The Republic of T.

Last week was a bad one for the McCain campaign, no matter how you slice it. First, he pulls the stunt of trying to “suspend” the campaign, only to get called out by Obama when the chronology of their exchange reveals an impulsive attempt by McCain to back Obama into “suspending the campaign” and following his lead. Instead, a reporter’s question gives Obama the chance to say that whoever wins the election and ends up in the oval office “will have to be able to do more than one thing at a time.”

Then he cancels on Letterman, only to have Dave catch him in a lie, and show the NBC video feed which revealed that McCain was sitting in a make-up chair, about to be interviewed by Katie Couric. McCain didn’t actually leave for D.C. until the next day. And the big bailout summit he made a big deal of coming back to Washington for (which Obama managed to attend too, without suspending his campaign), but didn’t get his hoped-for photo-op.

I think the way I lot of people felt about the McCain campaign could be summed up with one look.

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My previous post had me asking "How did we get here?" (Actually, I cleaned up my language for this post.) How did we end up on what could be an economic "road to perdition."

per·di·tion – noun
1. a state of final spiritual ruin; loss of the soul; damnation.
2. the future state of the wicked.
3. hell (def. 1).
4. utter destruction or ruin.
5. Obsolete. loss.

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This is the weakest shit I’ve heard in a long time.

Republican John McCain said Wednesday he is directing his staff to work with Democrat Barack Obama’s campaign and the presidential debate commission to delay Friday’s debate because of the economic crisis.

In a statement, McCain said he will stop campaigning after addressing former President Clinton’s Global Initiative session on Thursday and return to Washington to focus on the nation’s financial problems.

The Republican presidential hopeful called Obama before he made the statement and told him he was going to suspend his campaign, according to a McCain senior adviser.

Message: What is John McCain afraid of?

Message: John McCain has no message on the economy.

Message: A president can’t postpone a crisis while he gets his act together.

Message: There’s no time-outs in the White House

Message: John McCain isn’t ready to talk about the economy.

Message: John McCain doesn’t want to talk to you about the bailout.

If I were Obama, I’d stand in front of a camera and say something like this.

John McCain can’t wait to get back to Washington. The people he wants to talk to about the economy and the bailout are in Washington. The people he wants to hear from about the economy and the bailout are in Washington. The people John McCain thinks are dealing with the economy and will deal with the bailout are in Washington.

I guess John McCain has forgotten his own words. It’s easy to be in Washington and frankly be somewhat divorced from the day-to-day challenges people have. Like I said before, if all you do is walk the halls of power, all you’ll hear is the wants of the powerful.

John McCain can go back to Washington and talk with the people he thinks are dealing with the economy and will deal with the bailout. But you know and I know, the people who are really dealing with the economy, and the people who who are really going to pay for the bailout are out here in the rest of America, going to work, paying their bills, taking care of their families, and it’s getting harder for them to do it.

Let John McCain go back to Washington. Until I get a call from the Senate that it’s time for a vote, I’m staying out here to talk to you and listen to you, because the real economy isn’t in Washington, or on Wall Street. It’s right here. 

This is a post about two headlines and one scary story.

Headline one:

Bailout is financial equivalent of the Patriot Act

The passage is stunning:

“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,” the original draft of the proposed bill says.

And with those words, the Treasury secretary - whoever that may be in a few months - would be vested with perhaps the most incredible powers ever bestowed on one person over the economic and financial life of the United States. It is the financial equivalent of the Patriot Act, after 9/11.

Treasury Secretary Henry Paulson Jr.’s $700 billion proposal to bail out Wall Street is both the biggest rescue and the most amazing power grab in the history of the American economy.

Headline two:

McCain Campaign Can’t…Won’t…Rule Out Gramm As Treasury Secretary

For those of you who have developed a fondness for Tucker Bounds-themed bondage and domination videos, here’s another YouTube where David Shuster chortles his way through a segment in which Bounds cannot or will not bring himself to assure the American people that Phil Gramm - who recently called America a “nation of whiners” but who led the effort for the repeal of the Glass-Steagall Act that paved the way for the economic collapses of today - will not, under any circumstances, become Secretary of the Treasury in the McCain administration. If Bounds keeps at these sorts of “explanations,” the world’s supply of false equivalencies may run out by the first week of October.

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I admit it, the past week has left me speechless. As I sat and read the news about how the last of the investment banks shuffled off into extinction (kinda; they’re just becoming regular old banks now), it did feel like I was sitting in front of my television again watching the Berlin Wall come down.

In this sense, the fall of Wall Street is for market fundamentalism what the fall of the Berlin Wall was for communism — it tells the world that this way of economic organization turns out not to be sustainable. In the end, everyone says, that model doesn’t work. This moment is a marker that the claims of financial market liberalization were bogus.

Only this time there doesn’t seem to be as much celebrate.

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Sometimes, they were abandoned storefronts on the side of the road, in towns that didn’t seem busy enough to support much in the way of commerce.

Sometimes they were kudzu-covered the the point of impenetrability, and sometimes beyond the point of visibility.

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It is one of the great curiosities of conservatism that its adherents enthusiastically destroy regulations which — besides a conscience — act as a bulwark against greed and corruption, thereby making greed and corruption inevitable. Because when (a) there’s no wrong way to make a buck, and (b) no accountability or consequences for malfeasance, there’s no disincentive either. (Other than being able to sleep at night, which isn’t a problem if you don’t have a conscience in the first place.) And when the inevitable happens, the resulting disaster spreads (because it is never really contained), they bemoan the very same rampant greed and corruption their deregulation made inevitable.

Naomi Klein found hints of it, in the musings of Alan Greenspan.

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Guess who finally took his finger out of his ass and stuck it in the breeze.

Rarely have I seen or heard a candidate do a 180° so quickly, and then act as though the skid-marks and the smell of burning rubber aren’t obvious to just about everyone. But then came candidate John McCain (circa 2008).

On Monday morning, as Wall Street was absorbing one of the biggest shocks to the financial system in generations, Senator John McCain said he believed the fundamentals of the U.S. economy were “strong.”

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

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

As economic conditions have worsened over the course of this year and voter anxiety has increased, McCain has had to work to counter the impression - fostered by his own admissions as recently as last year that the economy is not his strongest suit - that he lacks the experience and understanding to address the nation’s economic woes.

We could take comfort in the idea that a president doesn’t have to know much about the economy. (Or foreign policy, for that matter, but that’s another discussion.) Or at least he doesn’t have to be an expert in the subject, so long as he surrounds himself with knowledgeable experts, and heeds their advice. Much depends, then, on the experts the president leans upon, their agendas, and their track records.

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*Sigh*

It’s almost too easy, but it’s hard to pass up the hypocrisy in John McCain’s latest statement.

Continuing with his attempt to convince American voters that Democratic presidential hopeful Barack Obama is little more than a celebrity, Republican opponent John McCain suggested today that flying off to attend a benefit concert headlined by Barbra Streisand is at odds with the man of the people style campaign Obama has been running.

According to Jonathan Martin’s Politico blog, McCain chided Obama during an appearance before a blue collar crowd in Youngstown, Ohio, using the opportunity to drive a wedge between the Illinois senator and the working class.

“He talks about siding with the people just before he flew off for a fundraiser in Hollywood with Barbra Streisand and his celebrity friends,” McCain said of his political rival. “Let me tell you, my friends, there’s no place I’d rather be than right here with the working men and women of Ohio.”

Said the presidential candidate married to a beer heiress, before he hopped on her private jet — because it’s really the only way to get around in Arizona — and flew of to one of their seven homes, so Cindy could change into another $300,000 dress, and John could change into a fresh pair of $520 loafers.

Right. Real “man of the people,” that one.

Why is this man smiling? If you had the same sweet deal he’s got, you’d probably smile too.

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It was a jaw-droppingly, mystifyingly obtuse, callous moment in an administration that’s given us enough of them to fill what would have to be the world’s most depressing bloopers reel. It also brilliantly captured a president and an administration who don’t feel American’s pain, but smirk at it instead.

I didn’t think he could top his farewell shout-out to the G8 — “Goodbye from the world’s biggest polluter” — but he did it.

A while back, I attempted to create a kind of Bush blooper reel.

Now I’ve got something to add to it. You can’t blame the president for wanting the cameras turned off for this.

My first thought was, “Well, who supplied the open bar?” But Jeff Danziger said it best with a political cartoon depicting a passed-out drunk to represent Wall Street, and Bush, dressed as a bartender, leaning against the bar and — with that trademark smirk — claiming ignorance about how the drunk got, well, drunk.

I can’t help wondering what late, great, former-Bush-classmate Molly Ivins would have made of Bush’s most recent stunner. In a 2003 Mother Jones article titled “The Uncompassionate Conservative,” wrote this about her fellow Texan.

In order to understand why George W. Bush doesn’t get it, you have to take several strands of common Texas attitude, then add an impressive degree of class-based obliviousness. What you end up with is a guy who sees himself as a perfectly nice fellow — and who is genuinely disconnected from the impact of his decisions on people.

I might differ with Ivins’ “perfectly nice fellow” assessment, given all that’s passed since she wrote it. Later on in the piece, she includes a description of a telling moment between Bush and Rev. Jim Wallis — progressive evangelical author of God’s Politics, and editor-in-chief/ CEO of Sojourners.

The Reverend Jim Wallis, leader of Call to Renewal, a network of churches that fight poverty, told the New York Times that shortly after his election, Bush had said to him, “I don’t understand how poor people think,” and had described himself as a “white Republican guy who doesn’t get it, but I’d like to.” What’s annoying about Bush is when this obtuseness, the blinkeredness of his life, weighs so heavily on others, as it has increasingly as he has acquired more power.

Four years hence, it’s got to be clear enough by now that Bush’s obtuseness — his ignorance of simple every-day-life matters affected by his policies, like the price of gas — is willful. If he “doesn’t get it,” when it come to the economic pain more and more American’s are dealing with, it’s because he doesn’t care to.

And that pain is more and more real each day. Just the headlines from the past week would make that clear to anyone who picked up a newspaper. (Something I suspect the President is still disinclined to do.)Foreclosures are up 120%. Some 220,000 homes were lost to repossession in the last quarter, and another 739,714 entered foreclosure in the first quarter. That’s one in every 171 American homes involved in what Treasury Secretary Henry Paulson euphemistically calls the “housing correction”, which he says must go on, even in the midst of a handing some very wealthy people a blank welfare check that I’ll get to in a bit.

Meanwhile, jobless claims pushed past 400,000 for the second time this year. That’s probably related in no small way to the spike in business bankruptcies, which is hitting small business particularly hard as they, struggle with the same things that consumers are struggling with. Like fuel costs driving up electricity bills, and causing an increase in cut-off notices as consumers have trouble keeping up with their bills. In fact, as the price of just about everything is going up, consumers are behind on or have walked away from $800 million in household debt; including mortgages, credit cards, and car loans. (That last one means that when some of them lose their homes they won’t even have cars to live in, because repo is about the only business that’s booming now.) And they can’t borrow against the equity in their homes in order to get caught up, because home values are still falling so hard that people count themselves lucky if they don’t owe more than their house is worth.

Meanwhile, the Fed has not only bailed out Bear Stearns by putting the same taxpayers mentioned above one on the line for $30 billion of Bear’s debts (y’know, the company that had $30 in debt for every $1 it had in assets?), it’s gone one better. The housing bill that passed this weekend included at bailout for Fannie Mae and Freddie Mac that could cost taxpayers anywhere from $25 billion to $100 billion. Despite business decisions that ran both companies into the ground, the housing bill passed this weekend with none of the conditions that both critics and common sense recommended. It amounts to that blank corporate welfare check I mentioned earlier.

The House dealt Fannie Mae (FNM) and Freddie Mac (FRE) a “Get Out of Jail Free” card on July 23, passing a bill that authorizes the Treasury Dept. to extend the mortgage-finance giants a lifeline without any of the conditions that the companies’ critics had demanded. The bill now heads to the Senate, where passage is expected within days. President Bush earlier dropped his threat to veto the legislation, so it should be signed into law soon.

…The bill would let the Federal Housing Administration back up to $300 billion in new loans so homeowners who cannot afford their house payments could try to escape foreclosure by refinancing into more affordable mortgages. Lenders would have to agree to take a substantial loss on the existing loans, and in return, they would walk away with at least some payoff and avoid the often-costly foreclosure process.

The plan also includes about $15 billion in housing tax breaks, including a credit of up to $7,500 for first-time buyers, and increases the statutory limit on the national debt by $800 billion, to $10.6 trillion.

Granted, the president finally dropped his threat to veto the bill, but his sticking point was a $4 billion dollar aid package for communities hardest hit by the wave of foreclosures to buy up foreclosed properties that are now part of an epidemic of blight facing urban neighborhoods. (Read, minority communities.)

House Democrats say a new $3.9 billion federal program to help state and local governments buy up foreclosed properties would be part of the solution. The Bush administration has opposed such block grants on the grounds that “the principal beneficiaries of this type of plan would be private lenders – who are now the owners of the vacant or foreclosed properties – instead of struggling homeowners who are working hard to stay in their homes.”

Still, House Speaker Nancy Pelosi said last week she doubts Mr. Bush will veto the housing-rescue package, which contains a separate provision he wants to strengthen the financial positions of faltering mortgage companies Fannie Mae and Freddie Mac. The disputed funds enable communities to buy up properties once on the revenue rolls that are now “taking the value of their neighbors’ homes,” she said.

Never mind that some of those “homeowners who are working hard to stay in their homes” would also like to protect what remains of the value of their homes and the quality of life in their communities from the consequences of blight caused by boarded up properties.

From Atlanta’s urban core to leafy neighborhoods filled with chirping crickets in Charlotte, N.C., some 2.2 million homes are expected to go through foreclosure – and stand empty – by the time the mortgage meltdown ends, according to Global Insight, an economic research firm. As the housing dominoes fall far from Wall Street, growing urban “ghost towns” of vacant houses are resulting in a costly crush of weeds, trash, and dereliction on a scale unseen in American cities since the Great Depression, economists say.

As a $4 billion package to help municipalities deal with foreclosure-related blight hangs fire in the US Senate, US mayors met last weekend in Miami to vent about the scourge of abandoned homes. Cash-strapped cities are now scrambling – often using on-the-fly ingenuity – to rescue neighborhoods suddenly vulnerable to crime and stunned by millions of dollars in lost equity wrought by loose credit, opportunistic speculators, and predatory lending.

…Some 44.5 million homes in the US now stand next to an empty house, resulting in a drop of at least $5,000 in property value per house. By that calculation, a total loss of home value of $220 billion across the US can be attributed to the vacancy problem.

“This is a man-made disaster that’s had more dramatic impacts on real estate markets than natural disasters [have],” says Bruce Katz, a housing analyst at the Brookings Institution, a think tank in Washington. “In a way, we have a lot of mini-Katrinas across the country.”

The cost of helping those communities turns out to be an unconditional bailout for the institutions that helped create the crisis, financed by the very people struggling to stay afloat in its wake, and several times larger than the amount proposed to help those communities.

The unconditional, accountability-free bailout is, according Treasury Secretary Henry Paulson, necessary to protect Fannie and Freddie against attacks from short selling speculators. It’s like, he says, a bazooka that scares off would-be attackers even if it’s never used. This from a guy who just a few weeks ago inveighed against helping homeowners in foreclosure because:

Faced with record-high foreclosure rates, the Bush administration has been scrambling to keep people from losing their homes, but many are beyond help, Treasury Secretary Henry Paulson said Tuesday.

Lax lending standards that accompanied the once high-flying housing market allowed people to buy homes they could not afford, Paulson said.

“Many of today’s unusually high number of foreclosures are not preventable,” he said in prepared remarks to a mortgage-lending forum meeting in Arlington, Va. “There is little public policymakers can, or should, do to compensate for untenable financial decisions.”

However, when Lawrence Summers puts the Fannie/Freddie bailout in the context of the Bear Stearns bailout, it seems clear that’s exactly what policymakers are doing: compensating for untenable financial decisions. It’s just that these untenable financial decisions were made by people much higher up on the economic food chain.

This, to put it mildly, is a highly problematic posture for policy. While I strongly supported the Federal Reserve’s policy response to the crisis at Bear Stearns because it was necessary to avoid systemic risk, it is easy to sympathize with those who fear that bailouts inhibit market discipline. Consider how much more problematic the Bear Stearns response would have been had policy-makers signaled their commitment to back the company’s liabilities without limit; left management in place with no change in the business model; and allowed dividends to be paid and shareholders to keep going with hope for a better tomorrow. Yet all of these elements are present in the cases of Fannie and Freddie.

To see the temptation and danger inherent in a situation of this kind, one need only look back to the mismanagement of the savings and loans crisis during the 1980s. Policy-makers protected depositors, allowed institutions to operate even when their fundraising depended on government support, and suspended regular standards in order to attract private capital. With gains privatized and losses socialized, taxpayers ultimately ended up with a $300bn-plus bill measured in today’s dollars.

That’s right. The management stays in place, despite financial decisions that ran the companies aground — helped along by the HUD requiring Fannie and Freddie to purchase subprime mortgage loans and allowing them to count billions invested in subprime loans as a “public good” that would foster affordable housing, while ignoring regulators’ warnings that subprime loans would be detrimental to those receiving them. And, as I mentioned before, the CEOs will probably keep their salaries. They will probably remain among the best paid executives in D.C.. Come next year, they will probably still have ten of the top 100 best paid executives in the country.

And why shouldn’t they? It’s par for the course. Many of us may have ended up about $1.7 trillion poorer in the Bush economy.

Americans saw their net worth decline by $1.7 trillion in the first quarter - the biggest drop since 2002 - as declines in home values and the stock market ravaged their holdings.

Meanwhile, the amount of equity people have in their homes fell to 46.2%, the lowest level on record.

The net worth of U.S. households fell 3% to $56 trillion at the end of March, according to the Federal Reserve’s flow of funds report, which was released Thursday.

The value of real estate assets owned by households and non-profits declined by $305 billion, while financial assets fell by $1.3 trillion, led mainly by a $556 billion drop in stocks and a $400 billion decline in mutual funds.

But the top 1 percent got richer.

In a new sign of increasing inequality in the U.S., the richest 1% of Americans in 2006 garnered the highest share of the nation’s adjusted gross income for two decades, and possibly the highest since 1929, according to Internal Revenue Service data.

Meanwhile, the average tax rate of the wealthiest 1% fell to its lowest level in at least 18 years. The group’s share of the tax burden has risen, though not as quickly as its share of income.

The figures are from the IRS’s income-statistics division and were posted on the agency’s Web site last week. The 2006 data are the most recent available.

The figures about the relative income and tax rates of the wealthiest Americans come as the presumptive presidential candidates are in a debate about taxes. Congress and the next president will have to decide whether to extend several Bush-era tax cuts, including the 2003 reduction in tax rates on capital gains and dividends. Experts said those tax cuts in particular are playing a major role in falling tax rates for the very wealthy.

They almost certainly played a major role in creating the record deficit we’ll be facing when Bush finally ends his shift behind the bar. No wonder 85% of us are unhappy with the economy, and 75% of us blame Bush’s policies for its sorry state.

In some places, after all, the bartender who kept pouring drinks for the obvious drunk is liable when that drunk staggers out of the bar, wreaks havoc, and wrecks lives. But in the barroom that is the Bush economy, Wall Street does indeed get drunk, but the rest of us get the hangover and get stuck with the tab.

By the time a good idea makes it to Congress — and actually gets some serious consideration — it is no longer an idea whose time has come, but one whose time is way overdue. Such is the case as Congress takes up the issue of CEO pay, while staring in the face yet another expensive, and all but inevitable, taxpayer-financed corporate bailout.

Democrats and Republicans queasy about a federal rescue of mortgage giants Fannie Mae and Freddie Mac are coalescing around the idea of letting the government slap limits on the multimillion-dollar pay packages of their executives.

Seems reasonable, at a time when the government — with funds provided by you and me — is stepping in with a bailout that could cost upwards of $25 billion, and even $100 billion. It seems even more reasonable when considered alongside the reality that Freddie Mac’s CEO made around $19.8 million in compensation even after the company’s stock lost half its value. Fannie Mae’s CEO didn’t do so bad either, with a $12.2 million paycheck and a $2.2 million bonus.

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In a post-9/11 America that no longer “does” irony — or nuance, for that matter — it’s not surprising that one of the significant ironies of the George W. Bush era went largely unnoticed. Six years after declaring the dawn of an “ownership society,” intended to create more homeowners (who would theoretically support conservative economic policies), and in the same month that president Bush declared National Home Ownership Month we learned that increases in home ownership have been erased — particularly among minorities — as a direct result of conservative economic policy.

Driven largely by the surge in foreclosures and an unsettled housing market, Americans are renting apartments and houses at the highest level since President Bush started a campaign to expand homeownership in 2002.

The percentage of households headed by homeowners, which soared to a record 69.1 percent in 2005, fell to 67.8 percent this year, the sharpest decline in 20 years, according to census data through the end of March. By extension, the percentage of households headed by renters increased to 32.2 percent, from 30.9 percent.

The figures, while seemingly modest, reflect a significant shift in national housing trends, housing analysts say, with the notable gains in homeownership achieved under Mr. Bush all but vanishing over the last two years.

…The confluence of factors has largely derailed what Mr. Bush called “the ownership society,” his campaign to give millions of people — particularly minority and lower-income families — a shot at homeownership by encouraging lenders to finance more home purchases.

“We’re not going to see homeownership rates like that for a generation,” said Mark Zandi, the chief economist at Moody’s Economy.com, a research company.

(We’ll address the full impact of the subprime mortgage debacle on minorities a bit later in this series.)

Plainly put, policies that were supposed to create more stakeholders in the U.S. economy have actually pushed more people to its margins, and many out of it entirely. Whether that was the intention probably depends on who you ask. But it raises some important questions, one of which was recently posed by New York Times columnist Paul Krugman.

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