Posts Tagged ‘McCain’

The Revenge of John McCain.

Saturday, December 1st, 2018

John McCain Was elected to Congress in 1982 and elected to the Senate in 1986 taking the seat previously held by Barry Goldwater. In 1989, he was involved in the “Keating Five Scandal.

The five senators—Alan Cranston (Democrat of California), Dennis DeConcini (Democrat of Arizona), John Glenn (Democrat of Ohio), John McCain (Republican of Arizona), and Donald W. Riegle, Jr. (Democrat of Michigan)—were accused of improperly intervening in 1987 on behalf of Charles H. Keating, Jr., Chairman of the Lincoln Savings and Loan Association, which was the target of a regulatory investigation by the Federal Home Loan Bank Board (FHLBB). The FHLBB subsequently backed off taking action against Lincoln.

The late 1980s were the era of the Savings and Loan scandals.

The Federal Home Loan Bank Act of 1932 created the S&L system to promote homeownership for the working class. The S&Ls paid lower-than-average interest rates on deposits. In return, they offered lower-than-average mortgage rates. S&Ls couldn’t lend money for commercial real estate, business expansion, or education. They didn’t even provide checking accounts.

In 1934, Congress created the FSLIC to insure the S&L deposits. It provided the same protection that the Federal Deposit Insurance Corporation does for commercial banks. By 1980, the FSLIC insured 4,000 S&Ls with total assets of $604 billion. State-sponsored insurance programs insured 590 S&Ls with assets of $12.2 billion.

Inflation in the late 1970s and early 1980s led to pressure on Savings and Loan institutions that had been lending money at 6% to home buyers but savers were demanding higher interest rates to compensate for inflation. The S&Ls were caught in the “Borrow high and Lend low” vise that led to their demise.

My review of Nicole Gelinas’ book on the 2008 economic crisis includes some discussion of the 1986 problems.

The story of the 2008 collapse begins in 1984 with the rescue of the Continental Illinois Bank. Here began the “too big to fail” story. Two things happened here that led to the crisis. One was the decision to bail out all depositors, including those whose deposits exceeded the FDIC maximum. Secondly, the FDIC guaranteed the bond holders, as well. Thus began the problem of moral hazard. Another feature of this story was the role of Penn Square Bank, which had gone under two years earlier in the wake of the oil price collapse, which devastated many of its poorly collateralized loans in the oil industry. Both banks had been caught seeking higher returns through risky investments. Penn Square, however, had been allowed to collapse. Continental was rescued and that began a trend that the author lays out in detail through most of the rest of the book.

The 1986 crisis and the 1989 scandal affected McCain deeply. He was a freshman Senator and was probably included in the group for two reasons. First he was the only Republican and Second, Keating, a Phoenix developer, was a constituent. McCain was humiliated and his ego was as big as all outdoors.

His reaction to his humiliation was once of the worst pieces of legislation in the 20th century, The McCain-Feingold Act.

In 1995, Senators John McCain (R-AZ) and Russ Feingold (D-WI) jointly published an op-ed calling for campaign finance reform, and began working on their own bill. In 1998, the Senate voted on the bill, but the bill failed to meet the 60 vote threshold to defeat a filibuster. All 45 Senate Democrats and 6 Senate Republicans voted to invoke cloture, but the remaining 49 Republicans voted against invoking cloture. This effectively killed the bill for the remainder of the 105th Congress.

McCain, still in his “Maverick mode and still running on ego, persisted.

McCain’s 2000 campaign for president and a series of scandals (including the Enron scandal) brought the issue of campaign finance to the fore of public consciousness in 2001. McCain and Feingold pushed the bill in the Senate, while Chris Shays (R-CT) and Marty Meehan (D-MA) led the effort to pass the bill in the House. In just the second successful use of the discharge petition since the 1980s, a mixture of Democrats and Republicans defied Speaker Dennis Hastert and passed a campaign finance reform bill. The House approved the bill with a 240–189 vote, sending the bill to the Senate. The bill passed the Senate in a 60–40 vote, the bare minimum required to overcome the filibuster. Throughout the Congressional battle on the bill, President Bush declined to take a strong position, but Bush signed the law in March 2002 after it cleared both houses of Congress.

The results have been disastrous. Congressmen have spent most of their time “dialing for dollars,” as fundraising is referred to and staff members write legislation. The result is monster bills, like Obamacare and Dodd-Frank, that have devastated the economy and destroyed healthcare in this country. Now another consequence is developing. Congress members are quitting.

Only once since 1930 has the number of voluntary departures been higher than it was this cycle. Members choosing to walk away from the legislative branch include eight Republican committee chairs, as well as House Speaker Paul Ryan (R-WI), who became the second speaker in a row to voluntarily give up the gavel of the most powerful position in the House.

Interviews with more than half a dozen departing members and some recently retired members revealed three major drivers behind the surge of retirements: a legislative process dominated by party leaders, the constant pressure to raise money, and political dysfunction plaguing Congress from top to bottom. The picture painted by these departing Republicans and Democrats lays bare a disturbing reality: Congress is fast becoming a place that repels, rather than attracts, public servants who want to get things done.

Committee chairs are expected to raise more money even than regular members.

Rep. Thomas Massie (R-KY), who was first elected to Congress in 2012, has said that party leaders’ efforts to get him to pay his dues went so far as reminders being “stuffed in my pocket during votes” on the House floor.

Asked what happens when member don’t pay their party dues, retiring Rep. Jimmy Duncan (R-TN) bluntly said “You don’t get these chairmanships.”

Outgoing Rep. Lynn Jenkins (R-KS), likewise, acknowledged fundraising frustrations and even joked, “My mom had taught me not to talk a lot about myself and never ask strangers for money, and then, that’s all I’ve done for the last ten years.”

Many soon-to-be retirees also look forward to walking away from the hostile culture that pervades Capitol Hill.

The recent decision by the Supreme Court on “Citizens United vs FEC has brought the issue into focus.

The United States Supreme Court held (5–4) on January 21, 2010, that the free speech clause of the First Amendment to the Constitution prohibits the government from restricting independent expenditures for communications by nonprofit corporations, for-profit corporations, labor unions, and other associations.

In the case, the conservative non-profit organization Citizens United sought to air a film critical of Hillary Clinton and to advertise the film during television broadcasts shortly before the 2008 Democratic primary election in which Clinton was running for U.S. President.

Outrage by Democrats followed and Obama even berated the Supreme Court majority during his State of the Union speech.

On January 27, 2010, Obama further condemned the decision during the 2010 State of the Union Address, stating that, “Last week, the Supreme Court reversed a century of law to open the floodgates for special interests – including foreign corporations – to spend without limit in our elections.

The statement about “foreign corporations” is a lie. He should know better since his campaign in 2008 disabled credit card verification to allow foreign donations, which are illegal.

Ultimately, John McCain did what he could in person to get revenge on the voters when he killed Obamacare repeal with his vote in the Senate in spite of his promise in the 2016 campaign to vote for repeal.

This might be McCain’s finest moment

Saturday, February 7th, 2009

McCain has always been recognized as a man of courage. He refused an offer by the North Vietnamese to repatriate him when he was unsure he could survive. Since his career in politics began, he has been an advocate of control of spending. Other than that, his positions have been all over the map and his Republican colleagues have been frustrated by his willingness to cooperate with the Democrats when the issue was one where solidarity might have been appreciated. His position on immigration, for example, has been puzzling and irritating to those worried about illegal immigration.

His choice of Sarah Palin was a welcome sign of an open mind and, while her campaign was mishandled, she was a sign that he could appreciate new talent. His conduct in the present crisis, however, may be his finest moment.

McCain’s stand is significant in a way no other Republican senator’s would be. He’s not the run-of-the-mill Republican making a partisan point. He’s hardly a Limbaugh dittohead. McCain is the Senate’s most relentless seeker of bipartisan compromise. His colleagues feared he might seek the media’s favor by going along with Obama.

But Obama left McCain and nearly every other Republican in Congress with only one option: Just say no. That’s what Republican House members said when they voted unanimously against Obamanomics. And on its merits, the Obama bill cries out for rejection. It’s dangerously expensive, crammed with pork, and bereft of credible economic incentives.

But, yes, there’s political risk in opposing it. An economic recovery may begin later this year not because of the Obama bill but in spite of it. Obama would step forward shamelessly to claim credit. And you can imagine the Democratic attacks on Republicans for opposing aid for college students, emergency help for strapped homeowners, funds for medical research, and all the other non-stimulative stuff in the bill. Politics can be unfair.

I’m assuming Democrats won’t embarrass Obama by failing to enact his first major piece of legislation when the final vote comes this week or next. Why would they balk? Like Obama, they adore spending. Never in the congressional careers of the current crop of Democrats has there been an opportunity for a spendfest like this. They will take full advantage.

Thus, McCain, so often the bipartisan, has seen that this is the time to say NO. He has earned the appreciation of the entire Republican Party for this stand.

Maybe it is 1929 again

Tuesday, October 28th, 2008

The world financial crisis has been blamed on the mortgage market in the US although it seems to be as bad in Europe and Asia, especially Japan. This seemed a bit odd as European markets should not have been as exposed to sub-prime American mortgages as American financial institutions are. It turns out that they have generated their own problems with little contribution from us.

French President Nicolas Sarkozy has been leading the way with the finger pointing, kicking American capitalism and calling for an end to the “hateful practices of the past.” Super Sarko has demanded that the upcoming economic summit to be hosted by US President George W. Bush be held in New York because, he said, “that’s where everything started.”

Newspaper headlines cheer that, suddenly, “Europe looks pretty smart.” Dutch newspaper Trouw announces that “European capitalism is better suited to meet the challenges of the present financial crisis.” German weekly Der Spiegel features the Statue of Liberty with an extinguished torch as “the price of arrogance.” German Chancellor Angela Merkel and her Finance Minister Peer Steinbruck tell us that the financial crisis is an American affliction. London’s The Daily Telegraph talks about “emboldened Europeans” eager to ambush Bush to impose a “European vision” for new financial market regulation.

Is this true ?

Well, maybe not. What have sub-prime mortgages got to do with Iceland, for example ?

Bayerische Landesbank, a state-owned regional bank, has put out its hand for a E5.4 billion ($11 billion) bailout from the German Government after writing down E2.6 billion in investments during the first half of this year, much of that related to sub-prime mortgages.

Indeed, the most recent data from the Bank for International Settlements should wipe the smirk from many European faces. Western European banks lent three-quarters of a total $US4.7 trillion ($7.5trillion) to emerging markets in eastern Europe, Latin America and Asia: a bursting bubble that surpasses the US sub-prime mess. Again, in Germany alone, financial institutions lent $US21.3 billion to Icelandic banks now collapsing, accounting for more than a quarter of all foreign lending to Iceland and more than five times the level of British lending, Iceland’s next biggest creditor country.

Iceland is in trouble because the big US air base at Keflavik and other US installations have closed.

Germany’s economic newspaper Handelsblatt speared European self-righteousness by listing eight German myths about the financial tsunami. Editor Bernd Ziesemer pointed out that the German Government’s bank bailout is almost the same size as the US package: “The truth is the most awful weapons of mass financial destruction came from London and Frankfurt.” Aggressive German financiers were busily inventing and packaging up derivatives that Europeans would prefer to frame as a curse of American capitalism.

In 1929, a large part of the collapse was due to profligate lending to Latin American countries, countries that had no reason for us to expect them to repay their debt. Similar things happened with the Mexican bailout under Clinton.

Before we embrace European solutions as our saviour, remember that in the past decade, Europe has had the distinction of stagnant job growth: unemployment in France and Germany has not fallen below 7 per cent. With European governments addicted to regulation and with work practices mired in rigid inflexibility, it could be that the US will recover much more quickly from a recession that many European countries. In that vein, beware of sniggering Europeans peddling myths about the demise of American capitalism and the need for a new inspiring European solution. The triumphalism behind talk of a new grand European model of economics may turn out to be short-lived.

Unless Obama is elected to “spread the wealth.” Then Laffer’s article in the Wall Street Journal may sound prophetic.

Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb’s book “Fooled by Randomness.”

Somebody once said “government is the problem, not the solution.”

To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn’t create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.

If you don’t believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they’ll do with Wall Street.

Oh well. I’m getting a bumper sticker for next year. “Don’t blame me, I voted for McCain.”

Maybe I won’t need it.

How McCain chose Sarah Palin for VP

Friday, October 24th, 2008

There is an article in the New York Times magazine on the McCain campaign that should have waited until after the election for publication but it has the story of the Palin nomination. There has been a lot of nonsense written about this. This looks like the definitive version.

On Sunday, Aug. 24, Schmidt and a few other senior advisers again convened for a general strategy meeting at the Phoenix Ritz-Carlton. McInturff, the pollster, brought somewhat-reassuring new numbers. The Celebrity motif had taken its toll on Obama. It was no longer third and nine, the pollster said — meaning, among other things, that McCain might well be advised to go with a safe pick as his running mate.

Then for a half-hour or so, the group reviewed names that had been bandied about in the past: Gov. Tim Pawlenty (of Minnesota) and Gov. Charlie Crist (of Florida); the former governors Tom Ridge (Pennsylvania) and Mitt Romney (Massachusetts); Senator Joe Lieberman (Connecticut); and Mayor Michael Bloomberg (New York). From a branding standpoint, they wondered, what message would each of these candidates send about John McCain? McInturff’s polling data suggested that none of these candidates brought significantly more to the ticket than any other.

“What about Sarah Palin?” Schmidt asked.

After a moment of silence, Fred Davis, McCain’s creative director (and not related to Rick), said, “I did the ads for her gubernatorial campaign.” But Davis had never once spoken with Palin, the governor of Alaska. Since the Republican Governors Association had paid for his work, Davis was prohibited by campaign laws from having any contact with the candidate. All Davis knew was that the R.G.A. folks had viewed Palin as a talent to keep an eye on. “She’d certainly be a maverick pick,” he concluded.

The meeting carried on without Schmidt or Rick Davis uttering an opinion about Palin. Few in the room were aware that the two had been speaking to each other about Palin for some time now. Davis was with McCain when the two met Palin for the first time, at a reception at the National Governors Association winter meeting in February, in the J. W. Marriott Hotel in Washington. It had not escaped McCain’s attention that Palin had blasted through the oleaginous Alaska network dominated by Frank Murkowski and Ted Stevens, much in the same manner that McCain saw himself doing when he was a young congressman. Newt Gingrich and others had spoken of Palin as a rising star. Davis saw something else in Palin — namely, a way to re-establish the maverick persona McCain had lost while wedding himself to Bush’s war. A female running mate might also pick off some disaffected Hillary Clinton voters.

After that first brief meeting, Davis remained in discreet but frequent contact with Palin and her staff — gathering tapes of speeches and interviews, as he was doing with all potential vice-presidential candidates. One tape in particular struck Davis as arresting: an interview with Palin and Gov. Janet Napolitano, the Arizona Democrat, on “The Charlie Rose Show” that was shown in October 2007. Reviewing the tape, it didn’t concern Davis that Palin seemed out of her depth on health-care issues or that, when asked to name her favorite candidate among the Republican field, she said, “I’m undecided.” What he liked was how she stuck to her pet issues — energy independence and ethics reform — and thereby refused to let Rose manage the interview. This was the case throughout all of the Palin footage. Consistency. Confidence. And . . . well, look at her. A friend had said to Davis: “The way you pick a vice president is, you get a frame of Time magazine, and you put the pictures of the people in that frame. You look at who fits that frame best — that’s your V. P.”

Schmidt, to whom Davis quietly supplied the Palin footage, agreed. Neither man apparently saw her lack of familiarity with major national or international issues as a serious liability. Instead, well before McCain made his selection, his chief strategist and his campaign manager both concluded that Sarah Palin would be the most dynamic pick. Despite McInturff’s encouraging new numbers, it remained their conviction that in this ominous election cycle, a Republican presidential candidate could not afford to play it safe. Picking Palin would upend the chessboard; it was a maverick type of move. McCain, the former Navy pilot, loved that sort of thing. Then again, he also loved familiarity — the swashbuckling camaraderie with his longtime staff members, the P.O.W. band of brothers who frequently rode the bus and popped up at his campaign events, the Sedona ranch where he unwound and grilled wagonloads of meat. By contrast, McCain had barely met Palin.

That evening of Aug. 24, Schmidt and Davis, after leaving the Ritz-Carlton meeting, showed up at McCain’s condominium in Phoenix. They informed McCain that in their view, Palin would be the best pick. “You never know where his head is,” Davis told me three weeks later. “He doesn’t betray a lot. He’s a great poker player. But he picked up the phone.” Reached at the Alaska State Fair, Palin listened as McCain for the first time discussed the possibility of selecting her as his running mate.

These machinations remained thoroughly sub rosa. McCain’s close friend, Lindsey Graham, the South Carolina senator, continued to argue passionately for Lieberman — “a McCain-Plus ticket,” he would say. McCain, referring to Romney, at one point said that “Mitt’s been awfully helpful with fund-raising,” according to a senior aide who was present during the discussion. “And he’d bring us Michigan.” Pawlenty’s name frequently came up in internal discussions, says that aide. But as for Palin, says another: “She just wasn’t one of the names. I mean, we heard more about Bloomberg.”

On Tuesday, Aug. 26, Schmidt picked up the phone around noon and called Jon Berrier, an old friend and partner at Schmidt’s consulting business in Northern California. Berrier was asked to get on a plane to Anchorage, check into a hotel, await further details and tell no one. The next morning, Davis White, who oversaw all of McCain’s travel logistics, met Berrier for breakfast in Anchorage. White informed Berrier that they would meet Palin at a private airstrip that afternoon, and that White would fly with Palin to Arizona to meet with Schmidt and Salter that evening — and then, the following morning, with McCain. If McCain offered the vice-president slot to Palin, White told Berrier, then Berrier would surreptitiously fly Palin’s husband, Todd, and their children to Ohio on Thursday evening, and a public announcement would be made there the next morning. The final decision wasn’t to be made until Thursday morning, but they should proceed as if it was going to happen.

Palin and her assistant, Kris Perry, met Schmidt and Salter on Wednesday evening in Flagstaff, at the house of Bob Delgado, the chief executive of Hensley & Company, Cindy McCain’s beer distributorship. McCain’s speechwriter had never spoken with Palin before. A senior adviser said: “Salter was always a big Pawlenty fan — son of a truck driver, salt of the earth, genuine guy. Just thought he was a good, honest addition to the McCain brand as opposed to, say, Romney.” That so much momentum had been building in Palin’s favor was likely a surprise to Salter, says one of the few individuals privy to the vice-presidential selection process: “Mark was new to it, and so it was important to us to make sure that he was in on the situation that was brewing.”

For two hours, Salter and Schmidt asked Palin questions based on the vetting material. Salter says they discussed her daughter’s pregnancy and the pending state investigation regarding her role in the controversy surrounding the state trooper who had been married to her sister. The two advisers warned her that nothing was likely to stay secret during the campaign. Salter says that he was impressed. “The sense you immediately get is how tough-minded and self-assured she is,” he recalled three weeks after meeting her. “She makes that impression in like 30 seconds.”

Now all three of McCain’s closest advisers were on board. The next morning was Thursday, Aug. 28. Salter and Schmidt drove Palin to McCain’s ranch. According to Salter, the senator took the governor down to a place where he usually had his coffee, beside a creek and a sycamore tree, where a rare breed of hawk seasonally nested. They spoke for more than an hour. Then the two of them walked about 40 yards to the deck of the cabin where the McCains slept. Cindy joined them there for about 15 minutes, after which the McCains excused themselves and went for a brief stroll to discuss the matter. When they returned, McCain asked for some time with Schmidt and Salter. “And we did our pros and cons on all of them,” Salter told me. “He just listened. Asked a couple of questions. Then said, ‘I’m going to offer it to her.’ ”

Late that same evening, a McCain spokeswoman, Nicolle Wallace, and the deputy speechwriter, Matthew Scully, were ferried to the Manchester Inn in Middletown, Ohio. Schmidt instructed them to turn off their cellphones and BlackBerrys. Then he opened the door of Room 508 and introduced them to McCain’s running mate. The two aides were surprised. Palin and Scully spoke for about 45 minutes, and the governor handed him a copy of the speech she had intended to give as one of the Republican convention’s many guest speakers. With this scant information in hand, Scully began his all-night drafting of Palin’s first speech to a national audience.

During the evening, Scully also traded e-mail messages with Matt McDonald, who had just gotten the news from Schmidt that the vice-presidential pick was someone who did not quite fit the campaign’s current emphasis on “readiness.” The story line, Schmidt informed McDonald, was now Change. The two of them, along with Rick Davis, talked through this rather jolting narrative shift. What they decided upon was workable, if inelegant. First, define the problem as Washington, not Bush. Second, posit both McCain and Palin as experienced reformers. And third, define Obama and his 65-year-old running mate, Senator Joe Biden, as a ticket with no real record of change. McDonald in turn transmitted this formulation to Scully and Salter, who was busily drafting McCain’s announcement speech.

The spunky hockey mom that America beheld the next morning instantly hijacked Obama’s narrative of newness. (“Change is coming!” McCain hollered, almost seeming startled himself.) And five days later, in the hours after Palin’s stunningly self-assured acceptance speech at the G.O.P. convention, I watched as the Republicans in the bar of the Minneapolis Hilton rejoiced as Republicans had not rejoiced since Inauguration Night three and a half long years ago. Jubilant choruses of “She knocked it out of the park” and “One of the greatest speeches ever” were heard throughout the room, and some people gave, yes, Obama-style fist bumps.

When the tall, unassuming figure of Palin’s speechwriter, Matthew Scully, shuffled into the bar, he was treated to the first standing ovation of his life. Nicolle Wallace confessed to another staff member that she had cried throughout Palin’s speech. Allowing his feelings to burst out of his composed eggshell of a face, Schmidt bellowed to someone, “Game on!”

The deal

Sunday, September 28th, 2008

UPDATE: This comparison looks better but the bill isn’t signed yet.

JP Morgan did a much better job with the Panic of 1907, a financial panic resulting from the San Francisco earthquake and immense insurance losses. I reviewed a book on this topic last spring.

The negotiations in Washington seem to have resulted in a deal. The resulting legislation is being drafted and will be posted on the internet at noon today. That will be the only positive development, in my opinion. The cause of this crisis has been described here in other posts. The essence of the solution, and the reason why I am pessimistic about it, is that the solution has been drafted by the same people who caused the crisis. Barney Frank and Chris Dodd are the parents of the monstrosities that Fannie Mae and Freddie Mac have become. The disastrous expansion of subprime mortgages has poisoned the credit markets of the world.

The story of John McCain’s suspension of his campaign has still not been very well explained. The Democrats have majorities in both houses of Congress. They did not need Republican votes for the original Paulson package if they were able to keep all their own people in line. What happened was that the House Republicans were not going to vote for the bill and Pelosi had stated that she would not bring the bill to the floor unless she was assured of 110 yes votes by Republicans.

When McCain announced he was returning to Washington, the Democrats quickly announced that they had arrived at a solution and his action was unnecessary. What they did not say was that they did not have the Republican votes that Pelosi said she needed.

“You were being asked to choose between financial meltdown on the one hand and taxpayer bankruptcy and the road to socialism on the other and you were told do it in 24 hours,” Representative Jeb Hensarling of Texas, head of the conservative group, said. “It was just never going to happen.”

If they were willing to pass the bill without Republicans, they were correct. They had a deal. The problem was that it was a deal between the Bush Administration and the Democrats. However, Pelosi was still determined to have Republican votes as cover for the huge groundswell of anger directed at the Congress and Wall Street over the crisis. What McCain did was sit down with the House Republicans and make sure they were included in the negotiations. The Democrats poisoned the bill with ludicrous provisions to fund radical socialist groups like ACORN, which has had many members convicted of vote fraud and which has been involved in expanding the toxic mortgages that are at the root of the problem. The worst provision was this:

DEPOSITS. Not less than 20 percent of any profit realized on the sale of each troubled asset purchased under this Act shall be deposited as provided in paragraph (2).

USE OF DEPOSITS. Of the amount referred to in paragraph (1) 65 percent shall be deposited into the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Regulatory Reform Act of 1992 (12 U.S.C. 4568); and 35 percent shall be deposited into the Capital Magnet Fund established under section 1339 of that Act (12 U.S.C. 4569).

REMAINDER DEPOSITED IN THE TREASURY. All amounts remaining after payments under paragraph (1) shall be paid into the General Fund of the Treasury for reduction of the public debt.

That means that ANY transaction that realizes a profit, regardless of profits, or losses, on the overall bailout program, will deposit 20% of that profit in a fund which goes to ACORN and similar organizations. These “community organizer” groups are at the root of the problem. They are Democrat activist groups and affiliated with the far left of the party, like Obama, who once worked for them.

A current comparison of provisions is linked here. It is a Word file. At present, the Republican leadership is circulating this list of provisions to correct a few concerns. However, not everybody is satisfied. A House aide sends this warning:

1) This is, essentially, the same bill. Total deal is $700b, which Paulson or next Treasury Secretary can spend the first $250b even if he believes unnecessary. He/She can spend second $450b if thought necessary. A new bill isn’t passed with veto proof majorities to repeal it. This is substantively identical to the original Paulson plan. Congress always had the power to repeal some or all of the authority if it has veto proof majorities.

2) As for Acorn and bankruptcy, they were never in the bill. Dodd/Frank tried to push those in mid/week, they weren’t in the plan already rejected by conservatives on Monday. Even Obama conceded that those provisions would come out. They were simply a red herring, used for extra bargaining power by the left.

3) Lipstick has been put on the pig, and perhaps some Members will be fooled by it, but their constituents will not. I think some political careers will be ended over this.

When I ask this aide if there is anything to be happy about, this aide replies:

Unclear. Still confusion over whether the “insurance” is a fig leaf (secretary’s choice to use – in which case, he wouldn’t) or substantive (mandatory).

We will see how this turns out but I am very pessimistic this morning.

A primer on the mortgage crisis

Thursday, September 18th, 2008

I am no finance expert, but I was explaining to my wife how this mortgage meltdown occurred and I thought a few others might be interested. I bought my first home in 1969. It was in South Pasadena and I paid $35,000 for it, with a $3500 down payment and a $3500 second trust deed taken back by the seller who had already moved into a new home and was motivated. Thus, I paid 20% down and Home Savings and Loan took the mortgage at 6% interest. For the next four years, I paid $204 per month on my mortgage and $35 per month to the second trust deed holder until I paid the second off two years later. In those days, Savings and Loan institutions, like the one in “It’s a Wonderful Life,” took in deposits at 4% interest paid and loaned money at 6% to home buyers. They kept their own loans in-house and collected the payments as their income. Like the S&L in the movie, they had borrowed “short” and loaned “long” so they were susceptible to runs.

The Savings and Loan debacle of the 1980s ended that era. A summary by someone who knows a lot more about this than I do is here. That, however, does not explain the mortgage mess.

The S&Ls were destroyed by inflation in the 1970s and 80s. By 1979, interest rates on houses were as high as 21% and savers had abandoned the S&Ls to invest in trust deeds (as I did) or in high interest bonds. I had US Treasury bonds that carried a coupon rate of 16% and, when bought at a discount, carried an interest rate of 18%. That was US Treasury paper ! The S&Ls depositors fled to higher yields and the action by Congress in freeing the interest rates they could pay was too late. Worse, it raised the total deposit cap that was insured by the Federal Savings and Loan Insurance Corporation, or FSLIC, to $100,000 from $20,000. There was no reason to do that and it was not debated. It was just added by the House Banking Committee chairman, Fernand St Germain. The result was the savings and loan scandal of the 1980s. After that, a new model was necessary for home loans. It was not an improvement.

As I explained the current mortgage process this morning, I tried to use simple examples for clarity. In my example of the 1969 purchase of my first home, the mortgage company serviced the loan, collecting my payments. It was in their interest to verify my creditworthiness as, if I defaulted, they would have to foreclose and take possession of my house. In the 1960s, houses kept their value but, in 1973 when I sold that house after moving to Orange County, I sold it for what I had paid. There was no appreciation. Considering that I had made improvements, I lost money. Why I didn’t keep it and rent it to someone else is another story? I should have but I was starting a new medical practice and didn’t want to manage a rental property 60 miles away. That was a bad decision as it was sold for $595,000 15 years later.

When I bought my house in 1991, the one I still own, the loan was handled by a mortgage broker. This was an innovation since 1969 and was at the root of the present crisis. Loans were no longer carried by the origination lender but were quickly sold to other investors. The broker made his money from the origination fees and the “points” paid by the borrower. This was just as true of banks, like Washington Mutual, as brokers. I refinanced my house a couple of years ago and made payments to WaMu for about six months. Then I received a notice that the loan was now owned by Wells Fargo. This resale market for mortgages had one bad feature and one good one. The bad feature was that the originating lender did not have to live with the decision to loan me money forever. Once they sold the loan, the problems that arose in the future, if any, were not their problems.

The good feature, and the bad, were a result of the Federal National Mortgage Association, Fannie Mae, and its sister organization, Federal Home Loan Mortgage Corporation, Freddie Mac, which buy residential mortgages from banks and brokers. They have criteria for those loans, and those that meet them are called “conforming.” Because Fannie Mae and Freddie Mac have been perceived as guaranteed by the government, the interest rates were lower for conforming loans.

The resulting mess is a consequence of moral hazard. The classic example of moral hazard is in insurance where the existence of insurance may cause the insured to behave in a less careful manner. That is exactly what happened here. If the lender was loaning his own, or his company’s, money, he had an awareness of the risk of default and an interest in minimizing that risk. The result was good judgment in lending. Once that risk was reduced or removed, by selling the mortgage to someone else, it became the problem of the buyer to assess risk. Fannie Mae and Freddie Mac were responsible for the risk in the loans they bought.

Then another factor entered the equation, the Congressional mandate. Congress, and especially the Democratic party, decided that lending standards were too restrictive toward minorities and the poor.

The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation’s banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.

That was the lead paragraph from the article, in 2000. This was all predictable. Moral hazard plus Congressional mandates. If I were a Democrat, I might say that the Congress was in Republican hands from 2000 to 2006. Very true. There is blame enough for both parties. Real estate developers and construction interests loved the new rules. They tend to be Republican. There were a few who tried to stem the tide.

From David Frum today:

By JOHN D. MCKINNON The Wall Street Journal; July 12, 2008; Page A8

WASHINGTON — Peter Wallison saw Fannie Mae’s troubles coming 25 years ago.

In the early 1980s, he was a top official in the Reagan Treasury Department. And Fannie Mae, at least by some measures, was insolvent, thanks to the economic storms that were then roaring through the savings-and-loan industry.

But getting anyone to do anything about the congressionally chartered mortgage company and its unusual vulnerabilities proved futile, even after Mr. Wallison began writing books warning that it and sister company Freddie Mac could take advantage of their government ties and relative lack of regulation to grow too large.

Fannie and Freddie applied pressure to try to silence Peter.

Almost immediately, he said, he experienced political pressure of the sort that—until now—has made Fannie Mae largely invulnerable to new legislative oversight and left it under the supervision of a weak financial regulator.

At the time, he sat on the board of a mortgage-insurance company that did extensive business with Fannie Mae. When the company’s officials noticed that they weren’t being chosen to insure some mortgage pools, Fannie officials told them it was because of Mr. Wallison’s new project at AEI, he said.

John McCain tried pass legislation.

For a decade reformers have tried to persuade Congress that they were allowing a serious risk to the government’s credit to develop in Fannie Mae and Freddie Mac, but few lawmakers would take action.

One of the reasons for this was the extraordinary power of Fannie and Freddie. They not only spent close to $150 million in lobbying over the last decade, but they also got their constituents—the securities industry, the homebuilders and the realtors—all powerful industries that depend on Fannie and Freddie’s largesse—to support their sole legislative objective: the defeat of any attempt to control their growth. Congress, as usual knuckled under to the special interest.

However, a very small number of lawmakers saw this problem for what it was, and were willing to stand up to the power of Fannie and Freddie—and I am proud to say that John McCain was one of them. In 2005, he joined a small group of Republican Senators to cosponsor the Federal Housing Enterprise Regulatory Reform Act, the strongest legislation introduced up to that time to control Fannie and Freddie. In a statement, he noted that “For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac…and the sheer magnitude of these companies and the role they play in the housing market…If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie and Freddie pose to the housing market, the overall financial system, and the economy as a whole.”

These were prophetic words, given what we know now, but they did not spring from a sudden conversion in that year. Three years earlier, McCain had introduced legislation—co-sponsored with the House Democratic leader Dick Gephardt—to create a Corporate Subsidy Reform Commission. The purpose of this group was to eliminate what McCain called “corporate welfare.” In a statement at the time, he noted that “There are more than 100 corporate subsidy programs in the federal budget today, requiring the federal government to spend approximately $65 billion a year…These programs provide special benefits or advantages to specific companies or industries at the expense of hard-working taxpayers. In years past, Congress has insisted that it would eliminate the existence of this corporate welfare, but virtually no such program has been eliminated…This bill aims to remove the special treatment given to politically powerful industries…”

In other words, as far back as 2002, John McCain realized that underlying what would ultimately become the Fannie and Freddie crisis was the willingness of Congress to provide financial support to private corporations. And he was willing to take on powerful interests to stop this process. If his bill had resulted in action at that time, the unprecedented steps that the Secretary of the Treasury and Congress had to take in the last two weeks would not have been necessary.

What do we do now ? The leaders of the financial world don’t know what to do. Harry Reid says no legislation is planned because they don’t know what to do.

I guess we will just have to elect McCain.

As usual, Herr Olbermann is wrong in his comments about one of McCain’s suggestions about how to deal with the crisis.

UPDATE: This comment from another blog on the subject of the AIG collapse is interesting. It ties the thread from Fannie Mae to all the other turmoil.

Question: What started this mess?

Answer: The housing “bubble” burst.

Question: How did that cause this problem?

Answer: Most mortgages are bundled and sold as fixed income securities (bonds). Once default rates went through the roof and housing values fell, the value of these bonds could not be determined.

Question: Why is that a problem?

Answer: When the value of a bond is unknown, no one wants to buy it.

Question: Why is that a problem?

Answer: Because a bond that you can’t get a bid on is pretty much worthless as an asset.

Question: And why is that a problem?

Answer: Because most financial firms are required to “mark to market” what they own. And a security that you can’t get other people to buy is valued at zero.

Question: Can’t you take an educated guess?

Answer: That’s what most firms are doing, but a guess is just a guess, not anything more precise. And if you are dealing with a firm that could be worth billions or could be billions in the hole, would you give them a loan? No. I didn’t think so. Ergo, there goes Lehman Brothers and Bear Stearns.

Question: And who began this mess?

Answer: Who are the world’s biggest bundlers and sellers of mortgage backed securities? Fannie Mae and Freddie Mac. They set the standards for mortgages. They relaxed lending standards to help the “poor” obtain home ownership. They hired lobbyists and gave millions to every politico who would take it to prevent a crackdown on their lending practices and the amount of leverage they were using. They went to incredible leverage levels to make their earnings numbers so that their politically appointed leaders could collect millions and hundreds of millions in salary and bonus.

Fannie and Freddy were the underwater earthquake that’s now creating this financial tsunami because the mortgage backed securities market involves trillions of dollars spread throughout the globe. History will show that a relatively few Democrat political hacks looking to line their own pockets may have cause the most massive financial panic in history.
9.19.2008 7:24am

UPDATE #2 This post on the Global Labor blog strikes me as wise and somber. It should be read. That link is now updated.

UPDATE #3: This Bloomberg piece has blown the lid off this story. The author is already getting threats. Guess from who ?

John McCain and the Senate

Sunday, September 14th, 2008

Divid Frum today posted a question about the effect on reformers of frustration with the political system. He intended the comment to apply to Sarah Palin.

Periodically there is an eruption of reform. The leaders of these eruptions have to be brave and charismatic. They excite intense loyalty among their followers – and provoke keen resentment among those who have enjoyed the old ways of doing business.

But it also often happens that this same bold leader has a strong messianic streak. They see no difference between themselves and their movement. They draw fierce lines between friends and enemies. They intensely resent criticism. They see no contradiction between their demand for total openness from others – and secrecy for themselves. They can be paranoid and vindictive – because after all, their enemies are enemies of the great cause.

I think this applies to John McCain. He has spent 25 years trying to cope with the traditions of the Senate as they apply to the present circumstances in politics. It is one reason why he and Joe Lieberman are such close friends. Prior to the 2000 election, Lieberman was a maverick like McCain. He supported school vouchers and opposed ethanol subsidies. He made the very good points that the teachers unions had obstructed any effort to reform schools and the ethanol subsidies had benefited corporate farming interests, like Archer Daniels Midland company at the expense of urban motorists like those represented by Lieberman. Once he was chosen by Al Gore as his VP nominee, Lieberman altered his positions to accommodate Democratic Party orthodoxy.

Once there was a tradition of Senators advocating positions that were good for the country. Senator Lister Hill, the son of a physician and named for the discoverer of antisepsis, was an advocate of building hospitals in the days when medical care was a good government issue. John Stennis was an advocate for national defense, although both of them were segregationists in the days when the South was segregated. Harry Truman was an obscure Senator, chosen by the political boss of Kansas City to be a Senator. After Pearl Harbor, there was a great deal of anger at the failure of intelligence and concern about war profiteering and corruption. Truman was placed in charge of a committee on the conduct of the war. It was called the Truman Committee and its honest and serious investigation of the Roosevelt Administration’s activities catapulted Truman to fame and the vice-presidency in 1944. It didn’t matter to him that the President was of his own party.

Today we see Senators like Trent Lott, whose interests were chiefly with pork barrel spending. Lott was an advocate for his state and the shipyards of Pascagoula, Missisippi, even supporting building ships that were not wanted by the navy.

The Senate majority leader, Trent Lott, wanted a half-billion dollars to start building a $1.5 billion ship called the LHD-8 at the Ingalls Shipyard in Mississippi, his home state.

The Senate, at his behest, approved the money this summer. But the House did not. Last month, House aides asked the Navy how much money really was needed to start the project. Last week, the Navy drafted an answer: $295 million, a lot less than Senator Lott wanted.

One of Senator Lott’s senior aides, a retired Navy officer, obtained the draft and faxed a handwritten memorandum on the senator’s stationery to an admiral at the Pentagon.

The memorandum said $295 million was ”the wrong answer.” The right answer — the answer that ”the Navy needs to support” — was ”at least $375 M to $500 M,” it said. ”We have worked too hard to give up on the $500 M now.”

The implication, according to several people involved in the process, was that the Navy should alter its testimony to support Senator Lott’s position. It has not.

McCain has fought a lonely fight against unnecessary spending. Some of his difficulties with his Republican colleagues comes from these lonely battles. His honor has always been his first concern, as archaic as that seemed in 2008 politics. In this very fair profile of McCain, we still see the leftist slant.

Galanti, like several other ex-POWS, was a supporter of Swift Boat Veterans for Truth, the group that spread unfounded accusations about John Kerry in 2004. The “Swift Boat” attacks against Kerry were a delayed reaction to what some veterans saw as Kerry’s betrayal of their cause upon his return home from Vietnam. “I have some pretty strong feelings about those sorts of people,” Galanti said.

Anyone who followed the story, knows that the swiftboat skippers told the truth about Kerry. This admission is code for the writer’s political stance, just as you could tell the communists in World War II by their reaction to the Hitler-Stalin nonaggression pact in 1939, then the German invasion of the USSR in 1942.

Now McCain has found a kindred spirit in Sarah Palin. I think that is a factor in his choice of her as a running mate. The fallout from this decision is still coming. Governor Palin has been furiously attacked from the left but she has found unlikely allies. The basic message, as I see it, is that McCain has found an ally in his lonely quest and is invigorated. She has been the subject of furious attacks but seems able to shake them off. They are a great combination and McCain has finally someone besides Joe Lieberman who can stand beside him and fight for what he thinks is important.

I have heard and read that he might be threatened by her popularity but I don’t see it that way. I think he has been grateful to share the burden and is no longer condemned to fight his battles alone. This is a man who was willing to defy his captors. Threats from a wimp like Obama are unlikely to deter him and will only give him more incentive.

Of course, the lies are out there.

The OODA loop

Sunday, September 14th, 2008

I have previously commented on John Boyd, here, and am a fan of this man’s work.

The ideas of U.S. Air Force Colonel John Boyd (1927-1997) have transformed American military policy and practice. A first-rate fighter pilot and a self-taught scholar, he wrote the first manual on jet aerial combat; spearheaded the design of both of the Air Force’s premier fighters, the F-15 and the F-16; and shaped the tactics that saved lives during the Vietnam War and the strategies that won the first Gulf War. In addition, Boyd led the Military Reform Movement in the 1970s and 1980s, calling for radical change in Pentagon procurement procedures. A perceptive and original thinker, he synthesized ideas from across disciplines to formulate his own philosophy about warfare, competition, decision making, and the nature of leadership.

Many of America’s best-known military and political leaders consulted Boyd on matters of technology, strategy, and theory. His notions of time cycles and competitive behavior – known as the OODA loops (Observation, Orientation, Decision and Action) – have influenced not only military combat but also business models in the U.S. and abroad. Yet despite Boyd’s influence within the military and in variety of professional circles, he published nothing, preferring military briefings as his medium.

In the Mind of War, Grant T. Hammond offers the first complete portrait of Boyd, his groundbreaking ideas, and his enduring legacy. Based on extensive interviews with Boyd and with those who knew him as well as on a close analysis of Boyd’s briefings, this intellectual biography brings the work of an extraordinary thinker to a broader public.

That is from a review of another book about him and his influence on the military. Now, Michael Barone, an analyst of politics, has picked up on the OODA loop terminology of Boyd to describe the McCain campaign.

John McCain was trained as a fighter pilot. In his selection of Sarah Palin, and in his convention and campaigning since, he has shown that he learned an important lesson from his fighter pilot days: He has gotten inside Barack Obama’s OODA loop.

That term was the invention of the great fighter pilot and military strategist John Boyd. It’s an acronym for Observe, Orient, Decide, Act.

“The key to victory is operating at a faster tempo than the enemy,” Boyd’s biographer Robert Coram writes. “The key thing to understand about Boyd’s version is not the mechanical cycle itself, but rather the need to execute the cycle in such a fashion as to get inside the mind and decision cycle of the adversary.”

The Boyd story has many facets. He also pioneered the principles of fighter design that are still used by the Air Force.

Then team Obama and its many backers in the media failed to Decide correctly, so when they Acted they got it wrong. Their attacks on Palin tended to ricochet and hit Obama.
Is she inexperienced? Well, what has Obama ever run (besides his now floundering campaign)? Being a small-town mayor, as Palin said, is like being a community organizer, “without the actual responsibilities.”

Is she neglecting her family? Well, how often has Obama tucked his daughters in lately? For more than a week we’ve seen the No. 1 person on the Democratic ticket argue that he’s better prepared than the No. 2 person on the Republican ticket. That’s not a winning argument even if you win it. As veteran California Democrat Willie Brown says, “The Republicans are now on offense, and Democrats are on defense.”

Pretty interesting. Much more on Boyd here.

Obama is now running against Sarah

Tuesday, September 2nd, 2008

UPDATE # 2: Last year, she was much more qualified. I wonder what happened?

In Alaska, Palin is challenging the dominant, sometimes corrupting, role of oil companies in the state’s political culture. “The public has put a lot of faith in us,” says Palin during a meeting with lawmakers in her downtown Anchorage office, where—as if to drive the point home—the giant letters on the side of the ConocoPhillips skyscraper fill an entire wall of windows. “They’re saying, ‘Here’s your shot, clean it up’.” For Palin, that has meant tackling the cozy relationship between the state’s political elite and the energy industry that provides 85 percent of Alaska’s tax revenues—and distancing herself from fellow Republicans, including the state’s senior U.S. senator, Ted Stevens, whose home was recently searched by FBI agents looking for evidence in an ongoing corruption investigation. (Stevens has denied any wrongdoing.) But even as she tackles Big Oil’s power, Palin has transformed her own family’s connections to the industry into a political advantage. Her husband, Todd, is a longtime employee of BP, but, as Palin points out, the “First Dude” is a blue-collar “sloper,” a fieldworker on the North Slope, a cherished occupation in the state. “He’s not in London making the decisions whether to build a gas line.”

In an interview with NEWSWEEK, Palin said it’s time for Alaska to “grow up” and end its reliance on pork-barrel spending. Shortly after taking office, Palin canceled funding for the “Bridge to Nowhere,” a $330 million project that Stevens helped champion in Congress. The bridge, which would have linked the town of Ketchikan to an island airport, had come to symbolize Alaska’s dependence on federal handouts. Rather than relying on such largesse, says Palin, she wants to prove Alaska can pay its own way, developing its huge energy wealth in ways that are “politically and environmentally clean.”

Well, that was then and this is now. Even the New York Times has changed its mind:

Where is it written that only senators are qualified to become President?… Or where is it written that mere representatives aren’t qualified, like Geraldine Ferraro of Queens?… Where is it written that governors and mayors, like Dianne Feinstein of San Francisco, are too local, too provincial?… Presidential candidates have always chosen their running mates for reasons of practical demography, not idealized democracy…. What a splendid system, we say to ourselves, that takes little-known men, tests them in high office and permits them to grow into statesmen…. Why shouldn’t a little-known woman have the same opportunity to grow?… [T]he indispensable credential for a Woman Who [sic] is the same as for a Man Who [sic] – one who helps the ticket.

That, of course, was from 1984.

ORIGINAL POST
A new development has appeared in the presidential campaign. Barack Obama has started to compare his qualifications for office to those of Sarah Palin. This is amazing. It began here. A left wing blog called Talk Left was running a pool on how long before Sarah Palin withdraws as a candidate for VP. The deluge of leftist slime seems to them to be too much for her to resist. I agree that it is disgusting but the left has seemingly transferred its hate of George Bush over to Sarah. Why ? Here is one opinion. A bit whimsical but with a good insight into the truth.

But she’s not a Democrat, which despite her va-va-va-voom appearance, means she’s not really a woman, which is one of the reasons we’ve spent the past four days since McCain unveiled her trying to tear her limb from limb. Just because she’s the governor of a state sandwiched between two obscure and unimportant countries, Canada and Russia, and spent more time in her first five minutes visiting American troops in Iraq than Evita Barry did during his entire Rainbow Tour, what could she possibly know about foreign policy? It’s not like she’s John Edwards or something.

So that’s why we’re having our Wellstone Funeral Moment at the moment. We mean well; we promised ourselves we wouldn’t go over the top with our outright loathing of the Neanderthals who preach “Christian” values while practicing Wiccanism and child sacrifice and who hate black people and gay people and want to destroy the environment just because they can, and want to amass more money than even John Kerry or Jon Corzine or Herb Kohl or Jay Rockefeller or Dianne Feinstein — the five richest senators — or Ted Kennedy or John Edwards or Nancy Pelosi have. That, usually, is the Kos Kidz’s job. Along with speculating exactly how Bush got from My Pet Goat to planting the depth charges that blew up the levees in New Orleans.

But sometimes the mask slips and you can see — whoops! — how much we hate you.

The new development is that Obama, himself, cannot resist the temptation to join the fray. He is supposed to be the presidential nominee, far above the concerns of a vice-president, which everybody knows doesn’t really matter. Why is he inserting himself, and even comparing himself, to her ? He was being interviewed on CNN, a friendly venue, when this revealing exchange took place.

COOPER: And, Senator Obama, my final question — your — some of your Republican critics have said you don’t have the experience to handle a situation like this. They in fact have said that Governor Palin has more executive experience, as mayor of a small town and as governor of a big state of Alaska. What’s your response?

OBAMA: Well, you know, my understanding is, is that Governor Palin’s town of Wasilla has, I think, 50 employees. We have got 2,500 in this campaign. I think their budget is maybe $12 million a year. You know, we have a budget of about three times that just for the month.

So, I think that our ability to manage large systems and to execute, I think, has been made clear over the last couple of years. And, certainly, in terms of the legislation that I passed just dealing with this issue post-Katrina of how we handle emergency management, the fact that many of my recommendations were adopted and are being put in place as we speak, I think, indicates the degree to which we can provide the kinds of support and good service that the American people expect.

Whaaat ?

Just for the record, Alaska’s FY2008 operating budget is $11.2 billion, and the state employs approximately 15,000 people. Those certainly aren’t huge numbers in federal terms, but they’re a good bit bigger than the Obama campaign.

What is he thinking off ? Maybe this. He has lost his cool and this will defeat him if nothing else will. He feels it’s necessary to lie about the qualifications of the vice-presidential nominee. Why ? Because she threatens him. The race has turned upside down.

What ever happened to Joe Biden ?

UPDATE: Here is a piece by an Alaskan about Sarah and her record as governor.

And here is “Sarah America” on energy.

The Palin firestorm

Monday, September 1st, 2008

UPDATE #2: My God ! a sensible Palin story from the MSM. I’ve been to Wasilla and it is actually a beautiful, upscale suburb of Anchorage. It should have become the Alaska capital in an initiative that failed in 1994, just before one of my visits to the state. It is ridiculous to have the capital at Juneau, which is hundreds of miles from the major population areas of the state. You cannot even get to Juneau by land ! The problem is the rivalry between Fairbanks and Anchorage. The Fairbanks voters will never allow the capital to move to Anchorage. A move to Wasilla, which is about 30 miles north of Anchorage and on the main highway to Fairbanks, was defeated in 1994. I expect that voters will learn a lot more about Alaska in the next few months.

UPDATE: Now she is a computer hacker, except it seems to have been completely legal. Cool !

The political left has gone crazy. Some segments have always been a bit that way but Sarah Palin seems to have tipped most of them over the edge. The first reaction, which was shared by a number of inside-the-beltway dinosaurs of both parties, was that McCain must have been desperate or senile to have chosen her. The inexperience argument seems a bit odd given the lack of experience of the candidate that the Democrats have chosen this year. Still, it has been tried. Some Democrats kept their heads and advised calm. Even they had trouble understanding the situation.

Third, and most important, voters don’t need our help to figure this out. In the end, they’ll be the best and toughest judge of whether or not Sarah Palin is ready. Back in 1988, the Dukakis campaign actually ran an ad against Dan Quayle. It didn’t work, and wasn’t necessary. In any case, Quayle had only himself to blame for falling flat on the national stage. By straining so hard to compare himself to JFK on the campaign trail, he practically wrote Bentsen’s famous line for him.

Notice no mention of how that 1988 election turned out.

The netroots, on the other hand went nuts. That’s why we call them nutroots.

Washington Monthly, a left wing magazine site that was run by Kevin Drum the past few years, has become a slightly less obscene DailyKos since Kevin left. They are still out of control. The entire site, the past 48 hours, has been hysteria nonstop. That is only a sample.

The result may not be pretty for Obama. This frenzy of anti-woman sentiment has caused one Hillary supporter to switch and that may be just the beginning. One accusation has been that the choice of Sarah was a crude play for the female vote. I don’t think so. I think McCain really sees some of his own instincts in her. He also may realize that it is time to move on to the next generation of Republican leaders. However, the furious and demeaning reaction to her pick may accomplish just that purpose.

Keep it up nutroots!

The Anchoress has the latest knockdowns on rumors, which have spread even to the London papers. I can’t imagine this will help Obama.