IF McCAIN PERSONIFIES ANOTHER BUSH TERM, OBAMA CLEARLY SHOWS WHAT A POST-BUSH AMERICA COULD BE LIKE

Yesterday we had McCain's response to the mortgage crisis

While McCain wants to spend billions to bailout reckless Wall Street speculators and criminals, while blaming consumers for the mortgage crisis and telling them to suck air and live in their cars, Obama is offering a more balanced and amelioratory approach. McCain, who has rubber stamped every single effort to tear down the regulatory protections that would have prevented the mortgage crisis and the Bear Stearns rip off, refuses to acknowledge that the government has a role in helping American citizens; but has no problem whatsoever in making sure grumpy shareholders get $10 a share instead of $2 a share (which was already $2 too much). Obama's speech at Cooper Union in NYC today elaborates on his statements yesterday about the symbiotic relationship between Wall Street and Main Street. If McCain sounded like a grouchy and pissed off curmudgeon yesterday, Obama sounds like someone trying to address a serious problem in a serious way and come up with a solution. Amid rumors that NYC Mayor Michael Bloomberg and Nebraska Republican Senator Chuck Hagel are considering endorsing him, Obama laid out a plan for modernizing the regulatory system that makes the financial markets function not just for the predators but for society as a whole. Going back to the beginning of American history to set the tone, he went straight to the central dilemma facing the Founding Fathers, a battle of ideas between Hamilton and Jefferson. "Hamilton had a strong belief in the power of the market. But he balanced that belief with the conviction that human enterprise 'may be beneficially stimulated by prudent aids and encouragements on the part of the government.' Government, he believed, had an important role to play in advancing our common prosperity. So he nationalized the state Revolutionary War debts, weaving together the economies of the states and creating an American system of credit and capital markets. And he encouraged manufacturing and infrastructure, so products could be moved to market."

And today we have Obama's

In the more than two centuries since then, we have struggled to balance the same forces that confronted Hamilton and Jefferson-- self-interest and community; markets and democracy; the concentration of wealth and power, and the necessity of transparency and opportunity for each and every citizen. Throughout this saga, Americans have pursued their dreams within a free market that has been the engine of America's progress. It's a market that has created a prosperity that is the envy of the world, and opportunity for generations of Americans. A market that has provided great rewards to the innovators and risk-takers who have made America a beacon for science, and technology, and discovery.

But the American experiment has worked in large part because we have guided the market's invisible hand with a higher principle. Our free market was never meant to be a free license to take whatever you can get, however you can get it. That is why we have put in place rules of the road to make competition fair, and open, and honest. We have done this not to stifle-- but rather to advance prosperity and liberty. As I said at NASDAQ last September: the core of our economic success is the fundamental truth that each American does better when all Americans do better; that the well being of American business, its capital markets, and the American people are aligned.

I think all of us here today would acknowledge that we've lost that sense of shared prosperity.

This loss has not happened by accident. It's because of decisions made in boardrooms, on trading floors and in Washington. Under Republican and Democratic Administrations, we failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices. We let the special interests put their thumbs on the economic scales. The result has been a distorted market that creates bubbles instead of steady, sustainable growth; a market that favors Wall Street over Main Street, but ends up hurting both.

Nor is this trend new. The concentrations of economic power-- and the failures of our political system to protect the American economy from its worst excesses-- have been a staple of our past, most famously in the 1920s, when with success we ended up plunging the country into the Great Depression. That is when government stepped in to create a series of regulatory structures-- from the FDIC to the Glass-Steagall Act-- to serve as a corrective to protect the American people and American business.

...Unfortunately, instead of establishing a 21st century regulatory framework, we simply dismantled the old one-- aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight. In doing so, we encouraged a winner take all, anything goes environment that helped foster devastating dislocations in our economy.

Deregulation of the telecommunications sector, for example, fostered competition but also contributed to massive over-investment. Partial deregulation of the electricity sector enabled market manipulation. Companies like Enron and WorldCom took advantage of the new regulatory environment to push the envelope, pump up earnings, disguise losses and otherwise engage in accounting fraud to make their profits look better-- a practice that led investors to question the balance sheet of all companies, and severely damaged public trust in capital markets. This was not the invisible hand at work. Instead, it was the hand of industry lobbyists tilting the playing field in Washington, an accounting industry that had developed powerful conflicts of interest, and a financial sector that fueled over-investment.

A decade later, we have deregulated the financial services sector, and we face another crisis. A regulatory structure set up for banks in the 1930s needed to change because the nature of business has changed. But by the time the Glass-Steagall Act was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework.

...The policies of the Bush Administration threw the economy further out of balance. Tax cuts without end for the wealthiest Americans. A trillion dollar war in Iraq that didn't need to be fought, paid for with deficit spending and borrowing from foreign creditors like China. A complete disdain for pay-as-you-go budgeting-- coupled with a generally scornful attitude towards oversight and enforcement-- allowed far too many to put short-term gain ahead of long term consequences. The American economy was bound to suffer a painful correction, and policymakers found themselves with fewer resources to deal with the consequences.

Today, those consequences are clear. I see them in every corner of our great country, as families face foreclosure and rising costs. I seem them in towns across America, where a credit crisis threatens the ability of students to get loans, and states can't finance infrastructure projects. I see them here in Manhattan, where one of our biggest investment banks had to be bailed out, and the Fed opened its discount window to a host of new institutions with unprecedented implications we have yet to appreciate. When all is said and done, losses will be in the many hundreds of billions. What was bad for Main Street was bad for Wall Street. Pain trickled up.

That is why the principle that I spoke about at NASDAQ is even more urgently true today: in our 21st century economy, there is no dividing line between Main Street and Wall Street. The decisions made in New York's high-rises have consequences for Americans across the country. And whether those Americans can make their house payments; whether they keep their jobs; or spend confidently without falling into debt – that has consequences for the entire market. The future cannot be shaped by the best-connected lobbyists with the best record of raising money for campaigns. This thinking is wrong for the financial sector and it's wrong for our country.

I do not believe that government should stand in the way of innovation, or turn back the clock to an older era of regulation. But I do believe that government has a role to play in advancing our common prosperity: by providing stable macroeconomic and financial conditions for sustained growth; by demanding transparency; and by ensuring fair competition in the marketplace.

...Over two million households are at risk of foreclosure and millions more have seen their home values plunge. Many Americans are walking away from their homes, which hurts property values for entire neighborhoods and aggravates the credit crisis. To stabilize the housing market and help bring the foreclosure crisis to an end, I have sponsored Senator Chris Dodd's legislation creating a new FHA Housing Security Program, which will provide meaningful incentives for lenders to buy or refinance existing mortgages. This will allow Americans facing foreclosure to keep their homes at rates they can afford.

Senator McCain argues that government should do nothing to protect borrowers and lenders who've made bad decisions, or taken on excessive risk. On this point, I agree. But the Dodd-Frank package is not a bailout for lenders or investors who gambled recklessly, as they will take losses. It is not a windfall for borrowers, as they will have to share any capital gain. Instead, it offers a responsible and fair way to help bring an end to the foreclosure crisis. It asks both sides to sacrifice, while preventing a long-term collapse that could have enormous ramifications for the most responsible lenders and borrowers, as well as the American people as a whole. That is what Senator McCain ignores.

For homeowners who were victims of fraud, I've also proposed a $10 billion Foreclosure Prevention Fund that would help them sell a home that is beyond their means, or modify their loan to avoid foreclosure or bankruptcy. It's also time to amend our bankruptcy laws, so families aren't forced to stick to the terms of a home loan that was predatory or unfair.

To prevent fraud in the future, I've proposed tough new penalties on fraudulent lenders, and a Home Score system that will allow consumers to find out more about mortgage offers and whether they'll be able to make payments. To help low- and middle-income families, I've proposed a 10 percent mortgage interest tax credit that will allow homeowners who don't itemize their taxes to access incentives for home ownership. And to expand home ownership, we must do more to help communities turn abandoned properties into affordable housing.

He went beyond dealing with the immediate housing crisis to proposing much-needed reforms to the regulatory framework dealing with our financial markets. He noticed the same thing I did yesterday about Treasury Secretary Paulson's speech explaining the $29 billion giveaway to Wall Street. If the government helps, Paulson acknowledged-- albeit grudgingly-- the beneficiaries need to be held accountable. Paulson was quick to wink and nod and assure them that, being a Republican, he didn't have any real accountability in mind. Obama is more serious. "The Federal Reserve should have basic supervisory authority over any institution to which it may make credit available as a lender of last resort. When the Fed steps in, it is providing lenders an insurance policy underwritten by the American taxpayer. In return, taxpayers have every right to expect that these institutions are not taking excessive risks. The nature of regulation should depend on the degree and extent of the Fed's exposure. But at the very least, these new regulations should include liquidity and capital requirements." He went on to lay out 6 principles of reform to update the regulation of the financial markets. This is what a presidential campaign should be about, not what we see unfolding in the gossip-oriented corporate media every day.

McCAIN DOESN'T WANT TO HELP HOMEOWNERS BUT HE JUST LOVES THOSE WALL STREET SPECULATORS

Wall Street insiders were sullen about the Bear Stearns bailout-- taxpayer money delivered into the hands of well off people who had made grotesquely bad (if not dishonest) decisions and who were able to make these decisions because of right-wing ideology that decries government regulation that protects the regular people from the rich and powerful. They were surly because shareholders would only get $2.00 a share and there would be no six-figure incentives for corporate managers to stay and make more catastrophic decisions. So the Bush Regime stepped up to the plate and grandly offered to make that $2/share $10/share, right out of our tax dollars. Something tells me actual conservatives (like Ron Paul would join actual liberals to oppose this incredible scheme.

Tuesday John McBush was in Orange County making a speech to Republican businessmen. He came down hard. "It s not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.” Right on, McCain! Uh... no; he was talking about people who are losing their homes because of unregulated mortgage predators, not about Wall Street brokerages and speculators. He differs from all honest political leaders in that he blames the victims for the crisis.

Hillary commented on McCain's approach in the exact same words, we've been using here at DWT: "Herbert Hoover." To McCain $29 billion to help make criminal Wall Street speculators whole is absolutely sound policy, but Hillary's plan to use $30 billion to keep American citizens in their homes, is... how did he put it? "rewarding people who were irresponsible at the expense of those who weren’t.” Is he worse than Bush? Absolutely:

Overall, the approach Mr. McCain suggested is even more cautious about federal intervention than that of President Bush. The Bush administration is looking to lower down payment requirements, at least temporarily. Mr. McCain said that he opposed reducing the down payment required for mortgages backed by the Federal Housing Administration, a step meant to revitalize slumping housing sales.

Senator Obama, speaking yesterday in Greensboro, North Carolina was aghast at McCain's hands off approach as the economy hurtles towards collapse.

John McCain has said that he doesn't understand the economy as well as he should, and yesterday he proved it in the speech he gave about the housing crisis…

He said that the best way for us to address the fact that millions of Americans are losing their homes is to just sit back and watch it happen.  In his entire speech, he offered not one policy, not one idea, not one bit of relief to the nearly 35,000 North Carolinians who were forced to foreclose on their dream over the last few months-– not one.
  
We've been down this road before. It's the road that George Bush has taken for the last eight years. It's the idea that government has no role at all in solving the challenges facing working families-– that all we can do is hand out tax breaks for the wealthiest few and let the chips fall where they may. And whether the rest of America is struggling with rising tuition or skyrocketing health care costs; plant closings or crumbling schools, the answer is always the same: "You're on your own."

Well we can't afford another four years of Bush economics. If there's one thing this crisis has taught us, it's that we can't have a thriving Wall Street and a crumbling Main street, because we're all connected. Our economy has to be the rising tide that lifts all boats, and that's why I'll take immediate action as President to help struggling homeowners. We'll help families and lenders rework existing subprime loans into affordable long-term fixed loans and create a foreclosure prevention fund to help keep Americans in their homes. We'll provide a mortgage tax credit to give homeowners relief, we're going to crack down on mortgage fraud and predatory lenders so that this doesn't happen again. John McCain may call helping struggling homeowners pandering, but I don't think the families in North Carolina who are losing their homes would see it that way. I think they expect their President to fight for them, and that's what I intend to do when I am President of the United States of America.

THE BEAR STEARNS FIASCO-- AN OUTGROWTH OF GOP POLICIES AND RIGHT WING IDEOLOGY

$1.2 million Bear Stearns Bldg. thrown into the deal for free

A few days ago we looked at the collapse of the Republican Party honeypot, Carlyle Capital Corporation (part of the notorious Carlyle Group). They defaulted on $16.6 billion in loans from many of the world's major banks. None of the GOP bloodsuckers, particularly the Bush family and their circle-- who have raked in unbelievable profits from their participation in Carlyle-- are in any way being held to account for this, of course. Those who write the laws, write them to effect what other people do, not what they do. In today's NY Times Gretchen Morgenson asks some questions about the Wall Street meltdown in general.

WHAT are the consequences of a world in which regulators rescue even the financial institutions whose recklessness and greed helped create the titanic credit mess we are in? Will the consequences be an even weaker currency, rampant inflation, a continuation of the slow bleed that we have witnessed at banks and brokerage firms for the past year?

Or all of the above?

Stick around, because we’ll soon find out. And it’s not going to be pretty.

Agreeing to guarantee a 28-day credit line to Bear Stearns, by way of JPMorgan Chase, the Federal Reserve Bank of New York conceded last Friday that no sizable firm with a book of mortgage securities or loans out to mortgage issuers could be allowed to fail right now. It was the most explicit sign yet of the Fed’s “Rescues ‘R’ Us” doctrine that already helped to force the marriage of Bank of America and Countrywide.

But why save Bear Stearns? The beneficiary of this bailout, remember, has often operated in the gray areas of Wall Street and with an aggressive, brass-knuckles approach. Until regulators came along in 1996, Bear Stearns was happy to provide its balance sheet and imprimatur to bucket-shop brokerages like Stratton Oakmont and A. R. Baron, clearing dubious stock trades.

On Monday one of the Republican authors of the economic collapse we are starting to experience, SEC Chair and former right-wing Congressman Christopher Cox, blatantly lied to the public by claiming the big Wall Street firms "were resting on comfortable capital cushions." They aren't-- and no one inside the Robber Baron-oriented Bush Regime knew that better than Cox. Today Bear Stearns would have had to file for Chapter 11 bankruptcy protection or sell itself to the highest (low) bidder. JP Morgan bought it at $2 a share, shares that were trading for $50 a share a few days ago-- and $170 a share one year ago. Put another way, "the price represents a startling 93 percent discount to Bear Stearns’ closing stock price on Friday."

Bankers and policy makers raced to complete the deal before financial markets in Asia opened on Monday, as fears grew that the financial panic could spread if Bear Stearns failed to find a buyer.

...The companies said that the Federal Reserve would provide special financing in connection with the transaction and that the Fed had agreed to fund up to $30 billion of Bear Stearns’s “less-liquid assets.”

This sale includes the Bear Stearns Manhattan headquarters, which alone is worth over a billion dollars. Still seems like a risky purchase for JP Morgan, although I suppose they had no choice because the size of the crash on Monday had they not done it would have been incalculable. The laissez fairies who are all hands off when ordinary Americans lose their homes and jobs and savings-- often due to corruption and incompetence at the top of the economic ladder-- but when these big corporations start to totter, due to their own malfeasance, the government steps in with our tax dollars to save the day. And no one has to give up any of those six and seven figure bonuses or severance packages. And to top it off the Fed announced today that they are lowering the interest rate by another quarter percent-- on top of the $200 billion they pumped into the system Tuesday. You notice how wan Bush looked and how he bumbled his way through his speech even more lamely than usual on Friday? Even he understands what's happening. Wait til the big banks report earnings-- losses-- later in the week.

As I hit the sack Sunday night in Los Angeles, all the Monday morning stock market openings in Asia are tumbling drastically, a big vote of no confidence in the Bush Regime's lame efforts to contain the financial meltdown. Tokyo's Nikkei index dropped 4.2% to a three year low and markets in Korea, Hong Kong and Australia are also sinking.


6:00 AM (PT) UPDATE: AS BAD AS I PREDICTED LAST NIGHT

This morning's Wall Street Journal tries to make some sense out of the mess, or, at least, gets the facts on the table. Paul Krugman, in this morning's NY Times is, as usual, more frank and to the point: The B Word. The Bush Regime is lying about not using taxpayers' money to bail out the big financial institutions and a bailout is inevitable. Why?

1- What goes up (housing prices) must come down
2- Risk exists
3- GOP ideology that regulation is bad led to inevitable and catstrophic consequences

The U.S. markets aren't open yet. CNN says they will open 200 points lower. Markets in the rest of the world were dramatically down. And what was up? The Euro and other currencies against teh dollar and the price of gasoline (not to mention inflation and unemployment). Even the Canadian dollar is now trading higher against the U.S. dollar!