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September 17, 2008

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Fact Check Time:

Barack Obama’s campaign responded to McCain’s remarks by labeling his desire for tougher oversight a myth. Obama spokesman Tommy Vietor noted that McCain in 1992 voted against imposing stricter controls on Fannie and Freddie during Senate debate on a broader housing bill, and this year argued against providing big government bailouts in response to the crisis, whether for big lenders or homeowners.

We give McCain some credit for weighing in on problems surrounding Fannie Mae, even though he got involved after a comprehensive government report issued a loud alarm to anyone watching. However, his attempts to depict those efforts as some sort of early warning that could have lessened the current credit crisis just don't wash. All McCain was talking about then was the potential fall out of accounting troubles in Fannie Mae and Freddie Mac. He didn't say anything about a free-wheeling climate among creditors that had major financial institutions becoming badly leveraged on bad loans. We rule his claim Barely True.

http://www.politifact.com/truth-o-meter/article/2008/sep/17/mccains-warning-fannie-and-freddie/

Thank you for your Barack Obama campaign talking points. When even McCain critics grudgingly admit that McCain's claims were, in fact, "Barely True" -- but "True" nonetheless! -- I'll take that as a stunning admission.

Now tell me about OBAMA's early warning about Fannie Mae and Freddie Mac that was better, more detailed, and more prescient than McCain's.

Go ahead. I'm listening.

Surely the messiah saw these troubles coming? And warned against them quite specifically? And introduced legislation to try to head off these problems, as John McCain did?

No -- go ahead -- I'm dying to hear about it!

Can it possibly be that John McCain has demonstrated experience, judgment, and wisdom on this issue that Obama was and is lacking?

How many times is it now that McCain's previous statements have been proven true and Obama's wrong?

The Iraq surge is another example. McCain took a politically tough position -- proposing and defending the troop surge when times were tough in Iraq. Obama opposed it and said it would never work. Later, Obama had to admit that the surge is working. Well GOLLLLL-EEE!!

In the competition for PROVEN judgment and foresight: McCain 2, Obama 0

I have not historically been a fan of John McCain, and I still have my reservations, but I have to admit that he has far better knowledge, experience, and judgment than Barack Obama. There is no comparison.

I shudder to picture Obama in the White House war room trying to work out a strategy in a serious national crisis. As demonstrated in the campaign, the only play in his play book is to blame someone else.

I think he'd be about as successful in coming up with a coherent strategy for our nation as Jimmy "America Held Hostage" Carter, who fumbled and bumbled his way through the Iranian hostage crisis all the way to the end of his presidency. Someimes poor judgment has very serious real-world-consequences.

To be fair, McCain addresses the internal accounting oversights of Fannie Mae and Freddie Mac. Score 1 for McCain.

And to be fair to Obama, he warned of the current housing Crisis in March of 2007, addressing several key issues which have become critical in recent days (namely the liquidity of the companies involved) His speech read:

"March 22, 2007

Dear Chairman Bernanke and Secretary Paulson,

There is grave concern in low-income communities about a potential coming wave of foreclosures. Because regulators are partly responsible for creating the environment that is leading to rising rates of home foreclosure in the subprime mortgage market, I urge you immediately to convene a homeownership preservation summit with leading mortgage lenders, investors, loan servicing organizations, consumer advocates, federal regulators and housing-related agencies to assess options for private sector responses to the challenge.

We cannot sit on the sidelines while increasing numbers of American families face the risk of losing their homes.

And while neither the government nor the private sector acting alone is capable of quickly balancing the important interests in widespread access to credit and responsible lending, both must act and act quickly.

Working together, the relevant private sector entities and regulators may be best positioned for quick and targeted responses to mitigate the danger. Rampant foreclosures are in nobody's interest, and I believe this is a case where all responsible industry players can share the objective of eliminating deceptive or abusive practices, preserving homeownership, and stabilizing housing markets.

The summit should consider best practice loan marketing, underwriting, and origination practices consistent with the recent (and overdue) regulators' Proposed Statement on Subprime Mortgage Lending. The summit participants should also evaluate options for independent loan counseling, voluntary loan restructuring, limited forbearance, and other possible workout strategies. I would also urge you to facilitate a serious conversation about the following:

* What standards investors should require of lenders, particularly with regard to verification of income and assets and the underwriting of borrowers based on fully indexed and fully amortized rates.

* How to facilitate and encourage appropriate intervention by loan servicing companies at the earliest signs of borrower difficulty.

* How to support independent community-based-organizations to provide counseling and work-out services to prevent foreclosure and preserve homeownership where practical.

* How to provide more effective information disclosure and financial education to ensure that borrowers are treated fairly and that deception is never a source of competitive advantage.

* How to adopt principles of fair competition that promote affordability, transparency, non-discrimination, genuine consumer value, and competitive returns.

* How to ensure adequate liquidity across all mortgage markets without exacerbating consumer and housing market vulnerability.

Of course, the adoption of voluntary industry reforms will not preempt government action to crack down on predatory lending practices, or to style new restrictions on subprime lending or short- term post-purchase interventions in certain cases. My colleagues on the Senate Committee on Banking, Housing and Urban Affairs have held important hearings on mortgage market turmoil and I expect the Committee will develop legislation.

Nevertheless, a consortium of industry-related service providers and public interest advocates may be able to bring quick and efficient relief to millions of at-risk homeowners and neighborhoods, even before Congress has had an opportunity to act. There is an opportunity here to bring different interests together in the best interests of American homeowners and the American economy. Please don't let this opportunity pass us by."

So, score 1 for Obama as well.

McCain:1 Obama:1

I personally can't award points on the surge yet, because as I have pointed out elsewhere, the surge is not a measure of success until the final tallies are in. We may have yet to face our Russian Winter on it. It's like patting ourselves on the back because our third-quarter play action worked. The game is not over yet. Not by a long shot.

As for the current financial situation. It looks like the government is once again going to use taxpayer dollars to bail out the companies and the market. A repeat of the S&L failures, which led to the economic recession of 1990-1991 and the huge deficits. The only difference being, where it took Reagan and Bush Sr. ten cumulative years to achieve the meltdown, George W. has manage to do it in eight.

It's ironic that the administrations of the most outspoken champions of capitalist free market policiy keep hitting meltdowns which force them to take socialist actions to save the economy.


George W. Bush didn't create the Fannie Mae crisis. He tried to head it off five years ago.

And Obama's "solution" of calling a summit is rather weak, don't you think? That's another way of saying that he has no idea what to do.

John McCain sponsored a specific bill, which Democrats defeated.

Finally -- you're right -- socialism is never the answer. We will not regulate our way out of the housing and mortgage crisis. If we recover, it will be because of the free market, and in spite of government regulation, not the other way around. As a "strict fiscal conservative" Republican, I'm sure you're appalled at Obama's proposed heavy-handed socialist solutions to this crisis.

Obama did not propose a concrete solution, as there was, at that point, a number of ways for the situation to be handled, but he urged that an immediate summit be taken to investigate the financial footing of the market, so that regulatory measures, if necessary, could be immediately put in place to protect the American taxpayer. It is no weaker than McCain's "barely true" rating on the issue. Score one for each.

No action was taken, and it boiled down to two options: Bail Out or let them Fail. Actually I am somewhat appalled at Bernanke and Paulson's current bail outs. I believe that this previous government bailout during the S&L crisis set a dangerous precedent which in some ways contributed to the current crisis. It said to companies "Go ahead, play fast and loose with the rules, take a gamble. If you make mistakes, the government will bail you out". And that's exactly what's happened again. Allan Meltzer of Carnegie Mellon put it best last night when asked if the Fed did the right thing in bailing out AIG:

"No. There were bids on the floor for AIG. AIG it didn't take the bids. It thought it could get a better deal from the government. That's a bad way to run the system..

..AIG has four parts. One of them was in trouble. The other three make money. It could be sold. It should have been sold. It should have gone as a private company to some other private company. And that was an option that was available..

It's a question of whether we're protecting the public interest or the private interest. The government is here to protect the public interest. What it's doing is protecting private interests. And that's a big mistake and one that we shouldn't continue to tolerate. We've gotten through now a whole range of these firms. The government has salvaged a number of them. That just puts all those losses onto the taxpayers. That's not where they belong.

..it might have been better if we had allowed it to be sold. I've been following these problems for 40 or 50 years. You know, it always comes down at the end to this. Someone goes to the secretary of the Treasury or, in this case, the chairman of the Fed and says, 'If we don't do this, we're going to have a terrible depression. It'll be known as the Bernanke depression. And if you don't act, there's going to be a disaster.' Well, that's not always the case. And these disasters should be headed off early or should be left to the marketplace to settle. They made these mistakes, and they should pay for them."

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As for myself, being a strict fiscal conservative does not mean being an adherent to free market principles. Not the same thing at all. I am not sure you completely understand what I mean when I say I am a "Moderate Republican" - the term used to be "Rockefeller Republican". Now you might sneeringly call me a RINO (though there are some issues in which I am conservative.) Unlimited Capitalism and the Complete Free Market are obviously flawed, especially in the context of today's global economy, as they will constantly run themselves into a cycle of recession after enjoying a period of economic boom. As this cycle goes on the boom gets shorter and the recession and recovery period get longer, since the financial capital is always relocated to the area where industry and market cost are cheapest, taking financial liquidity out of the previously primary market system.

Let me tell you what I what I support, as a strict fiscal conservative.

I support a balanced budget. Every year.

I support the necessary fair taxes to support said budget.

I am against deficit spending.

I favor paying our debts.

I am against government waste.

I do support efficient government infrastructure.

I support a free market that is clear and transparent and is overseen by a government which can step in and regulate, if it is necessary, to protect the American working man, consumer, and taxpayer, and avert a financial crisis before it happens.

Let me go back to taxes for a minute. The "dirty word". Biden said something today, which both McCain and Palin have twisted around a bit, but which really struck a chord with me. McCain and Palin tried to make it sound like he had said it was Patriotic to raise taxes, but that's obviously not what he was driving at. His point was that it is Patriotic to pay your fair share of taxes, and by this he means it is Patriotic to insure that your government works, not just for you, but for all Americans.

We have a duty to provide our government with the support it needs so that IT can fulfill it's duty to us, the American people. That is the substance of what Biden was after.

The constant far right mantra of "cut, cut, cut taxes at all costs!" leaves our government weak, and thus America weak. We're starting to see the effects of that now.

Obama and Biden might be too liberal when it comes to spending on programs, but economically, they're right about one thing. It's time for taxes to be fair. Tax cuts for the rich have absolutely got to go.

If we are fairly represented in our government, and our government is fiscally responsible, then it is a Patriotic duty to pay your fair share of taxes.


Andrew writes "Obama did not propose a concrete solution, as there was, at that point, a number of ways for the situation to be handled, but he urged that an immediate summit be taken to investigate the financial footing of the market, so that regulatory measures, if necessary, could be immediately put in place to protect the American taxpayer. It is no weaker than McCain's "barely true" rating on the issue. Score one for each."

Calling for a summit is simply a fancy name for assembling a committee, which is a fancy way of doing absolutely nothing for a long, long time, if ever.

And as for the rich paying their "FAIR SHARE" of taxes, what percent of Americns do you consider "rich," and what percentage of federal income taxes do they pay? The "rich" are already paying the vast majority of the taxes in this country. You don't just want them to pay their "fair" share -- the same pro rata share as everyone else. You're not even happpy with the current tax scheme, which has them paying way, way more taxes than everyone else. You want them to pay way, way, WAY more than everyone else.

That's your definition of "fair." As a fiscal conservative, you have apparently though very little, if at all, as to what confiscatory tax rates do to incentives to work and create. You assume that if you tax "poor" Person A at 5% or minus 5% (the earned income tax credit) (if that) and Person B, the "rich" guy, 45%, nothing bad will happen. But something bad does happen. Person B gets tired of it after awhile, and stops working so hard, since he only sees half of every dollar anyway. Person A, the low-paid employee, loses his job and needs even more government handouts. Meanwhile, Person C observes all this and asks himself, "Why should I bust my tail like Person A, when I can live pretty well on welfare and and food stamps, and get free medical care and free education for my children?" Rinse, repeat about 30 million times throughout the economy, and there you have the liberal "solution" in action.

You wonder why "free market" economies are boom and bust? Has it ever occurred to you that governments impose taxes, and tarrifs, and regulations, and fees, until they begin to seriously cripple the economy -- and only then back off, allowing the free market to recover? Analyze the worst "busts" in human history and you'll see the heavy hand of government behind most of them, if not all of them.

Is this another attempt to obfuscate the public. Nothing in the Federal Housing Executive Regulatory Acts of 2005 or 2007, supported by Senator McCain, would have had any bearing on the current financial crisis initiated by the reckless subprime lending policies of Ameriquest and Countrywide. Fannie Mae's exposure to subprime mortgages was limited since most of these mortgages did not meet the rather strict lending requirements of Fannie Mae or Freddie Mac. What got these companies into difficulty was the collapse of credit markets which made it difficult to raise capital in order to meet potential defaults in the housing sector. Once again, the right-wing bloviators and the sycophants surrounding McCain seek to befuddle and bedeck Elmer Fudd in prescience unworthy of a candidate who truly doesn't understand the economy about him. Fulminating about greedy executives might be worthy of a neo-Hooverian, but it doesn't advance our understanding of the present global crisis nor present any sort of workable mechanism to adequately address this. But, then, what should one expect of a Senator who sought to hinder federal intervention in the Savings and Loan crisis in order to protect a constituent?

Excuse me. I meant to write Federal Housing Enterprise Regulatory Reform Act. Boy, that's a mouthful ... of nothing.

"Calling for a summit is simply a fancy name for assembling a committee, which is a fancy way of doing absolutely nothing for a long, long time, if ever."

Well, summit, meeting, committee, whatever. It looks like it's finally happening, and I hope they're not just sitting around doing nothing:

http://www.bloomberg.com/apps/news?pid=20601068&sid=auI5M5F3uYmE&refer=home

As for the taxes, I'm not advocating an increase in taxes on the wealthy, I am advocating a repeal of the tax cuts and massive benefits they have received under the current administration. Call it a tax increase if you will, but Bush's actions have just been putting more money into the hands of the wealthy.

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Since you're using an A,B,C example above, let's go this way:

The wealth in this country is distributed roughly as follows:

39.7% of this Nations wealth is in the hands of the top 1% of America.

51.5% of the wealth is in the next 19% of America.

...and last...

8.8% of the wealth is in the remaining bottom 80% of Americans.

Now tell me, which of these groups really needs a $75,000 tax write off on an SUV? Which of these groups can afford a $75,000 or more SUV?

Did you know that there is no tax write off for the purchase of a used vehicle? So I guess if you're in the 21% of Americans who make $20,000 or less and can't really afford a new car, or even a used car, you'll be taking the Bus.

...only, the Bus doesn't run on time, and in fact your route has been canceled because your local municipal government cannot afford to maintain it's Bus fleet due to the lack of Tax revenue, the $75,000 that might have been allocated towards insuring that the bus that ran your route was properly maintained, and that the driver was paid her yearly salary of only $28,000 was instead given as a tax write off to Mr. Joe CEO who earned $12.8 million dollars last year (the average salary and compensation package for a S&P company CEO last year). His Junior CEOs, and Senior Vice Executive VPs, who all earned anywhere from $6 to $8 million in salary and compensation also took advantage of that tax credit.

Oh, and by the way, you've been fired from your job as a minimum wage earner at that company because you had to walk to work (come rain or brutal Florida sunshine), and were late a few times.

But don't worry. You'll get a refund on that $768 in Income Tax you paid, and after that's gone of one month trying to support yourself, maybe you'll find another job in a country that is enjoying some of it's highest unemployment rates in years.

Oh, and don't get sick, because I know you don't have Health Insurance.

----------------------------

Now, that's just an example, like your A,B,C example above. And both are rather extreme cases. But seriously, do you think it's fair that the wealthy are able to take advantage of a $75,000 tax loophole by writing off a luxury SUV as an Agricultural vehicle based on 6,000lbs of GVW? (Nevermind the economics of SUVs and their poor fuel consumption which results in more American Dollars ending up overseas in the Middle East, further weakening our domestic economy.)

I assume, because you are a Lawyer, that you fall in a bracket that will have to pay higher taxes. I assure you that though I don't make as much as the average Lawyer, both my wife and I will be falling in a bracket that pays higher taxes as well. (And even though it's rather personal, just to paint you a picture, I will reveal that my wife and I earn roughly $180k a year, and we have two teenage daughters, and I believe that we are very well off, especially since we own our house outright and have no debt, and no mortgage or anything of that nature to worry about.)

So for me, paying more in taxes, that's o.k. - I feel that the tax cuts and breaks have been too much, and I believe that higher taxes are necessary right now to fill the gaps in the budget so that all Americans are afforded an equal opportunity to advance themselves in our society in whatever way they see fit.

So, maybe I'll be paying a little more in taxes, and instead of going to the Bahamas for the next family vacation, we'll just go to Key West instead. If that little bit of extra taxes I pay helps my fellow American Mr. Joe Smith by getting that bus he needs running so he can get to work, well, I'll feel just fine about that.

That's Patriotism.

"As for the taxes, I'm not advocating an increase in taxes on the wealthy, I am advocating a repeal of the tax cuts and massive benefits they have received under the current administration. Call it a tax increase if you will, but Bush's actions have just been putting more money into the hands of the wealthy."

Rush Limbaugh has had the stastistics up at his website for some time:

http://www.rushlimbaugh.com/home/menu/top_50__of_wage_earners_pay_96_09__of_income_taxes.guest.html

The top 5% of all income earners in America pay more than half of all income taxes.

The top 50% of wage earners pay 96.3% of all federal income taxes.

Andrew writes: "39.7% of this Nations wealth is in the hands of the top 1% of America."

Wealth is not the same as income. The "wealth" of which you speak consists in many cases of family homes and farms.

Andrew writes: "51.5% of the wealth is in the next 19% of America."

Ditto.

Andrew writes: "8.8% of the wealth is in the remaining bottom 80% of Americans."

As Jesus said, "The poor will always be with us."

That's because the standard for poverty is ever-shifting.

The poorest person in America is far wealthier than the richest Pharaoh of ancient Egypt. He/she enjoys television, radio, sanitation, astonishingly advanced medical care, free education through age 18 and often through age 20 and beyond . . . the list goes on and on.

(Update to comment: I would also add that there will always be those who have more and those who have less, unless you give everyone the same thing or approximately the same thing regardless of whether they work or loaf -- in which case you will have the perfect Communist paradise, which in fact will be a sinkhole where nobody lifts a finger without being compelled to do so, since they get the same results regardless of what they do.)

Andrew: "Now tell me, which of these groups really needs a $75,000 tax write off on an SUV? Which of these groups can afford a $75,000 or more SUV?"

What the heck are you talking about?

Who cares about tax writeoffs on SUVs? Why don't we discuss the deductibility of caviar bought for business purposes, while we're at it? What a strange way to distract from the main point -- the TAX RATES and TOTAL TAX AMOUNTS paid by the wealthy.

If you're paying at 45% marginal tax rates (they were even higher before the Reagan years, thanks to Democrats), and then if Congress throws you a bone of a tiny deduction on some optional item like a SUV, it's a drop in the bucket compared to the tens of thousands OF dollars you are paying out in taxes. The relatively trivial deduction is there to minimize the squealing while the goose is being plucked.

Andrew: "Did you know that there is no tax write off for the purchase of a used vehicle? So I guess if you're in the 21% of Americans who make $20,000 or less and can't really afford a new car, or even a used car, you'll be taking the Bus."

Huh? It's Bill Gates' fault that not everyone in America has a free car? The wealthy are now responsible for buying cars for everyone?

And America's poor DON'T PAY INCOME TAXES. In fact, they even receive money back through the EARNED INCOME TAX CREDIT. They even file tax returns SOLELY FOR THE PURPOSE OF GETTING MONEY BACK.

". . . .Mr. Joe CEO who earned $12.8 million dollars last year (the average salary and compensation package for a S&P company CEO last year). His Junior CEOs, and Senior Vice Executive VPs, who all earned anywhere from $6 to $8 million in salary and compensation also took advantage of that tax credit."

This helps to explain, Andrew, why one of the Ten Commandments is "thou shall not covet." Covetousness leads to theft, and confiscatory tax rates are just that -- theft.

If you are fortunate enough to own any stock at all -- and most Americans do through 401K plans -- then you will be glad to know that the $10 or $100 billion company in which some of your stock is invested is staffed by top officers who are richly rewarded for putting the rest of their lives on hold to make SURE that the company makes a profit this year. No, they are not paid a "mere" $300,000 that even a VP in a small company can earn relatively fresh out of college. They have a much greater responsibility and are richly rewarded for making, say, a $100 million difference in the bottom line. Stockholders rationally weigh how to get the most for their dollars, and they've learned that if they pay a CEO enough so that they are set for life if the company thrives, they get much better results and the CEO compensation more than pays for itself. You'd make the same rational choice if you were in charge. "You can bring us, the shareholders, an extra $100 million in profits this year by reorganizing this place? Yes, in that case, we will gladly pay you $10 million! We'll come out $90 million ahead."

And since CEO compensation is so "high," the business schools in America will be FLOODED with "get rich quick and easy" applicants, right? Except that they aren't flooded, because the truth is that being a CEO is a hard job, and being a consistently successful CEO is even harder.

Finally, Andrew, all the dollars you send to the federal government instead of using them to help your daughters with college, or their weddings, or their first homes, will not go to that poor person down the street. More than half of every dollar that goes to the government evaporates in waste, inefficiency, and bureaucracy. Have you had any family members or friends who work in government? I have. Do you know how they function? They deliberately work slowly so that they won't be given even more work. Having no profit incentive, each agency's main incentive is to preserve its budget, jobs, and perks, while doing the least work possible. While many government employees strive admirably to bring ordinary work ethics to the job (including my family members, I'm proud to say), those employees are often berated by their fellow employees for working so hard and making the others look bad. This little scene is repeated in government offices around the country day after day, year after year. That's civil service for you.

And you, "patriotically," want to trust your heard-earned dollars to these people rather than to people with a proven ability to create wealth. Instead of wondering why you're paying so much to the bureaucrats, you want to take even more from the producers.

Gina, if you are a lawyer, I'd hire you any day. That simmering aggression would knock the socks off most opponents. It's not incidental the best form of defence is attack.

Hi everyone. I reckon the analysis below is close to the truth. Times up...

The American way to fail

* Robert Peston
* 19 Sep 08, 09:16 AM

The breathtaking rises in the price of bank shares this morning are symptomatic of a stock market that is bereft of reason and is being driven almost purely by hysteria and momentum.

Federal Reserve building in WashingtonThey are surging in part because of the FSA's crackdown on short-sellers but mostly because of the overnight news that the US Treasury Secretary, Hank Paulson, and the Chairman of the Federal Reserve, Ben Bernanke, are preparing a bold - or possibly impetuous - plan to tackle what can now be classified as the most severe and intractable malfunction of the banking system since the late 1920's.

As I put it on the Ten O'Clock News last night, yesterday's co-ordinated intervention by central banks, led by the US Federal Reserve, to pump an additional $180bn of short-term loans into the banking system treats only a symptom, not the cause, of banks' reluctance to lend to each other and to us.

It's a stopgap, while Paulson prepares to absolve many of the world's biggest banks of their idiocy during the boom years, by nationalising their bad debts.

To understand the pros and cons of what's being considered by Paulson, it's worth reminding ourselves of what created the latest terrifying phase of the credit crunch.

The ultimate cause is the chronic downturn in the US housing market. The proximate causes are the rotten loans to US homeowners sitting on banks' and other financial institutions' balance sheets that has mullered their capacity to make new loans.

The recent trigger has been the crises at Lehman, AIG, Fannie Mae and so on, which have created a climate of fear, in which bankers and managers of money appear to believe that almost any bank could collapse.

One important new stress has been a significant withdrawal of investors' cash from US money-market funds, because of the perception that the funds aren't as safe as was widely thought - which has in turn deprived banks of an important source of wholesale deposits (this sudden rise in the perceived riskiness of these funds was sparked by the announcement of a loss at the Reserve Primary Fund).

The drying-up of liquidity from money-market funds is in part what drove HBOS to acknowledge that the game was up, and that a rescue takeover by Lloyds TSB was the best form of protection for its savers and shareholders.

To reiterate, the big point is that Paulson is working with Congress on a package of measures that - he hopes - will attack the roots of the crisis.

It would involve buying many hundreds of billions of the banks' bad loans to overstretched US homeowners.

And it would also attempt to re-establish confidence in money-market funds by insuring them, in the way that retail bank deposits are insured against loss.

This would be the mother of all bailouts. It would certainly involve the deployment of hundreds of billions of US taxpayers' money, possibly more than a trillion dollars.

And it comes on top of the $300bn commitment of public money already made by Paulson to the rescue of Fannie, Freddie and AIG.

It all represents a massive humiliation for Wall Street, the giant US financial services industry and bankers supposed to be the canniest on the planet.

Paulson, himself, was one of their ilk, as the former boss of Goldman Sachs.

There will be serious long-term damage to the ability of the US to export its way of doing business to the rest of the world.

The American way of capitalism doesn't seem all that brilliant right now.

In that sense, a degree of moral authority - as well as financial clout - will shift east.

It'll also damage the robustness of the US public finances.

Possibly the biggest risk for the US is that in bailing out the finances of the private sector, Paulson would dent international investors' confidence in the American government's balance sheet - which could ultimately undermine the dollar, push up inflation even more and raise the cost of servicing debt for the US authorities.

Maybe the US is still big enough and powerful enough to persuade the rest of the world to pay for the mistakes of its financial sector - which is broadly what's being proposed.

But, as I mentioned here yesterday, surely it would be more rational for the Chinese to own the American financial system itself, rather than lend to the US Government (and in that context, it's resonant that Morgan Stanley may well be close to selling almost half of itself to CIC, China's state investment fund).

In this game of Wall Street Monopoly, there's no "get-out-of-jail-free" card

Great. I'm quoting Allan Meltzer and you're quoting Rush Limbaugh.

Who do you think has the correct facts here? The figures I quote for wealth were predominantly made up of cold hard cash based on income.

Your Limbaugh figure that the top 5% of earners pays more than half of all income taxes has no bearing since it doesn't actually relate to the percentage of their income that they directly paid. You quoted a marginal tax rate of 45%, but that figure is completely out of line. Here's the info from the IRS:

http://www.irs.gov/pub/irs-drop/rp-07-66.pdf

The tax rate for incomes over $357,000 was roughly $100,000 plus 35% of the income earned over $357,000. However, due to tax credits and benefits available to the rich under the current administration (which as an example, the SUV write off was, never mind that some people were able to write off million dollar homes, and more) many in the top 5% were able to get their tax rates down below 25%. Many of them paying LESS than what the middle income of America were paying. ($4,481.25 plus 25% of the excess over $32,550)


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"The poorest person in America is far wealthier than the richest Pharaoh of ancient Egypt. He/she enjoys television, radio, sanitation, astonishingly advanced medical care, free education through age 18 and often through age 20 and beyond . . . the list goes on and on."

http://www.theoechnology.com/Homeless%20in%20SF%2002.jpg

Something tells me that the man in the above picture is NOT enjoying television, radio, sanitation, astonishingly advanced medical care, and the benefits of of his free education through age 18. My guess is that he would prefer to be the richest Pharaoh of ancient Egypt rather than the poorest person in America.

(By the way, a near 70% of our homeless are Veterans. These are people who fought for their country, and now we can't be bothered to take care of them because we don't believe in the programs necessary to help them? Ridiculous. They took care of us, we should take care of them.)

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As far as CEOs go, your whole argument points to them rewarding stockholders. (Ken Lay did a great job there, didn't he?) But what you have to realize is that while they are so busy rewarding stockholders, who are generally in that wealthiest 5% of America, who are in turn rewarding the CEO and making sure the money runs around in an exclusive club, they are trodding on the working man. More jobs have been shipped overseas during the current administration than any other. Companies can make higher profits when they are exploiting workers in Bangladesh who will do the work for a mere 5 cents an hour compared to the American worker who gets paid a minimum wage of $6.55 an hour.

These CEOs are rewarded ridiculous sums as well, and sometimes for not even doing their job well. Ken Lay received a $25 million dollar parachute payment at the end of Enron, even though he had devastated the savings and investments of most of his employees. Carly Fiorina (McCain advisor) who shipped MY job overseas, also made me lose HALF the value in the HP stock that I had acquired while working for the company, and yet when she was FORCED off the board at HP she still received a parachute payment of $17 million.

Absolutely Ridiculous.

And it is our economy as a whole suffers. The American working man who is now out of work suffers.

I would also charge that companies are trodding on the American consumer, because the cost savings by hiring that worker in Bangladesh are not passed on to the consumer, no, they are mostly kept as profit which goes right back to the stockholders, once again, the wealthiest 5% of America.

I will agree with you that the federal government needs to take care of waste, and that it needs to be run more efficiently, but if we have clear transparency with our government and we know that it is working hard for us, then yes, I am going to trust my tax dollars to it.

I'd also like to point out that while we've spent a lot of time arguing over individual tax rates and tax cuts here, it is the corporations who have been the biggest recipients of tax cuts and benefits under the current administration, allowing many of them to make obscene profits, while shipping American jobs overseas.

This is the most egregious thing I can think of that needs to be rectified in our current political landscape.

Democrats created the Fannie Mae and Freddie Mac problems years ago. They stopped ALL eforts at reform until it was too late. Now they are trying to blame Bush, McCain and Republicans, everyone but themselves. That's the Gods truth and here is the proof:
http://strategicthought-charles77.blogspot.com/2008/09/democrats-created-fannie-mae-and.html

I'm just not so sure that it's as simple as that.

The 2005 reform which everyone trumpets McCain for, the Federal Housing Enterprise Regulatory Reform Act of 2005 was actually Chuck Hagel's bill, McCain was a co-sponsor on it (and not the sponsor of it, as many people seem to think.)

The bill was not voted on, but instead went to the Committee on Banking, Housing, and Urban Affairs, which is a Bi-Partisan committee made up of 21 members of Congress. At the time, 2005, it was comprised of 11 Republicans and 10 Democrats. Richard Shelby (R - Alabama) was the Chairman. It never re-emerged from the committee, and was cleared from the slate at the end of the legislative session.

Shelby was also on a committee in 2003 when the Bush administration recommended the overhaul, and "...after the hearing, Representative Michael G. Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal."

However, as near as I can ascertain, they never did introduce legislation on that.

The Democrats certainly argued against the 2003 measure, as they feared that it would make them renege on their promise to make housing affordable for low income families, but as far as I can tell, neither of the measures ever came to a vote. The Democrats were not in control of Congress during either of these measures.

I think both parties are to blame for not working harder, in a bi-partisan fashion, to address this critical issue.

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