2008 - %3, September

John McCain, Hero of Wall Street

| Wed Sep. 24, 2008 7:42 PM EDT

JOHN McCAIN, HERO OF WALL STREET....Katie Couric interviews Sarah Palin about reforming the finance industry:

COURIC: You've said, quote, "John McCain will reform the way Wall Street does business." Other than supporting stricter regulations of Fannie Mae and Freddie Mac two years ago, can you give us any more example of his leading the charge for more oversight?

PALIN: I think that the example that you just cited, with his warnings two years ago about Fannie and Freddie — that, that's paramount. That's more than a heck of a lot of other senators and representatives did for us.

COURIC: But he's been in Congress for 26 years. He's been chairman of the powerful Commerce Committee. And he has almost always sided with less regulation, not more.

PALIN: He's also known as the maverick though. Taking shots from his own party, and certainly taking shots from the other party. Trying to get people to understand what he's been talking about — the need to reform government.

COURIC: I'm just going to ask you one more time, not to belabor the point. Specific examples in his 26 years of pushing for more regulation?

PALIN: I'll try to find you some and I'll bring them to you.

How dare Couric ask the question three times in an effort to elicit an actual answer? She has obviously become a tool of the Obama campaign and is hereby banned from further contact with the McCain campaign on the grounds of insufficient deference.

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Cynicism Watch

| Wed Sep. 24, 2008 6:52 PM EDT

CYNICISM WATCH....A couple of hours ago I suggested that maybe John McCain would try to postpone the first debate to October 2nd because that would then eliminate the vice presidential debate. (So sad....) I thought I was just being hackishly cynical when I said that, but no: according to CNN, that's exactly what McCain is proposing. The VP debate would then be "rescheduled." (Perhaps to November 5th, joked Dana Milbank.)

My lesson for the day: No matter how hackishly cynical you think you are, you're no match for the hackish cynicism of the McCain campaign.

Ambinder on the Money

| Wed Sep. 24, 2008 6:44 PM EDT

I have to say, I think Marc Ambinder has the best response to John McCain's call to suspend the campaign due to his falling poll numbers the economic crisis. This is exactly when the public needs to see the candidates express and defend the policies they would use to get us out of this mess. This is exactly when we need to see who has the knowledge, intelligence, and fortitude to handle tough problems. In short, this is exactly when we need a debate.

Here's Marc:

This is the time when politics matters the most, not the least. When the philosophical differences that each party organizes around are put to the test of reality. When conflict builds consensus, not by ignoring conflict. When the public craves answers and debate from their politicians. When the stakes of the presidential election could not be more acute. Comparative advantage: the best thing the presidential candidates can do now is to practice their politics honestly, not to abandon politics altogether -- itself, of course, a political move. Suspending your campaign basically says: all that over the past sixteen months? It wasn't important. Ignore what I said or did. Too late. The tough thing here for McCain is that nobody in Washington asked him to come back; nobody seems to need him to come back; and that Democrats simply do not trust John McCain's motives.

This whole thing thing did get Rick Davis off the front pages though, didn't it?

Stunt Fatigue

| Wed Sep. 24, 2008 5:31 PM EDT

STUNT FATIGUE....Over at The Corner, even Kathryn Jean Lopez thinks Barack Obama sounds more sensible today than John McCain. Jason Zengerle comments:

That's how a McCain supporter is reacting to all of this. You do wonder if stunt fatigue is simply setting in. First there was the Palin pick. Then there was the jihad against the Times. At a certain point McCain's "bold" moves start to seem a little stale and predictable, don't they?

The McCain campaign is running on fumes at this point. They've been all over the map on the financial crisis. Both McCain and Palin are afraid to meet with reporters and answer actual questions. Even their prepared statements barely make sense anymore. They're completely at sea.

And now this. Obama calls McCain to privately work out a genuinely bipartisan statement about the bailout bill, and McCain immediately panics and runs off to the TV cameras to offer up a faux public one instead (and then leaves without taking questions, of course). A joint statement? Hah! Too puny. I dare Senator Obama to suspend our campaigns, sequester ourselves from the American public, and hold photo ops on Capitol Hill instead! In fact, I double dare him!

Sheesh. It's time for the Drama King to take his bows and exit stage right. Enough.

China's September Surprise: Tainted Formula Sickens 53,000 Infants

| Wed Sep. 24, 2008 5:12 PM EDT

The Chinese government managed to keep its latest disaster under wraps last month when Beijing was all the world's stage: it's top formula-brand, and 21 others, have been tainted with melamine, the industrial chemical that led to more than 100 recalls of Chinese-made pet food here in the US and has been blamed for thousands of pet deaths.

What started out as a notification that one company was affected ballooned to 22 and now the government is admitting that the tainted milk has led to the deaths of at least four infants and has sickened another 53,000. Unlike seafood (and everything else), the US doesn't allow dairy imports from China, so no formula in the US is at risk, though the FDA has stepped up testing of candies and other desserts made of dairy products in China.

Cases started cropping up several months ago but the government was slow to respond and even slower to notify the public of the potential that the formula they were using was unsafe. Children are showing signs of incontinence, vomiting, and kidney trouble. Melamine is used to artificially boost protein content, a move seen as a way to cut corners in a Chinese production market where suppliers are forbidden from boosting prices.

Investigators are suggesting that the government knew about the tainted formula as far back as March, and a bad-news ban leading up to the Olympics put the health of thousands of children at risk.

McCain Lurches Again

| Wed Sep. 24, 2008 4:21 PM EDT

McCAIN LURCHES AGAIN....OK, let me get this straight. After spending a full week flailing madly, tossing around wild charges almost daily, and careening from free market deregulator to the second coming of William Jennings Bryan — after all that, John McCain is now trying to gravely present himself as a man above politics: suspending his campaign, asking for Friday's debate to be postponed, and calling for a statesmanlike bipartisan bailout compromise.

Spare me. Let me guess: the debate should be postponed until October 2, which, sadly, will mean eliminating the vice presidential debate entirely. What a bummer, eh? And the guy whose campaign is funded by federal funds thinks all fundraising should be suspended. Imagine that. And the senator who hasn't showed up for a roll call vote since April suddenly thinks Capitol Hill is the place everyone needs to be. That should speed things up and calm down the financial markets, shouldn't it?

The cynicism is pretty stunning. Instead, how about switching the subject of the first debate to economic issues and actually hearing what John McCain thinks we ought to do? He does have a serious grasp on the issues, doesn't he? Why discuss them only behind closed doors?

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Financial Innovation Update

| Wed Sep. 24, 2008 3:28 PM EDT

FINANCIAL INNOVATION UPDATE....Yesterday I passed along Dani Rodrik's question about whether financial innovation has actually benefited the real economy. As he pointed out, it made homes available to a lot more people, but that turned out not to be such a great thing after all. Reader Brian J. then pointed me to Ben Bernanke's take on this issue from last year:

The increasing sophistication and depth of financial markets promote economic growth by allocating capital where it can be most productive. And the dispersion of risk more broadly across the financial system has, thus far, increased the resilience of the system and the economy to shocks.

Nope, neither of those turned out to be the case either. I'm tempted to say three strikes and you're out, but for now let's keep it an open question.

By the way, yesterday Tyler Cowen recommended this 2006 paper on credit derivatives, so I read it last night. It was quite good, and very accessible to lay readers. I was pleased to see that the authors basically concluded that CDOs are little more than a scam that violates basic economic principles and can only work (for a short time) thanks to industrial size helpings of hooey and sales malarkey. That's been pretty much my conclusion too. Credit default swaps are a different story, but the problem there is that, perhaps, hedging of risk might not really be such a good idea after all if it turns into an economy-wide phenomenon. After all, the people making/taking a loan (or issuing/buying a bond etc.) are the ones who are in the best position to assess the risk of the loan/bond/whatever and monitor its performance. Selling off risk to someone else often has real benefits, but it also produces incentives not to bother assessing risk properly and creates serious problems of nontransparency.

Also, it can cause the global economy to collapse via cascading counterparty defaults that send us back to the stone age. But that's a story for another time.

Second Radiohead Remix Project Offers Mixed Results

| Wed Sep. 24, 2008 3:04 PM EDT

mojo-photo-reckonerremix.jpgYou gotta give it to Radiohead: they know how to use that internet. While other bands fret about file-sharing or unauthorized mashups and remixes, Thom Yorke and his merry bandits gave away 2007's In Rainbows for free, if you wanted, and happily sold the individual instrument tracks from the song "Nude" on iTunes a few months back so amateur remixers could have their way with them. Now they've done it again, with (in my opinion) a slightly more compelling track from In Rainbows, the haunting "Reckoner." The band have set up a "Reckoner Remix Project" web site where producers can upload their tracks and fans can listen and vote for their favorites. There doesn't appear to be any prize (other than the possibility Mr. Yorke himself might pop your mix onto his iPod) and the fine print makes it clear that Radiohead owns everything, always and forever, but it's still pretty interesting to see what people have come up with.

McCain Proposes Suspending Campaign to Deal With Economic Crisis

| Wed Sep. 24, 2008 2:59 PM EDT

It's true. He even wants to delay the debate.

For the record, this is a bit surprising coming from the guy who cares so little about the actual business of the country that he has missed more Senate votes than anyone else in the chamber.

Anyway, I'll be taking some paid time off. Thanks, John McCain!

"It's a Question! Run!"

| Wed Sep. 24, 2008 2:56 PM EDT

The McCain campaign is protecting Sarah Palin from questions the way the Secret Service protects the president from bullets.

From the pool report account of what happened after McCain and Palin's meeting with Georgian President Mikheil Saakashvilli and Ukrainian President Viktor Yushchenko:

McCain then looked around the room and gestured as if to welcome questions. The AP reporter shouted a question at Gov. Palin ("Governor, what have you learned from your meetings?") but McCain aide Brooke Buchanan intervened and shepherded everybody out of the room.
Palin looked surprised, leaned over to McCain and asked him a question, to which your pooler thinks he shook his head as if to say "No."

No, sweetie. No questions for you.