Thoughts on the bailout

The banks ability to have money outstanding on loans is dependent on the capital they actually have on hand (the limit being a multiple of that capital). As long as they have the securities, they have to mark the lost value of that on their books and set it against their capital on hand. That reduced the amount of money they can mark themselves as having and thus reduced available credit.

Further, as long as these are out there, the level of risk of further busts is somewhat uncertain. One of the nastiest problems with all this securitized debt is that is has been so sliced and diced that no one can be sure where the risk lies, thus making lenders more reluctant.

The government purchase creates a minimum price for those securities, essentially giving taxpayers money to their holders. My main concern is that such action must also include the government obtaining equity when they make these purchases, so that they can have that to offset the securities in the event that Paulson's optimism about the ability to sell them at a favorable price in future is unjustified.

Further measures should be in this package to further put more of the loss on the shareholders and the corporate management. Limitations on management pay, minimal or no dividends for a period of time. Further issues of stock to raise capital (which will have the effect of diminishing the value of the holdings of the existing shareholders but also upping the amount of money the bank can lend out).

The first debate--Russia

Obama emphasized the importance of defending the independence of the small countries in the near-abroad, including keeping NATO membership open for Georgia and Ukraine. However, firmness with the Russians would have to dovetail with areas of common interest, such as non-proliferation. He got in a good shot regarding Bush's claim to have seen into Putin's soul.

McCain made an interesting point on Obama's statement at the onset of the Russian-Georgian war about both sides needing to show restraint not being an accurate assessment of the moral balance. McCain also made a good point, in which Obama concurred, about the fact that the Russian incursion was also about the pipeline and Ukraine.

Obama was able to use the pipeline issue to emphasize the need for alternative energy sources. McCain readvocates offshore drilling. I think that overlooks the Office of Energy Adminstration's report stated that developing such resources wouldn't have a significant impact. In 2030, there would only be an anticipated 7.2% in domestic oil production and 18% in domestic gas production--hardly enough.

The first debate--Iran

McCain argues that a nuclear-armed Iran would be a regional threat, and an existential one to Israel. McCain invokes his "league of democracies" that could bypass the UN Security Council. I don't think he's been that clear on whom he'd bring in and who he wouldn't. India isn't likely to fall in behind McCain's foreign policy; would he then exclude the world's most populous democracy? He also raised the disputed charge of Iranian IEDs in Iraq. Again, he doesn't mention Iran's influence with the Maliki government. Obama makes a good reply about how going into Iraq has done more to strengthen Iran then anything else.

Obama agrees that we need tougher sanctions but points out that Russian and Chinese support are necessary to have an effective sanctions regime. He also argued that direct diplomacy with Iran must be part of the approach. McCain argued that sitting with Ahmedinejad would legitimize him and his threats to exterminate Israel.

Emphasis on Obama's statement to not have preconditions. Obama made an interesting point that Kissinger, a McCain advisor, supported that position. He also mentioned that there was a difference between not having preconditions and not having preparations in the form of lower level talks and that his position didn't just entail an immediate summit.

McCain goes a bit overboard by arguing that meeting with Ahmedinejad would somehow be dangerous--not just unwise.

The first debate--lessons of Iraq/Afghanistan

McCain argues that the lesson is not to have a failed strategy such as our early occupation. He then mentions his advocacy of the surge. He argued that the surge has succeeded (but what of the lack of a political solution; the ethnically cleansed city of Baghdad, etc., the fact that the Sunni Awakening actually preceded the surge?). His statement about the consequences of defeat being increased Iranian influence is a bit laughable given how tight Maliki is with Teheran. Unfortunately, Obama doesn't bring these points up.

Obama naturally brings up his 2002 speech against the war and the human and economic losses the war entailed. McCain points out, accurately, that the new president will have to make future decisions on Iraq and that he was right on the surge and Obama was wrong. Obama concedes that the violence had gone down but points out that the gains of the surge essentially just offset the prior Bush disasters. He also mentions how McCain claimed that going into Iraq was going to be easy and that McCain's claim of success in Iraq echoed an earlier claim of having succeeded in Afghanistan.

McCain hits Obama's plan on the grounds that the success in Iraq are fragile. If they're fragile, how can he claim that we've succeeded.

McCain faulted Obama on actually stating that he would strike into Pakistan as the sort of thing that you don't say out loud. McCain also argued that Petraeus would make everything right in Afghanistan. Obama got in a good shot on McCain not being the person to give lectures on prudence in public statements (extinction for N. Korea, singing about bombing Iran). He also made a good point about how we lost legitimacy in Pakistan by coddling Musharraf. McCain pointed out that he had a different track record in supporting military actions (support for Bosnia, Kosovo, Desert Storm--opposition to Somalia and Lebanon).

Interestingly, McCain compared the prospect of defeat in Iraq to having lost in Vietnam. I have to wonder if McCain's position on Iraq is a way of exorcising his own demons from Vietnam.

The first debate--bailouts' required offsets

The question deals with what the $700 billion rescue plan would force them to give up. Obama would hold on to support for alternative energy development; his health plan and education and infrastructure. I'd be very curious to hear the numbers on that and he didn't actually say what he'd give up. McCain repeats his point on cutting spending. He makes a good point re ethanol subsidies (which Obama, a farm-state senator, supported). Also mentions defense procurement reform. He generally talks about creating efficiencies in government--an old stand-by. Of course, neither one dares mention what he'd cut.

McCain then mentioned a spending freeze (excepting defense, veterans and entitlements). Obama points out that a freeze wouldn't allow a consideration of specific programs. McCain stakes out a position in favor of nuclear power (45 new plants by 2030--covering energy independence and climate change).

McCain reprises his point about fighting spending. Obama hits back on the "orgy of spending" during the Bush administration. McCain invokes is "maverick" reputation and therefore can't be tied into Bush's policies.

The first debate--credit crunch

I like the idea of skipping opening statements. They are just packaged, canned statements and I'd rather hear questions.

First question on the bailout plan. Obama makes a good point regarding the need for oversight. Also takes aim a Republican deregulation and ties McCain to it. McCain goes for a cheap emotional shot by pointing out that Ted Kennedy is in the hospital. He then praises the bi-partisanship of the negotiations. Interesting that he doesn't mention the obstructionism of the House Republicans.

Obama stays on message in Lehrer's follow-up (follow-up questions being another improvement in the debate format). McCain talks about accountability with a reference to Eisenhower and D-Day--talks about the rewarding of corruption and greed. Obama's riposte hits McCain on his "fundamentals" statement.

Points to Lehrer for trying to get Obama to speak directly to McCain and vice-versa. They don't seem to be biting.

Second question re Presidential policies. McCain talks about cutting spending and mentions earmarks--takes a good shot at Obama re earmarks he's taken. Promises to veto spending bills.
Obama points out that earmarks only account for $18 billion, which are dwarfed by the Bush tax cuts that McCain would extend. OMB figures mention $16.5 billion in 2008. McCain doesn't really cover what he would cut beyond the earmark money.

The dispute centers on tax proposals. McCain doesn't answer Obama's point regarding how the former's statement on business taxes didn't cover the many loopholes that corporations have or how McCain's tax credit for health insurance if offset by removing deductibility for employers' health insurance premiums.

Maybe he can run for drama queen

John McCain seems to have the chops for it. His melodramatic suspension of his campaign leads one to believe that he considers the current credit crunch to be worse than the Civil War (Lincoln actively ran for reelection) or WWII (FDR ran in 1940 and 1944, although, given his health, he probably shouldn't of run in the latter).

First, although this a serious matter, it isn't 1929 redux. A piece on CNN.com pointed out that, unlike the Great Depression, the Fed has been smart enough to not restrict credit or start a trade war.

Second, it's not as if a deal can't be done without him. Neither McCain nor Obama sit on the Banking, Housing and Urban Affairs committee, which is doing the work on this. The key negotiators on this would be the majority and minority leaders of that committee and of the Senate. McCain is none of these.

Third, trying to cancel the debate is just silly. Oxford, MS isn't the far side of the moon. It is only 47 miles from the nearest airport at Tupelo which is, itself, only about 770 miles from DC. They could leave DC mid-afternoon, do the debate and be back by midday Saturday. I think DC will still be there when they get back.

The Obama Bounce

CBS polling saw an increase in Obama's lead from 3 to 8%s. Gallup saw is lead go from 3 to 6%. Rasmussen saw a McCain 1% lead change to an Obama 3% lead. The only minor shift was CNN which saw only a 1% shift.



The CNN poll taken 8/29-31 had 36% rating the speech "Excellent", 28% rating it "Good" while only 7% labeled it "Poor" or "Terrible". The USA Today/Gallup poll had 35% "Excellent" and 23% "Good" as opposed to only 7% "Poor" or "Terrible".



Since the polling was done as the Palin announcement was coming out, this should be consider net of it's effect.