"The Rulers of the Exchange of Mankind's Goods Have Failed..."

| Tue Sep. 30, 2008 4:56 PM EDT

Early 1933, when Franklin Delano Roosevelt gave his first inaugural address, was one of the most terrifying times in United States history. More than 10,000 banks had failed, credit had dried up, businesses had gone bankrupt, and the jobless rate was 25 percent, with another 25 percent underemployed and underpaid.

After telling Americans that "the only thing we have to fear is fear itself," FDR went on to describe the causes of the devastating financial crisis, in terms that sound all too familiar today:

"Only a foolish optimist can deny the dark realities of the moment.
"Yet our distress comes from no failure of substance. We are stricken by no plague of locusts.... Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
"True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
The money-changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit...."

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Quote of the Day - 9.30.08

| Tue Sep. 30, 2008 4:06 PM EDT

QUOTE OF THE DAY....From Barack Obama, speaking in Nevada today about the financial crisis:

For the rest of today and as long as it takes, I will continue to reach out to leaders in both parties and do whatever I can to help pass a rescue plan. To the Democrats and Republicans who opposed this plan yesterday, I say — step up to the plate and do what's right for this country. And to all Americans, I say this — if I am President of the United States, this rescue plan will not be the end of what we do to strengthen this economy — it will only be the beginning.

Good. That's what he should be saying. Is it politically risky to take a more active role in congressional negotiations — and with it, possibly more responsibility for an unpopular bailout? Maybe slightly. But if you want to be president of the United States, that's what you need to do. And you need to do it for real, not just for the cameras.

The rest of the speech isn't bad either. It could stand to have a little bit punchier explanation of what's going on, but overall, not bad at all.

The Importance of Being Boring

| Tue Sep. 30, 2008 2:47 PM EDT

THE IMPORTANCE OF BEING BORING....Barack Obama has another 2-minute ad running. Jonathan Stein says it's pretty dull ("I tuned out at 0:42"), but that being dull is the whole point:

Obama is presenting himself as the boring choice in this financial crisis. To the extent that boring correlates with responsible, adult, and steady, Obama wins. And with Obama's poll numbers looking the way they are, that appears to be a correlation worth betting on.

I think I'd take this even further, addressing Ross Douthat's surprise that Obama won last week's debate at the same time. The key insight is this: lots of ordinary viewers enjoy a bit of policy wonkishness. We political junkies, even those of us who enjoy policy discussions, don't. We've heard it a million times before.

But most viewers haven't, and they find it kind of interesting, the same way they mostly liked Bill Clinton's endless laundry list State of the Union addresses. They don't hear this kind of thing very often, and when they do it's a nice change of pace from the daily soundbites on the evening news, which are hard to put together into a coherent understanding of what each candidate stands for. Hearing it all in one piece is a bit of a revelation.

Needless to say, this can be overdone. And a financial crisis is an unusually good time for a sober, wonky address to the voters. But we shouldn't be too surprised that it works well both in ads and in debates. Voters like being treated like adults more than most of us give them credit for.

Where's Main Street?

| Tue Sep. 30, 2008 1:21 PM EDT

WHERE'S MAIN STREET?....Matt asks a question:

Here's what I don't understand about either the politics or the policy of the bailout failure. If the situation is as dire as Kevin Drum says then where's corporate America? That swathe of American business that isn't in the finance and housing sectors. ExxonMobil, Wal-Mart, Proctor & Gamble, Johnson & Johnson, Microsoft, Google, Chevron, etc.

Actually, I've been wondering the same thing. Here are two guesses.

First, these guys all thought the bill was going to pass. Sure, there'd be lots of grandstanding and high drama, but in the end they figured everyone would act like adults and understand that allocating money to buy a fire hose is a good idea when the economy is on fire. So there wasn't a big sense of urgency.

Second, they might have been sensitive to the possibility that their support would just make things worse. Saving "Main Street," to most Americans, means the dry cleaners down the street, not ExxonMobil. They're mad enough already about bailing out Wall Street, and if they thought they were bailing out ExxonMobil too — well, that might just be the last straw.

Anyway, those are just guesses. But I'll bet there's way more business lobbying going on behind the scenes today than there was last week. That might make the difference if the House takes up the bill again on Wednesday.

McCain and bin Laden

| Tue Sep. 30, 2008 12:59 PM EDT

McCAIN AND BIN LADEN....Our story so far: Barack Obama says that if he had actionable intelligence about Osama bin Laden's whereabouts in Pakistan, he'd take him out. John McCain says that's naive and reckless. Then, a couple of days ago while ordering a cheesesteak, Sarah Palin jumped in and said she'd take him out too. Huh? So on Monday Katie Couric asked the two of them whether Palin had gone off the reservation. Answer: that's a silly gotcha question. The issue isn't whether McCain/Palin take out bin Laden, it's whether they'd say that they're willing to take out bin Laden. "Never would our administration get out there and show our cards to terrorists," Palin said, "in this case to enemy, and let them know what the game plan is."

Got that? They'd do it, but they'd never publicly say they were going to do it. But Judah Grunstein points us to this interview with McCain from a year ago:

Q: So if you were president and you knew that bin Laden were over there, you had a target spotting, you could nail him, you'd go get him?

McCain: Sure. Sure. We have to, and I'm sure that after the initial flurry, that whoever our friends are, wherever he is, would be relieved because, as I mentioned to you before, he's still very effective in the world, very, very effective.

So long ago, before all of this nonsense hit the campaign trail, McCain himself was saying the exact same thing as Obama: if we knew where bin Laden was, of course we'd take him out — and then pick up the pieces afterward. Needless to say, this will come as no surprise to the government of Pakistan, which has never been under any illusions about this. (And neither have the terrorists, regardless of what Palin burbles about it.) But it's a useful attack line for McCain, so I guess we'll keep hearing it.

Mission Creep Dispatch: Peter Beck

| Tue Sep. 30, 2008 12:46 PM EDT

beck.jpgAs part of our special investigation "Mission Creep: US Military Presence Worldwide," we asked a host of military thinkers to contribute their two cents on topics relating to global Pentagon strategy. (You can access the archive here.)

The following dispatch comes from Korea expert Peter Beck, who teaches at American University in Washington, DC, and Yonsei University in Seoul.

Does South Korea Still Need GI Joe?

Strolling down the wide, grass-lined street, after passing the Burger King on the left and the convenience store on the right, you would be forgiven for thinking you are in Iowa, but the Yongsan Garrison is in the geographic heart of one of the most densely populated cities in the world: Seoul. Picture putting walls up around Central Park and handing it over to the German army.

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SOFA Update

| Tue Sep. 30, 2008 12:23 PM EDT

SOFA UPDATE....Nouri al-Maliki tells AP that (a) a security agreement with the United States is critical, and (b) legal jurisdiction is the biggest remaining hurdle:

The most important hanging issue here is the immunity or the legal jurisdiction over the American troops because certain powers, political powers inside Iraq are getting ready to use this issue once it's — if it's — approved, as a vehicle to overthrow, to destabilize the entire political system in Iraq, to destabilize the government. They would use it as a vehicle to re-ignite public feelings inside the country.

We have proposed that the legal jurisdiction would be on one hand, on one side, with the Americans ... when the troops are performing military operations. When they are not performing a military operation, they are outside their camps, the legal jurisdiction would be in the hands of the Iraqi judiciary.

Translation: if we don't get civil jurisdiction over U.S. troops, the government will fall. It's too much of a hot button issue for guys like, oh, Muqtada al-Sadr, just to pick a name out of a hat.

This actually seems pretty doable to me. The trick is to write language that appears to give Iraq jurisdiction over soldiers who aren't performing military missions, but then define "military mission" in a way that effectively prevents Iraqi police from issuing anything more important than a parking ticket to U.S. troops. This would be accompanied by a tacit agreement with Maliki that they won't force the issue by ever actually arresting an American soldier in the first place.

Of course, if that's all there were to it, we'd already have an agreement. Still, it's hard to imagine that this issue can't be finessed fairly easily.

Why a Democrats-Only Bailout Bill Won't Fly

| Tue Sep. 30, 2008 12:18 PM EDT

Now that I've noted the progressive goals for the next bailout bill, let me add that it's unlikely a Democrats-only bill, loaded with those very same progressive goals, is likely to pass. And it's because of conservative Dems. Ezra Klein makes the case:

The defecting Democrats look to be Blue Dogs -- which is to say, somewhat conservative, generally vulnerable, Democrats -- and members of the Black and Hispanic caucuses. A more liberal bill might get the latter two. It will lose 90 Republican votes. It won't get the Blue Dogs. And you'll lose a few dozen more Democrats who needed the bipartisan cover. My hunch is leadership is relying on market chaos to turn a few votes and trying to figure out the mixture of cosmetic changes and superficial giveaways that will push them over the finish line.

Which is to say, despite the intelligent commentary that suggests a radically different approach to the bailout bill might be wise, there's a relatively small chance we will get a radically different bill. We're more likely to get a bill that the House leadership has tinkered with enough — throwing in a progressive goal here, adding an earmark/sweetner there — to get 15 more votes.

Kevin Drum Wants You for the Bailout, But Consider This First

| Tue Sep. 30, 2008 12:01 PM EDT

Kevin urges readers to call members of Congress and tell them to vote for the $700 billion bailout bill. In an earlier posting, he explained why he favors the plan. But before readers pick up the phone, they might want to read what Mother Jones contributor Nomi Prims says about the bailout. Or what Mother Jones contributor James Galbraith has to say. Or what economist Dean Baker has to say.

Baker notes,

Almost every economist I know rejects the Paulson approach and argues instead for directly injecting capital into the banks. The taxpayers give them the money and then we own some, or all, of the bank. (That's what Warren Buffet did with Goldman Sachs.)
This isn't about begging for a sliver of equity as a concession for a $700 billion bailout, this is about constructing a bank rescue the way that business people would do it. We have an interest in a well-operating financial system. There is zero public interest in giving away taxpayer dollars to the Wall Street banks and their executives.
If Secretary Paulson constructed a package that was centered around buying direct equity stakes in the banks, he could quickly garner large majority support in both houses. Better yet, Congress could just construct its own package centered on buying equity stakes and send it to President Bush. If he balks, we can just threaten him with stories about the Great Depression.

The Lehman Bankruptcy

| Tue Sep. 30, 2008 11:59 AM EDT

THE LEHMAN BANKRUPTCY....Henry Paulson (and the Bush White House in general) handled the politics of the bailout bill poorly. But Ezra Klein says another factor is even more important:

Paulson's political mismanagement doesn't much surprise me. He's not a politician....It was his economic mismanagement that requires closer scrutiny. 15 days ago, he was presented with a crucial choice: Do you let Lehmnn fall into bankruptcy and create a market panic? Or do you save it and risk insulating Wall Street from the consequences of its actions? Timothy Geitner, the head of the New York Federal Reserve, warned that you had to save Lehman; the market couldn't endure that sort of uncertainty. Paulson disagreed. Lehman fell. It was the biggest bankruptcy in history. Within days, AIG, Goldman Sachs, and JP Morgan were swallowed by the chaos. It was arguably the costliest mistake in the crisis, and it was Hank Paulson's fault.

That's true. But the funny thing is that I don't think this really played a role in the events of the past week. The Lehman bankruptcy may have been a consensus disaster — even defenders of the decision are only willing to argue that maybe it was a necessary test case — but nobody really seems to be blaming Paulson for this. Maybe behind the scenes they are, but in public it's rarely even mentioned.

I'm not sure why. Maybe it's because a lot of people at the time seemed to agree that it was time to stop bailing out banks. Maybe it's because everyone knows there was no political support for propping up Lehman. I don't know. But I'd sure be interested in seeing a tick-tock of the events that led up to Paulson's decision. I've seen a couple of good pieces about the aftermath of the Lehman bankruptcy, but not much about the couple of days before it. Anybody know of one?