Unfortunately, it was time consuming, and blogging is addictive, so I had to avoid the blog. I'm not totally back, either. But here are some interesting political stories.
Want to know what happened when the Medicare bill passed the Senate the other day? Kevin Drum summarizes Krugman. There may be some hope for the Democratic Congressional leadership yet, the FISA cave-in and abandonment of the Rule of Law notwithstanding.
While you look at Kevin Drum, also look at the way Dick Cheney has buried the EPA report on Global Warming. His intent is to kick the can down the road and make the Democratic President release the bad news. It won't come out of the Bush administration because Cheney doesn't want the public to get the best current scientific consensus regarding how bad things really are. It's simply not politically favorable to the republicans and their oil company patrons.
The big news from the McCain camp is that McCain's co-chair and economics advisor told the Washington Post Editorial Board (Gramm was speaking for McCain, mind you) that regarding the concerns of the public about the current Recession Marie Antonnette had it right. "Let them eat cake."
Well, actually Gramm said "You've heard of mental depression; this is a mental recession. .... We have sort of become a nation of whiners." Same thing, really. Just a different translation from the (conservative and elitist) French Monarchists.
People in the McCain camp with less of a tin ear quickly got the candidate to disavow Gramm's statement. McCain stated that when Phil Gramm was speaking for McCain to the Wall Street Journal Editorial Board for McCain, he wasn't REALLY speaking for McCain.
Obama quickly added his view of the issue:
This follows the similar goof by McCain when he stated that America's most successful social program, Social Security, "...is a disgrace."
The only disgrace is that Wall Street bankers can't get their hands on the commissions they want from those large sums of money that are passing through the Social Security system. And somehow, the Social Security system works and works very well as it is structured, without the involvement of (expensive) Wall Street Bankers. Those "lost" commissions actually go to the retirees instead of making the Wall Street Bankers richer.
But back to the economy - the collapse of the mortgage market has gotten worse. Atrios reported yesterday that Fannie Mae and Freddie Mac, the two super large purchasers of mortgages, may shortly become insolvent. They either own or have guaranteed $5 trillion in mortgage debt. That is the poster child for "too big to fail." The Federal Reserve Chief, Ben Bernanke is considering taking them over - which means that the American taxpayer will cover their losses. If so, it will make the Savings and Loan Crisis look very small in comparison.
The Republican view is that such really large financial organizations should be bailed out if they become insolvent, but that the homeowners who are being foreclosed should not get any similar bail out. Yet bailing out the homeowners would prevent or alleviate the problems effecting the large banks.
according to National Public Radio this morning shares of Fannie Mae and Freddie Mac have dropped by half, indicating what the owners and buyers of those shares consider to be the most likely outcome of their problems will be. Phil Gramm and John McCain are wrong. The economic problems are not just "...a mental recession." They are instead the direct result of three decades of deregulation of the banking and financial sector forced through by the believers in the so-called "Free Market." An unregulated financial market always leads to a series of booms and busts, each larger than the one before. This was learned clearly by Franklin Roosevelt and was the reason for the Glass-Steagall Act which Phil Gramm ram-rodded the repeal of in the late 90's.
McCain has at least two real problems in his campaign for President. First is his ideological blindness resulting from his belief in so-called Free Markets. Second, as demonstrated by the McCain campaign messages on Social Security and on the economy is the lack of coordinated management in his campaign headquarters. The ideological blindness is not something that someone running for President as a Republican conservative can do anything about. The thing to watch is the campaign management as demonstrated by the lack of message discipline.
The two messages on Social Security and on the economy clearly demonstrate just how poorly managed the McCain campaign really is. I wrote about this problem earlier.
The McCain campaign knows it, which was what the earlier announcement that Steve Schmidt will take over the day-to-day operations of John McCain's presidential campaign from current campaign manager Rick Davis. Steve Schmidt is reportedly a message management expert. His skills will be sorely tested by the McCain campaign because of the very nature of his candidate and McCain's relationship with the Press.
The poor management of the campaign is a clear reflection of the man at the top, John McCain himself. It was similar poor campaign management that almost drove an essentially broke McCain out of the Republican primary in the Summer of 2007, and the poor management continues. McCain simply is not an effective top manager.
McCain has never personally managed any organization larger than his own Senate office. His largest naval management effort was a year running a squadron on an aircraft carrier, where overall management was handled by the Captain of the carrier. McCain was not in overall command there. Nor has McCain ever held strategic command anywhere before this run for the Presidency. If his efforts at managing his campaign are any indicator, both Obama and Hillary are much better managers than McCain is.
Still, I doubt that the McCain campaign will continue to make two or three gaffs a week as it is currently doing. They will learn as they go along - if they can overcome McCain's ego.
There's a lot more worth discussing, but I still have computer classes that need my focus. This just what I see that really needs to be written about.
Addendum July 12, 2008 at 9:31 AM CDT
The New York Times presents an interesting article on what the reported concern about Fanny Mae and Freddie Mac means to the general public at the moment. It may be serious, and it may just be more happy talk by the bankers to try to calm the publics fears so that they won't stop buying homes right now. It won't be clear which it is until next week at the earliest.
Yesterday's Washington Post story may be more realistic.
We're nearing that delicate point in the cycle when even the usual cheerleaders have hung up their pompoms, consumer and business confidence has disappeared and investors are driven mostly by fear rather than greed.Then we get today's offering from the Wall Street Journal about what the collapse of IndyMac Bankcorp means.
What started out as a credit crisis and then morphed into a broader financial crisis has finally worked its way into the real economy. That economic downturn -- a recession, inevitably -- is beginning to wash back on the already weakened financial sector, creating the kind of self-reinforcing vicious cycle that is difficult to control.
This is the way a market economy corrects for its excesses -- in this case, an excess of cheap debt that had the effect of inflating the demand for goods and services and the value of stocks, bonds, real estate and commodities. Now that that cheap credit has disappeared, the value of most of those assets has fallen while some of that demand for goods and services has begun to disappear.
As part of that "de-leveraging" process, households and some businesses are being forced to reduce their indebtedness, either by paying it down or admitting that they can't. But it is in the financial sector, where debt was piled on debt in ever-more complex arrangements, that things have begun to get real dicey. Prices for many credit instruments have collapsed, forcing banks and investment houses to take billions of dollars of real or paper losses. Meanwhile, creating new credit has been dramatically curtailed.
IndyMac Bank, a prolific mortgage specialist that helped fuel the housing boom, was seized Friday by federal regulators, in the third-largest bank failure in U.S. history.Many want to blame the collapse of IndyMac on a letter written by Sen. Chuck Schumer pointing out the weaknesses of the bank. Sen. Schumer responds that the bank was in trouble because of its shoddy loan practices, not because he wrote a letter. Sen. Schumer is right. The bankers just want to blame someone outside of banking for the really rotten loans the bankers themselves have been making for the last seven or more years.
IndyMac is the biggest mortgage lender to go under since a fall in housing prices and surge in defaults began rippling through the economy last year -- and it likely won't be the last. Banking regulators are bracing for a slew of failures over the next year as analysts say housing prices have yet to bottom out.
The collapse is expected to cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion, potentially wiping out more than 10% of the FDIC's $53 billion deposit-insurance fund.
The Pasadena, Calif., thrift was one of the largest savings and loans in the country, with about $32 billion in assets. It now joins an infamous list of collapsed banks, topped by Continental Illinois National Bank & Trust Co., which failed in 1984 with $40 billion of assets. The second-largest failure was American Savings & Loan Association of Stockton, Calif., in 1988.
IndyMac had been troubled for months, and investors were concerned about its possible downfall well before Sen. Schumer's comments. It specialized in Alt-A loans, a type of mortgage that can often be offered to borrowers who don't fully document their incomes or assets. The company sold most of the loans it originated, but continued to hold some on its books. As defaults piled up, IndyMac's finances deteriorated.It's not like IndyMac wasn't part of the CountryWide Mortgage Company which made more bad loans than any other mortgage company in the U.S.
The bank will be run by the FDIC and reopen Monday. The FDIC typically insures up to $100,000 per depositor. IndyMac had roughly $19 billion of deposits. Nearly $1 billion of those deposits were uninsured, affecting about 10,000 people, the FDIC said.
Much of the blame lies on the Libertarian Republican Alan Greenspan for refusing to regulate the banks during his long tenure as Federal Reserve Chief.
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