Center Right, Center Left

| Thu Nov. 6, 2008 12:46 PM EST

CENTER RIGHT, CENTER LEFT....Just in case you're curious, here's the difference between a center right country and a center left country. If you squint, you can see it.

In the end, 90% of Republicans voted for McCain and 90% of Democrats voted for Obama — almost exactly the same as the 2004 election. The difference? Independents got bluer by about eight points compared to four years ago. The Republican Party lost the middle everywhere, and as a result the map got slightly bluer everywhere too.

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CDS Demonization

| Thu Nov. 6, 2008 12:19 PM EST

CDS DEMONIZATION....Are credit default swaps a major villain in the global banking meltdown? Felix Salmon, responding to a piece by Nathaniel Baker, says no:

How do we know this? Well, just look at the magnitude of the exposures that Baker is talking about. Back in January, Bernstein Research analysts totted them up, and came to the conclusion that Lehman's unsecured exposure to triple-A counterparties in general — not just the monolines — was $4 billion: large, but certainly not large enough to bring down a bank with a balance sheet of over $600 billion. Bear Stearns's exposure was smaller still, just $330 million. What fraction of that exposure eventually turned up on the banks' income statements as a mark-to-market loss? That I don't know, but it's not necessarily very large: remember that AIG's troubles only really snowballed after Lehman and Bear had gone under — and AIG was by far the largest triple-A writer of CDS.

Salmon thinks the "CDS demonization meme" is dangerous, but I'm a little confused on this score. It's a little hard to get a handle on an exact figure, but within the U.S. banking system total losses on subprime mortgages themselves probably total around half a trillion dollars. That's a helluva lot of money, but it's nowhere near enough to crash the system. That can only happen if the losses are magnified several times over via derivative losses.

Now, Salmon's point is that the CDS market is only a small portion of the total OTC derivative market. And that's a fair point. But in a previous piece, Salmon wrote this:

I had lunch yesterday with Shane Akeroyd of Markit, and he had a more sophisticated take on what we're seeing. The problem isn't CDS specifically or even derivatives in general, he said: the problem is that the world had an enormous amount of leverage, and all that leverage is now being unwound at once. Do CDS make it easier to firms to lever up? Yes — but if CDS hadn't been around, some other instrument would have been found which had the same effect.

Well — OK. Maybe bankers would have found some other way to lever up. But in the event, Akeroyd is saying, they used CDS. So why then is it unfair to say that CDS exposure was a huge driver of the financial meltdown?

Salmon's larger crusade is to defend derivatives in general, and CDS in particular, as useful devices when they aren't abused, but it's not clear to me that this is especially controversial. The question is, how should they be regulated in the future to ensure that they aren't abused? I agree that leverage itself should be the primary target of regulatory reform, but surely, under the circumstances, some reasonably strict trading rules on derivatives of all kinds will end up being part of that. Leverage is a hard thing to get at directly, after all, and we're going to need to attack it from a variety of directions. A bit of CDS demonization might not be a bad place to start from.

UPDATE: More here, including a response from Salmon.

Pentagon to Stars and Stripes: Permission to Cover Election Denied

| Thu Nov. 6, 2008 11:21 AM EST

As the national media prepared to cover the historic 2008 election, Stars and Stripes, the Pentagon-funded daily newspaper, was making its own plans to report on the conclusion of the presidential race. As part of its election coverage, the paper planned to dispatch reporters to the common areas of military bases in order to chronicle the scene as the returns rolled on. A Stripes editor, Tom Skeen, advised the Pentagon of the paper's plans beforehand as a matter of "courtesy," but was "flabbergasted" by the response he received from the Office of the Secretary of Defense for Public Affairs: stand down. "As a matter of long standing policy, DoD personnel are to avoid engaging in activities that could associate the Department with any partisan election," the paper was told.

Copy Desk Watch

| Thu Nov. 6, 2008 10:59 AM EST

COPY DESK WATCH....I'd like to nominate this for misleading headline of the year:

Prop. 2 probably won't hike egg prices

Proposition 2 is the initiative that requires hens to be kept in cages that allow them to move around a bit. I voted for it, and it passed yesterday 63%-37%. But here's the story behind the headline:

Egg prices probably will not increase for Californians, according to a study by the UC Davis Agricultural Issues Center. That's because out-of-state farmers, who already supply Californians a third of their eggs — and could provide more — are not affected by the new law, so they won't have to change their housing.

...."The most likely outcome, therefore, is the elimination of almost all of the California egg industry over a few years," says the report.

So egg prices won't go up, but only because the California egg industry will be utterly destroyed. By this logic, the headline after Black Tuesday should have been, "Apple industry opens new distribution channel on Wall Street." Sheesh.

UPDATE: Actually, this is even weirder than it looks. The print version of this story bears practically no resemblance to the online version, and doesn't even include the quote about the elimination of the egg industry. Very strange.

I Thought Bob Novak Had Gone Away?

| Thu Nov. 6, 2008 10:15 AM EST

He retired back in August, but for some reason he's back, spinning like always.

Here's what he said in 2004, when asked if Bush's victory over Kerry was a mandate from voters:

"Of course it is. It's a 3.5 million vote margin."

And here's what he wrote yesterday about Obama's victory over McCain:

"...he neither received a broad mandate from the public nor the needed large congressional majorities."

Of course, Obama is on pace to win by over 7 million votes. He won more electoral votes than Bush in 2004 and will have larger congressional majorities. This is the definition of hackery. Why on earth people continue to publish Novak, especially drawing him out of retirement to do so, is beyond me. Hat tip Think Progress.

Oregon Comes Through: Dems Win Another Senate Seat

| Thu Nov. 6, 2008 10:05 AM EST

Oregon Speaker of the House Jeff Merkley has defeated moderate Republican incumbent Gordon Smith for Oregon's junior Senate seat, bumping the Dems' roster in the Senate to 57. For a rundown on where they are in Georgia, Minnesota, and Alaska, the three races still outstanding, click here. Below, an illustration of what Oregon looks like politically (courtesy of the Oregonian). Can you guess where Portland and Eugene are located?


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What's the Number One Thing Needed to Win an Election?

| Thu Nov. 6, 2008 9:38 AM EST

You'd like to think it's something like command of the issues or the ability to inspire, right? Maybe it's just plain old cash. From the Center for Responsive Politics:

Continuing a trend seen election cycle after election cycle, the biggest spender was victorious in 397 of 426 decided House races and 30 of 32 settled Senate races [in 2008]. On Election Day 2006, top spenders won 94 percent of House races and 73 percent of Senate races. In 2004, 98 percent of House seats went to the biggest spender, as did 88 percent of Senate seats.

Of course, cash may be correlative instead of causative. That is, candidates that are better qualified, better on the issues, and better able to inspire voters raise more money than their opponents, and then go on to win.

Dishing on Palin

| Wed Nov. 5, 2008 11:48 PM EST

DISHING ON PALIN....Don't lie: you know you want to hear it. The presidential campaign has only been over for 24 hours, but that's all it's taken for two months of accumulated bitterness and rage from McCain staffers toward Sarah Palin to finally explode onto the news pages. For starters, here is John McCain's private opinion of Palin, as reported by the Guardian:

An exasperated McCain has been telling friends in recent weeks that Palin is even more trouble than a pitbull. In one joke doing the rounds, the Republican presidential candidate has been asking friends: what is the difference between Sarah Palin and a pitbull? The friendly canine eventually lets go, is the McCain punchline.

Here is the McCain campaign's take on Palin's clothing extravaganza, as reported by Newsweek:

Newsweek has also learned that Palin's shopping spree at high-end department stores was more extensive than previously reported. While publicly supporting Palin, McCain's top advisers privately fumed at what they regarded as her outrageous profligacy.....An angry aide characterized the shopping spree as "Wasilla hillbillies looting Neiman Marcus from coast to coast," and said the truth will eventually come out when the Republican Party audits its books.

And here are some "McCain staffers" explaining that Palin is not just a moron, but a bad-tempered moron, as reported by Fox's Carl Cameron:

There was great concern in the McCain campaign that Sarah Palin lacked the degree of knowledgeability necessary to be a running mate, a vice president, and a heartbeat away from the presidency. We're told by folks that she didn't know what countries were in NAFTA, the North American Free Trade Agreement, that being Canada, the US, and Mexico. We're told that she didn't understand that Africa was a continent rather than a country just in itself. A whole host of questions that caused serious problems about her knowledgeability. She got very angry at staff, thought that she was mishandled, was particularly angry about the way the Katie Couric interview went. She didn't accept preparation for that interview when the aides say that that was part of the problem. And that there were times where she was hard to control emotionally. There's talk of temper tantrums at bad news clippings.

Regarding the last report, Shep Smith asks the obvious question: "How could they end up with a running mate who doesn't know that Africa is a continent?" Cameron explains that the vetting process "was truncated."

Earlier today, I had in mind a post about Palin that would have started out by saying that I didn't think she was stupid, just completely uninterested in national policy issues prior to August 29th. Needless to say, I'm glad I didn't write that post.

Transition Planning

| Wed Nov. 5, 2008 9:55 PM EST

TRANSITION PLANNING....A regular reader emails a question:

When do we get to start spreading some clever lies about Bush's people trashing the White House before Obama moves in? You know, something like they reprogrammed all the computers so that the letter "B" appears backwards and colored red. We need to think up some really stupid stuff that Fox News will swallow hook, line and sinker.

No time like the present! Leave suggestions in comments.

McCain's Foreign Policy Advisor Fired Last Week?

| Wed Nov. 5, 2008 9:01 PM EST

Turns out that McCain campaign top foreign policy advisor Randy Scheunemann was fired last week. CNN:

Randy Scheunemann, a senior foreign policy adviser to John McCain, was fired from the Arizona senator's campaign last week for what one aide called "trashing" the campaign staff, three senior McCain advisers tell CNN.
One of the aides tells CNN that campaign manager Rick Davis fired Scheunemann after determining that he had been in direct contact with journalists spreading "disinformation" about campaign aides, including Nicolle Wallace and other officials.
"He was positioning himself with Palin at the expense of John McCain's campaign message," said one of the aides.
Senior campaign officials blame Schuenemann specifically for stories about the way Wallace and chief campaign strategist Steve Schmidt mishandled Palin's rollout — stories that the campaign says threw them off message in the critical final weeks of the campaign.
Another aide said McCain personally was "very disappointed by Randy," who worked for McCain for many years in the Senate.

It would have been nice if someone had noticed at the time, and astonishing that the McCain campaign didn't reveal this until now.

Update: This folllow-up report by CNN is even more curious:

In another sign of drama and disarray inside camp McCain, former campaign senior adviser Randy Scheunemann responded late Wednesday to CNN and insisted he was "not fired and never [have] been fired."
In addition, Michael Goldfarb, a McCain press aide and Scheunemann ally, also insisted he was not fired.
However, Goldfarb did concede that Scheunemann's campaign e-mail was cut off, and his blackberry was taken away late Friday. Goldfarb admits that senior McCain aides were mad at Scheunemann, and wanted to fire him, but he insists they stopped short of that, and instead simply turned off his campaign communication.
Goldfarb says Scheunemann was in the office on Saturday. He was, however, noticeably missing on election night when top aides to John McCain and Sarah Palin gathered in Phoenix, Arizona.

So, his campaign email was shut off and his Blackberry was taken away. Does that sound like he was fired in all but name?