Barack Obama rejected the proposal—put forward by John McCain today—that the two presidential candidates leave the campaign trail, delay Friday’s debate, and return to Washington to work on a bailout package for the economy,
“Presidents are going to have to deal with more than one thing at a time,” he said, “it is not necessary for us to think we can do only one thing and suspend everything else.”
Expressing concern about infusing “Capitol Hill with presidential politics,” Obama said it was his desire to see the debate go forward.
“With respect to the debates it is my belief that this is exactly the time when the American people need to hear from the person who in roughly 40 days will be responsible for this mess,” he said. “I think it is going to be part of the president’s job to deal with more than one thing at once. I don’t see why we can’t be constructive in helping with this problem.”
Obama, who would not commit to taking advertisements off the air as McCain’s campaign has, delivered his remarks hours after McCain announced the suspension of his campaign. The Arizona Republican insisted that it was time for the two candidates to return to work to help push forward a bi-partisan bailout package to deal with the financial crisis.
Earlier in the afternoon, Democrats in Congress were already calling out McCain for engaging in what was described, at various times, as a “Hail Mary pass” and a “deeply cynical” ploy.
“The debate should take place as scheduled,” Speaker Nancy Pelosi said in an interview with NPR to be broadcast this afternoon. “We have to be able to do a couple of things at once. That’s what leadership requires.”
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Senate Majority Leader Harry Reid said in a statement that McCain’s move would actually impair negotiations over the bailout by introducing politics into the equation.
“I understand that the candidates are putting together a joint statement at Senator Obama’s suggestion,” said Reid. “But it would not be helpful at this time to have them come back during these negotiations and risk injecting presidential politics into this process or distract important talks about the future of our nation’s economy. If that changes, we will call upon them. We need leadership; not a campaign photo op.”
Later, Reid personally delivered his statement to McCain over the phone after the Arizona Republican called the Majority Leader. “Sorry, John, I already issued this statement,” Reid told McCain, a Democratic staffer told the Huffington Post.
The staffer added, “John McCain’s done enough damage to our economy in Washington. He should stay on the campaign trail.”
Sherrod Brown, meanwhile, called McCain’s move “a bit of a gimmick,” noting that the Arizona Republican had “never weighed in on these economic issues in the past,” and asking, rhetorically, why a presidential candidate couldn’t multi-task.
“This country is faced with enough crises, both foreign and domestic that they should be able to continue with this debate,” Brown told MSNBC.
Appearing at the same time on Fox News, Sen. Joseph Lieberman was sticking to the McCain campaign line - which seems to be that it is one’s patriotic duty to stop the campaign and work on the economy.
“A debate on foreign policy Friday night is important but not as important as saving American from an economic crisis,” he declared. “I would say it is more important of John McCain and Barack Obama to be here in Washington as part of a solution to this economic crisis.”
Democratic aides on Capitol Hill were incensed with McCain’s move. One, whose boss works on the Senate Banking Committee, described the move as “cynical politics” at its worst. Another, however, lamented the fact that McCain could very well claim the ethical high-ground. “In general,” said an aide. “I’d say we should have thought of it, but we did, then McCain [screwed] us.”
Whether the move was a political ploy on the part of the Republican candidate, Obama wouldn’t say. He did, however, note that he was the one who first broached McCain with the idea of releasing a joint statement on the crisis. That came in the form of an 8:30 a.m phone call this morning which McCain never answered. According to Obama, the two campaigns spoke six hours later, where it was suggested that in addition to the joint statement the candidates would meet in Washington D.C. with congressional leaders. Shortly thereafter, however, McCain had announced in front of television cameras that he was putting a temporary stop to the campaign functions.
“My assumption was that the joint statement would go out initially,” said Obama.
Now is the Time to Resist Wall Street’s Shock Doctrine
NaomiKlein.org
09/22/08
I wrote The Shock Doctrine in the hopes that it would make us all better prepared for the next big shock. Well, that shock has certainly arrived, along with gloves-off attempts to use it to push through radical pro-corporate policies (which of course will further enrich the very players who created the market crisis in the first place...).
The best summary of how the right plans to use the economic crisis to push through their policy wish list comes from Former Republican House Speaker Newt Gingrich. On Sunday, Gingrich laid out 18 policy prescriptions for Congress to take in order to “return to a Reagan-Thatcher policy of economic growth through fundamental reforms.” In the midst of this economic crisis, he is actually demanding the repeal of the Sarbanes-Oxley Act, which would lead to further deregulation of the financial industry. Gingrich is also calling for reforming the education system to allow “competition” (a.k.a. vouchers), strengthening border enforcement, cutting corporate taxes and his signature move: allowing offshore drilling.
It would be a grave mistake to underestimate the right’s ability to use this crisis—created by deregulation and privatization—to demand more of the same. Don’t forget that Newt Gingrich’s 527 organization, American Solutions for Winning the Future, is still riding the wave of success from its offshore drilling campaign, “Drill Here, Drill Now!” Just four months ago, offshore drilling was not even on the political radar and now the U.S. House of Representatives has passed supportive legislation. Gingrich is holding an event this Saturday, September 27 that will be broadcast on satellite television to shore up public support for these controversial policies.
What Gingrich’s wish list tells us is that the dumping of private debt into the public coffers is only stage one of the current shock. The second comes when the debt crisis currently being created by this bailout becomes the excuse to privatize social security, lower corporate taxes and cut spending on the poor. A President McCain would embrace these policies willingly. A President Obama would come under huge pressure from the think tanks and the corporate media to abandon his campaign promises and embrace austerity and “free-market stimulus.”
We have seen this many times before, in this country and around the world. But here’s the thing: these opportunistic tactics can only work if we let them. They work when we respond to crisis by regressing, wanting to believe in “strong leaders” - even if they are the same strong leaders who used the September 11 attacks to push through the Patriot Act and launch the illegal war in Iraq.
So let’s be absolutely clear: there are no saviors who are going to look out for us in this crisis. Certainly not Henry Paulson, former CEO of Goldman Sachs, one of the companies that will benefit most from his proposed bailout (which is actually a stick up). The only hope of preventing another dose of shock politics is loud, organized grassroots pressure on all political parties: they have to know right now that after seven years of Bush, Americans are becoming shock resistant.
A 1992 video featuring a Republican senator, Republican congressman and top Capitol Hill staffers who worked on Vietnam prisoner of war and missing in action issues say John McCain collaborated with North Vietnamese while a POW, and then covered up that involvement to the detriment of POW/MIA families seeking access to classified Pentagon records about their own family members.
Watch the Video
The video raises probing questions about the 2008 Republican presidential nominee’s war record, especially after McCain made his captivity a major part of his qualifications for the presidency at the Republican National Convention. In 2004, the GOP focused on Democratic nominee John Kerry’s war record to criticize his candidacy.
To date, the video has been posted on a handful of blogs but has been ignored by the mainstream media. While it features Republican stalwarts on POW/MIA issues, it also suggests that McCain’s war records at the Pentagon and in North Vietnam would reveal potentially very controversial details about the GOP’s presidential candidate.
The nearly eight-minute video is posted on YouTube under “Vietnam Veterans Against McCain.” It begins with the title, “1992 Senate Select Committee on POW/MIAs,” and features ex-Sen. Bob Smith (R-NH), Rep. Robert Dornan (R-CA), senate staffers Tracy Usry, James Lucier, and military family members Lynn O’Shea, of the National Alliance of Families and retired Army Cpl. Bob Dumas, whose brother was a POW lost in the Korean War, and Joseph Douglass, Jr., author of Betrayed, about America’s missing POWs. The video has no author credits.
The footage begins with Douglass, Usry, O’Shea and Smith all saying that McCain worked to kill legislation that would have opened the Pentagon’s classified archive of POW/MIA files. “Many, many documents were held back for no reason,” former Sen. Smith said. Dorman said legislation that passed the House with no opposing votes was single-handedly blocked in the Senate by McCain. “On the Senate side, we had one person standing in the way,” Dornan said, referring to McCain.
Dumas then gave the reason why - the Pentagon’s records would reveal McCain had collaborated with the Vietnamese. “He didn’t want nobody to check his background because a lot of POWs who were with him in the camp said he was a collaborator with the enemy,” Dumas said. “He gave the enemy information they wanted.”
Lucier, identified as a former U.S. Senate Chief of Staff, said “we do know that when he was over there, he cooperated with Communist news services in giving interviews that were not flattering to the United States.” Usry, identified as U.S. Senate Minority Staff former chief investigator, said “information shows that he made over 32 tapes of propaganda for the Vietnamese government.”
Dornan said there were transcripts of other POWs reacting to McCain’s false statements, saying, “Oh my God, is that Admiral McCain’s son Is that the admiral’s son? Is that Johnny, telling us that our principle targets are schools, orphanages, hospitals, temples, churches? That was Jane Fonda’s line.” Dornan said those transcripts are in war museums in North Vietnam, where McCain, as a senator, pressured the country not to release them or face opposition concerning normalization of relations with the United States.
“McCain could not have wanted those to turn up in the middle of a presidential race,” the ex-congressman said. “He knows that. I know that. And a few other people know that. That’s why he was against Bob Dole’s legislation.”
Dornan then offered another interesting explanation why McCain refused an offer by the North Vietnamese to be released. Dornan said those released first were collaborators, which would have ended McCain’s military career and hurt the Navy, where his father commanded the Pacific fleet.
“Nobody takes that one step beyond that,” Dornan said, speaking of McCain’s refusal to be released. “If Admiral John McCain’s son had accepted this princely status and come home in 1967, while others sat there for five years, what would the Navy have done with the son of an admiral who opted to get special treatment and come home? No Navy career. No House seat. No Senate seat. It would have been the end of his career.”
Steven Rosenfeld is a Senior Fellow at AlterNet.org, where he reports on elections from a voting rights perspective. His books include Count My Vote: A Citizen’s Guide to Voting (AlterNet Books, 2008), What Happened in Ohio: A Documentary Record of Theft and Fraud in the 2004 Election (The New Press, 2006), and Making History in Vermont: The Election of a Socialist to Congress (Hollowbrook Publishing, 1992). An award-winning journalist, he has been a staff reporter at National Public Radio, Monitor Radio, TomPaine.com, and at daily and weekly newspapers in Vermont.
Research support provided by the Investigative Fund of The Nation Institute; a longer version of this article is available at nationinstitute.org.
John McCain, who has risen to political prominence on his image as a Vietnam POW war hero, has, inexplicably, worked very hard to hide from the public stunning information about American prisoners in Vietnam who, unlike him, didn’t return home. Throughout his Senate career, McCain has quietly sponsored and pushed into federal law a set of prohibitions that keep the most revealing information about these men buried as classified documents. Thus the war hero people would logically imagine to be a determined crusader for the interests of POWs and their families became instead the strange champion of hiding the evidence and closing the books.
Almost as striking is the manner in which the mainstream press has shied from reporting the POW story and McCain’s role in it, even as McCain has made his military service and POW history the focus of his presidential campaign. Reporters who had covered the Vietnam War have also turned their heads and walked in other directions. McCain doesn’t talk about the missing men, and the press never asks him about them.
The sum of the secrets McCain has sought to hide is not small. There exists a telling mass of official documents, radio intercepts, witness depositions, satellite photos of rescue symbols that pilots were trained to use, electronic messages from the ground containing the individual code numbers given to airmen, a rescue mission by a Special Forces unit that was aborted twice by Washington and even sworn testimony by two defense secretaries that “men were left behind.” This imposing body of evidence suggests that a large number—probably hundreds—of the US prisoners held in Vietnam were not returned when the peace treaty was signed in January 1973 and Hanoi released 591 men, among them Navy combat pilot John S. McCain.
The Pentagon had been withholding significant information from POW families for years. What’s more, the Pentagon’s POW/MIA operation had been publicly shamed by internal whistleblowers and POW families for holding back documents as part of a policy of “debunking” POW intelligence even when the information was obviously credible. The pressure from the families and Vietnam veterans finally produced the creation, in late 1991, of a Senate “Select Committee on POW/MIA Affairs.” The chair was John Kerry, but McCain, as a POW, was its most pivotal member. In the end, the committee became part of the debunking machine.
Included in the evidence that McCain and his government allies suppressed or tried to discredit is a transcript of a senior North Vietnamese general’s briefing of the Hanoi Politburo, discovered in Soviet archives by an American scholar in the 1990s. The briefing took place only four months before the 1973 peace accords. The general, Tran Van Quang, told the Politburo members that Hanoi was holding 1,205 American prisoners but would keep many of them at war’s end as leverage to ensure getting reparations from Washington.
Throughout the Paris negotiations, the North Vietnamese tied the prisoner issue tightly to the issue of reparations. Finally, in a February 1, 1973, formal letter to Hanoi’s premier, Pham Van Dong, Nixon pledged $3.25 billion in “postwar reconstruction” aid. The North Vietnamese, though, remained skeptical about the reparations promise being honored (it never was). Hanoi thus held back prisoners—just as it had done when the French were defeated at Dien Bien Phu in 1954 and withdrew their forces from Vietnam. France later paid ransoms for prisoners and brought them home.
Two defense secretaries who served during the Vietnam War testified to the Senate POW committee in September 1992 that prisoners were not returned. James Schlesinger and Melvin Laird, secretaries of defense under Nixon, said in a public session and under oath that they based their conclusions on strong intelligence data—letters, eyewitness reports, even direct radio contacts. Under questioning, Schlesinger chose his words carefully, understanding clearly the volatility of the issue: “I think that as of now that I can come to no other conclusionsome were left behind.”
Furthermore, over the years, the Defense Intelligence Agency (DIA) received more than 1,600 firsthand reports of sightings of live American prisoners and nearly 14,000 secondhand accounts. Many witnesses interrogated by CIA or Pentagon intelligence agents were deemed “credible” in the agents’ reports. Some of the witnesses were given lie-detector tests and passed. Sources provided me with copies of these witness reports. Yet the DIA, after reviewing them all, concluded that they “do not constitute evidence” that men were still alive.
There is also evidence that in the first months of Reagan’s presidency, the White House received a ransom proposal for a number of POWs being held by Hanoi. The offer, which was passed to Washington from an official of a third country, was apparently discussed at a meeting in the Roosevelt Room attended by Reagan, Vice President George H.W. Bush, CIA director William Casey and National Security Adviser Richard Allen. Allen confirmed the offer in sworn testimony to the Senate POW committee on June 23, 1992.
Allen was allowed to testify behind closed doors, and no information was released. But a San Diego Union-Tribune reporter, Robert Caldwell, obtained the portion of the testimony relating to the ransom offer and wrote about it. The ransom request was for $4 billion, Allen testified. He said he told Reagan that “it would be worth the president going along and let’s have the negotiation.” When his testimony appeared in the Union-Tribune, Allen quickly wrote a letter to the panel, this time not under oath, recanting the ransom story, saying his memory had played tricks on him.
But the story didn’t end there. A Treasury agent on Secret Service duty in the White House, John Syphrit, came forward to say he had overheard part of the ransom conversation in the Roosevelt Room in 1981. The Senate POW committee voted not to subpoena him to testify.
On November 11, 1992, Dolores Alfond, sister of missing airman Capt. Victor Apodaca and chair of the National Alliance of Families, an organization of relatives of POW/MIAs, testified at one of the Senate committee’s public hearings. She asked for information about data the government had gathered from electronic devices used in a classified program known as PAVE SPIKE.
The devices were primarily motion sensors, dropped by air, designed to pick up enemy troop movements. But they also had rescue capabilities. Someone on the ground—a downed airman or a prisoner on a labor gang—could manually enter data into the sensor, which were regularly collected electronically by US planes flying overhead. Alfond stated, without any challenge from the committee, that in 1974, a year after the supposedly complete return of prisoners, the gathered data showed that a person or people had manually entered into the sensors—as US pilots had been trained to do—“no less than 20 authenticator numbers that corresponded exactly to the classified authenticator numbers of 20 US POW/MIAs who were lost in Laos.” Alfond added, says the transcript: “This PAVE SPIKE intelligence is seamless, but the committee has not discussed it or released what it knows about PAVE SPIKE.”
McCain, whose POW status made him the committee’s most powerful member, attended that hearing specifically to confront Alfond because of her criticism of the panel’s work. He bellowed and berated her for quite a while. His face turning anger-pink, he accused her of “denigrating” his “patriotism.” The bullying had its effect—she began to cry.
After a pause Alfond recovered and tried to respond to his scorching tirade, but McCain simply turned and stormed out of the room. The PAVE SPIKE file has never been declassified. We still don’t know anything about those 20 POWs.
The committee’s final report, issued in January 1993, began with a forty-three-page executive summary—the only section that drew the mainstream press’s attention. It said that only “a small number” of POWs could have been left behind in 1973. But the document’s remaining 1,180 pages were quite different. Sprinkled throughout are findings that contradict and disprove the conclusions of the whitewashed summary. This insertion of critical evidence that committee leaders had downplayed and dismissed was the work of a committee staff that had opposed and finally rebelled against the cover-up.
Pages 207-209 of the report, for example, contain major revelations of what were either massive intelligence failures or bad intentions. These pages say that until the committee brought up the subject in 1992, no branch of the intelligence community that dealt with analysis of satellite and lower-altitude photos had ever been informed of the distress signals US forces were trained to use in Vietnam—nor had they ever been tasked to look for such signals from possible prisoners on the ground.
In a personal briefing in 1992, high-level CIA officials told me privately that as it became more and more difficult for either government to admit that it knew from the start about the unacknowledged prisoners, those prisoners became not only useless as bargaining chips but also a risk to Hanoi’s desire to be accepted into the international community. The CIA officials said their intelligence indicated strongly that the remaining men—those who had not died from illness or hard labor or torture—were eventually executed. My own research has convinced me that it is not likely that more than a few—if any—are alive in captivity today. (That CIA briefing was conducted “off the record,” but because the evidence from my reporting since then has brought me to the same conclusion, I felt there was no longer any point in not writing about the meeting.)
For many reasons, including the absence of a constituency for the missing men other than their families and some veterans’ groups, very few Americans are aware of McCain’s role not only in keeping the subject out of public view but in denying the existence of abandoned POWs. That is because McCain has hardly been alone in this hide-the-scandal campaign. The Arizona senator has actually been following the lead of every White House since Richard Nixon’s and thus of every CIA director, Pentagon chief and National Security Adviser, among many others (including Dick Cheney, who was George H.W. Bush’s defense secretary).
An early and critical attempt by McCain to conceal evidence involved 1990 legislation called the Truth bill, which started in the House. A brief and simple document, the bill would have compelled complete transparency about prisoners and missing men. Its core sentence said that the “head of each department or agency which holds or receives any records and information, including reports, which have been correlated or possibly correlated to United States personnel listed as prisoner of war or missing in action from World War II, the Korean conflict and the Vietnam conflict, shall make available to the public all such records held or received by that department or agency.”
Bitterly opposed by the Pentagon (and thus by McCain), the bill went nowhere. Reintroduced the following year, it again disappeared. But a few months later a new measure, the McCain bill, suddenly appeared. It created a bureaucratic maze from which only a fraction of the documents could emerge—only the records that revealed no POW secrets. The McCain bill became law in 1991 and remains so today.
McCain was also instrumental in amending the Missing Service Personnel Act, which was strengthened in 1995 by POW advocates to include criminal penalties against “any government official who knowingly and willfully withholds from the file of a missing person any information relating to the disappearance or whereabouts and status of a missing person.” A year later, in a closed House-Senate conference on an unrelated military bill, McCain, at the behest of the Pentagon, attached a crippling amendment to the act, stripping out its only enforcement teeth, the criminal penalties, and reducing the obligations of commanders in the field to speedily search for missing men and report the incidents to the Pentagon.
McCain argued that keeping the criminal penalties would have made it impossible for the Pentagon to find staffers willing to work on POW/MIA matters. That’s an odd argument to make. Were staffers only “willing to work” if they were allowed to conceal POW records? By eviscerating the law, McCain gave his stamp of approval to the government policy of debunking the existence of live POWs.
McCain has insisted again and again that all the evidence has been woven together by unscrupulous deceivers to create an insidious and unpatriotic myth. He calls it the work of the “bizarre rantings of the MIA hobbyists.” He has regularly vilified those who keep trying to pry out classified documents as “hoaxers,” “charlatans,” “conspiracy theorists” and “dime-store Rambos.” Family members who have personally pressed McCain to end the secrecy have been treated to his legendary temper. In 1996 he roughly pushed aside a group of POW family members who had waited outside a hearing room to appeal to him, including a mother in a wheelchair.
The only explanation McCain has ever offered for his leadership on legislation that seals POW information is that he believes the release of such information would only stir up fresh grief for the families of those who were never accounted for in Vietnam. Of the scores of POW families I’ve met over the years, only a few have said they want the books closed without knowing what happened to their men. All the rest say that not knowing is exactly what grieves them.
It’s not clear whether the taped confession McCain gave to his captors to avoid further torture has played a role in his postwar behavior. That confession was played endlessly over the prison loudspeaker system at Hoa Lo—to try to break down other prisoners—and was broadcast over Hanoi’s state radio. Reportedly, he confessed to being a war criminal who had bombed a school and other civilian targets. The Pentagon has copies of the confessions but will not release them. Also, no outsider I know of has ever seen a nonredacted copy of McCain’s debriefing when he returned from captivity, which is classified but can be made public by McCain.
In his bestselling 1999 autobiography, Faith of My Fathers, McCain says he felt bad throughout his captivity because he knew he was being treated more leniently than his fellow POWs, owing to his propaganda value (his high-ranking father, Rear Adm. John S. McCain II, was then the commander of US forces in the Pacific). Also in this memoir, McCain expresses guilt at having broken under torture and given the confession. “I felt faithless and couldn’t control my despair,” he writes, revealing that he made two “feeble” attempts at suicide. Tellingly, he says he lived in “dread” that his father would find out about the confession. “I still wince,” he writes, “when I recall wondering if my father had heard of my disgrace.”
McCain still didn’t know the answer when his father died in 1981. He got his answer eighteen years later. In his 1999 memoir, the senator writes, “I only recently learned that the tape had been broadcast outside the prison and had come to the attention of my father.”
Does this hint at explanations for McCain’s efforts to bury information about prisoners or other disturbing pieces of the Vietnam War? Does he suppress POW information because its surfacing rekindles his feelings of shame? On this subject, all I have are questions. But even without answers to what may be hidden in the recesses of someone’s mind, one thing about the POW story is clear: if American prisoners were dishonored by being written off and left to die, that’s something the American public ought to know about.
AlterNet is a nonprofit organization and does not make political endorsements. The opinions expressed by its writers are their own.
Sydney H. Schanberg, a Pulitzer Prize-winning reporter, has since 1959 been a reporter and columnist for the New York Times, Newsday and the Village Voice. He has reported extensively on the POW story.
The Bush administration’s proposal to bail out some of Wall Street’s biggest players with an unprecedented transfer of public wealth to the private sector sent shock-waves throughout the nation.
Already deep in deficit, the administration wants to borrow $700 billion dollars—in addition to the $900 billion already spent this year to prop up troubled lending institutions and deal with the fall-out from the housing crisis—and entrust it to Treasury Secretary Henry Paulson, fresh from a long run on Wall Street himself. He’d then buy up worthless paper from struggling banks.
Who would get the money? Nobody knows. Paulson says he wants to hire Wall Street firms to oversee the process.
Under Bush’s plan, the taxpayer would get little, if anything, in return. The whole thing would happen without Congressional oversight, save for a semi-annual report on the process, and Paulson’s actions would be beyond challenge in the courts.
It is an economic coup d’etat in the making. And people are talking about little else. Here’s 10 things that have been on our radars ...
1. Shock Doctrine: Profiting from Crisis
Robert Borosage of Campaign for America’s Future invokes Naomi Klein’s “Shock Doctrine in asking whether we’re going to “get fleeced in this crisis” ...
Call it extortion. Every American is told to ante up $2,000--an estimated $700 billion in all--to bail out the banks from their bad bets, or they’ll bring down the entire economy.
In a speculative frenzy that allowed the Masters of the Universe to pocket millions personally, the banks filled their coffers with toxic paper that no one wants to buy. Now they sensibly don’t want to lend money to each other, since no one knows if the other is solvent. So they go on strike, and threaten to trigger a global depression, if they don’t get rescued.
The bailout will happen simply to avoid that depression. But depressions have some salutary effects - the scoundrels go belly up, the weakest get purged, and in the wake of the disaster, people demand strict regulation of the money lenders to keep their greed and predatory behavior in check, and government spends money on the real economy to put people back to work.
2. Has a “Consensus” Really Formed Around the Idea That Something Must Be Done?
Martin Crutsinger of the Associated Press reports that “economists”—implying, troublingly, all economists—see the Bush Bailout as"Necessary."
But Atrios—economist Duncan Black’s blog handle—has some questions about how everyone got on the same page so quickly ...
It’s fascinating to watch how easily consensus is manufactured. A few days ago elite opinion seemed to be cheering Paulson’s “no bailout” line, and now they’re cheering a trillion bucks thrown down the crapper ...
It’s unrealistic to imagine that I’d be able to really get enough honest information to have an informed opinion, but I spent some time thinking about what question all the Very Serious People should, at a minimum, want answered before they start cheering on [any] plans. This is what I came up with:
What changed between Monday and Friday? What new information did you have at the end of the week that you did not have at the beginning of the week which caused you to go from $0 to $1 trillion?
And, no, tumbling stock prices or babble about “deteriorating credit conditions” don’t count.
3. Is This Even Legal?
The Constitutionality of the plan is being hotly debated, according to Frank James, writing on the Chicago Trib’s blog:
Troubling to many critics is the breathtaking extraconstitutionality of the proposal which would give the Treasury secretary unusual powers that couldn’t be countermanded by Congress or the courts.
That appears on its face to violate the Constitution’s assertion of a balance of powers where no one branch is unchecked by the others.
James goes on to quote Alan Blinder, “former Federal Reserve vice chair and normally a mild-mannered, live-and-let-live Princeton University economics professor,” who said Paulson should be booted out of office for his proposal ...
“I’m speaking now as one of the earliest advocates of creating an institution like this, many, many months ago. And it’s a crying shame to see the way the Treasury has written this. I think the secretary of the Treasury should be dismissed, frankly. ... Asking for the authority to buy anything, with no review, with no court review, with no limits practically as to quantity or scope, with almost no congressional oversight. We have something more precious at stake than our precious financial system and that’s our precious Constitution. And frankly, if I were a member of Congress, having advocated for this for nine or ten months, I would vote against this unless it’s changed, dramatically...”
What’s Blinder talking about? Section 8 of the draft legislation released on Saturday reads, in its entirety:
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Sounds pretty like some pretty unbalanced powers to us.
And who’d be the new Emperor of the U.S. economy? McClatchy’s Kevin Hall explains:
Making the rounds on the Sunday morning talk shows, Treasury Secretary Henry Paulson repeatedly said today’s financial problems were long in the making. He should know. He was part of the Gold Rush that has brought the global financial system to the brink of collapse.
Paulson presided over one of the most profitable runs on Wall Street as chairman and chief executive officer of investment banking titan Goldman Sachs & Co. from 1999 until President Bush nominated him on May 30, 2006 to take over the Treasury Department.
[...]
With Paulson now seeking virtually unfettered authority to administer the largest bailout of the financial industry in U.S. history, many are wondering whether Paulson also doesn’t come with enormous potential conflicts of interest.
That was one reason Democrats on Sunday expressed reluctance to approve the administration’s draft legislation that would leave to Paulson virtually all authority over the proposed $700 billion bailout. The legislation would allow him to decide which securities to buy, from whom to buy them, and which outside companies and people to hire to help him do so.
4. Some Lawmakers Are Angry
The reality is that there’s less than a consensus that the “Paulson” plan is the way to go. Over at Open Left, Matt Stoller quotes an angry but (safely) anonymous Democratic Representative venting some spleen ...
Paulsen and congressional Republicans, or the few that will actually vote for this (most will be unwilling to take responsibility for the consequences of their policies), have said that there can’t be any “add ons,” or addition provisions. Fuck that. I don’t really want to trigger a world wide depression (that’s not hyperbole, that’s a distinct possibility), but I’m not voting for a blank check for $700 billion for those mother fuckers.
Nancy said she wanted to include the second “stimulus” package that the Bush Administration and congressional Republicans have blocked. I don’t want to trade a $700 billion dollar giveaway to the most unsympathetic human beings on the planet for a few fucking bridges. I want reforms of the industry, and I want it to be as punitive as possible.
5. Opposition Across the Political Spectrum
And the New York Times’ Paul Krugman’s not sure if it’ll work ...
So, here’s my problem: what we have now are a bunch of financial institutions in trouble, because they’re highly leveraged, and have mortgage-related assets on their books. And they can’t raise cash because nobody wants to buy those assets. The Paulson plan will in effect create a market for toxic paper, thereby supposedly unfreezing the markets.
But what if the institutions are fundamentally broke, even if the liquidity squeeze is relieved? ...
...Suppose that Hank Paulson does his reverse auction, and it turns out that the Treasury’s price for toxic waste is 40 cents on the dollar. Even so, [banks are] still underwater. So what does Treasury do then?
One answer, I suppose, is that we think that there aren’t too many firms in that position—and that those that will still fail, even with the Paulson Plan, aren’t going to disrupt the markets too much when they go down. But do we know that?
In a subsequent column, Krugman says that he agrees that doing something to prop up the financial sector is necessary, but he opposes the “blank check”—the lack of oversight built into the plan. In a rare instance, William Kristol agrees with Krugman. After saying that this is no time for ideological devotion to the “free markets,” Kristol asks ...
...is the administration’s proposal the right way to do this? It would enable the Treasury, without Congressionally approved guidelines as to pricing or procedure, to purchase hundreds of billions of dollars of financial assets, and hire private firms to manage and sell them, presumably at their discretion There are no provisions for—or even promises of—disclosure, accountability or transparency. Surely Congress can at least ask some hard questions about such an open-ended commitment.
And I’ve been shocked by the number of (mostly conservative) experts I’ve spoken with who aren’t at all confident that the Bush administration has even the basics right—or who think that the plan, though it looks simple on paper, will prove to be a nightmare in practice.
6. Do Joe and Jane Tax-Payer Really Have to Foot the Bill?
There’s lot’s of talk about how the legislation can be improved if it is passed. The WaPo’s Sebastian Mallaby thinks it unnecessary to use public dollars to boost ailing banks’ liquidity:
Raghuram Rajan and Luigi Zingales of the University of Chicago suggest ways to force the banks to raise capital without tapping the taxpayers. First, the government should tell banks to cancel all dividend payments. Banks don’t do that on their own because it would signal weakness; if everyone knows the dividend has been canceled because of a government rule, the signaling issue would be removed. Second, the government should tell all healthy banks to issue new equity. Again, banks resist doing this because they don’t want to signal weakness and they don’t want to dilute existing shareholders. A government order could cut through these obstacles.
7. What Would a More Progressive Bailout Look Like?
Economist Dean Baker offers up some “Progressive Conditions for a Bailout” at TPM:
Principles to Guide the Bailout
1) Financial institutions should be forced to endure the bulk of the losses with taxpayer funds only used where absolutely necessary to sustain the orderly operation of the financial system.
2) The bailout must be designed to minimize the opportunity for gaming.
3) The bailout should be designed to minimize moral hazard.
4) In the case of delinquent mortgages that come into the government’s possession, there should be an effort to work out an arrangement that allows the homeowner to remain in her house as owner. If this proves impossible, then former homeowners should be allowed to remain in their homes as renters paying the market rent. This should be done even if it leads to losses to the government.
5) There should be serious efforts to severely restrict executive compensation at any companies that directly benefit from the bailout.
He also offers up some ideas for restructuring the financial system so, as they say, read the rest.
8. Could the Plan Get Better Through Negotiation?
It appears to us that the first draft of the bill was so extreme, that it veered so far towards Mussolini’s definition of fascism—a perfect blend of state and corporate power—that it was intended as a starting point from which the administration could offer its opponents some concessions and still end up with something that’s terrible for Main Street.
Along those lines, the Wall Street Journal reports ...
The Bush administration has conceded several changes to its rescue plan for the troubled banking industry, including agreeing to compensation limits for bank chief executives taking part in the plan and the need for more help for homeowners facing foreclosure, a leading House Democrat said Monday.
Chairman of the House Financial Services Committee Rep. Barney Frank said the Treasury also agreed to Democrats’ idea that the federal government should receive warrants to take an equity stake in financial firms in exchange for the government purchasing toxic assets from them.
Congress may raise the cost of a $700 billion market-rescue deal by adding a new economic stimulus plan to benefit taxpayers, according to Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. (Sept. 22)
Senate Democrats also want to add tough new measures, including a provision that would allow the government to take shares of any financial institution that participates in the program.
Speaker of the House Nancy Pelosi said on Monday, “we will not simply hand over a $700-billion blank check to Wall Street and hope for a better outcome.” But we’ve heard that before ... we’ll see.
Of course, there is a chance that a wave of resistance coming from across the political spectrum could stop the deal, or that it might get mired in partisan bickering—sometimes “gridlock” is good.
9. Foreign Banks Can Cash in Too
Or perhaps the fact that U.S. tax-payers look like they might also end up bailing out foreign banks will end up being a fly in the ointment.
Now, the U.S. bailout looks as if it is going global, too, a move that could raise its cost and intensify scrutiny by Congress and critics.
Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic U.S. mortgage debt owned by their American units to the Treasury, getting the same treatment as U.S. banks.
On Sunday, Treasury Secretary Henry Paulson indicated in a series of appearances on TV talk shows that an original proposal introduced Saturday had been widened. “It’s a distinction without a difference whether it’s a foreign or a U.S. one,” he said in an interview with Fox News.
He’s right, in a way. There are no U.S. or foreign mega-banks—just multinational financial institutions with headquarters at home or somewhere abroad. If one accepts the logic of the plan at all, it might as well extend to multinationals with foreign-sounding names. The rabbit hole is only so deep, and we’re already way down it.
10. Is This Signaling a Decline in American Power?
According to Reuters, this all seems to be making the Chinese think that a A Different World is Possible ...
Threatened by a “financial tsunami,” the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.
The commentary in the overseas edition of the People’s Daily said the collapse of Lehman Brothers Holdings Inc., “may augur an even larger impending global ‘financial tsunami’.”
[...]
“The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States’ financial oversight and supervision,” writes the commentator, Shi Jianxun.
“The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States.”
Also, the Markets Reaction ...
A lot of people expected the markets to respond positively to the bailout plan, at least over the short-run, but they, too had a thing or two to say on Monday ...
Stock prices and the dollar plunged today—and oil and other commodities soared—on growing anxiety about the effect of the government’s proposed $700-billion rescue of the financial system.
The Dow Jones industrial average tumbled 372.75 points, or 3.3%, to 11,015.69, erasing the index’s 368-point gain Friday. The Standard & Poor’s 500 index lost 3.8%, and the Nasdaq composite index fell 4.2%.
It was the Dow’s sixth triple-digit increase or decrease in a row, and its fifth 350-point-plus move in six trading days.
Some investors who pulled money out of stocks poured it into commodities.
Oil futures shot up $16.37 a barrel to settle at $120.92 on the New York Mercantile Exchange after spiking as high as $130 in the last hour of trading. An index of 19 major commodities soared 3.9%.
The dollar posted its biggest decline on record against the nearly decade-old euro, and yields on Treasury bonds rose over concerns about the large amount of new debt that the government could take on to fund the bailout plan.
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