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Archive for September, 2008

FDIC Moves for Authority to Increase 100K Cap to 250K – Obama Claims Credit

Tuesday, September 30th, 2008

Obama Claims Credit for FDIC Idea

Obama Claims Credit for FDIC Idea

Early this morning Barack Obama issued a statement on the failed bailout package which, for the first time since the crisis began, included a specific policy proposal – an increase in the Federal Deposit Insurance Corporation’s (FDIC) coverage limit from 100,000 to 250,000.00. Democratic surrogates quickly appeared on across the cable news dials (such as Democratic House Whip Jim Clyburn on CNN) praising Obama’s proposal and leadership in proposing this bold FDIC move. Predictably, the internet mainstream media outlets (ABC, CNN, AP) quickly seconded Obama’s FDIC proposal and praised his move as helpful to revive yesterday’s defeated bailout package. Obama’s speeches today underscored the importance of the FDIC move, stating that it would “help restore public confidence in our financial system.

An objective report, unlike the three linked above (ABC, CNN, AP) about Obama’s new FDIC proposal, cannot exclude the fact that the House GOP negotiator Roy Blunt attempted to insert the FDIC coverage hike into the compromise agreement over the weekend, and the Democratic negotiators refused. As Obama’s campaign has stated many times and Obama himself declared Sunday on Face the Nation, for “two weeks I was on the phone everyday with (Treasury) Secretary (Henry) Paulson and the congressional leaders making sure that the principles that have been ultimately adopted were incorporated into the bill” and that he was “involved in shaping” many of the bailout’s provisions.

As Obama claimed deep involvement in every day of negotiations on the bailout, it is inexplicable why Obama did not encourage Democrats to accept the FDIC cap increase proposal from GOP House negotiator Blunt. This is especially so as this morning Obama believes that the FDIC move would “boost small businesses, make our banking system more secure” and restore confidence. Furthermore, as many House conservatives were pushing for this FDIC provision, the bill may have passed yesterday if this provision had been allowed in by the Democratic negotiators.

A reverse-Kerry move may be afoot here, albeit unreported by the mainstream media and unlikely to ever be reported: Obama and the Democrats were against the FDIC coverage hike before they were for it. It has become clear in the last two weeks that the McCain campaign simply cannot compete against the Obama campaign’s shaping of the media narrative over the economic crisis, notwithstanding the difference between Obama’s claims and the reality of the situation.

Obama’s stark reversal on the FDIC cap issue amazingly won today’s news cycle by proposing an idea that he and the congressional Democrats rejected just 72 hours ago. Whether the American public notices this gigantic flip flop on the FDIC by Obama remains to be seen. Regardless, objectively speaking, Obama’s deft handling of the media during the economic crisis and McCain’s continued missteps and inability to capitalize on Obama’s mistakes demonstrates a political competency gap that may ensure Obama’s election come November 4.

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Did Obama Scuttle Yesterday’s Bailout Vote? An Objective Analysis

Tuesday, September 30th, 2008

The defeat of the bailout deal in the House yesterday afternoon and subsequent largest single-day points selloff of the Dow Jones index has put a white hot focus on the bailout as the single most important issue in the campaign. The stakes for Obama and McCain could not be higher as the candidate who is perceived by moderate, centrist swing voters as fashioning a solution will probably seize the inside track to the presidency. An interesting question to independent, centrist observers is whether Obama’s campaign did or did not intentionally scuttle yesterday’s bailout vote in order to deny McCain credit for fostering the bipartisan package. Some evidence supports both theories. It cannot seriously be contended that McCain scuttled the package as he suspended his campaign to push the deal and limited campaigning through the weekend to focus on pushing House GOP members to vote for the bailout.

Last night, the Obama campaign changed strategy by strongly calling for the passage of the bailout with a single phrase: “Get it done”. This morning, echoing the House GOP’s call during weekend negotiations, Obama called for raising the federal deposit insurance coverage on bank deposits from $100,000 to $250,000 for each individual. Again this afternoon, Obama stated in a speech that this is a moment of national emergency in which the parties must come together to pass a bailout package immediately.

Obama’s move into the middle of the bailout deal fray is a marked shift from his campaign’s prior strategy over the last two weeks to stay away from direct, specific support for the bailout deal. To an objective observer, it appears that Obama is now making his move to the center on the bailout to appear presidential in a time of crisis and as leading the charge to a solution after yesterday’s failed vote and fear spreading throughout the American public and world. As overseas markets stabilized overnight and stock market is strongly up today, Obama is well-positioned to claim his shift in position made a significant difference.

Historians and independent minded voters will ponder whether or not the Obama campaign moved behind the scenes to scuttle the vote yesterday with last-minute manuveoring by the Democrats. Indeed, had the bill passed yesterday, McCain would likely have been perceived as the dealmaker who brought about bipartisan consensus with the suspension of his campaign. The actual moment-to-moment breakdown of yesterday’s vote and the last week of negotiations provide evidence both ways of the Obama campaign’s intent, or lack thereof, to scuttle the yesterday’s vote.

As a starting point, recall that last week very few House Republicans supported the bailout. At that time, congressional Democrats had been negotiating almost exclusively with Treasury Secretary Henry Paulson and excluding the House GOP from the talks on the bailout. On Tuesday of last week, Democratic Senate Majority Leader Harry Reid directly called on McCain to “produce” House GOP votes for the package and lead:

We need, now, the Republicans to start producing some votes for us. We need the Republican nominee for president to let us know where he stands and what we should do.

Also, early last week Pelosi announced that she would not push through the bailout package unless a majority of the House GOP supported the package. Sensing the potential for catastrophic defeat, Paulson then called upon McCain to get involved in the dealmaking process to bring along a significant portion of the House GOP.

McCain, being McCain, reacted dramatically to Paulson’s call and suspended his campaign the next day to focus on on pushing for a deal and a White House meeting with all congressional leaders and both candidates present. Obama, after rebuffing McCain’s request to jointly suspend campaign operations to deal with the crisis and delay the first debate, agreed Wednesday night to President Bush’s request to attend a Thursday White House meeting.

As McCain was touching down in DC on Wednesday, Democratic Committee Leaders Chris Dodd and Barney Frank, along with Paulson and a liberal GOP senator, announced that a bailout deal was reached. National media outlets cooperated and reported the bailout was a done deal. Objectively speaking, this reporting was clearly not grounded in reality as House GOP leaders had in no way signaled support for the Dodd-Paulson draft agreement and Pelosi had made clear that without that support, the House would not pass the bailout. Regardless, the media narrative reported that McCain had “blown up” the deal by arriving in Washington on Thursday afternoon, and Reid reversed himself by stating that McCain should stay out of town.

From a centrist, independent perspective, it is not hard to extrapolate Reid’s change in position as reactive to McCain’s bold suspension move and at the behest of the Obama campaign. Additionally, the hastily arranged news conferences on Wednesday to present the Dodd-Paulson deal were intended by the Obama campaign to undercut McCain’s move and paint him as reducing bipartisanship by “injecting presidential politics”.

The Dodd-Paulson draft was the product of negotiations between Paulson and the Democrats, and included many poison pills which made significant GOP support impossible. Such poison pill provisions included the now-infamous directive to provide 20% of any profit from any individual transaction under the bailout legislation to two federal trust funds, which hand out grants to organizations such as ACORN.

The turning point in the negotiations occurred on Thursday night at the White House, where Bush, McCain, Obama and congressional leaders from both parties convened a meeting about the bailout package. By the time of the meeting, in response to the Dodd-Paulson “deal”, the House GOP had released an alternative plan which would allow for banks to purchase federal insurance for the mortgage assets instead of Paulson’s plan to purchase the toxic mortgage assets directly. Bush began the meeting by yielding to Pelosi and Reid, who then yielded to Obama.

Obama expounded on the virtues of the Dodd-Paulson deal and attacked House GOP leader John Boehner for disrupting the Dodd-Paulson deal with his alternative proposals. Amazingly, Obama reportedly used talking points against the House GOP proposal leaked by Paulson to Goldman Sachs and then by Goldman Sachs to Obama. Boehner defended his proposals, and the meeting quickly devolved into a shouting match amongst the participants. The fallacy of the “deal” announced by Dodd, Frank and Paulson that afternoon was exposed and the meeting broke up in acrimony with an agreement to restart negotiations with a House GOP negotiator on board.

Thereafter, the House GOP leadership whip Roy Blunt was included in negotiations by congressional Democrats over the weekend and some of the more onerous provisions to conservatives were removed, such as the ACORN funding vehicle noted above and a provision that would allow bankruptcy judges to reduce principal and interest of defaulted mortgages without lender consent. The mortgage insurance alternative pushed by Blunt was included in the package, but only as an option as Paulson would not be compelled to use this option. Three other key provisions pushed by the GOP, an end to the “mark to market” requirement for valuation of assets (a return to a three year average in SEC reporting instead of a snapshot market valuation), a rise in the FDIC cap from $100,000 to $250,000.00 and temporary cuts in capital gains and inflow taxes were left out of the deal.

Negotiations dragged on over the weekend until all sides emerged late Saturday night with congressional Democrats again announcing a deal was in place while Blunt said he was “optimistic” but wanted to see the final text produced by the Democrats. A GOP aide added this tepid statement: “I’m not sure yet we can sell it to our conference, but I’m 100 percent sure that this is the best deal we could.”

After some jostling on the Sunday talk shows between campaign surrogates and personal appearances by McCain (“This Week”) and Obama (“Face the Nation”), a media consensus developed that the passage of the bailout deal was likely, if not inevitable. Both Obama and McCain claimed some credit. Indeed, top campaign strategists Steve Schmidt (McCain) and David Axelrod (Obama) squared off on the issue of who should get credit for creating the consensus needed to reach a deal, with Axelrod dismissing any productive role by McCain as “fiction”.

By Sunday night, the Obama campaign was certainly analyzing whether a passage of the Dodd-Blunt Saturday night deal would help or hurt his and McCain’s campaign. With the dire economic news dominating the headlines, Obama had been benefitting greatly in national and state polling, moving from a slight McCain lead to a small but significant Obama lead. The passage of the Dodd-Blunt compromise on Monday afternoon would have surely lead to a gigantic market rally and an intense focus on how each candidate contibuted over the last two weeks to fashion the solution.

Additionally, passage on Monday would have likely moved the severity of the immediate crisis from dominence over the campaign. While Obama’s campaign was already claiming some credit on the Sunday shows, internal polling may have indicated that McCain would be perceived positively as rallying support by delivering a critical bipartisan bill at a time of crisis should the bill pass and calm the markets. Up to this point, the Obama campaign had been successful in painting McCain as “blowing up” the Dodd-Paulson deal while slowing down subsequent negotiations by “injecting presidential politics”.

An analysis of the action on Monday is inconclusive as to whether Obama intentionally scuttled the House’s passage of the Dodd-Blunt package, with evidence on both sides.

Time reports some facts, albeit with a predictably liberal spin, regarding Monday’s vote in the House:

But the two parties have different accounts of what led up to the vote. Two Republican recollections of the same conversation had Blunt informing Hoyer that they were short — Blunt counted 60-some GOP votes and was hopeful they could get as many as 75 — and that Democrats would have to make up the rest. Four Democratic sources dispute this version, insisting they were always promised between 80-90 GOP votes — still short of the 100 votes that would make up a majority of House Republicans, but enough to qualify as a bipartisan victory.

But even some Republicans remarked that their leaders didn’t seem to be trying too hard to get the votes. There wasn’t “some of the bursting of arms that I’ve seen in some votes over the past 12 years,” said Rep. Chip Pickering, a Mississippi Republican. Why wouldn’t there be a harder push on such a crucial bill? “The leaders knew people have deeply held convictions on this,” Pickering said. “Everyone knew what the stakes were.”

And the stakes become even clearer once the tally started at 1:27 Monday afternoon. By 1:51, 227 members had voted against it – nine votes more than the 218 majority. By 2:02 p.m. Hoyer and Rep. Rahm Emanuel, the No. 4 House Democrat, were in animated discussions on the Republican side of the chamber with Boehner and Blunt. Hoyer “was running around in there saying, ‘The market is falling! The market is falling!'” said Scott Garrett, a New Jersey Republican. Faced with a major GOP shortfall, Democrats refused to force 12 of their members to change their votes for a bill that they had just spent the past week renegotiating in order to garner Republican support, dropping several provisions important to Democrats. By 2:05 the vote was done, failing to pass by a margin of 228-205. In the end, Republicans delivered 37%, or 65 of their 199 members, compared to 60% of House Democrats who voted for President Bush’s “rescue” plan.

An aide to No. 4 Democratic House Leader Raul Emanuel commented that “We wanted enough to put the pressure on the Republicans and Congressman Emanuel was charged with making it close enough. He did a great job.” Accordingly, the Democratic leadership itself confirms that vote totals for the bill were kept down to increase pressure on Republicans to support the bill, notwithstanding Blunt’s call to Hoyer earlier in the day stating that Blunt’s count was in the 60’s for GOP support.

It must be noted that Emanuel was a board member of Fannie Mae, and may be concerned about a potential McCain Department of Justice engaging in a widespread Fannie Mae investigation as he was a board member. Furthermore, Emanuel is born of Illinois politics, as is Obama, and has taken a role as a lead Obama surrogate since the end of the primaries when Emanuel supported Clinton and is clearly taking his marching orders from Obama.

Another piece of evidence which weighs against Obama intentionally blowing up the Dodd-Blunt deal is the release of Obama’s Monday remarks prior to his speech. Those remarks appeared to assume that the bailout had passed – once it failed, Obama’s actual speech was altered to reflect that reality. On the other hand, that release could have been gamesmanship by Obama’s campaign to disprove the potential accusation that he killed the bill before they were made.

The role of Democratic House Speaker Nancy Pelosi in the failure of Monday’s bailout package cannot be overstated, and Pelosi is certainly taking her marching orders from Obama as well. Incredibly, an aide to House Democratic leadership noted that Pelosi essentially ordered Democratic Whip James Clyburn to not do his job rounding up votes:

“Clyburn was not whipping the votes you would have expected him to, in part because he was uncomfortable doing it, in part because we didn’t want the push for votes to be successful,” says one leadership aide. “All we needed was enough to potentially get us over the finish line, but we wanted the Republicans to be the ones to do it. This was not going to be a Democrat-passed bill if the Speaker had anything to say about it.”

Pelosi’s final contributions as Speaker to move this legislation bear mentioning: railing against the House GOP members on Saturday for being “unpatriotic” for not engaging in bailout negotiations earlier (notwithstanding the fact that Democratic leadership froze out the House GOP) and moments before the vote Monday, giving a blisteringly partisan speech on the House floor attacking the GOP and Bush, dovetailing nicely with Obama’s claim that the crisis was the “final verdict” on Bush and GOP deregulation policies. In an odd moment of symmetry with Obama’s later speech, Pelosi’s partisan comments were deviations from the remarks issued by Pelosi’s office that morning and up to an hour after she spoke.

Most of Pelosi’s closest congressional allies from California voted against the bailout, and a third of the Democrats on the committee which wrote the bill (12 of 37) voted against the bailout. Almost all freshman Democratic House members voted against the bill with Pelosi’s blessing just as voting began, as did many of Pelosi’s House committee leaders. Many fence-sitters on the GOP side saw this early voting action and Pelosi’s attack speech as the straw that broke the camel’s back and lead them to vote against the package.

Furthermore, a majority (23-16) of the all-Democratic Congressional Black Caucus (CBC) voted against the bailout, despite the fact that few CBC members face competitive elections in November and Obama has considerable sway over the caucus. Indeed, even Obama’s national campaign chairman, close ally and Chicago-based Illinois Democrat Jesse Jackson, Jr. voted against the bill. Accordingly, it stands to reason that if Obama wanted to push the bailout package through, he could have called upon his close allies in the CBC or at least national campaign chairman Jackson to support the package – but Obama did not expend that political capital.

At the end of the day, McCain and the House GOP leadership was only able to garner 65 votes for the Dodd-Blunt bailout package. McCain’s Arizona House contingent all voted against the bailout as well, perhaps indicating the lack of McCain’s ability to corral votes. McCain did make calls on Sunday pushing the package to House GOP members.

At the moment of truth, Democratic leadership refused to force 12 of its members to switch their votes and the bill failed, creating a market free fall to the largest single day point loss in Dow Jones history. The resultant headlines clearly favored Obama, as McCain was ridiculed for being unable to garner enough House GOP support to pass the package. Had the package passed, even if only with the same 65 House GOP votes, McCain would clearly be in a position to claim some credit and the economic crisis would be declining in importance.

Taken together, the evidence outlined above does not conclusively prove whether Obama’s campaign did or did not intentionally scuttle yesterday’s vote, and it is likely no conclusive evidence will ever emerge. However, the fact that so many close allies of Obama’s voted against the bill, the mudslinging by Pelosi moments before the vote and Emanuel’s choking off of additional Democratic votes support the theory that the Obama campaign made a conscious decision to scuttle the bailout package Monday.

Obama clearly benefits from the continued dominance of the economic crisis on the media narrative of the campaign, and Obama’s newfound full-throated endorsement of the bailout after it’s failure yesterday indicates that Obama now wants the bailout to pass and the credit to accrue to him and not John McCain. Fear is now spreading through Main Street America and Obama may indeed be seen as the saviour of the economy with his new push, while the GOP is perceived as at fault for Monday’s failure. Whether Obama intentionally scuttled the vote Monday or not, the bill’s failure and his new strategy is likely to succeed in continuing his rise in the polls while foreclosing any chance that McCain can quickly regain the momentum and perhaps the Presidency.

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Bailout Vote Fails – Dow Crashes – Arm Twisting Ongoing

Monday, September 29th, 2008

Washington, D.C. shocked the markets just now as the vote on the bailout package failed 228-205, with one nonvote. Critics continue to tout alternative rescue strategies to the bailout which would not use taxpayer money to purchase the mortgage securities. The Dow Jones average dipped almost 700 points just as the “nay” votes passed the critical halfway point of 217 points, and is now stabilizing at approximately 450 points down at 10,700.

Already, two votes have switched to “yea”, and that count now stands 226-208. Right now, behind the scenes, the game of chicken between Pelosi and Boehner continues as another 11 votes are needed to switch to pass the bill. Whether the bill passes today or not will set the political agenda for the candidates the battle may take the focus off of McCain’s newly aggressive strategy outlined in his speech today.

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Country First or Obama First – McCain Comes out Swinging as Obama Spikes in Polls

Monday, September 29th, 2008

McCain Steps up Attacks

McCain Steps up Attacks

At noon today John McCain escalated the attack rhetoric significantly, lashing out aggressively at Obama on a wide range of issues. Obama similarily excoriated McCain at his rally yesterday in Virginia, so today’s speech is partially in response. However, McCain signaled that the political battle over the bailout is far from over while railing against the “evil and greed” of Washington as a key cause of the present economic crisis.

A series of polls taken in the aftermath of McCain’s suspension of his campaign and Friday’s debate show movement towards Obama. Obama now stands nearly or above Obama’s largest leads of the campaign, standing now at about 5-6% nationally, with undecided voters down. Taken together, the McCain campaign appears to now realize that last week’s manuevors fell flat with swing voters and are scrambling to find a different tone.

Many commentators were disappointed that McCain did not seize the initiative at Friday’s debate by exploring the roots of the present economic crisis and the role of government regulation in creating the housing bubble. Today’s speech upped the the rhetoric with the renewed use of the catchphrase “Country First or Obama First” and strong assertions that Obama cannot be trusted to tell the truth. The Obama campaign’s spokesman Bill Burton had an immediate, sneering response that McCain “packs a lot of lies in a short period of time.” Spokeswoman Stephanie Cutter piled on moments later by asserting McCain was lying and that is more evidence of his “erratic” tendencies.

In the background of today’s swinging by McCain, the bailout bill stands now at a very close margin in the House of Representatives while the market continues its slide. Voting just started in the House and both parties are working on head counts. It is essentially a game of chicken, with both Speaker Pelosi and Minority Leader Boehner trying to put forth as few votes as possible, and the package may not pass.

Indeed, should the market continue to slide if the bailout package passes, the focus may turn to who gets the blame for a flawed package. Never before in modern presidential history has the campaign been so heavily driven by day-to-day economic news. So far, Obama’s campaign has capitalized on the escalating daily negative news to build a lead and both campaigns are saying they’ll “probably” vote for the package on Wednesday.

A large focus of McCain’s speech today was his action and Obama’s “standing on the sidelines” during the economic crisis with reference to his campaign’s suspension. The next 24 hours and the direction of the news cycle – who gets credit, who gets blame – will determine whether McCain can regain the initiative he lost when the economic crisis escalated with Lehman’s bankruptcy.

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Bailout Deal Reached – Taxpayer Protections, Insurance Provision Added, ACORN Pork Removed

Sunday, September 28th, 2008

Verbal Deal Reached on Bailout

Verbal Deal Reached on Bailout

After midnight on Capitol Hill negotiators emerged to announce that a verbal bailout deal had been reached between Congressional Democrats and House GOP negotiator and whip Roy Blunt. Since the meeting at the White House on Thursday night, representatives of the House GOP and congressional Democrats have been locked in negotiations to create a bailout package that both parties could support.

John McCain returned to his Arlington, VA campaign headquarters after about a twelve hour stay in Mississippi to debate Barack Obama on Friday night. By suspending his campaign and returning to DC on Thursday, McCain provided the House GOP an opening to curb some of the more undesirable aspects of the bailout package negotiated between Treasury Secretary Paulson and congressional Democrats. Blunt laid out the most pressing objections on Saturday afternoon, and it appears the Democrats have caved on several of the demands.

Most importantly, Democratic giveaways to leftist public interest groups, such as ACORN and La Raza, were removed from the bill. The Dodd-Paulson bill, which was heralded as a completed bipartisan deal on Thursday afternoon (notwithstanding the lack of House GOP approval), contained a provision which provided for 20% of any profits realized on the sale of any asset purchased via the bailout to be funneled to the Housing Trust Fund and the Capital Magnet Fund. These two Funds would then hand out grants to service organizations, such as ACORN Housing, an offshoot of ACORN. Amazingly, the provision did not require an overall profit on the 700 Billion dollar investment – just profit on any individual transaction.

Instead of funnelling such potential profits to service organizations, the deal reached tonight will dedicate any and all profits directly to deficit reduction – a priority applauded by moderate and centrist Americans. Another provision inserted by Democrats which favored unionization was also watered down. Further, another provision to ensure that the federal government receives a piece of the selling banks, in the form of a stock warrant, is part of the new deal.

The other major change brought by the House GOP was the insertion of a program that would encourage banks to hold onto their mortgage backed securities by providing federal default insurance for a fee. It is hoped that this insurance provision will reduce the dollar amount of taxpayer funded loans that are required to purchase assets.

Certain bipartisan alternations to the original Paulson proposal were included in tonight’s deal as well, such as limits on executive compensation and significant oversight over the Treasury Department. The entity to be created as now envisioned by the bailout bill in some respects is similar to the Mortgage and Financial Institutions (MFI) Trust proposed by McCain about 10 days ago. Democrats were mainly responsible for the inclusion of increased assistance to defaulting homeowners, which a major change to bankruptcy law to allow reduction of mortgage balances in bankruptcy did not make the final package.

Of course, the heart of the bailout deal remains the authorization of borrowing by the Treasury Department to purchase “toxic” mortgage backed securities. The deal tonight allows for $350 Billion in authority immediately, with the potential for 350 Billion more unless a joint resolution of Congress is signed by the President disallowing the additional funding. It is hoped that the bailout package will calm markets, starting with Asia’s opening on Sunday night, and free up some liquidity in the U.S. Economy to allow normal business operations to continue.

With the bailout package now in its final form and all sides in agreement that something must be passed in the next few days to avoid a market selloff, the focus now turns to how McCain and Obama will present their position and responsibility for the package. Both candidates are well aware of the deep unpopularity of the bailout bill, with the public opposing the bailout 50%-24%.

Politically, the effect of the bailout deal is up in the air. John McCain will certainly attempt to claim credit for the improved bailout package that resulted from the inclusion of the House GOP in the negotiations. It remains to be seen whether McCain will assert that Congress followed suggestion of the MFI Trust in part with the new package. Obama will probably continue to assert that McCain’s presence was only counterproductive. After the Sunday talk shows and many surrogate appearances tomorrow, a picture of the political battleground on the bailout package should become clear.

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Obama v. McCain Tonight – Election on the Line

Friday, September 26th, 2008

Obama v. McCain Tonight

Obama v. McCain Tonight

Reversing his earlier pledge to skip tonight’s debate against Barack Obama in Mississippi, John McCain announced that he will debate tonight. McCain had on Wednesday suspended campaign operations as of Thursday morning and stated he would return to DC to work on the bailout and not attend tonight’s debate if the deal was not completed. By all accounts, last night’s meeting at the White House with the candidates, congressional leaders and Bush did not finalize any bailout deal.

After the meeting last night and this morning, McCain worked on convincing House GOP members to provide some room for negotiation. Now, citing “progress” in the negotiations, McCain announced he’ll attend the debate with the following statement:

Senator McCain has spent the morning talking to members of the Administration, members of the Senate, and members of the House. He is optimistic that there has been significant progress toward a bipartisan agreement now that there is a framework for all parties to be represented in negotiations, including Representative Blunt as a designated negotiator for House Republicans. The McCain campaign is resuming all activities and the Senator will travel to the debate this afternoon. Following the debate, he will return to Washington to ensure that all voices and interests are represented in the final agreement, especially those of taxpayers and homeowners.

McCain clearly had to back off of his bravado on Wednesday to bow to political reality – a large majority of America wanted the debate to go forward – 60-22%. Obama is rightly claiming that he stood by calmly while McCain moved erratically this week. However, the results of the debate will certainly subsume overcome the short term edge to Obama.

Looking back on the past three days, that McCain has accomplished four things: 1. Taking the media’s focus off of his advisor’s ties to Fannie Mae and Freddie Mac and Palin’s interview with Couric; 2. Putting Obama on the defensive and forcing him to come to the DC meeting instead of focusing on debate preparation; 3. Forcing the Democrats to sit down and listen to House GOP proposals, perhaps laying the seeds of a compromise; and 4. Increasing the stakes of tonight’s debate.

A quick review of history shows that the political environment favors the Democrats this year – only one time in modern history has a party held the White House after a two-term presidency: 1988. In 1988, Reagan was over 50% approval and the economy was not in crisis – today, Bush is at 30% approval and the economy is on the brink of potential meltdown.

The fact that McCain has seized the spotlight with his suspension gambit, while high risk, is also high reward. If McCain can seize the stage tonight, “over the head” of the media and directly to the American public, any media handringing over his tactics will melt away into a narrative of McCain strength. If he falters tonight, McCain will fall back into a significant electoral disadvantage and a feeling of inevitability may grow about an Obama victory. Tonight’s debate will be watched by many more voters than any event so far in Election 2008 – perhaps 60 million or more.

A useful “tale of the tape” summary by Politico is here. The format tonight will allow McCain and Obama room to directly confront each other. Obama’s debate negotiator, D.C. lawyer Bob Barnett, stated that the “unprecedented” structure of the debate allows for “free-form discussion” between the candidates. Centrists and independents will carefully scrutinize the nominees tonight and the tone of the last six weeks of the campaign will be set tonight. If Obama can take a perceived win or tie, his momentum will grow and McCain will be left to search for another game changing event. If McCain can win a clear perceived victory, centrist and independent voter reluctance to vote for Obama could increase and translate into a McCain lead going into the VP debate.

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Chance to Avoid Depression Spiral Expires Sunday Night – McCain, Obama and Bush Struggle to Cope with Historical Moment

Thursday, September 25th, 2008

Obama, Bush and McCain meet

Obama, Bush and McCain meet

The presidential campaign hit overdrive yesterday as the candidates grappled over McCain’s surprise suspension of his campaign in the face of iffy prospects for a deal on the bailout this week. President Bush also weighed in with a primetime speech last night which warned of a deep recession without quick action on his request for authority to borrow $700 Billion to purchase “toxic” mortgage-related assets. Up in the air is whether the the bailout package that now appears inevitable will be sufficient to meet market expectations in the short term and, more importantly, a resolution of the housing crisis.

Should the bailout be watered down too much or not pass, America could see a historical market meltdown Monday morning and serious recession, if not depression. Worldwide, banks are hoarding cash and not making loans, even inter-bank loans, as the world waits for Washington to act.

McCain shook up the presidential election Wednesday afternoon by suspending campaign operations and planning a return to Washington to push a quick bailout package. McCain also stated he would not debate Friday night unless a deal is in place. On Tuesday, Senate Majority Leader Harry Reid and other Democrats called upon McCain to produce GOP votes for bailout package. Sources from both parties stated that McCain’s support for a bailout package is the only way Congress will act.

Reid immediately condemned McCain for “injecting presidential politics” into the bailout debate after McCain’s suspension annoucement. Obama and the Democrats aggressively pushed their message last night and today that McCain’s move was a sign of desperation and McCain should be able to “multitask” by both showing up at the debate and dealing with the bailout.

Congressional Democrats and Senate Republicans have announced a deal in “principle” has been reached, however, House Republicans disagree and are circulating their own proposal, which would only insure the purchase of the “toxic” securities by private companies. Democrats are presently feverishly pushing the idea that a deal is in place across cable media, while Republicans are stating that a resolution has not yet been reached.

After initial reluctance to come back to Washington after McCain’s request, Obama answered President Bush’s request to return to Washington for a meeting on the bailout today at 4PM. Team Obama has reportedly landed in Washington and the meeting will include congressional leaders, McCain, Obama and Bush.

The drama set to unfold today is unmatched in any recent presidential election and the stakes are high as centrists and independent voters are watching the candidates carefully. If McCain can deliver the House GOP votes, he may get credit from undecided voters who were concerned about the bailout stalling on Capitol Hill. Obama also could share in that credit if the final deal is made between the leaders at today’s meeting in the White House. Alternatively, if a bailout deal passes and the stock market again crashes before the election, both candidates will have little room to maneuver.

The early announcements by Democrats appear aimed to douse any positive reflection upon McCain’s intervention. Obama apparently plans to have a 90 minute town hall meeting if McCain does not appear for the debate. Whether the public sees McCain more positively as working to push the bailout package or negatively as skipping out on a debate is the open question which will surely impact the race. A flash poll done today shows a huge majority believes the debate should go forward. Tonight and tomorrow may well decide both the likely winner of the presidential election and whether the economy will continue to spiral downwards or pull out of the continuing liquidity crisis and inch towards recovery.

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GOP Victory on Offshore Drilling – ban to expire October 1, 2008

Tuesday, September 23rd, 2008

Offshore Drilling Platform

Offshore Drilling Platform

For the last six months, the GOP has fought the Democratic-controlled Congress to terminate the two decades old congressional ban on offshore drilling for oil and gas. When Speaker Nancy Pelosi adjourned Congress for the summer without taking action, GOP congresspeople continued to make speeches on the floor of the House for months, even though the media was not allowed to record such speeches. The offshore drilling issue is one of only a few issues in which the GOP holds the upper hand in terms of overall popular sentiment and concentrated support from independent, centrist voters: 69% overall favor offshore drilling versus 19% against, while independent voters favor drilling 65%-19%.

Today, the political map leading to November 4 was reshuffled as House Appropriations Committee Chairman David Obey, D-Wis., notified the press that the provision to extend the offshore drilling ban would be removed from the session-ending general appropriations bill, thereby terminating the drilling ban in most U.S. coastal waters. While the Republican Party has now scored a major tactical victory in outlasting Democratic attempts to obscure the debate with bill that would allow very limited drilling, taking the issue off the table could take away a major wedge issue for McCain versus Obama.

Top GOP House member John Boehner crowed: “If true, this capitulation by Democrats following months of Republican pressure is a big victory for Americans struggling with record gasoline prices…” For at least today, the GOP can revel in its success, and we’ll likely see the market price of oil drop when this news is digested by the market tomorrow morning.

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Paulson vs. Congress live on Capital Hill on Bailout – History in the Making

Tuesday, September 23rd, 2008

Paulson and Bernake testifying today in Congress

Paulson and Bernake testifying today in Congress

Today Treasury Secretary Henry Paulson and others are testifying on Capitol Hill regarding the Bush Administration’s request for authority from Congress to borrow up to $700 Billion Dollars for up to two years to purchase mortgage related assets, almost exclusively of the subprime variety. Both Paulson and Federal Reserve Chairman Ben Bernake urged immediate Congressional action to forestall and reverse the deepening credit crunch across America and the world and potentially avoid a deep recession. Paulson faces a tough sell as US likely voters oppose the bailout 44%-25% and centrist, politically independent voters oppose the bailout 47%-18%. Sensing some popular resistance, DC politicians are aggressively confronting Paulson’s plan.

While packaged and sold to U.S. and international financial institutions as relatively safe and adequately secured investments over the last few years, shares in some bundled subprime mortgage instruments are presently nearly impossible to value. The subprime mortgages are not producing cash flow as predicted because the borrowers cannot make the payments and foreclosures have been rising steadily since 2006. The viral effect of a continued collapse in value of the subprime securities purchased by financial institutions on markets throughout the world may be staunched by the bailout.

Both Democrats and Republicans are pushing for minor alterations of the Administration’s proposal to add oversight and limit executive pay for financial companies that participate in the bailout. Democrats are further battling the Administration directly by attempting to limit the lending authority to a one-year period, reduce the cap on lending to $150 Billion dollars and tack on proposals for a $50 Billion Dollar stimulus package. The risk of the bailout being delayed beyond this week based on partisan wrangling over the legislation is having a dampening effect on the stock market, with the Dow Jones Industrial Average losing over 500 points this week so far, dipping below 11,000.

Nothing less than the survival of the United States as the financial center of the world and the dollar as the world’s currency is at stake this week. No amount of hyperbole can overstate the risks facing the world economic system from the spread of complex financial instruments secured by bundled subprime mortgages on U.S. homes. Indeed, last week the Dow Jones was several hundred trades away from a free fall to 8300 according to insiders at large trading houses. Every American, whether a Democrat, Republican, another party or an independent centrist should read the text of the Administration’s plan, the various changes and additions offered and scrutinize the actions taken in the next few days which will rewrite American financial history.

The risk of inaction by the Democratic Congress is to anger centrist, independent voters who may turn on the Democrats if no bailout is passed and the markets free fall after Congress adjourns. Obama could also suffer if Democrats are perceived as stopping the bailout. The risk of action by the Democratic Congress is two-fold: if the bailout fails, Democrats will be blamed along with Bush and the GOP. If the bailout succeeds and the markets rally strongly before the election, the Presidential election may tip to John McCain. History will be written this week, and the political and economic pressure on Congress, the Administration and the Presidential candidates could not be higher.

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