Saturday, September 27, 2008

Saturday Morning Cartoons--Daffy the Commando!

Here is a great, old, Warner Brothers wartime cartoon, Daffy the Commando. In this propaganda piece, Daffy Duck takes on the Nazis in the schizophrenic way that only Daffy can only do. This cartoon was direct by Friz Freleng, and was released on November 20, 1943. Pay special attention to when Daffy knocks old Adolf into a crybaby status. From YouTube:

Friday, September 26, 2008

McCain ad claims McCain won tonight's debate

And the debate hasn't even started yet. From The Washington Post:

Although the fate of tonight's presidential debate in Mississippi remains very much up in the air, John McCain has apparently already won it -- if you believe an Internet ad an astute reader spotted next to this piece in the online edition of the Wall Street Journal this morning.

"McCain Wins Debate!" declares the ad which features a headshot of a smiling McCain with an American flag background. Another ad spotted by our eagle-eyed observer featured a quote from McCain campaign manager Rick Davis declaring: "McCain won the debate-- hands down."

The screenshot can be found here.

I'm not sure what to say about this. Perhaps the Wall Street Journal posted the McCain ad before the debate even began, and then pulled the ad off the web page. It is likely that the McCain ad was to be placed on the Journal's web page after the debate, to generate conservative feedback in claiming that McCain won the debate. Looking at the comments on the WaPost story, there are a lot of readers saying that the ad was Photoshopped into the web screenshot of the page, with the blame on some unknown Obama supporter. That is also a possible reason. Personally, I will go with the WSJ screw-up in posting the ad before it was suppose to run.

More details on Mr. McCain goes to Washington

This interesting detail is from The Washington Post:

The first debate between John McCain and Barack Obama, scheduled for tonight, remained in limbo last night after the presidential candidates left a White House meeting without a deal on a $700 billion economic rescue plan.

Democrats immediately blamed McCain for disrupting the effort at compromise, saying his decision to suspend his campaign and return to Washington shifted the klieg lights of the White House contest to the tense and delicate congressional negotiations.


At the White House, the gathering turned contentious when House Minority Leader John A. Boehner (R-Ohio) brought up a new set of principles that conservative House Republicans had been laid out earlier in the day.

Boehner's move was received poorly by Obama and the other Democrats, who quickly pressed McCain to say whether he supported Boehner's position, according to a detailed account of the meeting. McCain declined to commit, one source said.


For much of yesterday, McCain shuttled between meetings and his Senate office, but rarely came close to the Capitol suites and committee rooms where the talks were taking place. He had returned to his Crystal City condominium by 6 p.m., where aides said he continued to work the phones in support of the deal.

Earlier, McCain had emerged from his office in the Russell Senate Office Building to a crush of reporters, saying nothing as he made his way to Boehner's office. In tow were a trio of his closest allies, Sens. Lindsey O. Graham (R-S.C.), Joseph I. Lieberman (I-Conn.) and Jon Kyl (R-Ariz.), as well as top campaign aides Rick Davis and Mark Salter.

Boehner and McCain discussed the bailout plan, but Republican leadership aides described the conversation as somewhat surreal. Neither man was familiar with the details of the proposal being pressed by House conservatives, and up to the moment they departed for the White House yesterday afternoon, neither had seen any description beyond news reports.

At 1:25 p.m., McCain left Boehner's office through a back door, walking across the Capitol's rotunda to the applause of tourists. Graham conceded the group knew little about the plan the nominee had come to Washington to try to shape.

Mr. McCain goes to Washington to play presidential politics. It was all about the McCain campaign trying to make John McCain appear "presidential" in rejecting a compromise bailout plan, created by President Bush and the congressional Democrats, for some surrealistic House GOP plan that neither McCain, or even Boehner, had a clue about the details of the House GOP plan. And let us not forget that McCain never bothered to read the three-page long Bush / Paulson bailout plan. John McCain's crass, presidential ambitions totally destroyed whatever bailout agreement was taking shape this week between the Bush administration and the congressional Democratic leadership.

John McCain is clearly incapable of running the Oval Office. At this point, I would say that President George W. Bush is a better president than John McCain could ever become.

McCain agrees to attend to tonight's debate

This is from MSNBC News:

WASHINGTON - Republican John McCain agreed to attend the first presidential debate Friday night even though Congress doesn't have a bailout deal, reversing an earlier decision to delay the event until Washington had taken action to address the crisis.

With less than 10 hours until the debate was scheduled to start, the McCain campaign announced that the Arizona senator would travel to the University of Mississippi. The campaign said that afterward McCain would return to Washington to continue working on the financial crisis.

Obama had always planned to attend the debate and was aboard his plane preparing to take off when McCain's announcement was made. McCain quickly moved to his own private aircraft and headed South with his wife and former New York Mayor Rudy Giuliani and his wife, Judith, on board.

The action contradicted the position McCain had taken Wednesday, when he announced, "I'm directing my campaign to work with the Obama campaign and the Commission on Presidential Debates to delay Friday night's debate until we have taken action to address this crisis."

McCain had also said he would suspend all campaign activities, but in reality the campaign just shifted to Washington while the work of trying to win the election went on.

McCain had taken a gamble with the move, trying to appear above politics and as a leader on an issue that had overshadowed the presidential campaign and given him trouble. But Democratic rival Barack Obama had not bowed to McCain's challenge, and instead questioned why the Republican nominee couldn't handle two things at once — the debate and involvement in the bailout negotiations.

An Associated Press-Knowledge Networks poll out Friday just before McCain's announcement showed the public overwhelmingly wanted the candidates to debate, 60 percent to 22 percent, with the rest undecided.

And here is what an ex-McCain adviser had to say about McCain's latest flip-flop on the Huffington Post:

After days of saying that John McCain would not attend Friday's presidential debate unless an agreement on a bailout package for the markets was "locked-down," the McCain campaign has gone back on its word.

On Friday, it announced that the Senator [John McCain] would head down to Mississippi even though, as they readily admit, much work remained needed on the bailout agreement.

The whole episode left even conservatives admitting that the McCain campaign looked erratic and a bit foolish with no apparent direction or guiding principle.

"It just proves his campaign is governed by tactics and not ideology," said Republican consultant Craig Shirley, who advised McCain earlier in this cycle. "In the end, he blinked and Obama did not. The 'steady hand in a storm' argument looks now to more favor Obama, not McCain."

Shirley added, "My guess is that plasma units are rushing to the McCain campaign as we speak to replace the blood flowing there from the fights among the staff."


"He will been seen as blinking first," Shirley declared, "since it was he who said he wasn't going until the crisis is averted. Hobson's choice, painted in a corner, bollixed -- pick your poison, or pick your cliche."

John McCain had certainly gotten himself into a pickle here. I don't even know why the McCain campaign tried to cancel tonight's debate with this silly publicity stunt. Was it because the campaign staff was worried that McCain would appear too old in debating with Barack Obama, or McCain would say the wrong things during the debate, or that McCain would angrily lash out against Obama? Was it because the McCain campaign was scared to have John McCain debate against Obama? Was it because the McCain campaign political policies are completely the same as the Bush administration political policies--policies that are opposed by the majority of this country? Whatever the reasons, the McCain campaign tried to pull out of this first debate. And in doing so, they made themselves look completely foolish, and potentially allowed Barack Obama to have 90 minutes of free campaign air time to present his own vision to the country. And now John McCain looks even more foolish in going back on his word to attend to tonight's debate.

Mr. McCain goes to Washington, and destroys the congressional bailout talks

This is from The Huffington Post:

Inside an intense White House meeting over the financial crisis on Thursday, where nearly every key player came to an agreement on the outlines of the bailout package, Sen. John McCain stuck out. The Republican candidate, according to sources with direct knowledge, sat quiet through most of the meeting, never offered specifics, and spoke only at the end to raise doubts about the rough compromise that the White House and congressional leaders were nearing.

McCain's reluctance to jump on board the bailout agreement could throw the entire week-long negotiation into a tailspin. Sen. Chris Dodd, after leaving the White House, suggested on CNN that the tenuous process could be derailed by what he viewed as McCain's political motives.

"What happened here, basically, if you want an honest appraisal of the thing, we have been spending a lot of time and I am tired. I have spent almost seven straight days at this in trying to come out with a workout plan for our economy a rescue plan," said Dodd. "What this looked like to me was a rescue plan for John McCain for two hours and took us away from the work we are trying to do today. Serious people trying to do serious work to come up with an answer."

According to the source with knowledge of the White House gathering -- which featured both presidential candidates, congressional leaders and the President -- virtually ever key figure in the room, save McCain and GOP Sen. Richard Shelby, were in agreement over a revised version of Treasury Secretary Hank Paulson's plan.

Towards the end, McCain finally spoke up, mentioning a counter-proposal that had been offered by some conservative House Republicans, which would suspend the capital gains tax for two years and provide tax incentives to encourage firms that buy up bad debt. McCain did not discuss specifics of the plan, though, and was non-committal about supporting it.

I am trying to analyze John McCain's behavior during the Bush photo-op meeting with congressional leaders and Barack Obama. And the only thing I can think of is what the frickin' hell was McCain doing there? Everyone was in agreement with the outline for the bailout--President Bush, Barack Obama, the House and Senate congressional leaders. Everyone except John McCain and GOP Sen. Richard Shelby. McCain sits silently through the entire meeting, never offers any specifics, only to say, at the end of the meeting, that he pretty much opposes the bailout package. McCain then made a counter-proposal:

Towards the end, McCain finally spoke up, mentioning a counter-proposal that had been offered by some conservative House Republicans, which would suspend the capital gains tax for two years and provide tax incentives to encourage firms that buy up bad debt. McCain did not discuss specifics of the plan, though, and was non-committal about supporting it.

Paulson, however, argued directly against the conservative proposal. "He said that he did not think it would work," according to the source. At another point in the meeting, President Bush chimed in, "If money isn't loosened, this sucker could go down" -- and by sucker he meant economy.

CBS News reports that the McCain counter-proposal included more corporate tax breaks and more government deregulation:

So what happened? I think presidential politics went to McCain's head. First I think that McCain opposed the $700 billion Bush/Paulson bailout plan because Barack Obama initially supported the plan. I don't believe McCain could ever support anything with Barack Obama. Second, any Bush bailout plan to be passed by the Democratic-controlled Congress would require some serious concessions. And there were some concessions made on the plan regarding the limiting of CEO compensation, doling out smaller chunks of $200 billion to the Treasury to buy up the bad debt, and then have Congress oversee the success or failure of the program. Also, any such bailout plan would have some regulatory oversight. President Bush and the Congressional Democrats agreed on an outline to such a bailout plan. The Conservative Republicans were balking on such a plan. When John McCain came to Washington, he would not accept any such government regulation, and threw his (non-committal) support for the conservative Republicans in proposing the alternative plan. By opposing the bailout package, McCain had embolden the conservative Republicans into walking out of the negotiations. According to the Washington Post:

As Friday began it was unclear the state of the negotiations on the rescue plan. After a day of apparent negotiating progress a renegade bloc of Republicans moved to reshape the a massive bailout plan, of the U.S. financial system yesterday, surprising and angering Bush administration and congressional leaders who hours earlier announced agreement on the "fundamentals" of a deal.

At a meeting at the White House that included President Bush, top lawmakers and both presidential candidates, House Minority Leader John A. Boehner (R-Ohio) floated a new plan for addressing the crisis that has hobbled global markets.

Democrats accused Boehner of acting on behalf of GOP presidential candidate Sen. John McCain (Ariz.) in trying to disrupt a developing consensus. The new proposal also displeased White House officials, including Treasury Secretary Henry M. Paulson Jr., who chased after Democrats leaving the meeting and -- half-jokingly -- dropped to one knee and pleaded with them not to "blow up" the $700 billion deal, according to people present at the meeting.


Rep. Spencer Bachus (R-Ala.), who had attended the meeting on behalf of House Republicans, denied that an agreement had been reached. While progress was made on peripheral issues, Bachus said, House Republicans remained adamantly opposed to the central point of the plan: purchasing bad assets from struggling firms.

"There's not a deal. There's not a deal made. There was progress on the issues," Bachus told reporters. He said House Republicans "would prefer a loan where we fix an interest rate or we would prefer insurance" rather than having the government buy up bad assets.

Bachus said many of those ideas were supported by McCain, who returned to Washington yesterday to participate in the negotiations. Bachus said he spoke to McCain on Wednesday, had breakfast yesterday with two McCain advisers and spoke to McCain again immediately after the morning meeting.

But, Bachus said, "John's not trying to call the shots for the House caucus, I can tell you that. He's just opposed to the plan in its present form."

[Representative Barney] Frank (D-Mass.) reacted angrily to Bachus's remarks, saying lawmakers had been well on their way toward a bill they could put to a vote and accusing McCain of engineering a breakdown. "This is the presidential campaign of John McCain undermining what Hank Paulson tells us is essential for the country," he said.

Despite expectations that a deal was near, Boehner took off in a different direction during the meeting, saying the bailout plan was not gaining traction among rank-and-file House Republicans.

As Obama and Frank peppered Boehner with questions about the new proposal, Bush rejected the idea as a too-broad rewrite of his administration's plan, according to the handwritten notes of one Democrat present.

"Don't start over," Bush said. "Don't start over."

It seems that the House Republicans were following John McCain's "leadership." By refusing to accept the bailout, McCain gave an opening to the House Republicans to offer their own alternative plan--one that was opposed by both President Bush and the Democrats (talk about an alliance here). Had John McCain agreed to the Bush bailout plan, any opposition by the House Republicans would have been stifled, and President Bush may have signed such an agreement by Saturday. So Mr. McCain went to Washington, and completely screwed up the Wall Street bailout negotiations for his presidential ambitions first, country second.

Did McCain really suspend his campaign?

I guess this is John McCain's definition of a suspended campaign. From YouTube:

This is just another razzle-dazzle publicity stunt, by the McCain campaign, to keep the news media focused on John McCain. It is meaningless bull crap. The McCain campaign offices were open, the ads were playing, the campaign was taking in donations. The only thing different was that John McCain stepped away from the campaign trail to attend a photo-op meeting with President Bush and Democratic candidate Barack Obama, and try to score more political brownie points for the McCain campaign. Of course, McCain also announced that he will not attend tonight's presidential debate unless a Wall Street bailout deal is passed by Congress, and signed by Bush. But talks broke down last night with House Republicans rejecting Treasury Secretary Henry Paulson's $700 plus billion Wall Street bailout plan. So John McCain is in another pickle here--will he "honor" his word and cancel tonight's debate with Obama, giving Obama an exclusive 90-minute town hall meeting to present his position? Or will McCain eat his own words, and attend the debate? If McCain does attend tonight's debate, then why the sudden reversal, when McCain claimed that he wouldn't attend the debate if Congress didn't pass a bailout plan? Another razzle-dazzle trick play by the McCain campaign to generate headlines.

Gov. seizes Washington Mutual, sells assets to J.P. Morgan Chase

Why am I not surprised? From The New York Times:

Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history.

Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual, the nation’s largest savings and loan, to JPMorgan Chase for $1.9 billion, averting another potentially huge taxpayer bill for the rescue of a failing institution.

Customers of WaMu, based in Seattle, are unlikely to be affected, although shareholders and some bondholders will be wiped out. WaMu account holders are guaranteed by the Federal Deposit Insurance Corporation up to $100,000, and additional deposits will be backed by JPMorgan Chase.

By taking on all of WaMu’s troubled mortgages and credit card loans, JPMorgan Chase will absorb at least $31 billion in losses that would normally have fallen to the F.D.I.C.

JPMorgan Chase, which acquired Bear Stearns only six months ago in another shotgun deal brokered by the government, is to take control Friday of all of WaMu’s deposits and bank branches, creating a nationwide retail franchise that rivals only Bank of America. But JPMorgan will also take on Washington Mutual’s big portfolio of troubled assets, and plans to shut down at least 10 percent of the combined company’s 5,400 branches in markets like New York and Chicago, where they compete. The bank also plans to raise an additional $8 billion by issuing common stock on Friday to pay for the deal.

Washington Mutual, with $307 billion in assets, is by far the biggest bank failure in history, eclipsing the 1984 failure of Continental Illinois National Bank and Trust in Chicago, an event that presaged the savings and loan crisis. IndyMac, which was seized by regulators in July, was one-tenth the size of WaMu.

Chalk up another big bank failure to the subprime mortgage mess. Who is going to be next? Wachovia?

Thursday, September 25, 2008

McCain hasn't read the Paulson bailout plan

Republican presidential candidate John McCain said, as of Tuesday, that he had yet to read Treasury Secretary Henry Paulson's proposed $700 billion Wall Street bailout plan. From YouTube:

The plan is three pages long:



Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.

(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

Thoughts on the Wall Street bailout

I've been a little busy with other things, so blogging has been nonexistent for the past four days. However I have been watching the news with great interest over the Bush administration's $700 to $1.8 trillion dollar bailout package for Wall Street. President Bush gave a prime-time speech, Wednesday, appealing for Americans to support the $700 billion plus government bailout package to Wall Street. Republican presidential candidate John McCain announced he was suspending his campaign so that he may attend to the country's financial crisis--even though he hadn't done a damn thing about the financial crisis for the past two weeks, except saying that the country's "economic fundamentals" were still strong. Both McCain, and Democratic presidential candidate Barack Obama, will attend a White House photo-op meeting to show the American people the leadership qualities they have, even though absolutely nothing will come from that meeting except for political posturing. McCain asked for Obama to postpone this Friday's first presidential debate, pushing the first presidential debate to the vice presidential debate's time-slot, thus canceling the VP debate. Obama refused to postpone Friday's debate. If there is no bailout plan passed by Congress, McCain will not attend Friday's debate:

What a mess.

First, the bailout package. According to the text of the proposed bailout plan, the Secretary of the Treasury "is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States." In other words, Treasury Secretary Henry Paulson will be given dictatorial powers in determining how to bail out Wall Street with a blank check, courtesy of the U.S. taxpayer. In addition, Paulson will report to Congress on the first three months after exercising the plan, and then report semiannually. Congress will have no oversight on this plan, nor will Paulson provide much information about how he will be spending the American taxpayers' money on this bailout. "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Whatever Paulson says, is law, and is not reviewable, nor can the courts overturn Paulson's dictatorial orders. It is breathtaking in the scope of absolute authority that Paulson, and the Bush administration, will be given in control of the U.S. economy for the benefit of Wall Street's greed and corruption. Finally, you can bet that Secretary Paulson will not demand any increased regulations or oversight of the subprime mortgage industry, or the debt contracts that got Wall Street into trouble in the first place--Wall Street certainly would not want more government oversight into their financial dealings, even though they are asking for a financial bailout from the government after getting into trouble in the first place. And while the government is bailing out Wall Street financial firms, there is complete opposition from the Bush administration, the Republicans, and the banking industry, for the Democrats proposal to allow bankruptcy judges to adjust the terms of homeowner mortgages. So it is okay for the government to bail out Wall Street, but not Main Street. And the Bush bail out plan doesn't say anything about Wall Street CEOs' "golden parachute" executive compensation plans, even as these same CEOs drove these Wall Street firms' excessive greed for this subprime mortgate mess, allowing these CEOs to walk away with millions as their firms go bankrupt. This is such a bad deal for the American taxpayer. We are bailing out Wall Street greed for nothing in return. Is it no wonder that 44 percent of Americans oppose the Bush administration's $700 billion Wall Street bail out plan?

Second, I need to say something about the Bush administration's PR-strategy in pushing Americans to support this $700 billion boondoggle of a Wall Street bail out plan. First, the Bush administration creates this plan to give Paulson, and the Bush administration, almost dictatorial powers over the U.S. economy in order to resolve this financial crisis. Then President Bush gives a prime-time speech, saying that the U.S. economy "is in danger" of a "long and painful recession" if Congress doesn't pass his $700 billion Wall Street bail out plan. Haven't we seen this strategy before--say, the push for giving Bush absolute power for going to war in Iraq to protect us from Saddam's WMDs? Say, the push for giving Bush absolute power to domestically spy on American citizens to protect us from terrorists? Say, the push for giving Bush even more power to escalate the Iraq war with the troop surge from al Qaeda insurgents? Or even the new Bush push for giving even more economic powers to bail out Wall Street from an evil recession? There is a pattern, where the Bush administration would incite fear of a terrible enemy coming to get Americans--it doesn't matter if it is the bogyman Iraqis, the bogyman terrorists, or even the bogyman recession--and demand that Americans give even more power to the Bush administration for the broken promise of protection. This is getting old. And it is not that President Bush is playing these fears on the American people. Bush is also playing these fears on Congress, demanding that Congress submits to his will, or Congress will become the unpatriotic enemy of America, surrendering to whatever bogyman Bush decides to present. Now it will be Congress' fault for this latest bogyman recession because Congress failed to pass Bush's $700 billion Wall Street bail out plan, even though the Bush administration was also responsible for not providing the regulatory oversight on Wall Street for the past eight years of this subprime mortgage collapse, and the economic fallout. At this moment, Congress is brokering a deal on this Bush Wall Street bailout package.

More to come.

Update: It appears that Congressional leaders have agreed on an outline for the government bail out plan of Wall Street. From The New York Times:

WASHINGTON — House and Senate negotiators from both parties said Thursday that they had reached general agreement to move forward with the Bush administration’s proposed $700 billion rescue effort of the nation’s financial system.

Emerging from a nearly three-hour meeting in the Capitol, Republicans and Democrats said they would continue working through the day to complete the legislative language and would begin final negotiations with the Treasury.

It was unclear if a final draft would be ready by 3:55 p.m. when Congressional leaders are scheduled to meet at the White House with President Bush and the two presidential candidates, Senator John McCain, Republican of Arizona, and Senator Barack Obama, Democrat of Illinois.

But lawmakers in both parties said that few substantive differences and no major obstacles remained. They said the bill would authorize the full $700 billion requested by President Bush, but that Congress was intent on disbursing the money in installments.

One plan under consideration would release $250 billion immediately, with another $100 billion available at the discretion of the president.

They also said that there would be limits on pay packages for executives whose firms seek assistance from the government and a mechanism for the government to be given an equity stake in some firms so that taxpayers have a chance to profit if the companies prosper in the months and years ahead.

So the deal will be that Congress will disburse the $700 billion in installments, hopefully with some serious oversight into how Treasury Secretary Paulson will be spending the money. Congress will be limiting Wall Street CEO pay packages for firms asking for the bail out money, and there will be some government equity stake in these firms. No deal on the bankruptcy judges modifying mortgage plans for individual homeowners. However, this detail was very interesting:

A senior Republican lawmaker, speaking on condition of anonymity so as not to undermine the party leadership, said there was a “violent reaction” among House Republicans to the Paulson plan. He said backers of the alternative, one of several that have been proposed, believe that they can force negotiators to accept it as part of a larger deal.

It appears that the Republicans were shocked and angered over the Bush $700 billion Wall Street bail out plan. The Republicans were offering their own versions of differing plans, including one by Representative Eric Cantor, the minority whip, which would rely on government-provided mortgage insurance to Wall Street firms, rather than taxpayer-purchases of mortgage securities. The Republicans appeared to be in opposition of the Bush Wall Street bail out plan. House Speaker Nancy Pelosi stated that she would not approve of any bail out plan without Republican support. So a congressional bail out plan will probably come out over this weekend, looking at the negotiations taking place between the House and Senate. The big question will be how much oversight will Congress demand within this plan? And will the congressional Republicans accept such a plan?

Saturday, September 20, 2008

Saturday Morning Cartoons--Happy Tree Friends - Popcorn Video: Spin Fun Knowin' Ya

For today's Saturday Morning Cartoons, I decided to take today's top favorited YouTube animation video, which as Happy Tree Friends in their Popcorn Video; Spin Fun Knowin' Ya. It is bizarre, cynical, and wickedly funny. From YouTube:

I think I'm going to have nightmares after watching this video.

If you want to see more Happy Tree Friends, check out Mondo Mini-Shows here.

Thursday, September 18, 2008

Sarah Palin blames collapse of AIG "with the construction bonds that they’re holding"

I originally saw this story via the Washington Monthly, and I found it interesting that Republican vice presidential candidate Sarah Palin would blame the federal bailout of American International Group on AIG's holding of construction bonds. The source story is from CBS News:

CLEVELAND, Ohio) During a quick stop at a diner in Cleveland, Ohio, Sarah Palin was asked for her reaction to the AIG bailout.

“Dissapointed that taxpayers are called upon to bailout another one,” she said. “Certainly AIG though with the construction bonds that they’re holding and with the insurance that they are holding very, very impactful to Americans so you know the shot that has been called by the Feds its understandable but very, very disappointing that taxpayers are called upon for another one.”

Construction bonds? I thought that the AIG bailout was due to the over-leveraging of mortgage-backed securities and other debt obligations.

According to USLegal Definitions website:

A bond is an obligation, expressed in writing, to pay a fixed and liquidated sum on the happening or nonoccurence of a specified condition or event. The term "bond" is conditioned on the performance of duties, or other obligations undertaken by the principal obligor in the bond or collateral things to be done by the principal obligor; and indemnity and fidelity bonds or undertakings to indemnify the obligee against loss from conduct of the principal.

Construction bonds usually involve a type ofbond called a surety bond. A surety bond is not an insurance policy. A surety bond is a guarantee, in which the surety guarantees that the contractor, called the “principal” in the bond, will perform the “obligation” stated in the bond. For example, the “obligation” stated in a bid bond is that the principal will honor its bid; the “obligation” in a performance bond is that the principal will complete the project; and the “obligation” in a payment bond is that the principal will properly pay subcontractors and suppliers. Bonds frequently state, as a “condition,” that if the principal fully performs the stated obligation, then the bond is void; otherwise the bond remains in full force and effect.

If the principal fails to perform the obligation stated in the bond, both the principal and the surety are liable on the bond, and their liability is “joint and several.” That is, either the principal or surety or both may be sued on the bond, and the entire liability may be collected from either the principal or the surety. The amount in which a bond is issued is the “penal sum,” or the “penalty amount,” of the bond. Except in a very limited set of circumstances, the penal sum or penalty amount is the upward limit of liability on the bond.

So a construction bond is basically an agreement that a contractor will perform some project, otherwise the contractor will be liable for failing to complete the project, and can be penalized for it. I can see construction bonds being issued to contractors for building government projects, like a hockey rink in Wasilla. But construction bonds have nothing to do with the demise of AIG--Sarah Palin got a little confused between construction bonds and subprime mortgage bonds that AIG was involved with.

And it wasn't just a single Sarah Palin "construction bond" gaffe. She said the same thing during an interview with Fox News Sean Hannity:

The problem with Wall Street executives, Palin says on the program airing at 9 pm EDT, is that they became "addicted to, we call it, OPM, O-P-M, 'Other People's Money.'''

As painful as the government bailout of AIG is, she maintains, "It's just too impacting, we had to step in there. I do not like the idea though of taxpayers being used to bailout these corporations. Today it was AIG, important call there, though, because of the construction bonds and the insurance carrier duties of AIG."


On the AIG bailout: "Well, you know, first, Fannie and Freddie, different because quasi-government agencies there where government had to step in because of the adverse impacts all across our nation, especially with homeowners."

"It's just too impacting, we had to step in there,'' Palin tells Hannity. "I do not like the idea though of taxpayers being used to bailout these corporations. Today it was AIG, important call there, though, because of the construction bonds and the insurance carrier duties of AIG....But first and foremost, taxpayers cannot be looked to as the bailout, as the solution to the problems on Wall Street."

Steve Benen at The Washington Monthly notes:

Putting this in the broader context, in just the last two weeks, we've seen Sarah Palin get confused about foreign policy, housing policy, entitlements, and now, economic policy. Dan Drezner, a conservative who doesn't understand Palin's appeal, added, "Her best skill displayed to date was delivering a speech off a teleprompter (not insignificant in politics, mind you) and she's apparently exaggerating that skill as well."

It occurs to me that first-time candidates for national office often struggle to get over the learning curve. Governors and senators will visit a coffee shop in Iowa City eight months before the caucuses, get confused about a policy detail, but improve as the campaign rolls on. They take their time, go through extensive briefings, and learn to get good. By the time the conventions are done, these candidates are supposed to be on the top of their game.

Sarah Palin was never ready for the national scene, she was simply chosen by the McCain campaign as a pro-life, hard-lined conservative, women candidate in which the McCain campaign had hoped to attract the Hillary voters to their camp. The McCain campaign never bothered to properly vet Sarah Palin, resulting in the Troopergate scandal, Sarah Palin's extremist conservative views, Palin's extreme penchant for secrecy, Palin's use of private email accounts to conduct state business, and finally Palin's pettiness in firing employees who cross her, or refuse to comply to Palin's unethical demands. John McCain took a third-rate candidate and stuck her in a first-rate office--with warts and all. And we're seeing just how unqualified Sarah Palin is for the vice president's office. It is no wonder that the McCain campaign is continually shielding Palin from the national press:

Though she has been on the campaign trail for nearly three weeks, Palin has yet to hold a press conference, and this morning’s stop marked the first time she answered a question from the press on the fly, prompting concerned looks from staffers.

It is like the McCain staffers know that Palin is unqualified in talking to reporters on the complex national issues--Palin's blaming AIG's collapse on construction bonds is just another example. And with 48 days left in the election, there is no way she can overcome the learning curve.

Sarah Palin is not qualified for the vice president's office. And John McCain is certainly not qualified for the presidency, not when he has selected such an unqualified running mate.

New York Times: McCain laboring to hit right note on economy

This is an interesting New York Times story that I found via The Huffington Post. From The New York Times:

VIENNA, Ohio — On Monday morning, as the financial system absorbed one of its biggest shocks in generations, Senator John McCain said, as he had many times before, that he believed the fundamentals of the economy were “strong.”

Hours later he backpedaled, explaining that he had meant that American workers, whom he described as the backbone of the economy, were productive and resilient. By Tuesday he was calling the economic situation “a total crisis” and denouncing “greed” on Wall Street and in Washington.

The sharp turnabout in tone and substance reflected a recognition not only that Mr. McCain had struck a discordant note at a sensitive moment but also that he had done so with regard to the very issue on which he can least afford to stumble.

With economic conditions worsening over the course of this year and voter anxiety on the rise, Mr. McCain has had to labor to get past the impression — fostered by his own admissions as recently as last year that the subject is not his strongest suit — that he lacks the experience and understanding to address the nation’s economic woes.

In the most recent case, he first sought to explain away his remarks about the economy’s fundamental soundness by saying he had been referring to the American people, almost daring his Democratic rival, Senator Barack Obama, to contradict him on that score. But within hours his aides were scheduling appearances for him Tuesday on all the morning television news shows so that he could try to erase the notion, being promoted aggressively by Democrats, that he was out of touch.

His campaign also sent to reporters the text of a speech he was delivering later Monday that included much starker language about the nation’s financial troubles, and by Tuesday had produced a new advertisement asserting that his experience and leadership were necessary in a “time of crisis.” Aides and advisers repeated to anyone who would listen the words that Mr. McCain has frequently spoken following his comments about the economy’s fundamental strengths: that “these are very, very difficult times.”

Beyond striking a more populist tone and more explicitly acknowledging the nation’s economic problems, his campaign also began an effort Tuesday to cast him as a strong leader with profound experience on economic issues, given his service on the Senate Commerce Committee, where he was chairman for six years. That effort quickly hit a pothole when one of his economic advisers suggested that he had helped to create the BlackBerry, by virtue of his role in brokering telecommunications legislation; the McCain campaign later disavowed that, calling the suggestion “boneheaded.”

For much of this year, Mr. McCain has seemed to struggle to strike a balance between conveying the optimism that many voters want in their leaders, and the I-feel-your-pain empathy that they crave during hard times. His task is complicated by the tension between his plans to continue many of the economic policies of the unpopular incumbent Republican president he hopes to succeed, and his pledges to improve the American economy and shake up Washington.

John McCain has a huge problem here--he has consistently flip-flopped on presenting his views of the U.S. economy. Ever since he started his presidential campaign, John McCain has argued that the U.S. economy is still strong, that the U.S. is not heading into a recession, and the recession fears were "psychological." But now with the collapse of Lehman Brothers and the Fed buyout of AIG, John McCain has had to reverse himself--especially regarding the AIG bailout, when McCain first opposed, and the supported the bailout. In response to the financial crisis hitting Wall Street, John McCain's proposal on dealing with this crisis is to convene a commission to study the crisis. John McCain rails at Wall Street greed that caused the financial crisis, while 83 Wall Street lobbyists work on the McCain campaign staff. McCain claims that he will "clean up Wall Street," however, McCain's senatorial record shows that McCain is a consistent supporter of government deregulation. As of September 15th, McCain still claimed that the "fundamentals" of the American economy were still strong, but then backpedaled in stating that the "fundamentals" really meant the American worker.

It is like John McCain had no economic policy to present, or even worst, it is an economic policy of a Bush third term, complete with more tax cuts to the rich, more government deregulation for corporate interests, and more destruction of the government's social safety net. This is not the kind of platform to run on, when Americans are worried about their economic future, when the U.S. economy is slowing down, and when there is financial panic on Wall Street over the financial industries over-leveraging of subprime mortgage-backed investments. The McCain campaign is only now realizing this. So there has been this sudden reversal by the McCain campaign from a personality-based campaign--John McCain the POW--to a populist, reformist-based campaign--John McCain the reformer. This is especially ironic since a political candidate that takes up a populist, reformist image, is one who advocates change in the political system. Throughout his campaign, John McCain has never advocated that he was a president who would bring change to the White House--John McCain was the man who would bring experience into the White House. John McCain was the man who would bring character--McCain was a POW--into the White House. John McCain was a man who would bring honor--I'd rather lose an election than lose a war--into the White House. But with the financial crisis taking place this week, and with Americans focusing their worries on the economy, John McCain had to reinvent himself, again, to pander to the American voter. So John McCain has decided to co-opt Democratic presidential candidate Barack Obama's message of change for McCain's own message. Only it is a McCain change message of hollow, meaningless words, designed simply to solicit votes for a McCain presidency that would continue a Bush legacy of more tax cuts to the rich, more government deregulation, more lobbyists and special interest access to a McCain White House, and perhaps a neocon continuation of more wars in Iraq, Georgia, Iran, or even Russia. It doesn't matter what the message is. It only matters that the message convinces enough voters to send John McCain into the White House.

And in the case of the economy, the McCain campaign is still trying to find the right, hollow, meaningless, message.

ABC News reports McCain's flip-flops on financial crisis

Here we go again. ABC News is now reporting on John McCain's flip-flops in the aftermath of the financial crisis this week. And it is not just McCain's flip-flopping over the federal government's bailing out American Income Group. The ABC News report shows multiple video examples of McCain claiming that he supports less government regulation, up to the March 2008, just before Bear Sterns went bankrupt. From YouTube:

Wednesday, September 17, 2008

McCain attacks Wall Street greed, while 83 Wall Street lobbyists work for his campaign

There is really not much else to say about this latest John McCain hypocrisy. From Mother Jones:

In the past few days, as the economic crisis has deepened, Senator John McCain has been decrying the excesses of Wall Street. At a campaign rally in Tampa on Tuesday, he vowed that he and Alaska Governor Sarah Palin, if elected, "are going to put an end to the reckless conduct, corruption, and unbridled greed that have caused a crisis on Wall Street." He noted that the "foundation of our economy...has been put at risk by the greed and mismanagement of Wall Street and Washington."

He blasted CEOs who "seem to escape the consequences." He denounced Wall Streeters who "dreamed up investment schemes that they themselves don't even understand" and who used "derivatives, credit default swaps, and mortgage-backed securities" to try "to make their own rules." He excoriated Fannie Mae and Freddie Mac for gaming the system. And he slammed financial industry lobbyists for misguiding members of Congress. "I can promise you the days of dealing and special favors will soon be over in Washington." On Wednesday morning, after the federal government committed $85 billion to prevent the collapse of the American International Group (AIG) insurance conglomerate, McCain again assailed irresponsible corporate executives. "We need to change the way Washington and Wall Street does business," he proclaimed.

McCain has been quick with fiery, populist-tinged speeches. But one thing has been missing: any acknowledgment that McCain's own campaign has been loaded with the type of people he's been denouncing. (The McCain campaign did not respond to a request for comment; we will update the post if they do.) As Mother Jones previously reported, former Senator Phil Gramm, McCain's onetime campaign chairman, used a backroom maneuver in late 2000 to slip into law a bill that kept credit default swaps unregulated. These financial instruments greased the way to the subprime meltdown that has led to today's economic crisis. Several of McCain's most senior campaign aides have lobbied for Fannie Mae and Freddie Mac. And the Democratic National Committee, using publicly available records, has identified 177 lobbyists working for the McCain campaign as either aides, policy advisers, or fundraisers.

Of those 177 lobbyists, according to a Mother Jones review of Senate and House records, at least 83 have in recent years lobbied for the financial industry McCain now attacks. These are high-paid influence-peddlers who have been working the corridors of the nation's capital to win favors and special treatment for investment banks, securities firms, hedge funds, accounting outfits, and insurance companies. Their clients have included AIG, the newest symbol of corporate excess; Lehman Brothers, which filed for bankruptcy on Monday sending the stock market into a tailspin; Merrill Lynch, which was bought out by Bank of America this week; and Washington Mutual, the banking giant that could be the next to fall. Among these 83 lobbyists are McCain's chief political adviser, Charlie Black (JP Morgan, Washington Mutual Bank, Freddie Mac, Mortgage Bankers Association of America); McCain's national finance co-chairman, Wayne Berman (AIG, Blackstone, Credit Suisse, Fannie Mae, Freddie Mac); the campaign's congressional liaison, John Green (Carlyle Group, Citigroup, Icahn Associates, Fannie Mae); McCain's veep vetter, Arthur Culvahouse (Fannie Mae); and McCain's transition planning chief, William Timmons Sr. (Citigroup, Freddie Mac, Vanguard Group).

Mother Jones provides a list of the Wall Street lobbyists working for McCain here.

McCain campaign event in Michigan becomes an Obama rally

This is from YouTube:

And does John McCain look rather pissed as he walks away, with the autoworkers chanting, "Obama!"

Morgan Stanley considers merger with Wachovia

This is also from The New York Times:

Morgan Stanley, one of the two last major American investment banks, is considering a merger with Wachovia or another bank, according to people briefed on the discussions.

Morgan Stanley’s chief executive, John J. Mack, received a telephone call on Wednesday from Wachovia expressing interest in the Wall Street bank. Morgan Stanley is considering other options as well. Other banks have also expressed interest in Morgan Stanley.

The talks are preliminary and no deal may emerge, these people cautioned. But if one is reached, it would mark the end of Morgan Stanley, one of the descendants of the original J. P. Morgan & Company.

Morgan Stanley, whose stock plunged sharply on Wednesday, would become the third major investment firm to fold amid the credit crisis. Lehman Brothers filed for bankruptcy on Monday, while Bank of America agreed to buy Merrill Lynch for about $50 billion. In March, JPMorgan Chase agreed to buy Bear Stearns at the urging of the government, as that securities firm teetered on insolvency.

Wachovia has also suffered badly over the past year, and many believed that it was seeking some merger partner. The firm has already retained Goldman Sachs to explore potential options, including a sale.

Earlier this year, Morgan Stanley approached Wachovia about a potential deal, but the North Carolina bank demurred, a person briefed on the matter said.

First, it is interesting that Goldman Sachs is working on the merger between Morgan Stanley and Wachovia. Goldman Sachs is also placing Washington Mutual on auction.

Anyways, here is the one-year stock chart for Wachovia:

Looking at all the stock charts from Wachovia, Washington Mutual, Merrill Lynch, and even American Income Group, they have all plummeted through 2008. Ever since the subprime housing collapse, these companies have been able to shield themselves from the subprime losses and write-downs, either by shifting profits from one division to another, suspending dividends, cutting branches, or slashing payrolls. They have reported the subprime losses and write-downs all along, but have countered them with cost-cutting efficiencies. And there was always the optimistic talk that we were turning the corner on the subprime mortgage mess. If anything, these past three days have shown us that we are deep into the subprime mortgage mess. The banks and financial institutions have engaged in all the cost-cutting efficiencies, and suspended dividend payments, and they are still seeing a red sea of write-downs and subprime mortgage losses that are still on the books. Lehman Brothers--gone! Merrill Lynch--gone! Bear Stearns--gone! American Income Group--taken over by the U.S. government! Washington Mutual--on the auction block! And now Wachovia will soon be gone, as it may become merged with Morgan Stanley.

There is this huge shakedown taking place in the financial industry and Wall Street. With so much bad debt sitting on the books of these financial corporations, banks are afraid of loaning money to other banks due to the fear of how much subprime debt do these banks have? It is why the Dow fell 450 points today, even as the U.S. government took control of AIG, or even as the Federal Reserve pumped $70 billion into the financial system on Tuesday. Wall Street is gripped with fear--which is the next bank that is going to fail? Investors have no confidence in the financial market. Look at this New York Times story on today's 450-point drop by the Dow:

Investors, seeking security in a market that has so far refused to stabilize, poured money into ultra-safe government notes, driving the yield on short-term Treasury bills to the lowest levels in 50 years. The moves meant that investors were willing to accept virtually zero return on their money in exchange for an investment that would not yield a loss.

“The positive impact of these government fixes, rescues and bailouts clearly are wearing off,” Mr. Yardeni said. “There’s no novelty in it any more.”

In London, the benchmark FTSE 100 index closed down 2.26 percent, and indexes in Paris and Frankfurt fell more than 2 percent.

The price of gold, a traditional safety spot in turbulent times, posted its biggest single-day gain in more than three decades, rising $70 an ounce. Silver had its biggest jump since the late 1970s.

“People are basically saying that things are going on that they can’t really justify,” Sam Stovall, the chief investment strategist at Standard & Poor’s, said. “And if you can’t explain them away logically, logic says get out of the way.”

Investors are running away from the stock market and buying U.S Treasuries, which pay almost nothing in return, but are considered safe investments. Or these investors are buying up gold, which rose $70 an ounce today. And this fear is spreading throughout the world. Russia halted its stock market trading today, on concerns of declining oil prices, violence in Georgia, the collapse of Lehman Brothers, and the U.S. bailout of AIG. And now it appears that the Dow fallout is spreading to Japan:

HONG KONG (MarketWatch) -- Japanese stocks tumbled early Thursday, hit hard by worries about global financial markets and after Wall Street suffered steep losses overnight, with banks like Sumitomo Mitsui Financial Group, and real estate firms like Mitsubishi Estate Co. leading the slide. The Nikkei 225 Average lost 3.2% to 11,375.81 and the broader Topix index skidded 3.5% to 1,082.32. New Zealand's NZX 50 index fell 3.2% to 3,164.23.

How much do you want to bet that the fear of the subprime mortgage losses is spreading to the Japanese banks, and how much these banks are leveraged into the subprime loans? The fear and the lack of investor confidence in the financial institutions are spreading throughout the world. I can't say whether this is going to be a short-term effect, where by next week, there may be a return of some type of sanity in the market. Or if more banks and financial institutions start to fail, due to the subprime mortgage mess, we could see a very turbulent September of wide stock market swings. But looking at the past three days, I do not think you are going to see much investor confidence returning to the markets--perhaps not until after the U.S. presidential elections. Investors and traders may just sit out on the sidelines until the end of this year, and then next year start planning their new investment strategies.

Washington Mutual is on the auction bloc

It appears that the financial crisis is taking another casualty--this time it is Washington Mutual. From the New York Times:

Washington Mutual, the struggling savings and loan, has been working on several efforts to save itself, including a potential sale, people briefed on the matter said Wednesday.

Goldman Sachs, which Washington Mutual has hired, started the process several days ago, these people said. Among the potential bidders that Goldman has talked to are Wells Fargo, JPMorgan Chase and HSBC. But no buyers may materialize. That could force the government to place Washington Mutual into conservatorship, like IndyMac, or find a bridge-bank solution, which was extended to thrifts in the new housing regulations.

Citigroup is also considering an offer, but would likely be able to buy Washington Mutual only if it emerged from a receivership, according to a person close to the situation. JPMorgan is maintaining its posture that it will not bid unless it receives government support, according to another person briefed on the matter.

The unsurprising announcement comes as the bank, which has suffered badly from losses on mortgages it had made, continues to stumble. Shares in Washington Mutual fell nearly 10 percent on Wednesday to $2.09; they have plunged 94 percent over the last 12 months. This week alone, investors have been frightened by Standard & Poor’s cutting of the bank’s debt rating to junk.

Here is the one-year stock chart for Washington Mutual:

Now in August, 2007, Washington Mutual warned that the subprime mortgage crisis was threatening its operations. According to the August 10, 2007 Raw Story:

US bank Washington Mutual warned that the subprime mortgage sector crisis is threatening its operations, in a document filed late Thursday with the Securities and Exchange Commission.

Due to the conditions roiling the subprime sector, "the companys liquidity may be affected by an inability to access the capital markets or by unforeseen demands on cash.

"This situation may arise due to circumstances beyond the companys control, such as a general market disruption," the bank said.

Washington Mutual said that during the first half of the year and continuing into the third quarter of 2007, there has been "significant volatility in the subprime secondary mortgage market which has spread into markets for all other nonconforming residential mortgages."

"While these market conditions persist, the companys ability to raise liquidity through the sale of mortgage loans in the secondary market will be adversely affected," it said.

So as early as August, 2007, WaMu was starting to see the effects of the subprime mortgage collapse eating into their ability to raise cash to cover their exposure into the subprime market, or to maintain their other operations. And look at this sentence--This situation may arise due to circumstances beyond the companys control, such as a general market disruption. I'd say that Lehman Brother's bankruptcy, Merrill Lynch's purchase by Bank of America, and the Fed's bailout of American Income Group certainly qualifies as a "general market disruption." WaMu's executives knew that if the crap hit the fan, the company was going to be in deep trouble. This September 10, 2008 New York Times story reports that Washington Mutual has "roughly $180 billion of mortgage-related loans, which could result in $9 billion to $14 billion in losses this year." BusinessWeek is reporting that WaMu has $239 billion in real estate loans, with $53 billion in adjustable-rate loans in which payments are optional, and losses are as high as 35 percent. Washington Mutual was on very shaky ground between the middle of 2007, and all through 2008. WaMu did get a $7 billion capital infusion by TPM, a private equity firm, however TPM is now saying they will "waive its right to be compensated if the bank sold more shares to raise capital." So even TPM's cash infusion could not help keep WaMu afloat.

Is there anyone willing to buy Washington Mutual? The New York Times story gives the possible suitors of Wells Fargo, JPMorgan Chase and HSBC. Washington Mutual has around $143 billion in deposits, which is certainly an attractive incentive for any bank to take control of. However, there is the $53 billion in adjustable-rate mortgages, with the loss-rate of a possible 35 percent. And who knows what else is in WaMu's $180 billion of mortgage-related loans. Any financial institution that is open to buy WaMu will be demanding that WaMu's subprime and adjustable-rate mortgage portfolios be removed from the sale, or at least have WaMu's sale price reduced to compensate for the potential losses resulting to the subprime mortgage collapse. And if WaMu's losses, due to the subprime mess, could be anywhere at $9 billion to 14 billion this year, or even BusinessWeek's citing WaMu losses at $28 billion this year, nobody knows the extent of WaMu's exposure in the subprime loans, or the write-down of those loans. I doubt that Washington Mutual could even be sold at auction, not unless it goes for an extremely cheap price.

Washington Mutual bankruptcy anyone?

Update: Now that the Dow has dropped 450 points on the news of the U.S. buyout of American Income Group, will the Dow drop another 100 or 200 points on the news of Washington Mutual's auction? Or even this recent merger between Wachovia and Morgan Stanley? Will the fear continue to grip Wall Street? Or will there be enough bargain hunters tomorrow, snatching up stocks to increase the Dow into positive territory?

Obama releases two-minute ad on state of economy

Barack Obama has just released this new two-minute campaign ad on his view regarding the state of the U.S. economy, and the current financial crisis taking place this week. From YouTube:

The Associated Press has some interesting details on this latest Obama ad:

BEVERLY HILLS, Calif. (AP) — Barack Obama sought to put a personal stamp on his economic policies in troubled times, appearing Wednesday in a two-minute television commercial to outline his plans and caution it won't be easy to fix the nation's worsening financial problems.

The new ad was filmed in Denver on Tuesday and was to be broadcast nationally in the wake of one of the worst days on Wall Street, as the stock market, reeling from the bankruptcy of Lehman Brothers and the takeover of Merrill Lynch, fell 500 points. The turmoil continued Tuesday when the Federal Reserve forged an extraordinary $85 billion rescue of insurance giant American International Group Inc.

The ad and a hardening of Obama's rhetoric reflected a turning point in the campaign to zero in on the economy as the No. 1 issue for voters. reports that the ad will "air in battleground states and nationally."

It is an interesting ad. Barack Obama talks about the current economic crisis taking place in the country, and provides his policy points for promoting change in the U.S. government and the economy. Obama does not mention his Republican opponent, Senator John McCain, in this ad. The tone of the ad appears to be a Barack Obama speaking to grown-up Americans--we've got bad economic problems, and here is my agenda on how to fix these problems. That is refreshing, considering the partisan attacks, mudslinging, and the negative campaigning we've been seeing throughout this presidential campaign--especially on John McCain's part. Will this ad work? I'm not sure. But by presenting this ad, Obama shifts the campaign back to focusing on the economy, where the Obama campaign believes they can win on this issue. And if the current U.S. economic conditions continue to deteriorate, I wonder if Americans will turn to Obama in the hope that a political party change in the White House will provide the necessary change to place the country back on the right track.

And just to point out, John McCain has released his own political campaign ad in the wake of the financial crisis on Wall Street. It is another negative attack against Barack Obama, with McCain claiming that he is the candidate of change, and promises to clean up "the corruption and greed on Wall Street." There is really nothing new in this latest John McCain ad. From YouTube:

McCain flip-flops on AIG bailout. Palin says no to bailout, Huckabee calls McCain a consistent government deregulator

The McCain campaign apparently has no clue as to how to respond the U.S. government's bailout of American Income Group, or even how to respond to this financial crisis currently taking place. First, here is this YouTube video of John McCain flip-flopping on whether he supports the government's bailout of AIG:

Looks like another John McCain flip-flop to add to the list.

Now here is Alaskan Gov. Sarah Palin's response to the economy and the U.S government's bailing out of financial institutions. From YouTube:

Sarah Palin clearly states that she refuses to bail out Wall Street investment firms from going bankrupt due to this subprime mortgage mess. Palin claims that the regulatory system needs a complete overhaul--does this mean more government regulation of the financial system? Palin refuses to provide specific policy points on how the McCain / Palin administration will "clean up" Washington's "broken regulatory system." However, the prime policy point that we can expect from a McCain / Palin administration is that they will not bail out Wall Street firms from this financial crisis--even though John McCain has flip-flopped in his initial rejection, then support for the federal government's bailing out of AIG.

And finally, I found this YouTube video of former Arkansas governor Mike Huckabee saying that John McCain has always been against government regulations, believing that the markets "will correct itself." From YouTube:

It would appear that even Mike Huckabee agrees that there should be some government deregulation in response to this latest financial crisis and subprime mortgage mess. What we're seeing here is a McCain campaign that is caught in a paralysis. John McCain's record has been one of consistent government deregulation in the financial services industry. However, the unfolding financial crisis, the Lehman Brother's bankruptcy, and the federal government's bailout of AIG, clearly shows the need for increased federal regulation and oversight into the financial industry--a complete contradiction to McCain's belief in deregulation. Hence, the paralysis where the McCain campaign can't seem to get their message straight. We've got John McCain flip-flopping on the AIG bailout, Palin saying that a President McCain will not bail out Wall Street firms, and Huckabee explaining that McCain has always supported government deregulation of the business market. It appears to me that the McCain campaign is trying to change its PR-message of becoming the government reformer for cleaning up the subprime mess in the financial services industry, however the McCain campaign does not want the American public to know that a McCain administration's reform policy will mean more government deregulation in the financial markets.

CNN calls out McCain's lies

Now CNN is calling out the McCain / Palin campaign for their lies. From YouTube:

Did John McCain lie when he warned that an economic crisis was coming

I found this ABC News story through Americablog, and it may reveal another John McCain lie:

"Two years ago, I warned that the oversight of Fannie and Freddie was terrible, that we were facing a crisis because of it, or certainly serious problems," Sen. John McCain, R-Ariz., told CBS this morning. "The influence that Fannie and Freddie had in the inside the Beltway, old boy network, which led to this kind of corruption is unacceptable and I warned about it a couple of years ago.”

How does this claim of foresight square with this interview that McCain gave to the Keene (NH) Sentinel, discussing the subprime mortgage crisis, in December 2007?

Q: “Well the dimension of this problem may be surprising to a lot of people, but to many people, to many others there were feelings that there was something amiss, something was going too fast, something was a little too hot. Going back several years. Were you one of them? Or, I mean you’re a busy guy, you’re looking at a lot of things, maybe subprime mortgages wasn’t something you focused on every day. Were you surprised?

McCain: “Yeah. And I was surprised at the dot-com collapse and I was surprised at other times in our history. I don’t know if surprised is the word, but...

Q: “S&Ls?”

McCain: “I don’t -- what did you say?”

Q: “The S&Ls."

McCain: "Yeah, the S&Ls."

Q: "Is this bigger than that?

McCain: “I don’t know the dimensions of this. It’s hard to know what the dimensions are. As I say, I never thought I’d pick up the paper and see a city in Norway is somehow dramatically impacted by it. When I say ‘surprised’ I’m not surprised when in capitalist systems that there’s greed and excess. I think it was Teddy Roosevelt who said ‘unfettered capitalism leads to corruption’ or something like that, that people have disputed for years.

“But so, in this whole new derivative stuff, and SIBs and all of this kind of new ways of packaging mortgages together and all that is something that frankly I don’t know a lot about.

"But I do rely on a lot of smart people that I have that are both in my employ and acquaintances of mine. And most of them did not anticipate this. Most of them, I mean I can find some that did. But, a guy that’s on my staff named Doug Holtz-Eakin, who was once the head of the Office of Management and Budget, said that there was nervousness out there. There’s nervousness. There was nervousness that we had such a long period of prosperity without a downturn because of the history of our economy. But I don’t know of hardly anybody, with the exception of a handful, that said ‘wait a minute, this thing is getting completely out of hand and is overheating.'

"So, I’d like to tell you that I did anticipate it, but I have to give you straight talk, I did not.”

Now John McCain did warn about the oversight of Freddie Mac and Fannie Mae. McCain stated that Fannie Mae's "quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal" and that Fannie Mae "used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems." But I doubt that McCain was even aware of the extent of Fannie Mae's exposure to the subprime housing mess, or even the extent of banks and Wall Street investment firms exposure to the subprime mess. So I'm not sure if this is another John McCain lie.

However I do see that the McCain campaign is using McCain warning of the lack of Fannie Mae oversight as a dubious claim that McCain knew the housing crisis was coming. I'm not sure I can buy McCain's claim. For one thing, John McCain has a record of shifting his political views as a means to shamelessly pander for votes. This may be another example of McCain's pandering. The second reason is that while John McCain may be currently trying to position himself as a champion regulator, his record shows that McCain has consistently sought more government deregulation. From the Washington Post:

A decade ago, Sen. John McCain embraced legislation to broadly deregulate the banking and insurance industries, helping to sweep aside a thicket of rules established over decades in favor of a less restricted financial marketplace that proponents said would result in greater economic growth.


McCain hopes to tap into anger among voters who are looking for someone to blame for the economic meltdown that threatens their home values, bank accounts and 401(k) plans. But his past support of congressional deregulation efforts and his arguments against "government interference" in the free market by federal, state and local officials have given Sen. Barack Obama an opening to press the advantage Democrats traditionally have in times of economic trouble.

In 2002, McCain introduced a bill to deregulate the broadband Internet market, warning that "the potential for government interference with market forces is not limited to federal regulation." Three years earlier, McCain had joined with other Republicans to push through landmark legislation sponsored by then-Sen. Phil Gramm (Tex.), who is now an economic adviser to his campaign. The Gramm-Leach-Bliley Act aimed to make the country's financial institutions competitive by removing the Depression-era walls between banking, investment and insurance companies.

That bill allowed AIG to participate in the gold rush of a rapidly expanding global banking and investment market. But the legislation also helped pave the way for companies such as AIG and Lehman Brothers to become behemoths laden with bad loans and investments.

And there are even more examples of McCain pushing for further government deregulation:

In 2007, he [McCain] told a group of bloggers on a conference call that he regretted his vote on the Sarbanes-Oxley bill, which has been castigated by many executives as too heavy-handed.

In the 1990s, he backed an unsuccessful effort to create a moratorium on all new government regulation. And in 1996, he was one of only five senators to oppose a comprehensive telecommunications act, saying it did not go far enough in deregulating the industry.

As chairman of the Senate Commerce Committee for more than a decade, McCain did not have direct oversight of the financial sector. But he sat at the center of arguments between telephone, cable and satellite companies, almost always pressing for more competition.

"I'm always for less regulation," he told the Wall Street Journal in March. He added: "I'd like to see a lot of the unnecessary government regulations eliminated."

In a sense, it is not about what John McCain says regarding the issue of the financial crisis and the subprime mortgage collapse, but also McCain's past record of government regulation of industries, and how a President McCain would deal with these current crisis. Looking at Senator McCain's record, it appears that McCain supports even more government deregulation in business and industry. In a financial services industry that is melting down due to the subprime mortgage mess, do we want a President McCain reducing even more government regulation and oversight into that industry?

Update: Here is Rachel Maddow and David Sirota discussing John McCain's long history of regulation of business, or deregulation of business. From YouTube:

Alaska Attorney General says state employees will not honor subpoenas

This is from Talking Points Memo:

Alaska's investigation into whether Gov. Sarah Palin abused her power, a potentially damaging distraction for John McCain's presidential campaign, ran into intensified resistance Tuesday when the attorney general said state employees would refuse to honor subpoenas in the case.

In a letter to state Sen. Hollis French, the Democrat overseeing the investigation, Republican Attorney General Talis Colberg asked that the subpoenas be withdrawn. He also said the employees would refuse to appear unless either the full state Senate or the entire Legislature votes to compel their testimony.

Colberg, who was appointed by Palin, said the employees are caught between their respect for the Legislature and their loyalty to the governor, who initially agreed to cooperate with the inquiry but has increasingly opposed it since McCain chose her as his running mate.

"This is an untenable position for our clients because the governor has so strongly stated that the subpoenas issued by your committee are of questionable validity," Colberg wrote.

Last week, French's Senate Judiciary Committee subpoenaed 13 people. They include 10 employees of Palin's administration and three who are not: her husband, Todd Palin; John Bitney, Palin's former legislative liaison who now is chief of staff for Republican House Speaker John Harris; and Murlene Wilkes, a state contractor.

French did not immediately return a telephone call Tuesday for comment.

Earlier in the day, Harris, who two months ago supported the "Troopergate" investigation, openly questioned its impartiality and raised the possibility of delaying the findings.

Like Colberg's letter, the surprise maneuver by Harris reflected deepening resolve by Republicans to spare Palin embarrassment or worse in the final weeks of the presidential campaign.

The surprise maneuver reflected deepening resolve by Republicans to spare Palin embarrassment or worse in the final weeks of the presidential campaign. That is the reason why these state employees will not honor the subpoenas. It is not about these employees conflict between the legislature and their loyalty to Palin. It is about running the clock down on this presidential election. Had Palin remained Alaska's governor, do you really think there would be this fight between the bipartisan commission and Gov. Palin, when Palin herself claimed that she would cooperate with the commission? Of course, this was before Palin was chosen to be McCain's vice presidential running mate. If there is any political "tainting," it is the McCain campaign that is tainting this investigation, with the hopes of squashing it before the election. And the longer the McCain campaign continues throwing up these roadblocks in the hope of squashing this investigation, the greater it makes Sarah Palin to be another corrupt politician that is trying to hide something.