Dark Star

Wanted to share with you an arresting letter from a friend:

Just thought I’d send some thoughts from small-business America. My husband’s business is a canary in the coalmine. When tax policies are favorable to business, he hires more guys, buys more goods, etc. When he is taxed more heavily, he fires people, doesn’t buy anything new, etc. Well, duh. So, at the mere thought of a President Obama, he has paid off his debt, canceled new spending, and jotted a list of whom to “let go.”


The first of the guys will get the news tomorrow. And these are not minimum-wage earners. These are “rich” guys, making between $200,000 and $250,000 a year.


My husband will make sure that we’re okay, money-wise, but he won’t give himself a paycheck that will just be sent to Washington. He’ll make sure that he’s not in “rich guy” tax territory. So, he will not spend his money, not show a profit, and scale his workforce down to the bare minimum.


Multiply this scenario across the country and you’ll see the Obama effect: unemployment, recession, etc. No business owner will vote for this man, but many a “middle-class worker” will vote himself out of a job. Sad the Republican can’t articulate this.

I’ll say. But she did, didn’t she?

Rep. Barney Frank was elected by a majority of the people of his district in Massachusetts. Senator Chris Dodd is brought to us by many but not all of the voters of Connecticut. And so on. Most of us never had the chance to vote for or against these solons. So why should we be blamed?

The regulatory changes that led us to this point were the work of lobbyists, bureaucrats and lawmakers including Dodd and Frank and corrupt executives, like Raines and Johnson. We know or can know their names.

The idea of blaming “all of us” is a way to avoid blaming those who did the deeds and reaped their ill-gotten gains.

What about cheap mortgages? Sure, some of us took them when they were offered. But who offered them and why? Yes, it is the Clinton-era changes to the Community Reinvestment Act that forced banks to lend more for “affordable housing.” Law firms, including ones connected to Obama, sued banks that failed to meet their low-income quotas for mortgages. Bankers were not driven by greed, as everyone says, but by fear. Fear of the baying hounds of regulators and lawyers would call them racist and ruin their careers. But who unleashed the hounds on the bankers?

Particular policies and people made this mess. The public’s only role will be to pay the tab, a cruel addition that will equal more than $2,500 per person. Can’t the talking class at least have the decency to stop blaming the one group generous enough to pay for the party they didn’t attend?

Many monumental errors and misjudgments contributed to the acute financial turmoil in which we now find ourselves. Nevertheless, the vast accumulation of toxic mortgage debt that poisoned the global financial system was driven by the aggressive buying of subprime and Alt-A mortgages, and mortgage-backed securities, by Fannie Mae and Freddie Mac. The poor choices of these two government-sponsored enterprises (GSEs) -- and their sponsors in Washington -- are largely to blame for our current mess.

How did we get here? Let's review: In order to curry congressional support after their accounting scandals in 2003 and 2004, Fannie Mae and Freddie Mac committed to increased financing of "affordable housing." They became the largest buyers of subprime and Alt-A mortgages between 2004 and 2007, with total GSE exposure eventually exceeding $1 trillion. In doing so, they stimulated the growth of the subpar mortgage market and substantially magnified the costs of its collapse.

It is important to understand that, as GSEs, Fannie and Freddie were viewed in the capital markets as government-backed buyers (a belief that has now been reduced to fact). Thus they were able to borrow as much as they wanted for the purpose of buying mortgages and mortgage-backed securities. Their buying patterns and interests were followed closely in the markets. If Fannie and Freddie wanted subprime or Alt-A loans, the mortgage markets would produce them. By late 2004, Fannie and Freddie very much wanted subprime and Alt-A loans. Their accounting had just been revealed as fraudulent, and they were under pressure from Congress to demonstrate that they deserved their considerable privileges. Among other problems, economists at the Federal Reserve and Congressional Budget Office had begun to study them in detail, and found that -- despite their subsidized borrowing rates -- they did not significantly reduce mortgage interest rates. In the wake of Freddie's 2003 accounting scandal, Fed Chairman Alan Greenspan became a powerful opponent, and began to call for stricter regulation of the GSEs and limitations on the growth of their highly profitable, but risky, retained portfolios.

If they were not making mortgages cheaper and were creating risks for the taxpayers and the economy, what value were they providing? The answer was their affordable-housing mission. So it was that, beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to grow. Subprime and Alt-A originations in the U.S. rose from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period the quality of subprime loans also declined, going from fixed rate, long-term amortizing loans to loans with low down payments and low (but adjustable) initial rates, indicating that originators were scraping the bottom of the barrel to find product for buyers like the GSEs.

The strategy of presenting themselves to Congress as the champions of affordable housing appears to have worked. Fannie and Freddie retained the support of many in Congress, particularly Democrats, and they were allowed to continue unrestrained. Rep. Barney Frank (D., Mass), for example, now the chair of the House Financial Services Committee, openly described the "arrangement" with the GSEs at a committee hearing on GSE reform in 2003: "Fannie Mae and Freddie Mac have played a very useful role in helping to make housing more affordable . . . a mission that this Congress has given them in return for some of the arrangements which are of some benefit to them to focus on affordable housing." The hint to Fannie and Freddie was obvious: Concentrate on affordable housing and, despite your problems, your congressional support is secure.

In light of the collapse of Fannie and Freddie, both John McCain and Barack Obama now criticize the risk-tolerant regulatory regime that produced the current crisis. But Sen. McCain's criticisms are at least credible, since he has been pointing to systemic risks in the mortgage market and trying to do something about them for years. In contrast, Sen. Obama's conversion as a financial reformer marks a reversal from his actions in previous years, when he did nothing to disturb the status quo. The first head of Mr. Obama's vice-presidential search committee, Jim Johnson, a former chairman of Fannie Mae, was the one who announced Fannie's original affordable-housing program in 1991 -- just as Congress was taking up the first GSE regulatory legislation.

In 2005, the Senate Banking Committee, then under Republican control, adopted a strong reform bill, introduced by Republican Sens. Elizabeth Dole, John Sununu and Chuck Hagel, and supported by then chairman Richard Shelby. The bill prohibited the GSEs from holding portfolios, and gave their regulator prudential authority (such as setting capital requirements) roughly equivalent to a bank regulator. In light of the current financial crisis, this bill was probably the most important piece of financial regulation before Congress in 2005 and 2006. All the Republicans on the Committee supported the bill, and all the Democrats voted against it. Mr. McCain endorsed the legislation in a speech on the Senate floor. Mr. Obama, like all other Democrats, remained silent.

Now the Democrats are blaming the financial crisis on "deregulation." This is a canard. There has indeed been deregulation in our economy -- in long-distance telephone rates, airline fares, securities brokerage and trucking, to name just a few -- and this has produced much innovation and lower consumer prices. But the primary "deregulation" in the financial world in the last 30 years permitted banks to diversify their risks geographically and across different products, which is one of the things that has kept banks relatively stable in this storm.

As a result, U.S. commercial banks have been able to attract more than $100 billion of new capital in the past year to replace most of their subprime-related write-downs. Deregulation of branching restrictions and limitations on bank product offerings also made possible bank acquisition of Bear Stearns and Merrill Lynch, saving billions in likely resolution costs for taxpayers.

If the Democrats had let the 2005 legislation come to a vote, the huge growth in the subprime and Alt-A loan portfolios of Fannie and Freddie could not have occurred, and the scale of the financial meltdown would have been substantially less. The same politicians who today decry the lack of intervention to stop excess risk taking in 2005-2006 were the ones who blocked the only legislative effort that could have stopped it.

The confusion stems from a failure — or refusal — to understand the difference between cutting funding and declining to increase funding to the requested degree. In a cut, you get less money; with a denied raise you get at least as much as you got before. This is not the first time liberals have abused these terms for political purposes.

Last year, the state of Alaska gave the Special Olympics $250,000. This year, the Alaska legislature requested $550,000 for Special Olympics, which would have constituted a 120 percent increase. It is typical, of course, for advocates to submit impossibly high budget requests, even during budget crunches, in the hopes of getting whatever they can. This is understood by anyone who has ever run an organization or prepared a budget that requires legislative or executive approval.

Gov. Palin denied the request, but not completely: She reduced it to a 10-percent raise, approving a gift of $275,000. A 10 percent raise during tough times is very good, as any employee in America would quickly attest. For most employees, a raise of 3 to 4 percent is a good raise.

In other words, not only did Palin not cut funding, she actually raised it — just not as much as some would have liked.

As a further check into the context of the 2008 raise, we went back to the 2005 budget. For that year, the Special Olympics received only $125,000. We also reviewed the Special Olympics 990 form for 2006, which shows that the group received over $1.8 million in revenues that year; thus, the organization gets the vast majority of its money from sources other than the state.

These numbers are straightforward. This information is easily accessible on the state of Alaska and Guidestar websites, and took us about 30 minutes to find. In other words, two professors at a little college in Western Pennsylvania have been left to do the simple research that America’s top news organizations — scrambling all over Alaska to dig up information on Gov.Palin — have ignored or, worse, abused.

No one wants to take ownership of the task of rescuing the economy right now. The Bush-Paulson plan has failed. The administration, House Democrats, and House Republicans (above all) have all proved unable to deliver. But there is someone who might be able to save the economy--and incidentally the Republican party: John McCain.

He should come back to D.C. But this time he needs to take charge--either by laying out the outlines of his own plan, or presiding over meetings at which a real plan that can pass is cobbled together. He might also insist on the immediate passage of a couple of provisions (raising or removing FDIC insurance limits, for example) that could mitigate the damage that could be done over the next few days.

It’s time for McCain to act decisively, and to lead, as he did with the surge. No one else seems up to it.

UPDATE: The following statement from the McCain campaign is fair enough, as far as it goes. But surely its logic is this: if this is really “a national economic crisis,” and others have failed to lead, then McCain should lead—by re-suspending his campaign (fine, let observers mock him when he announces this), and leading his party and the Congress towards a solution. They won’t mock if he can pull this off:

All: Please see the following statement by McCain-Palin senior policy adviser Doug Holtz-Eakin:

“From the minute John McCain suspended his campaign and arrived in Washington to address this crisis, he was attacked by the Democratic leadership: Senators Obama and Reid, Speaker Pelosi and others. Their partisan attacks were an effort to gain political advantage during a national economic crisis. By doing so, they put at risk the homes, livelihoods and savings of millions of American families.

“Barack Obama failed to lead, phoned it in, attacked John McCain, and refused to even say if he supported the final bill.

“Just before the vote, when the outcome was still in doubt, Speaker Pelosi gave a strongly worded partisan speech and poisoned the outcome.

“This bill failed because Barack Obama and the Democrats put politics ahead of country.” --McCain-Palin senior policy adviser Doug Holtz-Eakin

Reps. Boehner, Blunt, and Cantor just held a press conference, during which each of them blamed the loss of at least 12 Republican votes on Pelosi's floor speech, which struck a partisan tone that made teetering Republicans set their teeth and vote against her.

Republicans largely pulled their punches during the floor debate today, avoiding blaming the Democrats who deserve some blame for this crisis. They clearly felt the delicate bipartisan nature of the project was betrayed by Pelosi's fire-breathing, and they called her on it, Cantor holding up her speech in his hands as the "reason this did not pass today."

Democrats have been blaming Republicans for sinking the effort, but 97 Democrats voted against the bill. Cantor placed the blame, not only on Pelosi's inability to listen to Republican members, but her inability to lead her own party, claiming Republicans brought important bills to the floor when they were in the majority only when they were ready to deliver votes.

"We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House," House Minority Leader John Boehner said. Pelosi's words, the Ohio Republican said, "poisoned our conference, caused a number of members that we thought we could get, to go south."

Update: I think the House Republicans handicapped themselves by not making the central thrust of their argument against Pelosi about her inability to lead her own party. The criticism of Pelosi's speech is an easy one to parry for House Dems, who will say, "Really, one little speech is all that was required for you to endanger your country?" Even if the speech did matter, and it was undoubtedly a petty, impolitic move, it's hard to make that argument too loud without looking like they're whining.

Pelosi's inability to lead her own party and, indeed, her inability to even read them— she evidently believed she had the votes to make it happen— is closer to a political winner as an argument for Republicans. She is just an utter hot mess of a leader, and the opinion polls on Congress show it.

House lawmakers voted Monday to reject the historic $700 billion financial rescue plan, a sharp blow to the administration and bipartisan leaders in Congress who warn that the country is on the brink of an economic precipice.

With elections approaching, some lawmakers -- both Democrats and Republicans -- may feel nervous about voting for a plan that risks so much taxpayer money and can't promise success. But the president has lobbied hard to approve the plan, and U.S. officials also have stressed the dire consequences of taking no action.

There were 205 in favor of the legislation and 228 against. Among Democrats, 140 voted in favor and 95 against. Among Republicans, 65 voted in favor and 133 against.

Critics say the plan does not adequately address problems such as job losses and a distressed housing market that underlie current economic weakness. U.S. officials had hoped the plan would ease the credit crunch and restore confidence in the markets, even as markets plunged around the world. Those in favor of the rescue plan may have been trying to treat the most manageable symptom -- a frozen credit market -- if not the actual disease.
A vote in the Senate was expected Wednesday, and the president would have followed with a speedy signature.

You know where that very important $700-billion figure came from?

Here's a quote from that Forbes story:

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

They made it up to be sufficiently ginormous to frighten everyone into rapid action.

And it worked.

Analogies are never perfect, but here's one using horse racing. Don't expect a perfect correspondence to the banking situation, but I think it is close enough for government work.

Joe goes to the track and bets $2 on a horse.

Two guys standing nearby get into a discussion and Fred says to Sam, "I'll bet you $5 that Joe wins his bet."

Next to them are Bill and Bob. Bill says: "I'll bet you $10 that Fred welshes on his bet if he loses."

Next to them is Sally. Sally says: "For $3 I'll guarantee to Bill that if Bob fails to pay off, I'll make good on the bet."

Sally then goes to Mary and borrows the $7 needed in case she has to ever pay off and promises to pay back $8. She doesn't expect to every have to pay since she believes Bob will always make good. So she expects to net $2 no matter what happens to Joe.

A quick calculation indicates that there is now 2+5+10+3+7 = $27 riding on the outcome of the horse race.

Question how much has been "invested" in the horse race?

Answer:

$50,000 by the owner of the horse who is expecting to recoup his investment from the winnings of the horse and other future deals. Everyone else is gambling, not investing.

(Notice that the track owner gets his cut of the original $2 no matter what else happens.)

The issue with the home market is that the only "investor" was the person who bought the home. All those engaged in the meaningless derivatives spun off from this are gambling. You can see how quickly the face value of all these side bets can exceed the underlying investment. Who is holding these side bets - not the homeowner? It is the people at the failing investment banks, hedge funds and similar enterprises. Notice that the bailout is being directed at them not the homeowners.

The real world is, of course, even more complicated. Over the last 30 years people have been allowed to place bets on everything starting with the value of stock averages. They might as well bet on the temperature in Newark at 8:00 AM.

So when you hear everybody saying this is a crisis caused by the housing collapse, be skeptical. We are in the midst of a classic pyramid or Ponzi scheme and there is no way out except for people to lose a lot of money. All that is different this time is that it is the taxpayers who are being asked for the cash.

Let's add to this analogy. The Horse is the homeowner, the Owner of the horse is the mortgage issuing bank.

Now, you have a guy who buys a nice healthy horse. There is a Federal Government-backed institution (a GSE) who buys horses from horse-owners in bulk. There are requirements for the horses in question. Requirements such as, the horse has to be a certain breed, certain, weight, and has been proven to be a healthy animal.

Now let's say that institution seriously relaxed its standards, and would take horses in far worse shape than before. And what's worse, when they put them up for races (so that folks could bet on them) they couldn't speak to the health of the horse. Individuals who buy horses (lending banks) start buying horses left and right - no matter their health - because they can off-load them to the GSE. Matter of fact, the GSE encourages them to do just that.

As for the gamblers, they know that this GSE takes buys only healthy horses, and if something happens to the horse, the GSE will cover a certain percentage of the loss, which isn't true, but the gamblers think it is, which cause them to bet a lot more than they would under normal circumstances.

Now, a high percentage of the horses owned by the GSE start to go down in the races, from broken legs. And all these horses have to be put down. And the gamblers start looking to the GSE to cover a percentage of the bet. The GSE doesn't.

Now nobody wants to bet on horses from the GSE but the GSE owns over 50% of all racing horses and there's still no way to tell if horses in their stable are healthy or not, and you can't bet on a single horse, you have to bet on a whole package of their horses and they are all mixed in together.

So the gamblers, start leaving the track, and the individual horse-owners stop buying horses.

That's not perfect, but it's at least in the ballpark - or racetrack as it were.

The problem is the quasi-private status of Fannie Mae and Freddie Mac and the CRA.

See this video I posted earlier.

E. D. Litvak responds to my Munich post with some further history and perspective:

It is to the credit of the efficacy of German propaganda machine from 1920 right up today that the Treaty of Versailles imposed upon a defeated Germany is perceived has having been vindictive, unjust and harsh.

Was the Treaty of Versailles vindictive? You bet! Was it unjust? No way! Was it harsh? Well now, that depends upon what one means by 'harsh'. Compared to the Treaty of Brest-Litovsk imposed by a victorious Germany upon a defeated Russia in March 1918 and the treaty of Bucharest on a defeated Romania, (which, incidentally, gave both the British & the French a pretty good idea what to expect from a Germania Triumphant which, but for the intercession of the United States might very well have come to pass) astonishingly lenient.

Compared to her co-conspirators, the Austro-Hungarian & Ottoman empires, both of which ceased to exist, Germany got off comparatively unscathed. Her territories where not subjected (unlike Belgium, Northern France, Poland and parts of Russia) to the hot rake of war, and she managed to pay off her war debts by uncontrolled inflation which not only beggared her middle classes but also legally repudiated her debts. Indeed, Germany managed to default on her debt of the two world wars she started, (debts which we are still paying off), the first one by inflation, and second one by her total collapse.

For the sake of the argument, let’s assume that it was Germany rather than Great Britain and France who laid down the peace terms at the Versailles peace conference. There is no need to speculate what those terms would have been for they were laid down in black and white by Matthias Erzberger (1875-1921) a prominent German politician, the power behind Chancellor von Bettman-Hollweg, in clear and concise terms.

In the west, France would lose the Briey-Longwy iron basin and Belfort in Upper Alsace, as well as having a permanent German military presence on her coast from the Belgian border right down to and including Boulogne and Calais (which was exactly what Germany did in 1940). Further she would a heavy indemnity imposed upon her, which would have crippled her financially. And finally she would have been stripped of her colonies. Belgium would become a German protectorate and the neutrals, Holland, Denmark, Sweden and Switzerland would have to dance to the tune emanating from Berlin. As for Great Britain, Herr Erzberger wasn’t quite sure how to handle her but at the least she would be permanently excluded from Europe and be expected to pay a heavy indemnity as well as the loss of the British Channel Islands

In the East, the Kingdom of Poland would be restored to be ‘guided’ by Germany, the three Baltic states, Lithuania, Latvia and Estonia, governed as they were by local magnates who, like the junkers of East Prussia, were the descendents of the ancient Teutonic knights, would be incorporated into the German realm, and the Ukraine, separated from Russia, would also become a German protectorate.

(As an aside, and here I am speculating, it is quite within the bounds of possibility that in the event of a German victory Germany would have detached Palestine from the Ottoman empire and offered it to Jewry as a ‘national home’ for the second Reich was as philo-Semitic as he third Reich was anti-Semitic.)

It is the perceived wisdom that the Treaty of Versailles is directly responsible for the rise of Adolf Hitler, but there is a body of opinion (which obviously I share) that Germany would have started World War II in September 1939 no matter what kind of government she had at that time. That was the considered opinion of three participants of that treaty. Marshall Ferdinand Foch of France, "this is not a peace treaty, this is but an armistice"; Winston Churchill of Great Britain, "the Hun will try again"; Secretary of State Robert Lansing of the United States, "I give it twenty years," and twenty years later, on the dot, the Hun tried again and, like the first time, damn near succeeded.

Now, with the creation of the European Union, Germany is its powerhouse. She succeeded this time where her generals failed the first two times. She is now the undisputed master of Europe with only Islam as a possible contender for mastery of that continent.

As Congress slogged toward an appar ent financial-market rescue bill over the weekend, the time arrived for a closer look at the roots of the crisis.

Who were the culprits?

Many and varied.

But as Election Day grows ever nearer, the role of one candidate in particular stands out: that of Barack Obama.

As Stanley Kurtz details on the opposite page, Obama spent many years cultivating ties with, working with - and even funding - the very folks who pushed for the risky lending that underlies the current mess.

That is, "community organizer" groups like ACORN.

ACORN is especially noteworthy, not only because of its prominence in the drive to relax mortgage requirements, but also because of its shady tactics.

And its links to Obama.

Various ACORN chapters across the country, led by folks like Chicago's Madeline Talbott, staged in-your-face protests in bank lobbies and filed complaints meant to hold up mergers sought by targeted banking firms.

Unless the banks agreed to ACORN's terms - which many (understandably) did.

Talbott & Co. generally wanted them to ease down-payment requirements and ignore weak credit histories. And their intimidating tactics often necessitated police action, as at a '97 protest at Pulaski Bank & Trust in Arkansas, where activists blocked drive-through lanes.

The movement's biggest victory, of course, came when Fannie Mae and Freddie Mac began buying up the riskier loans - providing fresh incentive for banks to make even more of them.

No need to recount where all that led.

Meanwhile, Obama was right there by ACORN's side all along.

"I've been fighting alongside ACORN on issues you care about my entire career," he told the group last November.

Indeed, in the early '90s, Obama was recruited by Talbott herself to run training sessions for ACORN activists.

ACORN also got funding from two charities, the Woods Fund and the Joyce Foundation, when Obama served on their boards, and from the Chicago Annenberg Challenge - the radical "education reform" outfit Obama ran from '95 to '99.

Ironically, the group stood to be a key beneficiary of the goodies Democrats were loading into Treasury Secretary Hank Paulson's rescue plan - including one demand that 20 percent of any profits the feds make from reselling mortgage securities go to fund groups like ACORN.

Happily, that add-insult-to-injury bit appears to have been eliminated from the rescue bill - thanks essentially to Republican objections.

(In that context, it's worth noting that John McCain worked for years to rein in Fannie and Freddie. Had Democrats not blocked action, the whole mortage mess might well have been avoided.)

Debate over the rescue plan begins in earnest today - and much disapprobation will be heaped on "Wall Street greed" as it proceeds.

Don't be misled, though.

In the end, from a mighty ACORN an even mightier crisis did grow.

With Barack Obama's help.

Moments of crisis have their purpose, not least of which is to witness how those weathering them will measure up to much greater challenges ahead. The recent financial market tumble afforded priceless opportunities to rate the strength of character of those to whom we may soon be yielding the power to govern. It is noteworthy that when the opportunity arose to display the desired strengths upon which voters will be counting on beyond voting day, Barack Obama -- not John McCain -- chose instead to mock the presumed shortcomings of his opponent.

This particular crisis also furnished Obama and his loyal media posse with an unparalleled opportunity to reinforce the central theme of his campaign, which casts his opponent as the proud and fated heir of the totality of George W. Bush's legacy. The favored three-pronged Obama strategy now consists of dissociating his own party of any shared responsibility for the debacle, refocusing the blame for the negatives on his opponent and taking front stage as the deliverer from all our calamities. But this strategy is bound for failure.

The first reason why Obama will be defeated is that this hour of crisis has uncovered a fierce vein of opportunism in the man. This pathological streak, characterized by a blind determination to succeed at all costs, was prominently displayed in his gleeful impetuosity to capitalize on the media's alarmist reports of a complete financial "meltdown".

During this financial collapse's most climactic moments, Obama directed his efforts at pandering to a somewhat misguided public discontent and stoking the embers of panic, rather than drafting alternative solutions for addressing the economic imbalances that precipitated the crisis in the first place. For a campaign that was pioneered on the pledge to steer off petty attacks, these types of knee-jerk reactions now define both the man and his campaign as both marked by extreme lapses of cognitive dissonance.

The second reason for the coming fall of Obama is that, while bad tidings may draw some attention, they are seldom guaranteed to encourage sustained support for the messenger. Obama's own predecessor is well acquainted with the unintended consequences of placing too much emphasis on the politics of doom and derision. Most people are eventually worn out and disillusioned by the constant drum of negativity. Other than the static mantra of "change we can believe in" -- recently modified to the slightly more imperious "change we need" -- Obama has little to offer in the way of any substantial alternatives to offset his ominous outlook of a future absent his wisdom and guidance at the helm, which leads one to believe that about the only thing that he can guarantee will change are his campaign slogans.

The third reason for Obama's eventual defeat is that -- in spite of his hopes for the triumph of image over substance -- he seems not to have yet assimilated the rather basic political maxim that words and deeds which project mutually contradictory messages can easily become very powerful weapons in the hands of one's adversary. To wit, few things appeared more contrived than the impassioned appeals on behalf of the downtrodden and the stern words of rebuke against the excesses of ruthless Wall Street profiteers still in his breath, as he boarded his personal jet to join in a $28,500 (hat tip to readers for correcting the figure) per plate fund raising fete with the most fiscally intemperate of our species: the lavish Hollywood glitterati. Needless to say, such glaring inconsistencies leave Obama wide open to the same charges of hypocrisy he has more than once indignantly leveled against the opposition.

The fourth reason is Obama's curious -- but not wholly unpredictable -- decision to yoke himself with Joe Biden, the gaffe-prone and mischievously wry senator from Delaware, whose core ideology is virtually indistinguishable from his own. Set against McCain's choice of Sarah Palin as his running mate, which brought a new level of political relevance to the office of vice-president, the democratic ticket has suddenly emerged as the one that offers the least opportunities for distinct philosophical approaches to today's sundry economic and social issues. It is no wonder the McCain-Palin ticket has become so attractive to a country that -- contrary to the current progressive dogma -- is very willing to embrace diversity.

And finally, with the exigencies of the moment calling for more desperate measures will come the re-awakening in Obama's mind of the notion that sooner or later he will have to conjure up the uncharitable verdict of racial malfeasance as the cause for this country's hesitancy in exalting him to the lofty echelons of American politics. No longer will he forego requiring votes from the reluctant as guilt offerings to atone for their prejudice laden indecision, or employing subsidiary bully pulpits to showcase his own personal (and mostly imagined) upheaval as a contestant of unwonted pedigree amidst what he and his minions insist on characterizing as a hopelessly racist electorate. And the more egregious these calls to penance for racial sins at the voting booth become, the more he will incur the disdain of those who silently feel that it should only be called racism when one votes or doesn't vote for a candidate because of the color of his skin.

I've received phone calls in the last hour from two economists I respect, one of them Larry Lindsey, the other in a position where he'd prefer not to be named. Both have government experience, neither is alarmist by nature, and they say this:

The huge European bank Fortis is apparently about to fail. The ripple effect on the American banking system could be disastrous, with bank runs, liquidity crises, and stock sell offs possible Monday. Wachovia may well fail next week. As Larry put it, this really will be 1933 soon if we don't move rapidly to stabilize the banking system.

And here's the bad news: the current bailout bill, whatever its merits and likelihood of passage, does nothing to address this.

Congress should pass by Monday simple legislation doing two things:

1. Giving the FDIC authority to provide unlimited deposit insurance through the FDIC for transaction accounts in banks.

2. Authorizing the Secretary of the Treasury to provide unlimited protection of principal in money market funds through the Treasury's exchange stabilization fund.

Maybe my acquaintances (and I) are too worried; maybe this legislation wouldn't quite be the right solution. But I wanted to sound what may be, unfortunately, a needed alarm.

...Economic freedom means the freedom to succeed and the freedom to fail.

The decision to give the federal government the ability to nationalize almost every bad mortgage in America interrupts this basic truth of our free market economy.

Republicans improved this bill but it remains the largest corporate bailout in American history, forever changes the relationship between government and the financial sector, and passes the cost along to the American people. I cannot support it.

Before you vote, ask yourself why you came here and vote with courage and integrity to those principles.

If you came here because you believe in limited government and the freedom of the American marketplace, vote in accordance with those convictions.

Duty is ours, outcomes belong to God.

I’ve just given the draft bailout bill a first read (link here; there’s apparently a more recent draft posted at the House Financial Services cmte website, but it’s currently inaccessible).

There’s a lot of b.s. stuffed in it (more to come), but let’s start with one section that warrants your attention– Section 115 (c). It appears that Hank Paulson and the cackling Democrats have written in a provision that codifies the short-circuiting of the democratic process...

A tense standoff has developed in waters off Somalia over an Iranian merchant ship laden with a mysterious cargo that was hijacked by pirates.

Somali pirates suffered skin burns, lost hair and fell gravely ill “within days” of boarding the MV Iran Deyanat. Some of them died.

Andrew Mwangura, the director of the East African Seafarers’ Assistance Programme, told the Sunday Times: “We don’t know exactly how many, but the information that I am getting is that some of them had died. There is something very wrong about that ship.”

The vessel’s declared cargo consists of “minerals” and “industrial products”. But officials involved in negotiations over the ship are convinced that it was sailing for Eritrea to deliver small arms and chemical weapons to Somalia’s Islamist rebels

Democrat Barack Obama's presidential campaign blitzed bars and advocates for the homeless have lined up vans to ferry potential voters from shelters.

The prize could be thousands of traditionally elusive voters in hard-fought Ohio who would have the chance to register and vote on the same day — if the courts don't intervene.

STEPHANOPOULOS: “Speaker Gingrich, there’s also, I think, a recognition, at least in some of the polls I’ve seen, that something has to be done.”

SPEAKER NEWT GINGRICH: “Sure, look, something has to be done. … I suspect were I still in Congress, in the end George [Will] is right, and I probably would end up voting reluctantly yes, because I think when you’re given no choice …”

So, what did the Republicans achieve? They put strings on the availability of funds beyond $250 billion, requiring fresh Congressional action for the last $350 billion. They added a requirement that Treasury establish an insurance program which would be funded by participating companies. This may be a big deal; I'm not sure exactly how it is intended to operate or how much, in the end, it will reduce the exposure to the taxpayer. They established a bipartisan oversight committee, rather than a committee run only by the Democrats, as Dodd and Frank had proposed. They took out special interest boondoggles for unions and for ACORN, the voter fraud organization. They removed a provision that would have allowed bankruptcy judges to arbitrarily reduce mortgages, an ill-conceived measure that would have aggravated a central cause of the current crisis, the difficulty of evaluating mortgage-backed securities. And they mandated a GAO study on the impact of the mark-to-market accounting rule, implicitly encouraging regulatory agencies to revise or abandon that principle, which is a key reason why banks that have little to do with the origins of the crisis are currently threatened.

The insurance approach was always central to the House Republicans' alternative to the Paulson and Frank-Dodd proposals. Whether their impact on the final product is profound, as opposed to merely helpful, depends on whether the insurance program is implemented and becomes a significant brake on taxpayer exposure.

The role played by John McCain appears to have been a constructive one. He supported and worked with the House Republicans. The Democrats no doubt wanted his support for the final product, and that must have enhanced the Republicans' position at the table. The Democrats would not have wanted an unpopular bailout plan to be supported by Barack Obama and opposed by McCain.

If voters understood the events of the last week, they would probably return control of the House, and perhaps the Senate, to the Republicans. The mainstream media will make sure that doesn't happen.

Moderate tribesmen in parts of militant-ravaged north-west Pakistan are challenging Taliban extremists threatening to overrun their area, in what could develop into a mass resistance movement.

Villagers in parts of North-West Frontier province and the tribal territory, faced with the violent advance of the Pakistani Taliban, are starting to organise an armed indigenous resistance in the absence of help from the state.

The resistance has parallels with the "Sunni awakening" in Iraq, where tribesmen took on al-Qaida militants in Anbar province and elsewhere.

The Pakistani movement relies on tribal customs and widespread ownership of guns to raise traditional private armies, known as lashkars, each with hundreds or several thousand volunteers.

These tribal armies cannot stop individual acts of terrorism, like the devastating suicide bombing of the Marriott hotel in Islamabad last week that killed more than 50 people. But they aim to stop the development of an extremist mini-state in the north-west.

The lashkars are appearing in many areas, including Bajaur, in the tribal zone, and Dir and Buner in North-West Frontier province. The Taliban are heavily armed and entrenched in a line that runs along the Afghan border from South Waziristan, north through Bajaur and Mohmand, in the tribal area, and in adjacent districts in NWFP, including Swat.

"There's going to be a civil war, " said Asfandyar Wali Khan, leader of the Awami National party, which runs the provincial government in NWFP. "It will be the people versus the Taliban."

Barack Obama: We'll never forget what's-his-name

From the presidential debate Oxford, Miss. Sept. 26, 2008, between Sens. John McCain, Republican, and Democrat Barack Obama.

One of the more farcical claims that Democrats have leveled against Governor Sarah Palin is that as mayor, she "banned" books from the Wasilla, Alaska public library. The claim was a complete fabrication, and anyway, a mayor has no power to "ban" a book. Suppressing a work of literature in our time requires something quite different:

Scotland Yard's counter-terrorist command yesterday foiled an alleged plot by Islamic extremists to kill the publisher of a forthcoming novel featuring sexual encounters between the Prophet Muhammad and his child bride.

Early yesterday armed undercover officers arrested three men after a petrol bomb was pushed through the door of the north London home of the book’s publisher.

The Metropolitan police said the target of the assassination plot, the Dutch publisher Martin Rynja, had not been injured. ...

Security officials believe Rynja was targeted for assassination because his firm, Gibson Square, is preparing to publish a romantic novel about Aisha, child bride of the Prophet Muhammad. The Jewel of Medina, by the first-time American author Sherry Jones, describes an imaginary sex scene between the prophet and his 14-year-old wife.

The book's American publisher, Random House, was not so bold:

It was withdrawn from publication in America last month after its publisher there, Random House, said it feared a violent reaction by “a small radical segment” of Muslims. It said “credible and unrelated sources” had warned that the book could incite violence.

That's how you go about suppressing a book. No one seems to mind much, though, when the real thing happens.

Is anyone else besides me infuriated that for decades, while usually whining that taxes haven’t been high enough, both the executive and legislative branches of our supposedly “by the people, for the people” government have mostly done all they can to keep us from using and benefiting from our own resources?

I linked below to an article by Dick Morris which argues that John McCain will reap great benefit from being seen as the broker of a better deal when the Democrats cave in to the House Republicans on the terms of the bailout or whatever it turns out to be. I was skeptical, in part because I hadn't seen any indication that McCain has aligned himself with the House Republicans' position.

In rapid succession, though, I got an email from Republican Whip Roy Blunt, the Republicans' lead negotiator, that included this exchange from an interview:

Yellin: Well, Secretary Paulson and the Democrats could reach an agreement and they can reach without you being there in the room at all.

Blunt: I think we need to be together on this and work together on this, but it means more than take it or leave it. We have been down the take it or leave it road, and you know, until John McCain came back to Washington this week, the House Republicans were very much on the leave it side of it and we were arguing for more insurance or loans and protections, but everyone else is rushing for a deal and frankly John McCain came back and said, the House Republicans have the taxpayers in mind and I am with them.

And an email from Congressman John Shadegg:

For the first time since the potential crisis confronting our nation’s banking system arose, I am cautiously optimistic. The proposal initially offered by Secretary Paulson was irresponsible and woefully lacking in safeguards for American taxpayers. Thanks to intervention by Senator McCain, both the White House and Congressional Democrats appear to be moving toward a more responsible rescue plan.

So maybe McCain is better positioned to deserve credit for improvements in the legislation than, to my knowledge, has been reported publicly.

PAUL adds: Note John's careful wording of his last sentence, particularly his use of "deserve," as opposed to "receive." Whatever credit McCain may end up deserving, he will receive considerably less (if any) in the reporting of the MSM.

Gingrich: Bush doesn't understand fiscal crisis, and treasury secretary should resign | Political Insider

Former U.S. House speaker Newt Gingrich, whose criticism helped spark a GOP revolt against the bail-out of Wall Street proposed by the Bush Administration, predicted Saturday that House Republicans would reluctantly support legislation that permits the federal government to purchase and isolate the tainted mortgages at the root of the current credit crisis.

But Gingrich had harsh words for President Bush, who he said doesn’t understand the situation, and for Treasury Secretary Henry Paulson, who the former speaker said — for the first time — should resign.

Two quick points on the debate:

Obama inexplicably chose to feed the narrative that he's smug, arrogant and condescending by repeatedly referring to McCain as "John" and by his behavior while McCain was speaking; on the split screen Obama's expression was one of disdain and he had a tendency to interrupt and talk over McCain as McCain was trying to wrap up a point. Not necessarily in the same league with Gore's repeated sighing, but off-putting enough.

Second, at the very end Obama seemed to be going for a big finish. He talked about his father from Kenya "writing letter after letter" trying to come to college in the U.S., because in no other country on Earth could one make it like here—"our ideals and values inspired the world." Powerful stuff.

But then Obama concludes by saying " I don't think any of us can say that our standing in the world now, the way children around the world look at the United States, is the same. " CLANG. He then states, reminiscent of Kerry's "Global Test", that we need to "show the world that we will invest in education" and "things that will allow people to live their dreams".

The Obama campaign spent months countering Michelle Obama's " for the first time in my life I'm proud of my country " statement and then Obama himself suggests our ideals and values don't inspire the world, and that we ourselves realize our values and ideals are suspect.

Criticizing George Bush or any of our other political leaders is one thing. Contending America's ideals and values are somehow suspect is a breathtaking statement for a prospective commander in chief to make, especially when thousands of Americans have given life and limb, sons and daughters, in brave demonstration of our ideals and values.

In case Mr. Obama missed it, millions remain sufficiently inspired to try to come to America; our values and ideals still cause the rest of the world to look to us first whenever there's a crisis. And we always respond.

Like Obama and millions of other Americans, my father also came to America from another country. Not after writing letters trying to come to a prestigious college here, but after escaping from the death squads of the Soviet empire. Once here, he saluted the American flag every single day. And although he has since passed, I'm certain he'd marvel at our ideals and values today. He'd hold Obama's statement in contempt.

Insulting the values and ideals of America may be fashionable in the salons occupied by William Ayers and Rev. Wright. It may be a matter of course at swanky fundraisers in San Francisco attended by pampered glitterati. But it's not something likely to fly with those who expect their president to have unwavering pride in America and the sacrifices of its best and bravest.

Far be it from me to differ with the punditocracy’s mainstream, but I happen to feel that last night’s debate was a pretty big win for John McCain. I’m aware that most observers have called it a draw, agreeing that both men performed rather ably. I’m also aware that the polls show a majority of watchers thought Obama “won.” But still, it was a big night for McCain. Or more precisely, it was a bad night for Obama.

Judging these things like a high school debate is a fool’s (or CNN’s) errand. Who cares who “won” the debate? We’re not electing a debater-in-chief. A more probative inquiry is who won more votes. Or to ask a related question, who lost fewer votes.

I agree with the multitudes of analysts who say that both men performed ably. The strength of Obama’s performance, especially in the debate’s first half, came as something of a surprise. He must have cut his normal quotient of “ums” and “ahs” by at least 50%, and he put himself across in a relatively forceful manner. At the other end of the stage, McCain’s competence in this kind of forum came as no surprise to people familiar with John McCain’s skills. (As a Romney supporter during the primaries, McCain’s supple mind and command of details constantly provided frustration.)

But again, you don’t determine the winner of these things by calculating who most skillfully evaded taking a position on the Paulson Plan. We might as well skip ahead to the real goal which isn’t winning a debate but rather winning votes.

Like I said, McCain came across well as he always does at these things. Low end news gatherers who were expecting a doddering old warmonger got a surprise. McCain looked and sounded presidential.

McCain’s running attack on Obama did serious damage, especially given the way Obama’s behavior played right into the attack’s theme. Throughout the evening, McCain said that Obama “didn’t understand” things. The message was as subtle as a Howard Dean scream – on one part of the stage you had the old Warhorse who has been around the track; on the other end of the stage, according to McCain, you had a neophyte. McCain was making a frontal assault on Obama’s maturity and judgment.

The assault only directly drew blood in a couple of instances. Obama looked silly when he couldn’t distinguish between “tactics” and “strategy,” and his endless parsing on preconditions and preparations came across as patently disingenuous. But the real damage came with the debate’s optics. Having his maturity frontally challenged, Obama by his own creative antics often came across as childish, petulant and a little odd.

Let us count the ways:


1) Several times during the debate, Obama would smirk and laugh while McCain spoke. The optics of this were just awful. If Obama had wanted to come across as an arrogant jerk, this is the strategy he would have chosen. Frankly, it’s rather shocking that Obama repeatedly made such a mistake. Al Gore cost himself the 2000 election with his first debate performance where he derided everything George W. Bush said with a series of sighs and smirks. Oh yeah – the polls and the pundits said Gore “won” that tussle right after it concluded, although history has rendered a different verdict.

Gore’s antics were completely unprecedented. Up until that time, every other presidential candidate had managed to comport himself in a reasonably mature fashion while doing a televised debate. And yet in 2004, George W. Bush took the Gore tactics out for a test drive during his first debate with John Kerry, scowling virtually every time Kerry spoke. Bush’s lead in the polls quickly evaporated.

The voters expect a certain level of decorum from their candidates. Obama didn’t demonstrate that decorum last night. While he debated more effectively than he has in the past, he came across poorly.


2) On a related note, Obama kept referring to McCain as “John” while the older candidate referred to his foe as “Senator.” Again, I don’t understand the thought process here. Maybe Obama thought he would appear more presidential and less a lightweight by treating his more seasoned opponent in an overly familiar manner. But the difference in the two candidates’ approaches grated as the evening wore on.


3) Obama often refers to himself as “we.” What’s up with that?


4) Obama pronounces Pakistan like a high school civics teacher trying to show of his erudition – “Pah-kee-stun.” Whenever he does this, he comes across as a smarty-pants showoff. Besides, I would argue that in America, we know and commonly refer to the country in question as, you know, Pakistan, not Pah-kee-stun. Obama is only right on this if he also calls Spain “la España.”


5) The “two bracelets” moment showed Obama at his “I have to be the smartest guy in the room” worst. This could emerge as the signature moment of the debate, where Obama’s insecurities and insincerity combined to create a perfect storm. (Apparently, he couldn’t recall the name of the soldier he was purportedly honoring until he looked it up on his bracelet.)


America is still getting to know Barack Obama. Last night, the candidate did himself no favors. Mind you, I’m not a habitual hater of Obama. I’ve never called him “despicable” or “evil,” the terms most currently in vogue on the left to describe John McCain. In fact, as I’ve written many times, from everything I’ve heard Barack Obama is a good guy. But he didn’t come across as one last night.

...For example, one of Paulson’s proposals for buying up distressed securities is a reverse auction in order to establish prices for these secondary market debt instruments. Once that price is established, the government will presumably buy each debt security backed by a pool of mortgages at the price established by the auction.

But there are tens of thousands of different pools of mortgages against which hundreds of thousands of debt instruments have been issued, all of which have different characteristics. Is Paulson going to undertake a reverse auction for each different type of debt security? Is that even possible? It would take 100 years to do so, and the ultimate result would provide neither stability nor transparency. Paulson will invariably have to undertake an ad-hoc approach in the face of random bidding with no hope of real success, similar to what he has done so far in addressing this financial crisis.

Instead of providing a general government bailout of mortgage-related securities as a means to addressing the liquidity crisis, the government should consider guaranteeing — for a price and under certain conditions — the principal balance of each troubled mortgage held by the servicers who administer mortgage-backed security pools. This would create a “floor” on the value of each troubled mortgage originated in the primary market, thereby creating a floor on the value of the related secondary market mortgage-backed security, thereby helping to eliminate valuation uncertainty, and restoring confidence and liquidity to the market.

So that borrowers also benefit, the government guaranty would only be provided if the servicer of the mortgage loan provided to the non-performing borrower a better set of terms (i.e., reduce the principal balance of the loan to some extent and offered the borrower a better fixed interest rate). In addition, the government would charge a guarantee fee.

Presidential debates are important -- and the first debate is the most important of all, establishing an arc of opinion that persists unless jarred loose by big mistakes or dramatic events.

So whether this year's first presidential debate between Sens. Barack Obama and John McCain is Friday night or postponed a few days, it may be the fall's most critical event. In the nine first debates since 1960, the perceived winner of the debate averaged a 4.2 point net swing in the Gallup poll.

I worry about McCain using humor in the debate. He doesn't have the natural delivery. It comes off corny 85% of the time. I hope he lays off the looking in the camera and addressing "my friends". I wish the first debate was a townhall format.

There, it's off my chest.

Knowing how unpopular the bailout is with the American people, the Democrats are not about to pass anything without broad Republican support even though their majorities permit them to act alone. Instead of signing on with the Democratic/Bush package, the House Republicans are insisting on replacing the purchase of corporate debt with loans to companies and insurance paid for by the companies, not by the taxpayers. That, of course, is a popular position. McCain would be comfortable to debate this issue division all day. And, if the Dems don’t cave into the Republican position, that’s probably exactly what he’ll do on Friday night’s scheduled debate in Mississippi.

But the Democrats are not about to be stubborn. They know their package is a lemon and need the political cover of Republican support. So the Republicans can write their own ticket…and they will. John McCain will be at the center of the emerging compromise while Obama is out on the campaign trail kissing babies. If the deal is cut before Friday’s debate, my bet is that McCain shows up in triumph. If it isn’t, he shows up anyway and flagellates Obama over the differences between the Democratic package and McCain’s.

By Monday, at the latest, the Democrats have to cave in and pass the Republican version. They don’t dare pass their own without GOP support, so they will have to cave in to the Republican version.

Then McCain comes out of the process as the hero who made it happen when the president couldn’t and Obama wouldn’t. He becomes the bailout expert.

And, of course, the bailout will work. With the feds standing behind the bad debt, whether by purchase or loans and insurance, Wall Street will breathe a sigh of relief. Bears won’t dare bet against the economy with the entire weight of the federal government on the other side. They may be bears but they are not rabid.

Finally, McCain, as the reigning expert on bailouts, then can take the tax issue to Obama, saying that a tax increase, such as the Democrat is pushing, would destroy the bailout, ruin the economy, and trigger a collapse.

This bold move by McCain is about to work. Big time.

There is a caution, however, about the debates tonight.

In a TV debate between a tall man and a short one, the tall guy usually wins - we haven’t had a short president since Harry Truman. Young man vs. older one? The younger usually wins.

Handsome, charismatic candidate against a man who’s neither? Well, you get the point: John McCain will have three strikes against him as he enters the first presidential debate tonight (assuming it goes ahead).

But McCain will have two things going for him. The subject will be on national security, his strong suit, and he’ll be coming off a bounce driven by his dramatic intervention this week in the financial-rescue package.

Yet as Mr. McCain’s misleading advertisements became fodder on shows like “The View” and “Saturday Night Live,” Mr. Obama began his own run of advertisements on radio and television that have matched the dubious nature of Mr. McCain’s more questionable spots.

The TWS take on this seems to be on the money:

Speaking of arguing against interest...This article shall be their defense against cries of bias from now until Election Day. "Bias? Remember that one time we wrote about Barack Obama's ads critically? Now, leave me alone while I investigate Sarah Palin's aunt's citation for hunting out of season."

Yesterday, he laid at least some of the blame for the subprime mess on Congressional Democrats mess:

CHRIS CUOMO, ABC NEWS: A little surprising for you to hear the Democrats saying, "This came out of nowhere, this is all about the Republicans. We had nothing to do with this." Nancy Pelosi saying it. She signed the '99 Gramm Bill. She knew what was going on with the SEC. They're all sophisticated people. Is that playing politics in this situation?

BILL CLINTON: Well, maybe everybody does that a little bit. I think the responsibility the Democrats have may rest more in resisting any efforts by Republicans in the Congress or by me when I was President to put some standards and tighten up a little on Fannie Mae and Freddie Mac.

Also speaking with Cuomo, Clinton tagged McCain's trip to Washington as a "good-faith" effort instead of a political stunt:

"We know he didn't do it because he's afraid because Sen. McCain wanted more debates," Clinton said, adding that he was "encouraged" by the joint statement from McCain and Sen. Barack Obama.

"You can put it off a few days the problem is it's hard to reschedule those things," Clinton said, "I presume he did that in good faith since I know he wanted -- I remember he asked for more debates to go all around the country and so I don't think we ought to overly parse that."

Earlier this week the networks threw a major tantrum when the McCain campaign tried to limit their access to Republican vice presidential candidate Sarah Palin’s meetings with foreign officials.

Today, Democratic vice presidential candidate Joe Biden met with Georgian President Mikhail Saakashvili and completely excluded the press...

KIEV, Ukraine — A Ukrainian ship seized off Somalia by pirates had 33 Russian T-72 tanks in its cargo, officials said Friday.

Defense Minister Yury Yekhanurov told reporters that the cargo on the ship, the Faina, also included "a substantial quantity of ammunition and spare parts," according to Larisa Mudrak, a spokeswoman for President Viktor Yushchenko.

It was not immediately known where the tanks were being shipped to, although the ITAR-Tass news agency said they had been sold to Kenya. Yekhanurov also said the tanks had been sold "in accordance with international law," according to Mudrak.

John McCain is resuming his campaign activities and will debate Barack Obama Friday night in Mississippi, McCain’s campaign announced two days after the Republican candidate said he would suspend his campaign to deal with a financial rescue plan being debated in Washington.

McCain’s campaign will resume “all activities and the senator will travel to the debate this afternoon. Following the debate, he will return to Washington to ensure that all voices and interests are represented in the final agreement, especially those of taxpayers and homeowners,” the McCain campaign said in a statement released around 11:30 a.m. ET.

Bill O'Reilly clowned hackers involved with the Sarah Palin hack job so…. they set their sights on the ire-rising Fox News anchor.

Last week, hackers broke into BillOreilly.com, stole personal details including passwords of the site's members and made them public via various internet forums.

The hacking of Bill O's site was allegedly a response to the Fox host's 'scurrilous attacks' of Wikileaks (a website that published Sarah Palin's hacked information), other members of the press, and 'Hacktivists'. It was their way of 'thumbing their noses at the pundit'.

Bill O. and his people are working with authorities to get to the bottom of the hack job.

The following statement was posted on the O'Reilly site:

“The FBI and Secret Service are close to indicting some of the perpetrators and we will keep you posted when the arrests are made. All premium members receive the full backing of our legal team and if anyone is hassled in the least, please inform us immediately. In the latest case, no proprietary information was obtained by hackers and we have safeguards in place to protect everyone who does business with us.

Rest assured that we are on this. Our defense of Sarah Palin has led some criminals to attempt to disrupt our enterprise. At this moment federal authorites and our attorneys are compling information against these people. Again, if any person is bothered in any way - please let us know. We stand behind our products but, most importantly, we stand behind you. We’ll get the bad guys. Count on it.

It was also mentioned that 'hacktivists' aren't done terrorizing the Fox pundit and are planning another attack.

The glee in European capitals at the woes of "Anglo-Saxon" capitalism is tangible. Sarkozy and the German finance minister pile on, with Sarkozy saying, "Self-regulation as a way of solving all problems is finished. Laissez-faire is finished. The all-powerful market that always knows best is finished." Peer Steinbruck, meanwhile, claims that this would have all been avoided if Washington hadn't laughed at German proposals for stricter regulation...

When it comes to the bailout plans, from a Democratic perspective: If it is House Republicans who are the problem, who cares what they think? Isn't it a distinguishing characteristic of the House that the majority can pretty much do what it wants? It's the Senate where the minority can make lots of trouble and slow down the process. In the House, we have seen Nancy Pelosi and her top lieutenants steamroll over Republican objections time and again in all sorts of legislative matters. Before Pelosi, we saw a Republican majority do similar things. So if Pelosi wants the bailout to happen, and House Democrats are united behind her, why don't we have a bill?

I'm not sure about the central planks of the alternative plan House Republicans have put forward:

* Rather than providing taxpayer funded purchases of frozen mortgage assets, we should adopt a mortgage insurance approach to solve the problem.

* Currently the federal government insures approximately half of all mortgage backed securities. (MBS) We can insure the rest of current outstanding MBS; however, rather than taxpayers funding insurance, the holders of these assets should pay for it. Treasury Department can design a system to charge premiums to the holders of MBS to fully finance this insurance.

Immediately, this strikes me as the kind of program that has the potential to become a permanent feature of the policy landscape as opposed to a temporary measure. These kinds of government insurance plans can be very hard to kill. Whatever its drawbacks, the Paulson plan — buy, hold, liquidate — would be easier to terminate.

The McCain campaign is now trying to broker a deal between House Republicans, Treasury Secretary Paulson, and the Democrats. This will be tough--but it’s worth a shot.

If it works, fine. If it fails, McCain will have, I think, three alternative paths:

1. Support Bush/Paulson/the Democrats. The rationale would be that the emergency is grave, the markets require action, and this is the only legislation that can pass. This is where most observers expect McCain to end up, it may well be where he has to end up, and it may be the right place to end up--IF the emergency is so grave and IF this is the only alternative that can pass. McCain could still stipulate he’ll improve the plan when he becomes president, that Bush and the Democrats messed this up, etc., etc. This outcome becomes likely if the markets start to meltdown today. It’s not particularly attractive substantively or politically, but....

2. Support House Republicans. Very dicey, obviously. For one thing, I’m not sure that their plan of letting banks buy insurance on mortgages they’ve written makes sense--isn’t that in effect a buy back at par? But it’s also politically risky: If the bailout legislation passes over McCain’s (and House Republicans’) opposition, and the markets (in the short term at least) like it, McCain hasn’t been part of the solution. If nothing passes, McCain can be blamed--which isn’t necessarily so bad if the markets don’t melt down, but if they do....

3. Improve on both Paulson and House Republicans with a new offer. This, based on my admittedly imperfect understanding of all this (but McCain has access to people with really good understanding), might be a combination of Larry Lindsey’s refinance-home-owners proposal and Lucian Bebchuk’s (and others’) proposal for direct bank recapitalization through Treasury security purchases and right offerings to shareholders. Introducing a new alternative at the eleventh hour might seem pretty bold and risky, but a) it’s probably better policy than what’s on the table now, b) who’s to say it couldn’t get a lot of support quickly, and c) there’s something attractive about opposing Henry Paulson and Barney Frank at once (sort of like opposing both Donald Rumsfeld and Harry Reid on Iraq a couple of years ago), and proposing a better course. It might be worth at least trying this alternative today, rather than focusing exclusively on trying to broker a deal between warring parties both of whose ideas aren’t great, or having to default to options 1 or 2.

There's a reason voters in presidential races tend to shy away from electing senators. The primary skills of a legislator--talking, compromising, "representing"--are different from those of an executive--deciding, choosing, "executing." There are individuals who have the ability both to deliberate patiently and act energetically--but it's a rare combination. The best legislators tend not to be great executives, and vice-versa.

This year, for the first time in U.S. history, both major party nominees for president are sitting senators. The winner may be the one who can convince some portion of the electorate that he's less "senatorial," and more "presidential," than the other.

That's why McCain's action Wednesday--announcing he would come back to Washington to try to broker a deal to save our financial system--could prove so important. The rescue package that was so poorly crafted and defended by the Bush administration seemed to be sliding toward defeat. The presidential candidates were on the sidelines, carping and opining and commenting. But one of them, John McCain, intervened suddenly and boldly, taking a risk in order to change the situation, and to rearrange the landscape.

Of course his motives were partly election-related. But "the interest of the man must be connected with the constitutional rights of the place." If candidate McCain, for whatever mixed motives, ends up acting in a way that results in a deal that is viewed as better than the original proposal, and that seems to stabilize the markets and avert a meltdown--he'll benefit politically, and he deserves to. For McCain will have acted presidentially in the campaign--which some voters, quite reasonably, will think speaks to his qualifications to be president.

As for the question of Friday night's debate, which some in the media seem to think more important than saving the financial system--if the negotiations are still going on in D.C., McCain should offer to send Palin to debate Obama! Or he can take a break from the meetings, fly down at the last minute himself, and turn a boring foreign policy debate, in which he and Obama would repeat well-rehearsed arguments, into a discussion about leadership and decisiveness. And if the negotiations are clearly on a path to success, then McCain can say he can now afford to leave D.C., fly down, and the debate would become a victory lap for McCain.

So the action of these few days becomes more important than the talk of that hour and a half Friday night. One could even say the contrast between the two men in action becomes the true debate over who should be president. The media, being talkers and debaters, love debates, overestimate their importance, and are underestimating the possible effect of McCain's dramatic action. In the debate itself, McCain should mock the media's greater concern for gabbing than solving our economic problems, and should associate Obama with such a talk-heavy media-type approach to politics. If the race is between an energetic executive and an indecisive talker, the energetic executive should win.

Here's a three-sentence summary of just the past two years: In October 2006, North Korea tested a nuclear weapon and earned the condemnation of the world and stern warnings from the Bush administration. Then, last spring, after promising better behavior, North Korea was caught proliferating nuclear technology to Syria, the world's second-leading state sponsor of terror, and the Bush administration, after keeping this information secret for months in order to protect its diplomatic efforts with Kim Jong Il, once again thundered warnings against further nuclear development and proliferation. Then, in a triumph of the diplomacy of dreams, the Bush administration proposed even more concessions -- offering to lift key economic sanctions on North Korea and remove the rogue regime from the list of state sponsors of terror.

And now, to the surprise of few outside the State Department, North Korea has refused to honor its obligations under the six-party talks and seems as determined as ever to continue its nuclear program.

So how long until the State Department offers new concessions?

Politico's Patrick O'Connor reports that Democratic House financial services committee chairman Barney Frank slammed John McCain for engaging in the bailout negotiations:

"McCain is Andy Kaufman in his Mighty Mouse costume - 'Here I Come to Save the Day,'" Frank said as he left a Thursday morning caucus meeting with House Democrats, saying the Republican presidential candidate's decision to enter the mix "is not helpful."

"He hasn't been involved," Frank said. "He doesn't know anything about it."

Why does Barney Frank think he's in a position to say McCain is unqualified to be at the negotiating table? Check out this Fox News report, via Ace, focusing on Frank's role in thwarting efforts to avert this crisis: