2008

Unpublished
n/a

The Times On Bush, the Bailout, Debates

The New York Times offered these thoughts this morning:

Absence of Leadership

It took President Bush until Wednesday night to address the American people about the nation's financial crisis, and pretty much all he had to offer was fear itself.

There was no acknowledgement of the shocking failure of government regulation, or that the country cannot afford more tax cuts for the very wealthy and budget-busting wars, or that spending at least $700 billion of taxpayers' money to bail out Wall Street and the banks should be done carefully, transparently and with oversight by Congress and the courts.

We understand why he may have been reluctant to address the nation, since his contempt for regulation is a significant cause of the current mess. But he could have offered a great deal more than an eerily dispassionate primer on the credit markets in which he took no responsibility at all for the financial debacle.

He promised to protect taxpayers with his proposed bailout, but he did not explain how he would do that other than a superficial assurance that in sweeping up troubled assets, government would buy low and sell high. And he warned that "our entire economy is in danger" unless Congress passes his bailout plan immediately.

In the end, Mr. Bush's appearance was just another reminder of something that has been worrying us throughout this crisis: the absence of any real national leadership, including on the campaign trail.

Given Mr. Bush's shockingly weak performance, the only ones who could provide that are the two men battling to succeed him. So far, neither John McCain nor Barack Obama is offering that leadership.

What makes it especially frustrating is that this crisis should provide each man a chance to explain his economic policies and offer a concrete solution to the current crisis.

Mr. McCain is doing distinctly worse than Mr. Obama. First, he claimed that the economy was strong, ignoring the deep distress of the hundreds of thousands of Americans who have already lost their homes. Then he called for a 9/11-style commission to study the causes of the crisis, as if there were a mystery to be solved. Over the last few days he has become a born-again populist, a stance entirely at odds with the career, as he often says, started as "a foot soldier in the Reagan revolution."

After daily pivoting, Mr. McCain now says that the bailout being debated in Congress has to protect taxpayers, that all the money has to be spent in public and that a bipartisan board should "provide oversight." But he offered not the slightest clue about how he would ensure that taxpayers would ever "recover" the bailout money.

Mr. McCain proposed capping executives' pay at firms that get bailout money, a nicely punitive idea but one that does nothing to mitigate the crisis. And that is about as far as his new populism went.

What is most important is that Mr. McCain hasn't said a word about strengthening regulation or budged one inch from his insistence on maintaining Mr. Bush's tax cuts for the wealthy. That trickle-down notion has done nothing to improve the lives of most Americans and, even without a $700 billion bailout, saddled generations to come with crippling deficits.

Mr. Obama has been clearer on the magnitude and causes of the financial crisis. He has long called for robust regulation of the financial industry, and he said early on that a bailout must protect taxpayers. Mr. Obama also recognizes that the wealthy must pay more taxes or this country will never dig out of its deep financial hole. But as he does too often, Mr. Obama walked up to the edge of offering full prescriptions and stopped there.

We don't know if Mr. McCain or Mr. Obama will do any good back in Washington. But Mr. McCain's idea of postponing the Friday night debate was another wild gesture from a candidate entirely too prone to them. The nation needs to hear Mr. Obama and Mr. McCain debate this crisis and demonstrate who is ready to lead.

 

About that MBA

As I get ready to hear from our President tonight, I am comforted by recalling that indeed he is our first President with an MBA. 

Perhaps, tonight, he can use that MBA to explain this statement from his Treasury Department earlier this week.  

Chicken John Won't Debate

My initial reax to Old Man McCain's new stunt is that this isn't going to fly.

McCain Tries to Bail Out Due To Bailout

For well over a week, NDN has been offering its thoughts on the causes, effects, and proposals in the financial meltdown. Yesterday, Simon Rosenberg and Dr. Robert Shapiro released an essay encouraging the federal government to keep people in their homes and stabilize the housing sector. U.S. Sen. Barack Obama has been doing the same, meeting with top economists, outlining his principles, and working to ensure that this financial bailout actually helps everyday Americans.

Meanwhile, U.S. Sen. John McCain, has, in the words of George Will, "substituted vehemence for coherence," for the last week, calling for the head of SEC Chairman Chris Cox, demanding regulation he used to crusade against, and otherwise misunderstanding the complex levers that drive America’s financial sector.

Today, following an 8:30 am call from Obama and some very, very bad public polling, McCain snapped, and decided that the financial crisis was in fact worthy of a significant reaction. McCain’s chosen reaction, leaving the campaign trail to return to the scene of the deregulation and try his hand at crafting legislation that accomplishes the opposite of what he has stood for his entire political career, is the easy way out. It is designed to do one thing: place Obama in an awkward position. One must not confuse this – campaign tactics – for what McCain wants people to think it is – leadership.

So, instead of campaign trail theatrics and huff-and-puff returns to Washington, let’s have a debate on Friday. But, instead of talking about foreign policy, let’s talk about the financial meltdown and the future of the American economy. An unprecedented number of Americans think the country is headed in the wrong direction, and they are looking for those who would lead to demonstrate that they have a plan to put the nation back on track. These two Senators are running for President amidst the greatest economic turmoil in a very long time. The American people deserve a debate.

UPDATE: From Obama, courtesy of Politico.com's Ben Smith:

It’s my belief that this is exactly the time the American people need to hear from the person who in approximately 40 days will be responsible with dealing with this mess.
...

Presidents are going to have to deal with more than one thing at a time. It's not necessary for us to think that we can do only one thing, and suspend everything else.

 

Back to Basics: The Treasury Plan Won’t Work

Years of reckless mismanagement by the self-styled masters of the financial universe and senior economic policy officials now leave us with no alternatives but major action – but the Administration’s proposals are neither the only alternative nor anywhere close to the best one.

The Treasury says we need its plan to address a liquidity crisis, with banks unable to secure the funds to lend to sound businesses that need to invest or just need to meet their payrolls. There is evidence that overnight lending to banks by other banks or other financial institutions is way down. But there’s no evidence of sound companies unable to get funds to meet operating requirements. Moreover, the Federal Reserve has opened its "discount" window and is prepared to lend funds to any financial institution and at below-market rates. The Bush Administration seems to be trying to steamroll Congress and the public: we have to conclude that there is no liquidity emergency that could conceivably justify the steps they propose.

The Treasury also says Americans have to be prepared to bankroll their plan, because more financial institutions are on the verge of insolvency, which would trigger serious problems for the economy. The insolvency or capital problem is self-evident, since these institutions created it. They borrowed hundreds of billions of dollars to buy mortgage-backed securities and to sell the default-protecting derivatives of those securities, all of which were patently speculative: they bought and sold them precisely because they produced very large streams of monthly income, and since financial markets trade off risk and return, their initial high returns signaled that they were very risky.

Now that the securities have fallen sharply in value, these institutions owe much more on the debt they took on to buy them than the securities themselves are worth. That means capital losses that come out of their equity and leave many of them technically insolvent or close to it. So there is a real capital or equity problem across much of our financial system. The Treasury plan won’t solve it, however, not at least on terms that any sensible legislator, regulator or taxpayer should consider.

The Treasury plan originally contemplated providing that capital by paying financial institutions more than their securities are currently worth – since it’s the current market value of those securities that threatens these institutions with insolvency. So that means ordinary taxpayers would have to overpay for the assets of institutions owned and operated by the richest people in America. That’s the Bush economic doctrine, but it’s not mine – is it yours?

At a minimum, if taxpayers are to overpay rich people for their risky investments, they should get a big equity stake in all the institutions in return. That would make it a version of a debt-equity swap – but if that’s what it is, we alternatively could use regulation to require debt-equity swaps between the institutions and those they actually owe to debt to. That would be cleaner, less intrusive over the long run, and create no taxpayer exposure.

Alternatively, Congress could mandate that these institutions halt dividend payments and raise more capital, since we’re in this fix because they haven’t been subject to capital/equity requirements. Anything can find a buyer at the right price, and as a result of these institutions’ mismanagement, they’ll have to trade more of their equity for the capital -- as Goldman Sachs is doing now with Warren Buffet.

That still leaves the most serious business. Congress needs to take serious steps to address the underlying cause of the crisis by stabilizing the underlying assets: provide a new loan facility for homeowners facing foreclosure or new mechanisms to renegotiate the terms of the mortgages of people facing foreclosure. It also leaves one more thing: the stark and unhappy recognition that the Treasury, the Federal Reserve and the White House have produced an unworkable, inequitable and inefficient plan that Congress need not and should not accept.

New Post Poll Has Obama Up 52-43

This one is sure to have our busy Capital abuzz this morning.

Se Lanza Campaña llamada "Adelante" en Colorado Para Animar Participación de Votantes

Hoy, el centro de investigación llamado The New Policy Institute, un filial de NDN sin fin de lucro y no-partidario, lanzó una campaña para motivar a ciudadanos Hispanohablantes a votar este Noviembre.

La campaña se llama Adelante. Comienza esta semana con anuncios a punto de saturación del mercado de radio en Colorado, y con una página de Internet, www.adelante08.org. La campaña hará dos cosas: por un lado ayudará a motivar al público a votar y por otro lado explicará el proceso para votar, incluyendo información sobre votación temprana y votación ausente. Se espera que gran parte del público serán Hispanos que van a votar por primera vez. La primera fase de la campaña comienza hoy en Colorado. Entre hoy y el día de las elecciones, Adelante lanzará cientos de anuncios en Denver (estaciones KBNO, KXPX, KJMN y KMXA), Colorado Springs/Pueblo (estaciones KNKN y KRYE), y en Fort Collins/Greeley (estación KGRE). Para escuchar el primer anuncio, “Acuérdate”, o leer el guión del anuncio y la traducción al Inglés, haga clic aquí.

Para más información sobre el electorado en los Estados Unidos, vea el reporte recientemente publicado por NDN, Hispanics Rising II. Durante muchos años, NDN y sus filiales han luchado para asegurarse de que la voz de la comunidad creciente de Latinos sea escuchada dentro del gran debate que informa a la democracia Estadounidense. Esta campaña es el capítulo mas reciente dentro de este esfuerzo de muchos años.

-- Guión del anuncio --

Español:

MUJER: ¿Qué tan lejos hemos llegado?
HOMBRE: Acuérdate de Roberto Clemente.
MUJER: De la misma Selena.
HOMBRE: O de César Chávez.
MUJER: Sí, hemos llegado muy lejos, pero no podemos vivir de glorias pasadas.
HOMBRE: Este año, de ti depende decidir si nos quedamos hasta donde hemos llegado o seguimos avanzando.
MUJER: Sigue adelante y vota.

Mensaje pagado por Adelante, NPI y el Tides Center.

NDN Affiliate Launches Campaign in Colorado to Urge Spanish-speaking Citizens to Vote

Today, The New Policy Institute, a non-partisan 501 c (3) affiliate of NDN, has launched a new campaign to encourage Spanish-speaking citizens to vote this November.

The campaign is called Adelante, Spanish for “Moving Forward.” The campaign kicks off this week with saturation-level statewide radio spots in Colorado, and the launch of a new Web site, www.adelante08.org. The campaign will both encourage people to vote and explain the process of voting, including early and absentee voting, to what is projected to be a large pool of first-time Hispanic voters.

The first phase of the paid media portion of the campaign begins today in Colorado. Between now and Election Day, the Adelante campaign will run hundreds of radio spots in Denver (stations KBNO, KXPX, KJMN, and KMXA), Colorado Springs/Pueblo (stations KNKN and KRYE) and Ft. Collins/Greeley (station KGRE).

To listen to the first ad, "Acuérdate," or "Remember," click here. A transcript of the ad, and the English translation, are below.

For more background on Hispanic voting trends in the United States, please view NDN’s recent report, Hispanics Rising II.

For many years now, NDN and its affiliates have worked to ensure that the voice of the fast-growing Latino community is heard in the great debate that informs American democracy. This campaign is the latest installment in that long-standing effort.

To read the script in Spanish and English, please see below:

Español:

MUJER: ¿Qué tan lejos hemos llegado?
HOMBRE: Acuérdate de Roberto Clemente.
MUJER: De la misma Selena.
HOMBRE: O de César Chávez.
MUJER: Sí, hemos llegado muy lejos, pero no podemos vivir de glorias pasadas.
HOMBRE: Este año, de ti depende decidir si nos quedamos hasta donde hemos llegado o seguimos avanzando.
MUJER: Sigue adelante y vota.
Mensaje pagado por Adelante, NPI y el Tides Center.

English:

WOMAN: How far have we come?
MAN: Remember Roberto Clemente.
WOMAN: Or Selena.
MAN: Or even César Chávez.
WOMAN: Yes, we have come really far, but we can’t live from glories of the past. 
MAN: This year, it is up to you to decide if we stay where we are or if we continue to move forward.
WOMAN: Move foward and vote.
Message paid for by Adelante, NPI and the Tides Center.

NDN's Robert Shapiro on Marketplace

NDN Globalization Initiative Chair Dr. Robert J. Shapiro spoke yesterday on Marketplace, the daily radio show by American Public Media.  Shapiro talked about the strain this proposed bailout will put on the agenda of the next president. The full transcript is below, as well as a link to the audio of the interview.

KAI RYSSDAL: Amid all the uncertainty about how this bailout's going to work, commentator and economist Robert Shapiro points out that $700 billion is a whole lot of money not to have.

ROBERT SHAPIRO: Whatever we do, this bailout will use up virtually all of the resources the next president needs to bring about whatever changes he's envisioning.

That's because the government will need those resources to buy up all those devalued mortgage-backed securities and their derivatives.

The direct costs of buying up all those falling securities will come over the next several months. But any revenues the Treasury eventually recoups from selling them back to the market? That won't happen for years, if ever.

And that leaves the next president facing a deficit of $600 billion to $700 billion, maybe more.

There goes the money for President Obama to expand health care coverage, or for President McCain to cut corporate taxes or extend President Bush's tax cuts for wealthy people.

And next, President Obama may have to trade off a major push on alternative fuels against those new tax cuts for the middle class.

While President McCain may have to give up extending tax relief for dividends or the funding for his educational reforms.

Both candidates also may face a version of the dilemma European leaders faced in the 1960s and 1970s, when they gave up plans to maintain strong military spending in order to elaborate their social welfare protections.

Here, this time, the next president's promises to expand the Army may well give way to new subsidies not for poor or working people, but for the financial institutions that once presided so proudly over the global economy.

Since most of the bailout's costs should come in the next two years or so, they shouldn't constrain the new president's longer-term plans for perhaps one major initiative. That is if he still has any public support left after failing to deliver on all those other promises he's making right now. 

Listen here to the audio of Shapiro's interview.

 

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