The raid on the United States treasury

A Counter Punch article by Michael Hudson contains this bit:

This is so important a topic, that it deserves top billing!!! Hidden inside the AIG bailout funding package, surely hastily cobbled together, but carefully enough to include a totally corrupt clause, was a handy dandy clause that permits raids. The conglomerate financial firms are permitted at this point to use private individual brokerage account funds to relieve their own liquidity pressures. This represents unauthorized loans of your stock account assets. So next, if the conglomerate fails, your stock account is part of the bankruptcy process.

Chuck Schumer had this to say:

“You can’t give all this power to any one person, particularly a non-elected person, as much as we respect the secretary, without making sure that conflicts of interest are dealt with, that people are treated fairly.”

And from Chris Dodd, Chairman of the Senate Banking Committee, on a provision that would bar judicial scrutiny of the U.S. Treasury Department’s acquisition:

“I think that may be illegal, not to be able to challenge things. I’m not sure that would hold up anyway.”

Barney Frank from the House committee and Paulson have come to some kind of agreement; no news from Dodd, at this point. Obviously, something has to happen quickly … but just what that might be is worrisome to the point of national aneurism [just one more bubble to collapse -- actually, the only good news I can see is that there AREN'T any more bubbles!]

And Mr. Bush wants us to move on this ASAP! Of course he does!

I don’t like to think of the public as sheep, and I do think we’ve awakened to a good deal over these last years, but if we still entertain the fantasy that the US of A is a Democratic Republic … or that what is happening behind the scenes in this bail-out doesn’t line the pockets of the few at the expense of the entire planet and smack of a final strike at the heart of this nation under the Bush backdrop … then we should just put our heads down and munch a little more grass.

Baaaaaaah!

Jude

Naomi Klein Discusses “Disaster Capitalism” On Real Time With Bill Maher
(VIDEO)
HuffPo
September 22, 2008

Naomi Klein, author of the book “The Shock Doctrine,” was a guest on Bill Maher’s HBO Show, “Real Time.” Klein’s book posits that certain people often like when there is a disaster because it allows them to rationalize making radical and unpopular changes that normally the citizenry would not go for. She discusses her theory of “disaster capitalism” within the context of the current economic crisis. Open link for clip. ++

The Middle Class Must Not Be Forced to Bail Out Wall Street Greed
Senator Bernie Sanders, CommonDreams
9/21/08

For years, as a member of the House Banking Committee and now as a member of the Senate Budget Committee, I have heard the Bush Administration tell us how “robust” our economy was and how strong the “fundamentals” were. That was until a few days ago. Now, we are being told that if Congress does not act immediately and approve the $700 billion Wall Street bailout proposal these “free marketers” have just written up, there will be an unprecedented economic meltdown in the United States and an unraveling of the global economy.

This proposal as presented is an unacceptable attempt to force middle income families (and our children) to pick up the cost of fixing the horrendous economic mess that is the product of the Bush Administration’s deregulatory fever and Wall Street’s insatiable greed. If the potential danger to our economy was not so dire, this blatant effort to essentially transfer $700 billion up the income ladder to those at the top would be laughable.

Let us be clear. If the economy is on the edge of collapse we need to act. But rescuing the economy does not mean we have to just give away $700 billion of taxpayer money to the banks. (In truth, it could be much more than $700 billion.

The bill only says the government is limited to having $700 billion outstanding at any time. By selling the mortgage-backed assets it acquires - even at staggering losses - the government will be able to buy even more resulting is a virtually limitless financial exposure on the part of taxpayers.) Any proposal must protect middle income and working families from bearing the burden of this bailout.

I have proposed a four part plan to accomplish that goal which includes a five-year, 10% surtax on the income of individuals above $500,000 a year, and $1 million a year for couples; a requirement that the price the government pays for any mortgage assets are discounted appropriately so that government can recover the amount it paid for them; and, finally, the government should receive equity in the companies it bails out so that when the stock of these companies rises after the bailout, taxpayers also have the opportunity to share in the resulting windfall.

Taken together, these measures would provide the best guarantee that at the end of five years, the government will have gotten back the money it put out.

Second, in addition to protecting the average American from being saddled with the cost, any serious proposal has to include reforms so that we end the type of behavior that led to this crisis in the first place. Much of this activity can be traced to specific legislation that broke down regulatory safety walls in the financial sector and allowed banks and others to engage in new types of risky transactions that are at the heart of this crisis. That deregulation needs to be repealed. Wall Street has shown it cannot be trusted to police itself. We need to reinstate a strong regulatory system that protects our economy.

Third, we need to address the needs of working families in this country who are today facing very difficult times. If we can bail out Wall Street, we need to respond with equal vigor to their plight. That means, for example, creating millions of jobs through major investments in rebuilding our crumbling infrastructure and creating a new renewable energy system. We must also make certain that the most vulnerable Americans don’t freeze in the winter or die because they lack access to primary health care.

Finally, we need to protect ourselves from being at the mercy of giant companies that are “too big to fail,” that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement, and even the illegal conduct of these companies’ executives.

These are the last days of the Bush Administration, the most dishonest and incompetent in modern American history. It is imperative that, at this important moment, Congress stand up for the middle class and for fiscal integrity. The future of our country is at stake. ++

Growing Right-Wing Opposition to the Paulson Plan
Glenn Greenwald, Salon via CommonDreams
Monday, September 22, 2008

On Saturday morning, I noted — quoting Atrios — the almost complete lack of debate over the ever-changing dictates issued by Treasury Secretary Hank Paulson. Last week, whatever Paulson said on any given day — no bailouts; only selected bailouts; massive $700 billion bailout plan — immediately became the unchallenged conventional wisdom.

That has all changed. Prominent economists, who had previously been defending Paulson for the most part, began voicing serious doubts about his plan. As the AP put it yesterday: “Many of the same economists and opinion-makers who’d provided a bipartisan sheen of consensus to Treasury Secretary Henry Paulson’s previous moves have quickly begun casting doubts on the wisdom of a policy that would allow Treasury to purchase without oversight hundreds of billions of dollars of difficult-to-price assets from financial institutions.” Not only Paul Krugman, who was a skeptic from the start, but conservative economic experts have also now expressed opposition, including former Bush and Romney advisor Greg Mankiw and — in an excellent column on Saturday — Sebastian Mallaby, who described the rapid move to embrace Paulson’s plan as “extremely dangerous.”

And now, some of the most rabid ideologues on the Right are voicing increasingly strident opposition as well. At National Review last night, Newt Gingrich wrote that “watching Washington rush to throw taxpayer money at Wall Street has been sobering and a little frightening” and said he “hopes Congress will slow down and have an open debate.” Thereafter, NR’s Yuval Levin proclaimed that nobody could read through the Paulson proposal “without concluding that everyone in Washington has lost their minds.” In The New York Times today, Bill Kristol said he’s “doubtful that the only thing standing between us and a financial panic is for Congress to sign this week, on behalf of the American taxpayer, a $700 billion check over to the Treasury,” while Michelle Malkin posted a lengthy alarmist screed warning that “Hank Paulson must be contained.”

Right-wing opposition to the Paulson plan is vital for having any meaningful chance to stop it. Does anyone have any confidence at all in the Democrats’ willingness and/or ability to impede this bailout train if the Bush administration and the Right were vigorously behind it, warning the nation of impending doom unless we submit to vast, unchecked government power of the type Henry Paulson is demanding?

The instances of complete Democratic acquiescence under those circumstances — including when they “controlled” the Congress — are far too numerous to allow any rational person to think Democrats, standing alone, would stop the Paulson plan. As sad as it is, meaningful right-wing opposition is critical for that to happen.

More interesting are the reasons why these right-wing polemicists have decided they have real doubts about the wisdom of the Paulson plan. In opposing the plan, each of them cited — with alarm — the provision which vests full, unfettered and unreviewable discretion in the Treasury Secretary to determine how the $700,000,000,000 is allocated: Levin (plan gives “essentially unlimited power to use $700 billion to make purchases the scope of which is defined very loosely and vaguely”); Gingrich (”We are being reassured that we can trust Secretary Paulson ‘because he knows what he is doing’. Congress had better ask a lot of questions before it shifts this much burden to the taxpayer and shifts this much power to a Washington bureaucracy”); Kristol (”There are no provisions for - or even promises of - disclosure, accountability or transparency”); Malkin (Washington is demanding we “fork over $700 billion to Treasury Secretary Henry Paulson and allow him to dole it out to whomever he chooses in whatever amount he chooses — without public input or recourse”).

Apparently, the same political faction that has cheered on every instance of unchecked, absolute executive power over the last eight years — which demanded that the President, and he alone, decide which citizens, including Americans, can be spied on, detained, even tortured, and that no oversight or disclosure was needed for any of that — has suddenly re-discovered their desire for checks on federal government power. The reason? They say it themselves: with the looming prospect of an Obama presidency, they may no longer be in charge of that Government and these “small government conservatives” have thus suddenly re-awoken to the virtues of checks and balances, oversight and other restraints.

In explaining his opposition to the Paulson plan, Levin warns:

Even if Hank Paulson were the all knowing god of economics, would it make sense to give this kind of power to the treasury secretary for the next two years just forty days before an election? Shall we go through our mental list of who an Obama administration (or a McCain administration for that matter) is likely to put in that post?

Gingrich writes:

Imagine that the political balance of power in Washington were different.

If this were a Democratic administration the Republicans in the House and Senate would be demanding answers and would be organizing for a “no” vote . . . . But because this gigantic power shift to Washington and this avalanche of taxpayer money is being proposed by a Republican administration, the normal conservative voices have been silent or confused.

It’s time to end the silence and clear up the confusion.

Malkin is actually worried about vesting such power in Paulson himself — she thinks he’s basically a tool of the Communist Chinese, a follower of “Gore-esque” eco-zealotry, and worst of all, someone with ties to some Democrats — but the point is the same: people have long predicted that the Right will do a complete reversal (once again) in their positions on vast federal power and unlimited executive authority the minute that such power is vested in someone they oppose and fear rather than in themselves. The remarkable spectacle of watching these right-wing authoritarians suddenly demand Congressional oversight and voice opposition to unlimited executive power — two months before a highly possible Obama victory — is quite obviously reflective of that shift.

Rather hilariously, this was the very first comment from a Malkin reader after she sounded the alarm about the provision in the Paulson plan providing that his decisions are “non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency”:

So something that is unconstitutional cannot be reviewed by a Federal court? I guess, not even the Supreme Court. Well, if it is accepted, a precedent has been set, which will allow other proposals/bills to go through, regardless of legality, being “non-reviewable” by Federal court. A government running amok . . . with people cheering.

This person obviously has no idea that such provisions are hardly “unprecedented,” but have been appearing in several of the most controversial bills of the last eight years (as but one example, The Military Commissions Act, a right-wing favorite, essentially purported to bar courts from reviewing the President’s decisions about who to detain and further barred judicial review of the Congressional scheme, and similar “court-stripping provisions” have long been a right-wing favorite in all sorts of contexts). And more generally, this is how our Government has worked: the President demands unlimited power and Congress gives it to him. It’s only because visions of a Muslim, terrorist-sympathizing, socialist President Obama are haunting them in their feverish nightmares is the Right suddenly deeply fearful once again of vesting vast power in the Federal Government and the Executive.

But no matter. The blatant hypocrisy here, while extreme, craven and obvious, is also healthy. Hypocrisy of this sort is actually a vital part of how checks and balances are supposed to work. It is expected that political factions, when in charge of the government, will seek to obtain greater power for themselves, and the check against that is that the “opposition party” will battle and resist — not necessarily out of ideology or principle but due to raw power considerations and self-interest.

That is what has been so tragically missing from our political process for the last eight years: while the GOP sought greater and greater government power, Democrats acquiesced almost completely when they weren’t complicitly enabling it. While the Executive was off the charts in terms of the power it seized, the Congress was off the charts in its passivity and eagerness to relinquish its Constitutionally assigned powers to the Bush White House. That’s what has caused the extreme imbalance, with a bloated Republican Party and virtually unlimited presidential power: the failure of Democrats and the Congress to serve as a check on any of that. As their newfound contempt for unlimited power makes conclusively clear, the executive-power-worshipping Republicans of the last eight years — if there is an Obama presidency — will quickly re-discover their limited government power “principles” and won’t be nearly as accommodating.

UPDATE: I should add that Congressional Democrats, while largely on board with the fundamentals of the bailout plan, have been making noises about demanding some limits and oversight on how this fund is managed, and the political climate is certainly part of what is motivating the Right to voice these doubts, as illustrated by the bizarre and deeply cynical spectacle of the GOP presidential nominee — of all people — joining with the Democrats to demand limits on CEO compensation.

The point, though, is that Democrats typically make noises of this type and then capitulate at the end if they stand alone. This Paulson bill can be stopped only with widespread opposition that cuts across the standard ideological/partisan lines, and it shouldn’t be that hard to argue why handing over $700 billion to the very people who caused this disaster, while allowing them to walk away soaked with profits, is not a good idea, and that vesting unlimited power in the Bush administration to manage that is a particularly bad idea. If Democrats can’t win that argument, what argument can they win?

UPDATE II: A Rasmussen Reports poll released today found that “most Americans are closely following news reports on the Bush Administration’s federal bailout plan for the country’s troubled economy, but just 28% support what has been proposed so far.” Thirty-seven percent oppose it and 35% are unsure. As El Zongo notes in comments, this bailout — like the FISA gutting and telecom amnesty which preceded it — has no real constituency beyond the Washington establishment.

That the public is so opposed and/or primed to oppose it more doesn’t mean this won’t pass — we don’t exactly have a substantial connection between what Washington does and public opinion — but it does provide an important foundation for derailing this if political leaders decide they should or must. ++

Cash for Trash
PAUL KRUGMAN, NYT
September 21, 2008

Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.

There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.

Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.

So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:

1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.

2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.

3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.

4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”

The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?

Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital.

Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?

The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.

That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)

But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.

I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.

But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future. ++

The mortgage buck stops where?
A public reckoning by Congress is needed before taxpayers are put on the hook.
The Christian Science Monitor’s Editorial Board
September 22, 2008

Like a subprime mortgage, Congress may soon put taxpayers on a risky hook for mortgages gone bad. The Bush administration wants authority to spend up to $700 billion, or about the cost of the Iraq war, to buy up troubled loans. A federal rescue effort may stem a financial market meltdown. But it shouldn’t be done without a reckoning.

Americans need to hear a full-throated debate by lawmakers about the range of players in this mortgage maelstrom who either lied, took on too much debt, or failed to check creditworthiness as these loans were issued and then sold up the financial food chain to the point where it has become nearly impossible to determine their value.

They also need to hear about the government’s role in encouraging a housing bubble – and that will mean Congress needs to look at itself. No longer should federal support for owning a home be based on the false premise that housing prices will always go up or that taxpayers are the final backstop for mortgage holders.

The reason for such a public accounting isn’t vindictive. And Congress may not even be able to accurately apportion blame or determine the price to be paid for past mistakes. Rather, it is to help make sure that lessons are learned and that better safeguards will be put in place to prevent another cycle of bad debts.

America is in the midst of a morality tale. From the Wall Street titans who failed to assess risk to the home buyers who lied about their income on mortgage applications, the message must now be one of zero tolerance for such misdeeds.

Congress should also determine if the proposed federal purchases of bad mortgages will come at fire-sale prices. The plan calls for the Treasury Department to pay for mortgages that American-owned financial institutions have been unable to sell. The assumption is that the property market will eventually pick up, and Treasury can later unload these debts at a profit to taxpayers. This will allow financial firms to get on with normal business without a cloud of uncertainty hanging over their assets.

With Uncle Sam offering cash on the barrel, however, it may be tempting for firms to enter a game of chicken and demand a price that will allow their shareholders and management to suffer little. Congress should make sure that Treasury is not allowed to blink and pay too much to recoup a taxpayer investment.

Lawmakers could, of course, decide that there are other ways than buying up mortgages to unclog credit in financial markets. They could simply offer loans to troubled companies. But for now, with the financial system at risk and last week’s stock-market gyrations, the crisis calls for swift action.

Temptations in Congress will be strong – just five weeks before an election – to tack on other demands in order to cater to special interests. This will only distract from a reckoning and delay passage of the purchase plan. Other efforts, such as being lenient toward homeowners facing foreclosure, can come later.

First, taxpayers need to know if deterrents are coming to avoid another mortgage crisis and prevent another tapping of their money.

The buck can’t always stop with them. ++

BUSH’S LEGACY OF SQUANDERING TAXPAYER MONEY
Progress Report
9/21/08

This weekend, President Bush proposed a massive, $700 billion buyout of troubled financial institutions, in a plan that “would place no restrictions on the administration” and stipulates that actions by the Treasury Secretary “are non-reviewable…and may not be reviewed by any court of law or any administrative agency.” The proposal also would grant the Treasury the power to hire outside firms “to help manage its purchases.” Given Bush’s history of fiscal mismanagement — particularly when it comes to hiring contractors — Americans should be skeptical of his new plan. In Iraq, $142 million was wasted on projects that were either terminated or canceled, a “significant” amount of U.S. funds have been funneled to Sunni and Shiite militia groups, $5.1 billion in expenses has been charged without proper documentation, and another $10 billion has been wasted or poorly tracked, to name just a few examples. Bush’s response to Hurricane Katrina was equally mismanaged. An estimated $2 billion was spent in fraud and waste, nearly 11 percent of the total spent by FEMA in the first year following the hurricane. In the area of defense spending, the Pentagon reported $1 trillion it could not account for in 2003. It also paid $1.7 billion in excessive fees to the Interior Department, and another $50 million Air Force contract was awarded in a process “fraught with improper influence, irregular procedures, and glaring conflicts of interest.” It’s no wonder that Princeton economist Paul Krugman called the Treasury’s demand for “dictatorial authority” “an unacceptable proposal.”

Wall Street Is Licking Its Chops at the Bush Team’s Multi-Hundred Billion Dollar Giveaway Plan
If Wall Street gets away with this, it will represent an historic swindle of the American public.
William Greider, The Nation

The Fleecing of America
ROGER COHEN, NYT
September 21, 2008

The $700 Billion Wall Street Bailout: One More Weapon of Mass Deception
Not since the Bush Administration’s lies about Iraq’s “weapons of mass destruction” have the American people been so despicably misled.
Richard W. Behan, CommonDreams
Monday, September 22, 2008

Welcome to the Final Stages of the Coup…
If you must break the law, do it to seize power: in all other cases observe it.- Julius Caesar
Larisa Alexandrovna, HuffPo via CommonDreams
Sunday, September 21, 2008

Fury at $2.5 Billion Bonus for Lehman’s New York Staff
David Prosser, The Independent/UK
Monday, September 22, 2008

Up to 10,000 staff at the New York office of the bankrupt investment bank Lehman Brothers will share a bonus pool set aside for them that is worth $2.5bn (£1.4bn), Barclays Bank, which is buying the business, confirmed last night… ++

Obama, Not McCain, Shows Steady Hand in Crisis
Albert R. Hunt, Bloomberg
Sept. 22

For the first time since 1932 a presidential election is taking place in the midst of a genuine financial crisis. The reaction of the candidates was revealing.

John McCain, railing against the “greed and corruption” of Wall Street, won the first round of the sound-bite war. He came out with a television commercial on the “crisis” early on Monday of last week, and over the next three days gave more than a dozen broadcast interviews. He and running mate Sarah Palin would reform Wall Street and regulate the nefarious fat cats that caused this fiasco.

It was a great start. It then went downhill as he stumbled over his record of championing deregulation, claimed the economy was fundamentally strong, and flip-flopped over the government takeover of American International Group Inc.

For his part, Barack Obama didn’t come across as passionately outraged and wasn’t as omnipresent or as specific.

More revealing, though, was to whom both candidates turned on that panic-ridden morning of Sept. 15, and how the messages evolved before and after that day.

McCain called Martin Feldstein, the well-known Republican economist and Reagan administration adviser, John Taylor of Stanford University, who served in President George W. Bush’s Treasury and Carly Fiorina, once the chief executive officer of Hewlett-Packard Co.

Obama called former Federal Reserve Chairman Paul Volcker, and former Treasury Secretaries Robert Rubin and Larry Summers.

It was a mismatch.

Towering Volcker

Feldstein, for all his intellect, was ineffective in the Reagan administration; then-White House deputy chief of staffDick Darman cut him out of important action. Volcker, first at the Treasury and then as chairman of the Federal Reserve, was a towering figure in every way.

Taylor is a well-regarded academic. In four years as undersecretary of the Treasury, he left few footprints. Summers, as both deputy secretary and secretary, left a lot.

Fiorina is smart and quick; to put it charitably, Rubin will forget more about financial markets than she’ll ever know.

When it comes to governance, and either Democrat Obama or Republican McCain will inherit this miserable financial mess, the best guide is who they talked to, what they said, where they’ve been, and how knowledgeable they are.

Obama’s record and earlier speeches belie some of his more populist rhetoric. Yet they also suggest, as do his advisers, a much more activist government role than is likely under a McCain-Palin administration.

Comfortable With Subject

Obama called for the overhaul of the financial-regulatory system and tougher enforcement well before this past week’s traumas.

Detached observers who watched him last week, especially in a Bloomberg Television interview, were taken by how conversant and comfortable he was on the subject, despite his thin record. Few detached observers came away with that impression watching the Arizona senator.

Much of the re-regulatory fever focuses on the Federal Reserve and any new agencies created to clean up the fiasco. Central, however, will be a more vigorous Securities and Exchange Commission, or whatever holds that investor-protection function.

McCain displayed a sudden interest in the SEC last week when he demanded that Chairman Chris Cox be fired. When his campaign was asked if the senator had ever criticized the current commission’s performance before, they failed to respond.

All For Obama

Tellingly, three former SEC chairmen, a Democrat, Arthur Levitt, and two Republicans, David Ruder and Bill Donaldson, have endorsed Obama. Levitt is a board member of Bloomberg LP, the parent company of Bloomberg News.

Donaldson, who was tapped by Bush to head the SEC, says Obama called him last year about the financial-regulatory problems. He has never heard from McCain.

“Obama has been talking about the need for better financial regulation well before this crisis hit and has done some real thinking about it,” says Donaldson, a lifelong Republican. “McCain comes across as someone who suddenly realized changes have to be made.”

There is a case for McCain: it’s if you believe in less regulation, that the government should get out of the way and let the markets work their will.

No `Real Understanding’

“I don’t think anyone who wants to increase the burden of government regulation and high taxes has any real understanding of economics,” McCain said this spring at an Inez, Kentucky, town hall meeting, where he also declared “the fundamentals of our economy are good.”

Until recently, he repeatedly invoked Ronald Reagan’s calls for less regulation. He voted for the 2002 Sarbanes-Oxley corporate-governance regulations — then last year said he regretted that vote.

McCain isn’t averse to some regulations. He has strongly championed a greater federal role in campaign finance, tobacco and boxing. In each case, he saw a clear villain — special- interest money, a tobacco product that puts profits ahead of lives, and unscrupulous boxing promoters.

There has been little evidence that prior to last week he ever put financial firms in this category. Although he assailed excessive corporate compensation last week, McCain has opposed a tepid House-passed bill that would give corporate shareholders the right to cast a non-binding vote on compensation of top executives.

Turning to Gramm

The person he has turned to most for counsel on such matters is his ex-Senate colleague Phil Gramm. Gramm is a political Gordon Gekko, a brainy economist with a Darwinian view of markets and public policy.

It’s not easy to remember what the financial world looked like 10 days ago much less 10 months ago. Decisions that will be reached after this election will be the most important since the 1930s.

Obama, as more than a few Democrats are complaining, hasn’t been as quick, sharp — or demagogic — as they would like. McCain has been beset by deeper difficulties: an inchoate and inconsistent message that seems to reflect political exigencies more than principled convictions.

On the financial crisis, last week belonged to Obama. ++

“So keep fightin’ for freedom and justice, beloveds, but don’t you forget to have fun doin’ it. Lord, let your laughter ring forth. Be outrageous, ridicule the fraidy-cats, rejoice in all the oddities that freedom can produce. And when you get through kickin’ ass and celebratin’ the sheer joy of a good fight, be sure to tell those who come after how much fun it was.”
~ Molly Ivins, 1944 - 2007

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