Critics of Senator Barack Obama make a strategic mistake when they talk about his "past associations." That just gives his many defenders in the media an opportunity to counter-attack against "guilt by association."
We all have associations, whether at the office, in our neighborhood or in various recreational activities. Most of us neither know nor care what our associates believe or say about politics.
Associations are very different from alliances. Allies are not just people who happen to be where you are or who happen to be doing the same things you do. You choose allies deliberately for a reason. The kind of allies you choose says something about you.
Jeremiah Wright, Father Michael Pfleger, William Ayers and Antoin Rezko are not just people who happened to be at the same place at the same time as Barack Obama. They are people with whom he chose to ally himself for years, and with some of whom some serious money changed hands.
All articles referenced are copied in full at end of post. ---------------------------------------------------------------------------------- RealClearPolitics HorseRaceBlog By Jay Cost
« Nebraska and Maine? | HorseRaceBlog Home Page October 07, 2008 The McCain Campaign and the Financial Crisis
If Niccolò Machiavelli were to envision an economic crisis that would cripple the Republicans prior to Election Day, he couldn't do much better than one precipitated by the banking industry.
The Republican Party was founded in 1854 as one consequence of the Kansas-Nebraska Act. That measure divided the Whig Party into sectional factions and so destroyed it for good. The GOP was formed mostly from the remnants of the northern Whigs - and, unsurprisingly, the party picked up many Whig principles, which it has retained even after 150 years. The Whig Party stood for expanding American industry (hence its support of protective tariffs, burdensome to American business in 2008 but quite helpful in 1854), individual enterprise, the social utility of wage labor, the "man on the make," and infrastructure improvements.
Above all, the Whigs had a pro-banking reputation. The Whig Party formed partially in response to the actions of President Jackson against the Bank of the United States. Believe it or not, banking was a big issue in the 1830s - and the Whigs were for a strong, central bank. The Republican Party, having inherited much of the pro-business sentiment of the Whig Party, has been pro-banking in spirit for 150 years. Your average voter might not know the historical reasons for why the GOP is a pro-banking party, but s/he understands that it is.
That could be hurting the GOP as much as anything right now. If this were an economic crisis precipitated by a massive labor union strike - akin to what Harry Truman had to put up with after World War II - I'd wager the horse race numbers would be reversed right now. After all, the Democratic Party is identified with labor. But this is a crisis precipitated by the banks. Combine that with the fact that George W. Bush is at the helm, and it's unsurprising that the public has assigned the blame to the GOP.
This has put John McCain in a terrible spot. McCain's key electoral strength (at least relative to GOP also-rans like Mitt Romney) is that he is not an orthodox Republican. His relationship to the GOP is a bit like Diet Pepsi's relationship to Pepsi. That's why he had such stiff competition for the GOP nomination - lots and lots of people in this country are still big fans of the GOP (we call them Republicans), and they weren't tickled with the idea of a Diet Republican winning the nomination. But in the broad middle of the country, there is disaffection with George W. Bush and, by extension, the Republican Party. McCain's maverick label was his best hope for overcoming those sour feelings.
This banking crisis does not diminish McCain's maverick bona fides, but it makes them less relevant. Already uncomfortable with the GOP, the current economic predicament has probably made the public more so. Conservatives have thought for a while that McCain should hit back against the Democrats for their previous stands on Fannie and Freddie. However, McCain might be smart to drop that subject altogether. A Republican who runs against the banks might as well pee into the wind.
So where does McCain go from here? Mike Murphy has this advice:
Palin should drop the braying attacks on Obama's aging hippie bomber pals and start connecting to her cherished hockey moms on the one issue they = (sic) are actually worried about; a quickly slowing economy. Chuck the hacky and ineffective negative ads and switch to man on the street spots with real people voicing their real doubts about Obama; too weak to stand up to Washington's mighty special interest cartel or the newly empowered Democratic bosses of the Congress and Senate, too liberal to know how to fix the economy, too inexperienced to handle a dangerous world. On Tuesday, McCain should look into the camera and connect to the 80 million scared and worried Americans who will be watching him.
McCain is losing. To regain a chance to win, McCain must run as who he truly is; pragmatic, tough, bi-partisan and ready to break some special interest china to get the right things done in Washington. Fix the message, and you will fix the states.
Prior to the collapse of Lehman Brothers, I would have agreed with this wholeheartedly. Today, I think this is nothing more than a way for McCain to lose. Lose with grace and dignity, lose in a way that inspires the good folks over at Swampland, but lose nonetheless.
Average voters do not have anything approaching perfect information. They are probably not keenly aware of how McCain is different from the average Republican. I think they have a sense that he is - and in a vaguely anti-GOP year, that might be enough. However, this banking crisis means we are no longer in a vaguely anti-GOP year. We're in a year when one of the groups the Republicans are thought to stick up for gets the blame for screwing up the economy. That changes things. To return to the soda metaphor - it isn't enough to be Diet Pepsi when the country really wants a Coke.
So, don't expect Mike Murphy to be singing the praises of the McCain-Palin team anytime soon. It is probably not going to follow his advice. Or perhaps better put, it's not going to follow his emphases. "Pagmatic, tough, bi-partisan and ready to break some special interest china to get the right things done in Washington..." That will still be a theme on the Republican side, but don't expect it to be the dominant theme. McCain will keep singing this tune, but most of his surrogates are going to go on the attack.
Second, it means the definition of "Barack Obama" is more open to interpretation than other past nominees. The Obama campaign has used this vagueness to great effect. Simply put, because Obama has a slender record, he can be many things to many people. He can be the prophet of a new age to the chi tea crowd in Hyde Park, and a hardy Jacksonian fighter to the black coffee crowd in Youngstown. Politicians have been doing this dance routine for centuries. The fact that Obama's story is hardly conditioned by a paper trail enables him to do this with more facility than most contemporary politicians.
But this does not mean that Obama "is" only who he says he is. His thin record is potentially a double-edged sword because anybody can try to define him. With the mentioning of William Ayers, the GOP has just now begun the process of offering its alternative definition of the junior senator from Illinois. It waited until October because, as I noted last week, anywhere between 20% and 30% of the electorate is now making up its mind. This is the time to begin this process.
What McCain and the Republicans will try to do is the opposite of what Obama and the Democrats are trying. The Democrats want to fold McCain into the generic Republican because they know that a generic Republican would be hard-pressed to do better than 45% this year. The Republicans, knowing that the country is in a mood to elect a generic Democrat, will speak specifically about Obama, trying to make him seem quite worse.
Can they succeed at this? Perhaps. Again, Obama is less "credentialed" than most major party nominees in a hundred years. Public opinion of him is based largely upon political claims about him, as opposed to an immutable record of accomplishment or even a long history on the national scene. That means that the perception of who Obama is might be alterable.
Obama certainly did himself no favors by associating with people like William Ayers. This gives the Republicans a tactical advantage. They don't need to link Obama to Ayers; rather, they need to give specifity to the vague term "associate."
And if focusing on William Ayers doesn't work, expect to see a return of Jeremiah Wright, the most provocative of all Obama's past "associations." It was not noted at the time, but Wright might have done real if temporary damage to Obama's reputation back in March. The following is a track of Obama's weekly net favorable rating, according to Rasmussen.
Obama's Net Favorability.jpg
Note the dip that his numbers took after March 13th, the day ABC News reported on Wright's "God Damn America" sermon. It lingered at or below zero until March 28th, a full 10 days after Obama gave his "More Perfect Union" speech in Philadelphia. His numbers rebounded a bit in April, only to fall back down in May. Ultimately, it was not Obama's speech on Wright that resurrected his numbers, but his victory over Hillary Clinton on June 3rd. This indicates that, as a political matter, the Wright controversy might not be finished. Even if media types were satisfied with Obama's speech in Philadelphia - there is evidence that the mass public was not.
Ultimately, the GOP might end up using it even if McCain "prefers" it isn't used. The state and national party committees can go forward without his blessing. This is one side effect of the campaign finance "reform" that politicians from both parties have supported (and McCain has championed). Lines of accountability are quite blurry in the current regime. In many respects, the national and state committees are independent of candidate committees. Even though McCain gave a boatload of cash to these outlets immediately prior to his convention, and even though he is allowed to coordinate with them to some degree, he does not have control over the way many of these resources are used.
This means that a candidate can have the best of both worlds: he can enjoy the effectiveness of a negative attack while condemning it at the same time. The end result is therefore similar to what we saw in the early age of American electoral politics when the presidential nominees didn't take an active part in politicking, but their affiliates nevertheless went for the jugular.
I'd bet every dollar I have that this is going to offend the sensibilities of Democrats nationwide. But I'd also bet every dollar that, if the shoe were on the other foot, the Democrats would not hesitate to do likewise. One party's vicious smear is the other's vital truth. That's just the way it is.
I'm again reminded of Old Hickory. During the 1828 campaign, his surrogates accused John Quincy Adams of acting as a pimp for the Czar of Russia. Adams's supporters accused Jackson of murdering his own soldiers during the Creek War. Politicos don't level attacks like that anymore, but that's because such attacks wouldn't work anymore. However, we should always expect them to do what they think will work - the denunciations of their political opponents notwithstanding. ---------------------------------------------------------------------------------- October 07, 2008 The Real Obama By Thomas Sowell
Critics of Senator Barack Obama make a strategic mistake when they talk about his "past associations." That just gives his many defenders in the media an opportunity to counter-attack against "guilt by association."
We all have associations, whether at the office, in our neighborhood or in various recreational activities. Most of us neither know nor care what our associates believe or say about politics.
Associations are very different from alliances. Allies are not just people who happen to be where you are or who happen to be doing the same things you do. You choose allies deliberately for a reason. The kind of allies you choose says something about you.
Jeremiah Wright, Father Michael Pfleger, William Ayers and Antoin Rezko are not just people who happened to be at the same place at the same time as Barack Obama. They are people with whom he chose to ally himself for years, and with some of whom some serious money changed hands.
Some gave political support, and some gave financial support, to Obama's election campaigns, and Obama in turn contributed either his own money or the taxpayers' money to some of them. That is a familiar political alliance-- but an alliance is not just an "association" from being at the same place at the same time.
Obama could have allied himself with all sorts of other people. But, time and again, he allied himself with people who openly expressed their hatred of America. No amount of flags on his campaign platforms this election year can change that.
Unfortunately, all that most people know about Barack Obama is his own rhetoric and that of his critics. Moreover, some of his more irresponsible critics have made wild accusations-- that he is not an American citizen or that he is a Muslim, for example.
All that such false charges do is discredit Obama's critics in general. Fortunately, there is a documented, factual account of what Barack Obama has actually been doing over the years, as distinguished from what he has been saying during this election campaign, in a new best-selling book.
That book is titled "The Case Against Barack Obama" by David Freddoso. He starts off in the introduction by repudiating those critics of Obama who "have been content merely to slander him-- to claim falsely that he refuses to salute the U.S. flag or was sworn into office on a Koran, or that he was born in a foreign country."
This is a serious book with 35 pages of documentation in the back to support the things said in the main text. In other words, if you don't believe what the author says, he lets you know where you can go check it out.
Barack Obama's being the first serious black candidate for President of the United States is what most people consider remarkable but how he got there is at least equally surprising.
The story of Obama's political career is not a pretty story. He won his first political victory by being the only candidate on the ballot-- after hiring someone skilled at disqualifying the signers of opposing candidates' petitions, on whatever technicality he could come up with.
Despite his words today about "change" and "cleaning up the mess in Washington," Obama was not on the side of reformers who were trying to change the status quo of corrupt, machine politics in Chicago and clean up the mess there. Obama came out in favor of the Daley machine and against reform candidates.
Senator Obama is running on an image that is directly the opposite of what he has been doing for two decades. His escapes from his past have been as remarkable as the great escapes of Houdini.
Why much of the public and the media have been so mesmerized by the words and the image of Obama, and so little interested in learning about the factual reality, was perhaps best explained by an official of the Democratic Party: "People don't come to Obama for what he's done, they come because of what they hope he can be."
David Freddoso's book should be read by those people who want to know what the facts are. But neither this book nor anything else is likely to change the minds of Obama's true believers, who have made up their minds and don't want to be confused by the facts.
Copyright 2008, Creators Syndicate Inc. Page Printed from: http://www.realclearpolitics.com/articles/2008/10/the_real_obama.html at October 07, 2008 - 08:06:01 AM PDT --------------------------------------------- Read more!
I guess this is what lawyers call 'evidence.' It's the equivalent of having a video of John Wilkes Booth sneaking through Ford's Theater and having him stop to face the camera and slowly state his name and birthdate [5/10/1838]
Tom Bevan puts his focus on a regulator who warned of the coming mess and was attacked for doing so. These are the actual words of Democratic representatives defending Fannie Mae and Obama adviser, Franklin Raines. I double checked the transcript in case someone was manipulating the video to make them appear corrupt or clueless.
Greg Mankiw does a good job of calling out Sen Obama on his interpretation of the financial crisis:
If Senator Obama really wants to transcend partisan politics, as he would sometimes have us believe, he might want to give a slightly more balanced view of the history of how this all started. He also might want to take note that the Bush administration warned about some of these problems five years ago and had its reform efforts stymied by prominent members of Senator Obama's own party.
Barney Frank is a Democrat, has represented MA's 4th congressional district since 1981 and is the world's most famous graduate of the Buddy Hackett School of Broadcasting. In his case, the question I have is not how he missed the Fannie Mae corruption. The question is why anyone expected him to notice it. Barney Frank's male lover ran a prostitution ring out their home for over a year and he claimed to not have known.
All articles referenced are copied in full at end of post. ---------------------------------------------------------------------------- Greg Mankiw post Distorting History
In the debate last night, Barack Obama asked a good question about the present financial crisis but then gave an answer that was, at best, incomplete:
The question, I think, that we have to ask ourselves is, how did we get into this situation in the first place? Two years ago, I warned that, because of the subprime lending mess, because of the lax regulation, that we were potentially going to have a problem and tried to stop some of the abuses in mortgages that were taking place at the time....we're also going to have to look at, how is it that we shredded so many regulations? We did not set up a 21st-century regulatory framework to deal with these problems. And that in part has to do with an economic philosophy that says that regulation is always bad.The main problem, we are led to believe, was a Republican ideology of unfettered capitalism that led to insufficient government involvement in the financial system.
Senator Obama might want to read this NY Times article from 1999: In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders....Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people.I am not suggesting that the entire crisis should be put in the lap of the Clinton team. There is plenty of blame to go around. Indeed, the problem goes back at least as far as the Johnson administration, which helped set up a housing finance system that was always fundamentally flawed.
If Senator Obama really wants to transcend partisan politics, as he would sometimes have us believe, he might want to give a slightly more balanced view of the history of how this all started. He also might want to take note that the Bush administration warned about some of these problems five years ago and had its reform efforts stymied by prominent members of Senator Obama's own party.
Update: Here is a related news video. --------------------------------------------------------------------------- Tom Bevan post October 2, 2008 The Regulator Speaks
You may have seen a YouTube that's been zipping around the Internet over the past week featuring clips from a Congressional Hearing on Fannie Mae that took place in late September 2004 (as of this writing it has registered more than one million views). The eight minute and thirty-seven second video attacks Democrats for thwarting oversight of Fannie Mae and shows Republicans voicing support for increased regulation.
One clip in the video offers what looks to be damning proof of Rep. Barney Frank declaring there are "no safety and soundness issues" with Fannie Mae. Another shows Rep. Maxine Waters saying there is "no crisis" and touting the "outstanding leadership of Franklin Raines" - the head of Fannie Mae who was forced out shortly thereafter in disgrace for accounting fraud that took place under his watch. Yet another shows Rep. Lacy Clay calling the hearing a "political lynching of Frank Raines."
Playing a bit part in the video was Armando Falcon, Jr., the Director of the Office of Federal Housing Enterprise Oversight (OFHEO). Mr. Falcon, who was appointed to the position by Bill Clinton in 1999, went before the committee to present OFHEO's preliminary findings on accounting irregularities at Fannie Mae.
In the video, Mr. Falcon comes in for some rough treatment at the hands of Rep. Gregory Meeks, who declared he was "pissed off" at Mr. Falcon for submitting his report and said that it called into question Mr. Falcon's credibility and competence.
I tracked down Mr. Falcon and spoke to him briefly yesterday by phone. I asked him if he'd seen the video (he had) and whether he felt the selective clips in the video presented an accurate representation of what took place that day.
"It was an accurate depiction of how that hearing went," Mr. Falcon said. "As someone who worked for the Banking Committee for eight years, I was disappointed by the reception I got when I tried to submit the report on the findings for Fannie Mae. They gave me no benefit of the doubt that I might be right."
I asked Mr. Falcon if the September 2004 hearing was an isolated event, or whether this kind of thing happened on more than one occasion.
"My whole tenure at OFHEO trying to strengthen oversight of Freddie Mac and Fannie Mae - it was always a challenge in dealing with members of Congress who thought these companies could do no wrong," Mr. Falcon responded.
Clashing with Congress was "symptomatic of the difficulties that came with trying to be a strong regulator," Mr. Falcon said, adding that those difficulties often came from both sides of the aisle.
I asked Mr. Falcon if there were times when he felt he was "thwarted" by Congress, and whether that would be the proper term to describe the kind of opposition he ran into.
"Yes," Mr. Falcon said, "there were many instances over the years where that happened."
But, Mr. Falcon added, there were "some good members of Congress" who were supportive of his agency's efforts, citing Reps. Maurice Hinchey (D-NY) and Richard Baker (R-LA) as two members in particular who worked on behalf of OFHEO.
"So we had some bipartisan support from some members of Congress," Mr. Falcon said, "Unfortunately, we also had to deal with some strong opposition." ------------------------------------------------------------------------------ ABC on Barney Frank Scandal: No Political Hay for GOP, He's 'Truly Gifted' By Tim Graham October 5, 2006
Congressman Barney Frank’s scandalous tolerance of a gay prostitution business operating out of his house, uncovered by the Washington Times in 1989, drew from ABC nowhere near the dramatic amount of attention ABC gave Mark Foley. On the August 25, 1989 World News Tonight, Sam Donaldson noted it just once in passing, a mere 67 words:
"Massachusetts Representative Barney Frank, an acknowledged homosexual, today confirmed that his Washington apartment had been used as a callboy headquarters by a male prostitute for a year and a half until late 1987. Responding to a story in today's Washington Times, Frank said he had hired the prostitute out of his own funds as a personal aide and fired him when he found out what was going on."
There's no Brian Ross making dramatic accusations of "X-rated" behavior. To his credit, as World News Tonight stayed off the story, Donaldson went into more detail on the August 31 PrimeTime Live, but notice how Donaldson wants some measure of fairness and accountability (even a little noise about Democratic leaders going easy), and Diane Sawyer wants to make excuses:
Barney Frank: "I thought I was going to be a liberal who got involved directly with an individual who needed help, that I had an individual who was going to get help and he took me."
Donaldson: "Congressman Frank says he was taken. Diane, what do you think? Do you think this is Frank's private business or should the House of Representatives properly get into it?"
Sawyer: "Well, the House is going to investigate. He called for it. Obviously, if he condoned it, if he said to them - and I find it very hard to believe – ‘Go ahead and run your ring out of my house. Be sure and turn out the lights and empty the ashtrays when you're done.’ Obviously they're going to reprimand him and the voters are going to make the final decision. If he didn't know, it is a different issue."
Donaldson: "Well, that's true. And homosexuality is not really the issue there. You put your finger on it. Was his apartment being used as a house of prostitution? I think some may find it very hard to believe that for a year and a half he didn't know this, he didn't have any signs of this."
Sawyer: "But the fact of the matter is if they can't prove it, somebody in Washington has got to stop and say -- 'cause I think the rest of the country has said it a long time -- 'How long are we going to continue to have this persistent, possibly prurient, but certainly punitive interest in people's private lives? When is it going to stop?'"
Donaldson: "Well, I think people's private lives, if they're public officials and they're running for public office, are things that are up for grabs from the standpoint of the voters having a right to say, ‘Look, the guy wants to do this, it's fine, but I'm going to vote against him, so I want to know about it.’ You know, the thing that bothered me at first was that the Speaker of the House and some of the other top Democrats in the House seemed not to get excited about Congressman Frank's problem, not even to the point of investigating. And I think that's very dangerous for the House to take that attitude and for the Democratic Party to take that attitude."
Sawyer: "I think of the last eight sex scandals, six have been Democrats, two have been Republicans, but nobody wants to get into that game of statistics. Nobody's going to win."
Donaldson: "I think everybody's human, but it doesn't matter the party. Everyone should punished equally."
On September 18, 1989, after weeks of studiously ignoring the issue, World News Tonight ran a tough story by Jim Wooten claiming "Barney Frank’s political future has suddenly become precarious." The Boston Globe called on him to resign, as did liberal columnist Mark Shields. Democratic strategist Bob Beckel guessed he wouldn’t last much longer. But the only sources in the Wooten story were worried liberals. Wooten concluded: "Representative Frank is generally pretty eager to be on camera, but today he declined all interviews and issued instead a written statement. It said, ‘I will not resign’. That's fast becoming a minority view among his friends and colleagues in Congress."
But within a few weeks, on October 27, 1989, ABC was amazingly using Frank as an ethical scold against former Reagan HUD secretary Sam Pierce in the HUD scandal:
Sheilah Kast: "[Pierce] said he would keep doing that until what he called an accusatory atmosphere changed. The subcommittee was not impressed."
Frank: "The Fifth Amendment does not say that the atmosphere is too tense and therefore I will not testify."
On July 20, 1990, the House ethics committee absolved Frank of knowing about the prostitution ring, but recommended a reprimand for Frank for fixing Gobie’s 33 parking tickets and wrote a "misleading memo" to secure Gobie’s probation. Reporter Sheilah Kast concluded: "One antigay Republican will try to have Frank expelled. That won't pass, but the full House is likely to vote next week to reprimand Frank, making it difficult for Republicans to use Frank's ethics as a national campaign issue. Sheilah Kast, ABC News, on Capitol Hill."
Six days later, when the House voted to reprimand Frank, Kast once again insisted there was no political hay for Republicans in the Frank scandal: "The House voted two to one against the tougher penalties, most Democrats siding with Frank, most Republicans against him. With Democrats rallying around him, the reprimand is likely to have little impact on Frank's effectiveness here and almost no impact on his chances for reelection. Sheilah Kast, ABC News, on Capitol Hill." (This was true, in the end: he won 66 percent of the vote.)
On the February 20, 1992 Prime Time Live, Sawyer promoted Frank's new book, Speaking Frankly: "Congressman Barney Frank of Massachusetts. A man called one of the truly gifted legislators of our time. By some accounts, able to influence up to 70 percent of Democrats' votes on his issues, fair housing, defense cuts." She called him "A public figure fierce about private life, a scrappy intellectual who has made a career out of saying exactly what he thinks." The first sentence of Sawyer's segment: "Meet the man who does the most scandalous thing you can do in Washington. He tells the truth." (So much for that "misleading memo" he wrote to secure Gobie's probation.)
Sawyer brought up the Gobie story with a heavy dose of empathy: "Frank has said it all happened because he felt trapped in the closet." She wondered: "Was that the roughest time in politics for you?" When Frank said it showed clumsiness and stupidity, Sawyer interjected: "Loneliness?" Frank replied: "Yeah."
On December 31, 1992, ABC showed its love for Barney Frank by putting on Frank and his then-lover, Herb Moses, in the middle of a celebrity medley singing "Winter Wonderland," awarding them this (suddenly political) part of the lyrics: "And pretend that he is Parson Brown. He'll say are you married, we'll say 'no, man'..."
—Tim Graham is Director of Media Analysis at the Media Research Center --------------------------------------------- Read more!
Congrats to Norman Braman, he's #286 on Forbes list of the richest Americans. I'm sure it's a net positive thing that he and his $1.7 billion call Miami home. But not when it comes to the local sports scene. Mr Braman has financed many successful campaigns to defeat sales tax proposals to upgrade the Orange Bowl over the years. Lately, he has turned his attention and monies to defeating the efforts to renovate downtown and build a baseball stadium at the Orange Bowl site in Little Havana.
I'm not sure why Mr Braman seeks to deny our local professional teams the benefits of a modern public facility to play in, like the one he enjoyed when he owned the Eagles in Philadelphia. Maybe he just wants a very quiet city to enjoy his retirement. I kinda picture him near the window, peeking out from behind the curtains, muttering about those darn Marlins kids. Most people his age who want to reduce noise typically just turn off their hearing aids. But when you're that wealthy, apparently nobody ever just says 'oye viejo, let it go.' I guess that's how the rich are different, they issue their friends 1099's and rarely hear the word no. Even with their hearing aids turned on.
I was interested in the following description of his wealth in the Forbes report:
Swelling contemporary art market bumps Braman onto The Forbes 400; spectacular collection-worth an estimated $1 billion-includes pieces by Picasso, Jasper Johns, Andy Warhol, David Smith.
Not one Hispanic on that list, what gives! Joke.
But it did make me think. Isn't Jeffrey Loria an arts dealer? Oh man, are we Miami sports fans caught in pissing contest between two Northeast arts dealers which, like everything NY, ended up in Miami? Tom Wolfe where are you? We can't wait for that book any longer.
Wolfe had a great line that 'no one ever got hurt in a literary [or artsy] fistfight.' But that may not be true in our case. The Orange Bowl may have been imploded on top of Cubans, over an argument about Cubism, truly frightening.
Perhaps in sports, as in life, 'you always hurt the one you love.' In this case, I'm not feeling the love though. More like gratitude for a community in which Braman made his riches, but now feels increasingly alienated from. 'Sure, he thinks, people still call, but for the donation. Always for the check, like I don't know why they call. Oh well, the weather is to die for.'
All articles referenced are copied in full at end of post. ------------------------------------------------------------------------------------- Net Worth: $1.7 billion Source: Service, Self made Age: 76 Marital Status: Married, 2 children Hometown: Miami, FL, United States Education: Temple University, Bachelor of Arts / Science
Swelling contemporary art market bumps Braman onto The Forbes 400; spectacular collection-worth an estimated $1 billion-includes pieces by Picasso, Jasper Johns, Andy Warhol, David Smith. Second son of eastern European immigrants born and raised in Philadelphia. First job: traveling liquor salesman. Built vitamin retailer Keystone Discount Stores. Merged with Philadelphia Pharmaceuticals 1967, cashed out for $1 million a year later, moved to Florida. Bought Cadillac dealership in Tampa 1972; today owns 16 dealerships in Miami, Palm Beach and Denver. --------------------------------------------- Read more!
Accounting is not sexy. I know. Convincing people that FASB 157 is the root of our problems is a tough sell. I recommend a Donna Summer-like impersonation on the floor of the House if we are to see real movement on this issue:
Mark to Market, baby... When you're lending to others than me there's no valuation I'd rather see than your his-torical costs, baby
Brian Westbury makes the case in a WSJ op-ed that removing the recent accounting change would have a great impact. Given that it may alleviate the need for the Federal government to spend hundreds of billions, it's hard to figure the downside here. Investors being fooled by lack of transparency? At this point there's so much transparency, financials may need to be issued with an R rating.
I'll attempt to summarize Westbury's points:
A vast majority of mortgages, corporate bonds, and structured debts are still performing. But because the market is frozen, the prices of these assets have fallen below their true value.
The only transactions taking place in the subprime marketplace have been sales to private equity firms that do not have to mark assets to market prices.
Mark-to-market accounting forces financial firms to treat all potential losses as if they were cash losses.
If the loss is large enough, then the firm can find itself in violation of capital requirements. This, in turn, makes it vulnerable to closure, nationalization or forced sale.
Firms that are otherwise solvent must price assets to fire-sale values. Not only does this make them ripe for forced liquidation, but it chases away capital and leads to a further decline in asset values.
It was the use of mark-to-market accounting that allowed Treasury to declare Fannie Mae and Freddie Mac bankrupt.
Fannie Mae and Freddie Mac had positive cash flow when they were nationalized by the Treasury. They have not drawn a dime from the Treasury's $200 billion facility that was created to bail them out.
All articles and song lyrics referenced are copied in full at end of post. The Queen of Disco will always appear first. -------------------------------------------------------------------------------
Donna Summer - "Love to Love You Baby" - 1975
I love to love you baby...
When you're laying so close to me there's no place I'd rather you be than with me here
I love to love you baby...
Do it to me again and again you put me in such an awful spin in a spin
I love to love you baby...
Lay your head down real close to me soothe my mind and set me free set me free
I love to love you baby...
When you're laying so close to me there's no place I'd rather you be than with me here
I love to love you baby...
Do it to me again and again you put me in such an awful spin in a spin
I love to love you baby...
I love to love you baby...
I love to love you baby...
Love to love you baby baby...
I love to love you baby...
When you're laying so close to me there's no place I'd rather you be than with me here
I love to love you baby...
Do it to me again and again you put me in such an awful spin in a spin
I love to love you baby
Lay your head down so close to soothe my mind and set me free set me free
I love to love you baby
When you're laying so close to me there's no place I'd rather you be than with me here
I love to love you baby ----------------------------------------------------------------------------- WSJ 10/1/08 How to Start the Healing Now - Fix accounting rules and private money will come. By BRIAN WESBURY [picture was available, but I declined - JC]
The most amazing paradox of 2008 is the continued growth of the U.S. economy and the sorry state of the U.S. financial markets. Despite major financial-market problems, real GDP has increased by 2.1% in the year ended in the second-quarter -- 3.1% if we exclude housing. Not everything is great, but we all must agree that the economy has remained remarkably resilient.
This paradox works both ways. Financial problems have not yet dragged down the economy, but it is also true that the economy is not the cause of financial-market problems. Most of the loans that have been going bad in recent months would have gone bad even if the economy had been growing twice as fast. So what is to blame for the "worst financial crisis since the Great Depression"?
The answer seems simple. Mark-to-market accounting rules have turned a large problem into a humongous one. A vast majority of mortgages, corporate bonds, and structured debts are still performing. But because the market is frozen, the prices of these assets have fallen below their true value. Firms that are otherwise solvent must price assets to fire-sale values. Not only does this make them ripe for forced liquidation, but it chases away capital and leads to a further decline in asset values.
For example, the prices of assets on the books of Washington Mutual, when it was bought by J.P. Morgan at a fire-sale price, were cited as a reason to mark-down the assets on the books of Wachovia. This, some say, forced the FDIC to arrange its sale to Citibank.
The same is true of what happened to Fannie Mae and Freddie Mac, which had positive cash flow when they were nationalized by the Treasury. Here's something you won't believe: Fannie Mae and Freddie Mac have not drawn a dime from the Treasury's $200 billion facility that was created to bail them out. It was the use of mark-to-market accounting that allowed Treasury to declare them bankrupt. On a cash flow basis, they were solvent.
Mark-to-market accounting causes so much mayhem because it forces financial firms to treat all potential losses as if they were cash losses. Even if the firm does not sell at the excessively low price, and even if the net present value of current cash flows of these assets is above the market price, the firm must run the loss through its capital account. If the loss is large enough, then the firm can find itself in violation of capital requirements. This, in turn, makes it vulnerable to closure, nationalization or forced sale.
Because the government has been so aggressive with the use of these capital regulations, private capital has been scared away. Just about the only transactions taking place in the subprime marketplace have been sales to private equity firms that do not have to mark assets to market prices. Their investors agree to commit capital for the long haul, and because they are able to bend the current holders of these assets over the knee of the accounting rules they get prices that virtually guarantee a huge profit.
Despite all this evidence, the government has yet to provide relief from mark-to-market accounting. However, the Financial Accounting Standards Board will meet today to discuss potential changes. One thing it ought to consider is that the Treasury plan tips its hat to the problem by acknowledging that its goal is to put a floor under distressed security prices. Warren Buffet understood this and invested in Goldman Sachs before the law had passed, but with full expectation that it would. Other investors will follow. There is no shortage of liquidity in the world.
Nor would relaxing mark-to-market rules temporarily in the U.S. -- let's say for three years, for troubled assets issued between 2003 and 2007 -- undermine our standing internationally, as some allege. If a $700 billion bailout fund and the takeover of Fannie Mae, Freddie Mac and AIG have not already undermined foreign confidence, then nothing will. On the same day the bailout bill failed in the U.S. House of Representatives, the dollar soared.
Another argument is that changing the accounting rules is like sweeping the problem under the rug, which could lead to a Japanese-style decade of lost growth. However, back in the 1990s, Japan took six years to get real overnight lending rates below zero. It also increased tax rates. This was what caused Japan's lost decade -- a policy-induced deflationary recession, not just an unwillingness to book losses.
But it took the Federal Reserve only six months to cut real rates below zero, starting last September, and U.S. tax rates are unlikely to be hiked anytime soon. Even Barack Obama says he would not raise taxes in tough economic times. As a result, the U.S. is not anywhere near the kind of environment that would allow that to happen. Nor will relaxing mark-to-market rules allow losses to be hidden or ignored. Basing prices for illiquid assets on cash flows would still reflect impairment, but not allow them to dip down to fire-sale levels.
Once private investors know they cannot be taken out by accounting rules and illiquid markets, their cash will flow freely. And if the real issue is to find a proposal that will help fix the problems in our financial markets urgently, then the current Treasury plan fails the test. Because of government bureaucracy and legal issues, the first purchases by the Treasury plan will not be made for at least two weeks and possibly four weeks. Mark-to-market accounting changes could start the healing overnight and prevent the U.S. from moving further away from free-market capitalism.
Mr. Wesbury is chief economist at First Trust Portfolios L.P. ------------------------------------------------------ Read more!
Would that it have been Jorge Cantu's 30th, or even the animated character, Mr. Simpson. No, something much less useful, my conversion to 'homer status' that will make Rick Weaver sound like Vin Scully in the coming months.
My interest in the Marlins and their finances was the impetus for this blog. The basic idea was to was to take the Forbes analysis and translate it onto a financial statement. It appealed to my forensic inner-child accountant. I got some attention and it gave me an ostensible purpose for writing, which as it turns out, is what I really enjoy and intend to continue pursuing.
I recently had an exchange with a reader of my blog and critic of plans to build a baseball stadium on the Orange Bowl site. It was a friendly communication, but it left a bad taste for me. In a very minor way, my academic interest in the Marlins finances was in effect aiding and abetting those who wish to derail the stadium plans.
I have lived in or about the Little Havana neighborhood since 1961. It currently houses my Catholic Parish and I love what the area has represented to our Miami community. Along with the Freedom Tower, it is our Ellis Island. As such, my real and practical interests as a Miamian -- supporting investments in our community -- badly trumped [think Ali v Quarry] any esoteric interest in MLB finances.
So goodbye focus on MLB profitability and hello to analyzing who is for or against investments in local infrastructures. Perhaps to shine a light on those who have a certain standing in this community and oppose the stadium plans -- Michael Putney, Norman Braman, etc -- but perhaps were not as vehement, or even approved, other local projects, like the Arsht Center. Those who do not oppose the construction of non-essential facilities indiscriminately, certainly invite scrutiny as to the criteria used in distinguishing which projects they support.
Welcome to the new, unofficial and woefully inadequate blog home to the Little Havana Stadium Plan for Homers. We are the few, the loud, the aquamarines [I know it's teal OK - work with me].
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