Entries for September 2008

Contrary to widespread expectations in Washington and on Wall Street, Treasury Secretary Henry Paulson's financial bailout/rescue package was not agreed to at the White House meeting that started at 4 p.m. Thursday. The meeting included the congressional and committee leaders of both parties and the administration's top financial officials, plus two presidents—George W. Bush and either Barack Obama or John McCain.

Picking up on my Frozen North post, Dan at Gay Patriot argues that the McCain-Palin ticket has a chance to pick up one electoral vote from Maine's Second Congressional District. (Maine, like Nebraska, assigns two electoral votes to the ticket that carries the state and one each to the ticket that carries each congressional district.) He notes helpfully that Maine's moose hunting season occurs this week and also October 13-18.

Fannie Mae and Freddie Mac, and Congress, according to my American Enterprise Institute colleague, Kevin Hassett. His Bloomberg column links to a prescient 2005 article by another AEIer, Peter Wallison. And here is Wallison's latest, coauthored by AEI colleague Charles Calomiris. All three are well worth reading.

Stanley Kurtz has been investigating the Chicago Annenberg Challenge files in the Richard J. Daley Library at the University of Illinois-Chicago Circle, and he has reported on his results in the Wall Street Journal. I have written before on Ayers, the unrepentant Weather Underground terrorist bomber, who claims to have set bombs at the U.S. Capitol, and Kurtz notes that Obama has tried to play down his long and close association with Ayers. Ayers was the cofounder of the CAC, and Obama was chairman of the board; Kurtz makes it clear that Obama worked more closely with Ayers than previously suggested. But mostly Kurtz concentrates on what the CAC actually did. There are two serious issues here: Mainstream media have shown an almost complete lack of interest in both of them.

During financial disaster week, Barack Obama took the lead over John McCain in national polls, by 2.3 percent in the Real Clear Politics average. But the reshuffling of the political deck seems to have opened up more states for McCain and have closed off some states for Obama, specifically, in the northern tier of the country: call it the Frozen North. Wisconsin, Minnesota, and Washington seem to be in play now. Preconvention polls showed Obama well ahead in each; postconvention polls show him leading by only a few points. That's 31 electoral votes on the table. And North Dakota, Montana, and Alaska seem to be out of play. Obama was competitive there in pre-convention polls, though there weren't many of them; he's well behind in postconvention polls. That's nine electoral votes off the table. Net advantage to McCain: 40 electoral votes. The Obama campaign has evidently reached the same conclusion: It is closing its North Dakota offices and the sending staffers to Minnesota and Wisconsin.

The bankruptcy of Lehman Brothers, the sale of Merrill Lynch to Bank of America, the 500 plunge of the Dow, the government takeover of AIG—all these have got the presidential candidates talking about the economy. But both Barack Obama and John McCain have been vague about their solutions. And for good reason. Our economic problems are concentrated in the finance sector, and that's the part of the economy the average voter knows least about.

Moreover, the political blame is widely dispersed. George W. Bush and Bill Clinton and Democrats and Republicans in Congress have all pushed policies to increase home ownership. The problem is that many marginal home buyers were unable to pay their mortgages when house prices fell. Another problem: Under a long-standing regulatory regime, the firms that rated packages of securitized mortgages were paid by the sellers rather than the buyers. Some of those mortgage securities turned out to be worth less than buyers thought.

It appears that Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have persuaded congressional leaders to support a new government agency, modeled on the 1980s' Resolution Trust Corp. and the 1930s' Home Owner Loan Corp. Both agencies absorbed bad debt, then eventually sold off the collateral and went out of existence. House Financial Services Committee Chairman Barney Frank called for such an agency earlier in the week, and so it seems very likely that this will pass before Congress leaves on its fall recess. As I write, the stock market is up sharply; investors seem to assume that this is going ahead.