In his first critical remarks about the government response to the financial market crisis, Barack Obama said Sunday that the Bush administration has “offered a concept with a staggering price tag, not a plan.”
“We must work quickly in a bipartisan fashion to resolve this crisis to avert an even broader economic catastrophe,” Obama said at a rally here. “But Washington also has to recognize that economic recovery requires that we act, not just to address the crisis on Wall Street, but also the crisis on Main Street and around kitchen tables across America.”
Obama took aim at the three-page bailout plan from Treasury Secretary Henry Paulson, saying the “American people must be assured that the deal reflects the basic principles of transparency, fairness and reform.” [continued…]
As officials in Washington raced to put together a bailout plan for the nation’s teetering financial system, Sen. John McCain hammered Sen. Barack Obama as part of the problem while Obama said any rescue should include a new stimulus package for working families.
Gyrating stock markets and the intensity of the discussions in Washington overshadowed the two presidential candidates on Friday. But the winner probably will find that his administration will be deeply affected by the results of what happens over the next few weeks.
Efforts to stabilize the financial system not only could affect the size of the federal budget deficit, but will add another large problem on top of the wars in Iraq and Afghanistan and make it more difficult for Obama and McCain to make their mark with a big domestic initiative. [continued…]
House Financial Services Committee Chairman Barney Frank said the federal government may require companies participating in a proposed financial rescue plan to agree to curtail their executives’ compensation.
“We will again be talking about compensation packages,” Frank said in a speech today before the Washington-based advocacy group AARP. “If you want to participate in this, we want you to show us that you’ve got rules that don’t allow'” the “excessive golden parachutes.”
He scoffed at suggestions such restrictions may dampen companies’ enthusiasm for the bailout.
“Are they telling us that the financial leaders of this country who clearly welcome this” bailout program, “who understand why it’s necessary and who would get some near-term benefit for their own institutions” would “boycott it if it’s going to cost them a few million of the many millions they have?” he said. “I would be hesitant to impute that degree of lack of public-spiritedness to them.” [continued…]
With truly extraordinary speed, opinion has swung behind the radical idea that the government should commit hundreds of billions in taxpayer money to purchasing dud loans from banks that aren’t actually insolvent. As recently as a week ago, no public official had even mentioned this option. Now the Treasury, the Fed and congressional leaders are promising its enactment within days. The scheme has gone from invisibility to inevitability in the blink of an eye. This is extremely dangerous.
The plan is being marketed under false pretenses. Supporters have invoked the shining success of the Resolution Trust Corporation as justification and precedent. But the RTC, which was created in 1989 to clean up the wreckage of the savings-and-loan crisis, bears little resemblance to what is being contemplated now. The RTC collected and eventually sold off loans made by thrifts that had gone bust. The administration proposes to buy up bad loans before the lenders go bust. This difference raises several questions.
The first is whether the bailout is necessary. In 1989, there was no choice. The federal government insured the thrifts, so when they failed, the feds were left holding their loans; the RTC’s job was simply to get rid of them. But in buying bad loans before banks fail, the Bush administration would be signing up for a financial war of choice. It would spend billions of dollars on the theory that preemption will avert the mass destruction of banks. There are cheaper ways to stabilize the system. [continued…]
Not until 2004 could the 9/11 commission at last reveal the title of the intelligence briefing President Bush ignored on Aug. 6, 2001, in Crawford: “Bin Laden Determined to Strike in U.S.” No wonder John McCain called for a new “9/11 commission” to “get to the bottom” of 9/14, when the collapse of Lehman Brothers set off another kind of blood bath in Lower Manhattan. Put a slo-mo Beltway panel in charge, and Election Day will be ancient history before we get to the bottom of just how little he and the president did to defend America against a devastating new threat on their watch.
For better or worse, the candidacy of Barack Obama, a senator-come-lately, must be evaluated on his judgment, ideas and potential to lead. McCain, by contrast, has been chairman of the Senate Commerce Committee, where he claims to have overseen “every part of our economy.” He didn’t, thank heavens, but he does have a long and relevant economic record that begins with the Keating Five scandal of 1989 and extends to this campaign, where his fiscal policies bear the fingerprints of Phil Gramm and Carly Fiorina. It’s not the résumé that a presidential candidate wants to advertise as America faces its worst financial crisis since the Great Depression. That’s why the main thrust of the McCain campaign has been to cover up his history of economic malpractice. [continued…]
Dear United States, Welcome to the Third World!
It’s not every day that a superpower makes a bid to transform itself into a Third World nation, and we here at the World Bank and the International Monetary Fund want to be among the first to welcome you to the community of states in desperate need of international economic assistance. As you spiral into a catastrophic financial meltdown, we are delighted to respond to your Treasury Department’s request that we undertake a joint stability assessment of your financial sector. In these turbulent times, we can provide services ranging from subsidized loans to expert advisors willing to perform an emergency overhaul of your entire government.
As you know, some outside intervention in your economy is overdue. Last week — even before Wall Street’s latest collapse — 13 former finance ministers convened at the University of Virginia and agreed that you must fix your “broken financial system.” Australia’s Peter Costello noted that lately you’ve been “exporting instability” in world markets, and Yashwant Sinha, former finance minister of India, concluded, “The time has come. The U.S. should accept some monitoring by the IMF.” [continued…]
Does Wall Street’s meltdown presage the end of the American century? Many commentators have warned that the past week’s financial mayhem signaled a major political setback for the United States as well as an economic one. “Why should the rest of the world ever again take seriously the American free-market model after this debacle?” a leading British journalist asked me last Thursday. This crisis, he argued, was to economics what the Iraq war was to U.S. foreign policy: a fatal blow to the credibility of American claims to global primacy.
Certainly, if the talk of a “unipolar moment” after the collapse of the Soviet empire was hubris, then the credit crunch has been a very American nemesis. Ten years ago, there was a strange competition in the United States to see who could be more arrogant. Neoconservatives argued that the rest of the world should hurry up and embrace the American political way or prepare to be bombed into the democratic age. But equally smug were the neoliberal economists, who argued that the rest of the world should hurry up and embrace the so-called Washington consensus of expanding trade, attacking inflation and encouraging foreign investment, or prepare to be sold short. One lot derided the political failure of the Muslim world; the other lot heaped scorn on Asian “crony capitalism,” supposedly the root cause of the 1997-98 Asian financial crisis.
The neocons got their comeuppance in Iraq, where American forces were not, after all, ultimately embraced as liberators. The neolibs got theirs this month, as a Republican Treasury Department, headed by the former CEO of Goldman Sachs, effectively nationalized first the country’s biggest mortgage lenders and then its biggest insurance company. As the presidential candidates, in rare unison, heap opprobrium on Wall Street gamblers and slumbering regulators, the stage seems set for the demise of “market fundamentalism,” in George Soros’s phrase. [continued…]
For the past seven years, the Bush administration studiously ignored the Afghan Taliban and Al Qaeda leadership gathering in the tribal areas of Pakistan, and now scrambles to make up for lost time. US elections are looming, and facing the humiliating prospect of Osama bin Laden outlasting a two-term presidency and even expanding his reach, President Bush has pushed the Pentagon into a do-or die-hunt for bin Laden. Whether the search for an “October surprise” for the election succeeds or not, the radical threat is now beyond easy military solution.
It’s a sign of desperation that on September 16, the Chairman of the US Joint Chiefs of Staff Admiral Mike Mullen was in Islamabad meeting the Pakistan army chief General Ashfaq Kayani, his boss Secretary of Defence Bob Gates was in Kabul, while Pakistan’s newly elected President Asif Ali Zardari was in London begging Prime Minister Gordon Brown to get the Americans off his back and deliver aid to a beleaguered country rather than angry ripostes.
Pakistan is at the centre of a gathering firestorm engulfing south and central Asia in the most volatile confrontation since 9/11. Pakistan, Afghanistan, the US and NATO all bear heavy responsibility for the crisis. President Bush had neither the inclination nor urge to do right by Afghanistan, despite pleas by President Hamid Karzai to eliminate cross-border terrorist strikes from Pakistan and effectively rebuild the country. Senior US officers serving in Afghanistan say they begged the White House and the State Department for action in 2006, but Bush was cosy with Pakistan’s former President Pervez Musharraf and Iraq occupied US attention. Meanwhile, veteran John McCain flails in effectively playing the national security card against Barack Obama because Republican policies failed to secure the homeland against future Al Qaeda attacks. [continued…]