For the new contagion, the same old prescriptions
By Steven Pearlstein, Washington Post, October 8, 2008

Against a backdrop of an unfolding meltdown in global financial markets and the near-certainty of a U.S. recession, the two candidates for president used the occasion of a much-anticipated town hall meeting last night to repeat all the talking points they were making long before the recent bank failures, the free fall of stock prices and the federal government’s expensive rescue efforts.

A televised national debate is hardly the ideal place to lay out a 10-point program for containing the credit crisis or for rebuilding and redesigning the world’s financial infrastructure. But neither did either candidate see it as an opportunity to lay out the broad principles he would follow in managing the current crisis or to sketch the outlines of a new form of capitalism that might replace the current model, which many Americans are coming to conclude provides too little in the way of fairness and economic security.

Asked by an Internet questioner what sacrifices they were prepared to ask Americans to make to get us out of the economic mess, both Barack Obama and John McCain sidestepped the question, with McCain resorting to his familiar promises to cut back on pork-barrel spending and Obama pitching a easy-to-swallow plea for everyone to turn down the thermostat.

Rather than talking about sacrifices, the candidates got into their most spirited exchanges while trying to outdo each other in proving that he would be the most aggressive and committed in cutting taxes for most households. [continued…]

It is time for comprehensive rescues of financial systems
By Martin Wolf, Financial Times, October 7, 2008

As John Maynard Keynes is alleged to have said: “When the facts change, I change my mind. What do you do, sir?” I have changed my mind, as the panic has grown. Investors and lenders have moved from trusting anybody to trusting nobody. The fear driving today’s breakdown in financial markets is as exaggerated as the greed that drove the opposite behaviour a little while ago. But unjustified panic also causes devastation. It must be halted, not next week, but right now.

The time for a higgledy-piggledy, institution-by-institution and country-by-country approach is over. It took me a while – arguably, too long – to realise the full dangers. Maybe it was errors at the US Treasury, particularly the decision to let Lehman fail, that triggered today’s panic. So what should be done? In a word, “everything”. The affected economies account for more than half of global output. This makes the crisis much the most significant since the 1930s. [continued…]

The Palins’ un-American activities
By David Talbot, Salon, October 7, 2008

“My government is my worst enemy. I’m going to fight them with any means at hand.”

This was former revolutionary terrorist Bill Ayers back in his old Weather Underground days, right? Imagine what Sarah Palin is going to do with this incendiary quote as she tears into Barack Obama this week.

Only one problem. The quote is from Joe Vogler, the raging anti-American who founded the Alaska Independence Party. Inconveniently for Palin, that’s the very same secessionist party that her husband, Todd, belonged to for seven years and that she sent a shout-out to as Alaska governor earlier this year. (“Keep up the good work,” Palin told AIP members. “And God bless you.”) [continued…]

Voting the fate of the nation
By Chalmers Johson, TomDispatch, October 7, 2008

In his acceptance speech at the Democratic National Convention, Barack Obama called the forthcoming presidential election a “defining moment” in this country’s history. It is conceivable that he is right. There are precedents in American history for an election inaugurating a period of reform and political realignment.

Such a development, however, is extremely rare and surrounded by contingencies normally beyond the control of the advocates of reform. So let me speculate about whether the 2008 election might set in motion a political reconfiguration — and even a political renaissance — in the United States, restoring a modicum of democracy to the country’s political system, while ending our march toward imperialism, perpetual warfare, and bankruptcy that began with the Cold War. [continued…]

Spying on the future
By Tom Engelhardt, TomDispatch, October 5, 2008

The year is 2010 and, yes, Saddam Hussein is gone and there are no American troops in Iraq, but, as the report suggests, “the challenge will be to see whether a modern, secular successor government emerges that does not threaten its neighbors” — especially since those dogged Iraqis are back at work on their nuclear weapons program. Meanwhile, the national security agenda of American policymakers, who face no conventional military challenges, is dominated by five questions: “whether to intervene, when, with whom, with what tools, and to what end?”

Surveying the world in 2010, we find a Russia irredeemably in economic decline, a China beset by too many internal problems to hope for military dominance in Asia, and a North Korea so transformed that military tensions have vanished from the Korean peninsula (along, evidently, with the North Korean nuclear program). Oh, and those food riots that swept the globe recently, they never happened. After all, it’s well known that food production has kept up with population pressures, and energy production has been more than a match for global energy needs. As for global warming? Never heard of it. On the bright side, the key to the future is “international cooperation,” led, of course, by us truly. [continued…]

Judge orders 17 detainees at Guantánamo freed
By William Glaberson, New York Times, October 8, 2008

A federal judge on Tuesday ordered the Bush administration to release 17 detainees at Guantánamo Bay by the end of the week, the first such ruling in nearly seven years of legal disputes over the administration’s detention policies.

The judge, Ricardo M. Urbina of Federal District Court, ordered that the 17 men be brought to his courtroom on Friday from the prison at Guantánamo Bay, Cuba, where they have been held since 2002. He indicated that he would release the men, members of the restive Uighur Muslim minority in western China, into the care of supporters in the United States, initially in the Washington area.

“I think the moment has arrived for the court to shine the light of constitutionality on the reasons for detention,” Judge Urbina said.

Saying the men had never fought the United States and were not a security threat, he tersely rejected Bush administration claims that he lacked the power to order the men set free in the United States and government requests that he stay his order to permit an immediate appeal.

The ruling was a sharp setback for the administration, which has waged a long legal battle to defend its policies of detention at the naval base at Guantánamo Bay, arguing a broad executive power in waging war. Federal courts up to the Supreme Court have waded through detention questions and in several major cases the courts have rejected administration contentions. [continued…]

Why McCain’s time with the Council of World Freedom matters
By Sam Stein, Huffington Post, October 6, 2008

Since Sunday, Democrats have been buzzing about the re-revelation that during the 1980s, Sen. John McCain served on the board of a far-right conservative organization that had supplied arms and funds to paramilitary organizations in Latin America.

Democratic strategist Paul Begala lit the fire when, during an appearance on Meet the Press, he warned that this relatively obscure detail from McCain’s past could draw him into a guilt-by-association game he was bound to regret.

“John McCain sat on the board of…the U.S. Council for World Freedom,” said Begala, “The Anti-Defamation League, in 1981 when McCain was on the board, said this about this organization. It was affiliated with the World Anti-Communist League – the parent organization – which ADL said ‘has increasingly become a gathering place, a forum, a point of contact for extremists, racists and anti-Semites.'” [continued…]

Global fears of a recession grow stronger
By Mark Landler, New York Times, October 7, 2008

When the White House brought out its $700 billion rescue plan two weeks ago, its sheer size was meant to soothe the global financial system, restoring trust and confidence. Three days after the plan was approved, it looks like a pebble tossed into a churning sea.

The crisis that began as a made-in-America subprime lending problem and radiated across the world is now circling back home, where it pummeled stock and credit markets on Monday.

While the Bush administration’s bailout package offers help to foreign banks, it seems to have done little to reassure investors, particularly in Europe, where banks are failing and countries are racing to stave off panicky withdrawals after first playing down the depth of the crisis.

Far from being the cure for the world’s ills, economists said, the rescue plan might end up being a stopgap for the United States alone. With Europe showing few signs of developing a coordinated response to the crisis, there is very little on the horizon to calm rattled investors. [continued…]

The GOP goes back to its ugly roots
By Gary Kamiya, Salon, October 7, 2008

The End of Days is approaching for John McCain and Sarah Palin, and at least one member of the ticket is not likely to greet this development with religious rapture. Their numbers are tanking. Their campaign has had to pull out of Michigan, and they are trailing in most of the battleground states they must hold onto. Even Karl Rove has predicted an Obama win if the election were held today. McCain’s hotheaded behavior during the Wall Street crisis and his numerous other erratic tactical swerves have backfired. And his biggest gamble, choosing Sarah Palin as vice president, is increasingly looking like a disaster.

McCain’s all-too-predictable response: get ugly, as he did on Monday is his disturbing rant against Obama in New Mexico.

The man who incessantly talks about “honor” has checked his own at the door. Back in April, McCain — himself the victim of a vicious, race-baiting smear campaign orchestrated by Karl Rove in 2000 — disavowed a North Carolina ad attacking Obama for his association with the Rev. Jeremiah Wright. “It’s not the message of the Republican Party,” McCain said. “It’s not the message of my campaign. I’ve pledged to conduct a respectful campaign.”

But that was before McCain faced imminent defeat. His “pledge” has turned out to be about as credible as his sudden incarnation as a lifelong enemy of Wall Street. On Monday, McCain rolled out a new TV ad, “Dangerous,” that accuses Obama of being “dishonorable.” “Who is Barack Obama?” a narrator ominously asks. “He says our troops in Afghanistan are ‘just air-raiding villages and killing civilians.’ How dishonorable.”

Of course, this is an outrageous smear. Obama was simply pointing out the well-known fact that in fighting an insurgency, over-reliance on air power is counterproductive. That’s because airstrikes inevitably result in civilian deaths, which turn the population against the side carrying them out. U.S. airstrikes and the ensuing civilian casualties are one of the biggest points of contention between the U.S. and Hamid Karzai’s regime in Afghanistan, and they are a huge issue in Pakistan and Iraq as well.

But none of those facts matter, because McCain desperately needs to paint Obama as a traitor, an alien, a defeatist, and un-American. The rhetorical question “Who is Barack Obama?” is not accidental: It is intended to raise fundamental doubts about whether he is a real American. It ties into the online smears that accuse him of being a Muslim, a terrorist, of not saluting the flag, hating the troops, attending a madrassa, hating Israel, and so on. [continued…]

The United States and Iraq: still getting it wrong
By Reidar Visser, openDemocracy, October 3, 2008

The United States presidential candidates are not the only ones scrambling to put together a credible interpretation of the situation in Iraq these days. The Pentagon’s latest quarterly report to the US Congress – Measuring Stability and Security in Iraq, delivered on 1 October 2008 – shows that Washington’s defence establishment shares the same difficulty.

There are two basic problems in the report, which covers the period June-August 2008. The first concerns its assessment of “the fundamental nature of the conflict in Iraq”. At the outset there is bombast: “[While] security has improved dramatically, the fundamental character of the conflict in Iraq remains unchanged – a communal struggle for power and resources”. That is as about as wrong as one can be in describing the political dynamics of the past year. [continued…]

Robert Baer interviewed on NPR
Robert Baer interview by Terry Gross, Fresh Air, October 2, 2008

“What ultimately the Iranians would like is to become an equal partner of the United States — I know this is a tall order and we’re going to wait decades for anything like this to come about — but in their hearts this is what they would like.”

Terry Gross: An equal partner in what?

Baer: In the Middle East.

They would like to sit down with the United States and Israel and actually come to a solution for the Palestinians.

They would like to support and give power to the Shia in Lebanon, because the Shia are approaching a majority in Lebanon.

They would like to co-administer Mecca with the Saudis.

They feel that their sect has been repressed since 680AD — since the murder of the Prophet’s grandson. They believe that this is the Shia millenium. [continued…]

Heeding the lessons of another war
By Maleeha Lodhi and Anatol Lieven, IHT, October 1, 2008

Forty years ago, the United States began to mount raids into Cambodia and to undermine the government of King Sihanouk in order to cut Vietcong supply lines.

As a result, America’s war with Vietnamese Communism spread into Cambodia, leading to the triumph of the Khmer Rouge and the Cambodian genocide. But these horrors occurred after the U.S. itself had quit Vietnam and after the U.S.-backed regime in South Vietnam had collapsed. Washington’s widening of the war benefited neither America nor its local allies.

The U.S. is now making the same mistake in Afghanistan and Pakistan. If continued, ground incursions by U.S. troops across the border into Pakistan in search of the Taliban and Al Qaeda risk drastically undermining the Pakistani state, society and army.

Many Pakistanis are berating their new civilian government and the military for being too supine in their response to the American actions. There have also been public calls for NATO supply lines through Pakistan to be cut, which could cripple the Western military effort in Afghanistan. The latest dreadful terrorist attack in Islamabad illustrates the danger of a wider conflagration and the price Pakistan is paying for its role as a U.S. ally. [continued…]

Reversal of fortune
By Joseph E Stigliz, Vanity Fair, November, 2008

When the American economy enters a downturn, you often hear the experts debating whether it is likely to be V-shaped (short and sharp) or U-shaped (longer but milder). Today, the American economy may be entering a downturn that is best described as L-shaped. It is in a very low place indeed, and likely to remain there for some time to come.

Virtually all the indicators look grim. Inflation is running at an annual rate of nearly 6 percent, its highest level in 17 years. Unemployment stands at 6 percent; there has been no net job growth in the private sector for almost a year. Housing prices have fallen faster than at any time in memory—in Florida and California, by 30 percent or more. Banks are reporting record losses, only months after their executives walked off with record bonuses as their reward. President Bush inherited a $128 billion budget surplus from Bill Clinton; this year the federal government announced the second-largest budget deficit ever reported. During the eight years of the Bush administration, the national debt has increased by more than 65 percent, to nearly $10 trillion (to which the debts of Freddie Mac and Fannie Mae should now be added, according to the Congressional Budget Office). Meanwhile, we are saddled with the cost of two wars. The price tag for the one in Iraq alone will, by my estimate, ultimately exceed $3 trillion. [continued…]

The specter of Wall Street
By Steve Fraser, TomDispatch, October 2, 2008

Wall Street sits at the eye of a political hurricane. Its enemies converge from every point on the compass. What a stunning turn of events.

For well more than half a century Wall Street has enjoyed a remarkable political immunity, but matters were not always like that. Now, with history marching forward in seven league boots, we are about to revisit a time when the Street functioned as the country’s lightning rod, attracting its deepest animosities and most passionate desires for economic justice and democracy.

For the better part of a century, from the 1870s through the tumultuous years of the Great Depression and the New Deal, the specter of Wall Street haunted the popular political imagination. For Populists it was the “Great Satan,” its stranglehold over the country’s credit system being held responsible for driving the family farmer to the edge of extinction and beyond. [continued…]

The choice
The New Yorker, October 13, 2008

Never in living memory has an election been more critical than the one fast approaching—that’s the quadrennial cliché, as expected as the balloons and the bombast. And yet when has it ever felt so urgently true? When have so many Americans had so clear a sense that a Presidency has—at the levels of competence, vision, and integrity—undermined the country and its ideals?

The incumbent Administration has distinguished itself for the ages. The Presidency of George W. Bush is the worst since Reconstruction, so there is no mystery about why the Republican Party—which has held dominion over the executive branch of the federal government for the past eight years and the legislative branch for most of that time—has little desire to defend its record, domestic or foreign. The only speaker at the Convention in St. Paul who uttered more than a sentence or two in support of the President was his wife, Laura. Meanwhile, the nominee, John McCain, played the part of a vaudeville illusionist, asking to be regarded as an apostle of change after years of embracing the essentials of the Bush agenda with ever-increasing ardor.

The Republican disaster begins at home. Even before taking into account whatever fantastically expensive plan eventually emerges to help rescue the financial system from Wall Street’s long-running pyramid schemes, the economic and fiscal picture is bleak. During the Bush Administration, the national debt, now approaching ten trillion dollars, has nearly doubled. Next year’s federal budget is projected to run a half-trillion-dollar deficit, a precipitous fall from the seven-hundred-billion-dollar surplus that was projected when Bill Clinton left office. Private-sector job creation has been a sixth of what it was under President Clinton. Five million people have fallen into poverty. The number of Americans without health insurance has grown by seven million, while average premiums have nearly doubled. Meanwhile, the principal domestic achievement of the Bush Administration has been to shift the relative burden of taxation from the rich to the rest. For the top one per cent of us, the Bush tax cuts are worth, on average, about a thousand dollars a week; for the bottom fifth, about a dollar and a half. The unfairness will only increase if the painful, yet necessary, effort to rescue the credit markets ends up preventing the rescue of our health-care system, our environment, and our physical, educational, and industrial infrastructure. [continued…]

Anger vs. steadiness in the crisis
By Joe Klein, Time, October 2, 2008

A few hours before the House of Representatives smacked down the financial-bailout package, I watched John McCain — eyes flashing, jaw clenched, oozing sarcasm and disdain — on the attack in Ohio: “Senator Obama took a very different approach to the crisis our country faced. At first he didn’t want to get involved. Then he was ‘monitoring the situation.’ That’s not leadership; that’s watching from the sidelines.” And I thought of Karl Rove. Back in 2003, at the height of Howard Dean mania, Rove was skeptical about Dean’s staying power as a candidate: “When was the last time Americans elected an angry President?”

Much has been written about McCain’s mercurial temperament during the past few weeks. An election campaign that was supposed to be all about Barack Obama has turned out to be all about John McCain. In the process, the other side of the equation — Obama’s steadiness throughout — has been pretty much overlooked. Just after the House shot down the bailout, Obama took to the stage in Colorado, and the contrast with McCain couldn’t have been greater: “Now is not the time for fear, now is not the time for panic,” he said. “We may not be able to do everything overnight … But I want you to understand, I know we can do it … Things are never smooth in Congress. It will get done.”

We journalists have an extensive vocabulary for cataloging the failures of politicians and a skimpy one for celebrating their successes. It’s safer to be skeptical: no one will ever accuse you of being in the tank. And so we’ve heard lots, in a negative way, about Obama’s coolness and intellectuality. And at times in this campaign — during Hillary Clinton’s populist transformation, after Sarah Palin’s convention speech — Obama’s demeanor has seemed problematic. He was too remote, too cerebral and nuanced in his answers, it was said; he had to get warmer, learn to love junk food, practice his bowling. But Obama stubbornly remained himself through the tough times; his preternatural calm has proved reassuring in both the economic crisis and the first debate. “His performance has been polished and steady,” a prominent Republican told me. “John’s has not been.” [continued…]

Olmert’s lame-duck epiphany about Palestinian peace
By Scott McLeod, Time, September 30, 2008

He is a former leader in the rightist Likud Party who for decades staunchly believed that the West Bank and Gaza Strip belonged to the Jewish people and that the territories, along with the Golan Heights, should remain part of Greater Israel forever. Along with former Prime Minister Ariel Sharon, Ehud Olmert gradually came to understand that this was a fantasy. They broke away from Likud and created the centrist Kadima (“Onward”) Party three years ago. Now, as Olmert hands the reins to Tzipi Livni and leaves office amid a corruption scandal, he’s made a series of stunning departure statements that form a swan song of historical importance. Peace advocates, Israeli dreamers, Arab skeptics and U.S. mediators in a future McCain or Obama Administration should read his words carefully and take note.

The political lame duck’s views expressed in interviews and public comments reveal the sweeping reversals that have taken place among some of Israel’s ultra-nationalists. Olmert says Israel should withdraw from “almost all” of the West Bank and Golan Heights. A former mayor of “the undivided capital of the Jewish state,” he now advocates dividing Jerusalem with the Palestinians. He wants to keep some of the Jewish settlements that adjoin Israel’s pre-1967 border but accepts giving the future Palestinian state Israeli territory in a land swap with a “close to 1-to-1-ratio.” “The notion of a Greater Israel no longer exists,” Olmert says, “and anyone who still believes in it is deluding themselves.” [continued…]

Bahrain calls for Middle East bloc to bring together Iran and Israel
By Ian Black, The Guardian, October 2, 2008

Middle Eastern countries should set up a new regional organisation that includes all Arab states as well as Israel, Iran and Turkey, pro-western Bahrain urged yesterday.

The call – which is likely to provoke controversy – came from Sheikh Khalid bin Ahmed al-Khalifa, the Gulf state’s foreign minister. “Why don’t we all sit together even if we have differences and even if we don’t recognise each other?” he told the London-based daily al-Hayat. “Why not become one organisation?

“Aren’t we all members of a global organisation called the United Nations? Why not [come together] on a regional basis? This is the only way to solve our problems. There’s no other way to solve them, now or in 200 years.”

Asked if that should include Israel, he replied: “With Israel, Turkey, Iran and Arab countries. Let them all sit together in one group.” [continued…]

Trio of warlords blamed for surge in Afghanistan violence
By Greg Miller, Los Angeles Times, September 30, 2008

The escalating insurgency in Afghanistan is being spearheaded by a trio of warlords who came to prominence in the CIA-backed war to oust the Soviets but who now direct attacks against U.S. forces from havens in Pakistan, according to U.S. military and intelligence officials.

Militant groups led by the three veteran mujahedin are behind a sharp increase this year in the number and sophistication of attacks in Afghanistan and pose a major challenge to President Bush’s hope of stabilizing the country by deploying thousands of additional troops.

Despite a flurry of U.S. airstrikes against their organizations and million-dollar bounties on their heads, the Pashtun chieftains have been able to operate, and even expand their networks, largely unmolested from bases spread along the border with Pakistan. [continued…]

British envoy says mission in Afghanistan is doomed, according to leaked memo
By Charles Bremner and Michael Evans, The Times, October 2, 2008

Britain’s Ambassador to Afghanistan has stoked opposition to the allied operation there by reportedly saying that the campaign against the Taleban insurgents would fail and that the best hope was to install an acceptable dictator in Kabul.

Sir Sherard Cowper-Coles, a Foreign Office heavyweight with a reputation for blunt speaking, delivered his bleak assessment of the seven-year Nato campaign in Afghanistan in a briefing with a French diplomat, according to French leaks. However sources in Whitehall said the account was a parody of the British Ambassador’s remarks.

François Fitou, the deputy French Ambassador to Kabul, told President Sarkozy’s office and the Foreign Ministry in a coded cable that Sir Sherard believed that “the current situation is bad; the security situation is getting worse; so is corruption and the Government has lost all trust”. [continued…]

A shake-up at the top of Pakistan’s spy agency
By Omar Waraich, Time, September 30, 2008

Pakistan may currently enjoy what seems to be a healthy if noisy democracy, but the office of army chief remains the most powerful one in the country — certainly exceeding the effective control of any politician or civilian bureaucrat. And now Pakistan’s army chief, General Ashfaq Kayani, is showing that he is truly in charge of the military — and hence the most powerful man in the country.

Just before midnight on Sept. 29, Kayani replaced the head of Pakistan’s premier intelligence agency and elevated a slew of handpicked generals to key positions in a major shake-up of the military leadership. The most striking appointment is the promotion of Lieut. General Ahmed Shujaa Pasha to head of the Inter-Services Intelligence (ISI), one of the world’s most powerful spy agencies — routinely described, and decried, as a “state within a state.” Pasha, who had headed military operations in the tribal areas, replaces Lieut. General Nadeem Taj, an appointee and relative of recently departed President and ex–army chief Pervez Musharraf, who was infamous for intertwining military and political affairs. [continued…]

Terrorist attacks in Pakistan stir anger at U.S.
By Issam Ahmed, Christian Science Monitor, October 1, 2008

For Jamil Asghar, owner of the Bata Shoe Store in Saddar Market, preparations for this year’s Eid-al-Fitr celebrations are being marred by an ever-present sense of danger.

“Look around you,” he says, surveying the crowded middle-class bazaar. “If a bomb went off here, where these innocent people are standing, can you imagine how bad it would be?”

Though unequivocal in his view that terrorists are kaffirs (unbelievers), Asghar also has no doubt where the root cause of the recent increase in suicide bombings and other deadly attacks lies: the United States and its military incursions into Pakistan’s tribal zones. [continued…]

The cost of boots on the ground in Iraq
By John Basil Utley, FPIF, September 30, 2008

It takes half a million dollars per year to maintain each sergeant in combat in Iraq. Thanks to a Senate committee inquiry, an authoritative government study finally details the costs of keeping boots on the ground. The Congressional Budget Office (CBO), in its report Contractors’ Support of U.S. Operations in Iraq, compared the costs of maintaining a Blackwater professional armed guard versus the U.S. military providing such services itself. Both came in at about $500,000 per person per year.

News reports of the study have largely focused on the total cost of U.S. contractors. The 190,000 contractors in Iraq and neighboring countries, from cooks to truck drivers, have cost U.S. taxpayers $100 billion from the start of the war through the end of 2008. Overlooked in this media coverage has been the sheer cost per soldier of keeping the army in Iraq. This per-soldier cost is more comprehensible and alarming than the rather abstract aggregate figure. [continued…]

The trickle-up bailout
By Jonathan G.S. Koppell and William N. Goetzmann, Washington Post, October 1, 2008

The theory underlying the bailout plan stalled in Congress is that rescuing the finance industry will restore market stability and that the benefits will eventually trickle down to average Americans. Thus, solving the subprime mortgage crisis has morphed into a much larger challenge: reassembling the architecture of the financial markets, which seemingly requires giving the Treasury secretary nearly a trillion dollars and extraordinary latitude to pick winners and losers.

There is an easier and more politically palatable fix: Pay off all the delinquent mortgages.

The financial crisis is a liquidity crisis, yes, but it is ultimately a product of homeowner failures to pay. Unless this fundamental problem is fixed, we will continue to see — and need to treat — the symptoms. The proposed bailout ignores this. Yet the sum being demanded from taxpayers is almost certainly more than sufficient to pay off all currently delinquent mortgages. [continued…]

GOP, RIP?
By Timothy Noah, Slate, September 30, 2008

The Republican-led defeat of President Bush’s Wall Street bailout plan caused an immediate financial catastrophe: The stock market fell an unprecedented 777.68 points, wiping out, by one estimate, $1.2 trillion in wealth. But the greater and more lasting damage may be to the Republican Party itself.

Percentagewise, the Sept. 29 crash was one-third the size of Black Monday, the stock-market crash of Oct. 19, 1987. As I write, the Dow Jones Industrial Average has risen more than halfway back up (though stock prices remain volatile). It’s still possible to believe that the economy will return to normal in a year or two. For Republicans, though, the events of Sept. 29 could well be remembered as the start of a decades-long exile from power—much as Democrats remember Nov. 4, 1980. [continued…]

The GOP blames the victim
By Thomas Frank, Wall Street Journal, October 1, 2008

Two weeks ago, I wrote that the breakdown of the nation’s financial industry was undeniably a self-induced injury; that it would finally force conservatives to own up to the wrongheadedness of their deregulatory project; that they couldn’t possibly blame the disaster on any of their traditional bogeymen.

But I had forgotten about conservatives’ extraordinary instincts for blame-evasion. This is a movement, after all, that blandly recasts its greatest idols as traitors once their popularity has crashed; that routinely sloughs off responsibility for . . . well . . . anything since, by its logic, conservatism has never really been tried in the first place. Consider in this respect Mitt Romney’s remarkable speech to the Republican convention a few weeks ago, in which he rallied his party against Washington — a place his party has controlled, to one degree or another, for nearly three decades — by listing the city’s various institutions and crying, “It’s liberal!”

Or consider the way the House Republicans torpedoed the bailout bill a few days ago. The real reason they did it was almost certainly to evade responsibility for an unpopular measure but the announced reason seemed designed to convince the nation’s 7-year-olds — because Nancy Pelosi said something mean. [continued…]

Mainstream economists reconsider globalization
By Christopher Hayes, TNR, October, 2008

Fifteen years after NAFTA and ten years after the protests against the World Trade Organization in Seattle, economists can now look at the actual results from a host of multilateral free-trade agreements. The results do little to overthrow the basic theoretical argument about comparative advantage–economies do best when they specialize in producing the goods and services they can make most efficiently and trade for those goods outside their specialization–but they have led many economists to be far more skeptical of the actual “free trade” policies that have emerged from Washington over the last several decades. The evidence has forced academics to focus on the distribution of trade’s negative effects, the role trade agreements play in rising inequality, and the failure of trade agreements to deliver the bounty of jobs their advocates predicted. The result is that, while they may still deride protectionism, laissez-faire economists who once sought to keep government from meddling in the market have begun to embrace an unlikely new partner: the welfare state. [continued…]

Can Asia rescue the global economy?
By Linda Lim, YaleGlobal, September 29, 2008

hat change a decade brings. Western bankers and pundits who hectored Asians for poor governance and lack of transparency during the 1997 financial crisis now hope for help from Asia as the hallowed “Anglo-American financial system” implodes.

Asian countries whose currencies and economies collapsed then were not victims of their own monetary or fiscal profligacy. Unlike the US today, their governments did not have large budget deficits, nor did they cause inflation by printing money. Some like Thailand had fixed exchange rates which became overvalued because they were tied to a then-strengthening US dollar, and capital-market liberalization attracted large short-term foreign capital inflow. This “hot money” built up domestic asset bubbles and generated large current account deficits, which attracted currency speculators. Other countries like Indonesia were victims of financial contagion once their neighbors’ currencies crashed.

Since then, many though not all economists have concluded that capital market liberalization and free capital flows in developing countries not only fail the test as an unalloyed good, but are unnecessary and, at worst, pernicious. [continued…]

This economy does not compute
By Mark Buchanan, New York Times, October 1, 2008

A few weeks ago, it seemed the financial crisis wouldn’t spin completely out of control. The government knew what it was doing — at least the economic experts were saying so — and the Treasury had taken a stand against saving failing firms, letting Lehman Brothers file for bankruptcy. But since then we’ve had the rescue of the insurance giant A.I.G., the arranged sale of failing banks and we’ll soon see, in one form or another, the biggest taxpayer bailout of Wall Street in history. It seems clear that no one really knows what is coming next. Why?

Well, part of the reason is that economists still try to understand markets by using ideas from traditional economics, especially so-called equilibrium theory. This theory views markets as reflecting a balance of forces, and says that market values change only in response to new information — the sudden revelation of problems about a company, for example, or a real change in the housing supply. Markets are otherwise supposed to have no real internal dynamics of their own. Too bad for the theory, things don’t seem to work that way.

Nearly two decades ago, a classic economic study found that of the 50 largest single-day price movements since World War II, most happened on days when there was no significant news, and that news in general seemed to account for only about a third of the overall variance in stock returns. A recent study by some physicists found much the same thing — financial news lacked any clear link with the larger movements of stock values. [continued…]

Lesson from a crisis: when trust vanishes, worry
By David Leonhardt, New York Times, October 1, 2008

In 1929, Meyer Mishkin owned a shop in New York that sold silk shirts to workingmen. When the stock market crashed that October, he turned to his son, then a student at City College, and offered a version of this sentiment: It serves those rich scoundrels right.

A year later, as Wall Street’s problems were starting to spill into the broader economy, Mr. Mishkin’s store went out of business. He no longer had enough customers. His son had to go to work to support the family, and Mr. Mishkin never held a steady job again.

Frederic Mishkin — Meyer’s grandson and, until he stepped down a month ago, an ally of Ben Bernanke’s on the Federal Reserve Board — told me this story the other day, and its moral is obvious enough. Many people in Washington fear that the country is starting to spiral into a terrible downturn. And to their horror, they see the public, and many members of Congress, turning into modern-day Meyer Mishkins, more interested in punishing Wall Street than saving the economy.

All of which may be true. But there is good reason for the public’s skepticism. The experts and policy makers who so desperately want to take action have failed to tell a compelling story about why they’re so afraid. [continued…]

Asia rides high – for the moment
By Gideon Rachman, Financial Times, September 29, 2008

The great Wall Street meltdown is a huge economic and financial event. But might it also signal a historic shift in global politics – a moment that both marks and accelerates the decline of American power?

I have just spent the past two weeks in China and India – and it is clear that the thought has occurred to many people there. Whatever the long-term economic impact on Asia of America’s financial crisis, a psychological shift is already evident.

The success of the Beijing Olympics in August and the failure of Wall Street in September has been a boost to Chinese self-confidence.

Pan Wei, director of the Center for Chinese and Global Affairs at Beijing university, mused aloud to me that: “My belief is that in 20 years we will look the Americans straight in the eye – as equals. But maybe it will come sooner than that. Their system is in chaos and they need our money to rescue them.” [continued…]

They just don’t get it
By Steven Pearlstein, Washington Post, September 30, 2008

Oy vey.

That is the technical economic term that best sums up a day in which the House of Representatives refuses to pass a $700 billion rescue plan pushed by the White House and congressional leaders from both parties, Wachovia is taken over in a deal that will have the government potentially owning 10 percent of Citigroup, a few European banks fail, the Federal Reserve and other central banks are forced to inject an additional $300 billion into the global banking system, the Dow Jones industrial average plunges 778 points, and investors everywhere rush to the safety of gold and short-term Treasury bills.

The basic problem here is that too many people don’t understand the seriousness of the situation.

Americans fail to understand that they are facing the real prospect of a decade of little or no economic growth because of the bursting of a credit bubble that they helped create and that now threatens to bring down the global financial system. [continued…]

Failure written in West Bank stone
By Gershom Gorenberg, Washington Post, September 30, 2008

The latest phone call came from a journalist in Denmark. Why, he asked, has Israeli settlement in the West Bank continued despite peace negotiations with the Palestinians?

As a historian of settlements, I’m used to this question. Outgoing Prime Minister Ehud Olmert insists that Israel’s future depends on a two-state solution. Building new homes in settlements only makes it more difficult to withdraw. When President Bush convened the Annapolis conference last November, there was media buzz about a settlement freeze. Olmert said that every request to build from within the government required his approval. Yet in the past year, construction has increased — despite Olmert’s talk, despite Bush’s supposed commitment to his 2003 “road map” plan with its freeze on settlement.

Nearly a thousand housing units are being built in Maale Adumim, according to Peace Now’s Settlement Watch project. At Givat Zeev, another of the settlements ringing Jerusalem, a 750-unit project was approved this year. The government has asked for bids on building nearly 350 homes in Beitar Illit, also near Jerusalem. Meanwhile, hundreds of homes have been added at settlements deep in the West Bank, with the government’s acquiescence if not approval. [continued…]

Olmert says Israel should pull out of West Bank
By Ethan Bronner, New York Times, September 30, 2008

Prime Minister Ehud Olmert said in an interview published on Monday that Israel must withdraw from nearly all of the West Bank as well as East Jerusalem to attain peace with the Palestinians and that any occupied land it held onto would have to be exchanged for the same quantity of Israeli territory.

He also dismissed as “megalomania” any thought that Israel would or should attack Iran on its own to stop it from developing nuclear weapons, saying the international community and not Israel alone was charged with handling the issue.

In an unusually frank and soul-searching interview granted after he resigned to fight corruption charges — he remains interim prime minister until a new government is sworn in — Mr. Olmert discarded longstanding Israeli defense doctrine and called for radical new thinking, in words that are sure to stir controversy as his expected successor, Foreign Minister Tzipi Livni, tries to build a coalition. [continued…]

Bibi: I’ll resume settlement activity
Jerusalem Post, September 29, 2008

Binyamin Netanyahu will resume building in existing West Bank settlements if he is elected prime minister, the opposition leader told Walla! News on Sunday.

“I don’t understand why there can be natural growth in Arab neighborhoods, but not in Jewish neighborhoods,” he said. “There is a difference between the plans of a family that has more children and wants to close off its balcony and the building of additional neighborhoods. There is no reason why there shouldn’t be development of existing [Jewish] neighborhoods.”

The opposition leader reiterated that there was currently no chance of a peace deal with the Palestinian Authority and therefore, the only option was an economic arrangement. He said that after such an agreement had been kept properly, a peace deal could be examined. [continued…]

American diplomats meet Syrians in sign of thaw
By Jay Solomon, Wall Street Journal, September 30, 2008

Senior American and Syrian diplomats held a series of meetings over the past week here, a sign of a potential thaw between the U.S. and a country that President George W. Bush has alleged is a principal sponsor of international terrorism.

A State Department official said the U.S. used the talks as an opportunity to list its grievances with Syria. But the diplomats also discussed Washington’s support for peace talks between Syria and Israel over the future of the disputed Golan Heights region, participants in the talks said. The two sides also talked about Damascus’s role in the security situations in Iraq, Lebanon and the Palestinian territories.

“I consider this a good progress in the American position,” Syrian Foreign Minister Walid Moallem said in an interview with The Wall Street Journal in New York Monday. “We agreed to continue this dialogue.” [continued…]

For U.S. and Sunni allies, a turning point
By Ernesto Londono, Washington Post, September 30, 2008

First Lt. Justin John, 6-foot-4 and built like a linebacker, plopped down on a sofa in front of Ibrahim Suleiman al-Zoubaidi, one of the leaders of the mainly Sunni armed groups that have helped the U.S. military quell violence in Iraq since last year.

Zoubaidi, a small man armed with a revolver, had one thing on his mind: This week officials of Iraq’s Shiite-led government will assume authority over the groups, which have been backed by the United States.

“They will kill us,” Zoubaidi declared. “One by one.”

Across Baghdad, leaders of the groups speak about the transition in similarly apocalyptic terms. Some have left Baghdad, saying they fear that the Iraqi government will conduct mass arrests after the handover. Others are obtaining passports and say they will flee to Syria. [continued…]

Know-alls
The Economist, September 25, 2008

If a Muslim chemistry graduate takes an ill-paid job at a farm-supplies store what does it signify? Is he just earning extra cash, or getting close to a supply of potassium nitrate (used in fertiliser, and explosives)? What if apparent strangers with Arabic names have wired him money? What if he has taken air flights with one of those men, with separate reservations and different seats, paid in cash? What if his credit-card records show purchases of gadgets such as timing devices?

If the authorities can and do collect such bits of data, piecing them together offers the tantalising prospect of foiling terrorist conspiracies. It also raises the spectre of criminalising or constraining innocent people’s eccentric but legal behaviour.

In November 2002 news reports revealed the existence of a big, secret Pentagon programme called Total Information Awareness. This aimed to identify suspicious patterns of behaviour by “data mining” (also known as “pattern recognition”): computer-driven searches of large quantities of electronic information. After a public outcry it was dubbed, perhaps more palatably, Terrorism Information Awareness. But protests continued, and in September 2003 Congress blocked its funding. [continued…]

The fight goes on, militants tell Pakistan
By Syed Saleem Shahzad, Asia Times, October 1, 2008

When United States President George W Bush and British Premier Gordon Brown interacted with their Pakistani and Afghan counterparts on the sidelines of the United Nations General Assembly in New York last week, they expressed satisfaction for the conflict escalation against the Taliban and al-Qaeda in the South Asian War theater. (See Militants shake off Pakistan’s grip Asia Times Online, Sep 29.)

This escalation, particularly in Pakistan’s tribal agencies, is a gamble based on the tactics used by the US’s chief man in Iraq, General David Petraeus, in 2007. Following a “surge” in the war, the US offered an olive branch to the militants. This created a wedge between al-Qaeda and the Iraqi tribal resistance and led to a significant reduction in the intensity of the resistance.

In Pakistan, there is no sign of this happening. Indeed, the reverse is true. [continued…]

The revenge of ideas: Karl Polanyi and Susan Strange
By Fred Halliday, Open Democracy, September 24, 2008

Karl Polanyi’s The Great Transformation: The Political and Economic Origins of Our Time (1944)… is a book of imaginative and wide-ranging historical sociology that traces the rise of the modern capitalist market from the industrial revolution in England in the late 18th century (the “great transformation” of the book’s title) to the convulsions of the 1920s and 1930s and the outbreak of the second world war.

Polanyi’s book begins in the unlikely setting of the Pelican Inn – a pub in Dorset, England’s “west country”, where in the 1790s agricultural labourers met to protect their living standards. It goes on to provide a compelling, if wilfully digressive, account of how modern markets work; and in particular of the inbuilt instability, and inexorable swings and oscillations, that they embody. The author challenges the idea that there is anything “natural” or universal about the modern market; Polanyi emphasises the cultural and political underpinnings of markets, and shows how this complex phenomenon – at once generating wealth and provoking instability and poverty – is the particular outcome of modern industrial society.

His conclusion is a product of the broad, social-democratic, and informed liberal opinion of the time – that is, in the aftermath of the great depression in the 1930s and during a global war: that markets are human and contingent entities that have to be regulated, and managed, by states. There is no such thing as a “hidden hand”. A “pure” market unanchored to other social institutions and practices cannot exist. [continued…]

A little problem with capitalism
By Thomas Walkom, Toronto Star, September 27, 2008

What’s happening now on Wall Street is seen as a new story. It is not. It is a very old one.

Karl Marx wrote about it; so did John Maynard Keynes. More recently, tycoon George Soros has pronounced on it, as has the redoubtable Economist, a decidedly pro-free market financial magazine.

This old story is quite simple: Capitalism is unstable. It is an economic system that can be ruthlessly productive. But is also one of wheels within wheels – internal contradictions Marx called them – that can, and regularly do, spin out of control.

Marx, a German philosopher suffering from boils, saw these contradictions as opportunities; he figured that capitalism’s self-destruction would lead to a better world.

Keynes, a British economist who liked to speculate in foreign currency over his morning tea and toast, saw them as problems that could destroy a world he rather liked. The welfare state edifice that bears his name was designed in the post-1945 period to, literally, save capitalism from itself. [continued…]

Washington’s waning way: how bail-outs poison a free market recipe for the world
By Alan Beattie, Financial Times, September 28, 2008

Debating with Al Gore in the presidential election eight years ago, George W. Bush defined a new, humbler attitude towards the rest of the world. “I’m not so sure the role of the United States is to go around the world and say, ‘this is the way it has got to be’,” he said. “I just don’t think it’s the role of the United States to walk into a country and say: ‘we do it this way, so should you’.”

In one area Mr Bush might be about to get his wish, though not perhaps in the way he expected.

The events of the past few weeks on Wall Street have handed ammunition to the opponents of free markets well outside the financial sector and way beyond America’s shores. A model of freewheeling finance the US has pushed around the world, which had already undergone some tactical withdrawals over the past decade, appears in headlong retreat.

For some, the retreat of the Washington model risks turning into a rout. David Rothkopf, a senior Commerce department official during the administration of President Bill Clinton, says the world is at a turning point. “This is a watershed,” he says. “This is the end of 25 years of Reagan-Thatcherism, ‘leave it to the market, less government is better government’. That is over – period.” [continued…]

Bankrupt economics
By Robert J. Samuelson, Washington Post, September 29, 2008

What we are witnessing, in the broadest sense, is the bankruptcy of modern economics. Its conceit has been that we had solved the problem of stability. Oh, there would be periodic recessions, but the prospects of a major economic collapse were negligible because we knew how the system worked and could take steps to prevent it. What’s been so unsettling about the present crisis is that it has not conformed to the standard model of business cycles and has not submitted to familiar textbook solutions.

A hallmark of the crisis has been the stark contrast between the “real economy” of production and jobs and the tumultuous financial markets of stocks, bonds, banks, money funds and the like. Even with the 60 percent drop in housing construction since early 2006, the real economy has so far suffered only modest setbacks. Yes, there are 605,000 fewer payroll jobs than there were in December; still, 137.5 million jobs remain. Meanwhile, financial markets verge on hysteria. The question is whether this hysteria will drive the real economy into a deep recession or worse — and what we can do to prevent that. [continued…]

Daring to say loans made no sense
By David Carr, New York Times, September 29, 2008

Sometimes, if you want the real answer, you have to ask a dumb question.

Alex Blumberg, a producer at “This American Life,” a public radio show that specializes in old-fashioned storytelling about local slices of Americana, has never owned a house or had a mortgage, let alone covered the financial industry. Nonetheless, he was fascinated as he watched the subprime mess unfold.

His dumb question? “Why are they lending money to people who can’t afford to pay it back?”

In 2006, Mr. Blumberg began bothering his friend Adam Davidson, an experienced business reporter at National Public Radio, about subprime loans. Mr. Davidson, who had a broad knowledge of global capital markets, patiently walked him through collateralized debt obligations, yield and risk curves, and the growing amount of international capital in need of a home. But Mr. Blumberg still didn’t get it. How could securities based on lending money to bad risks be good business?

“I was embarrassed for him,” Mr. Davidson said. “I understood how money flowed around the world and I was talking to big-picture thinkers.”

Soon, Mr. Blumberg was madly surfing the Web and torturing his wife and friends with arcane talk about loan syndication and credit-default swaps. “It was a very unhealthy obsession,” he says now. “I just couldn’t understand how they could expect to be paid off when everyone I knew was maxed out on their credit cards. And these were very big loans.”

He decided to do the story for “This American Life,” a show that has a reputation for discussing things like summer camp and inner demons.

“I told him, I don’t know how you’re going to do a story about mortgage securitization for ‘This American Life,’ but good luck,” Mr. Davidson said. But by December of last year, both Mr. Davidson and the broader markets were beginning to have their doubts about whether the fallout from subprime lending had actually been contained.

The more they talked, the more Mr. Davidson realized the education was going both ways. They eventually came up with a one-hour collaboration between NPR News and “This American Life” called “The Giant Pool of Money” that was broadcast last May and became a much downloaded primer on all the mayhem that followed. [continued…]

Analysis: the failure of the bailout bill
By Chris Cillizza, Washington Post, September 29, 2008

The failure of the financial bailout bill in the House is a classic example of an old adage: all politics is local.

Despite the fact that President George W. Bush and the leadership of both parties lined up behind the bill, the rank and file of both parties — particularly on the Republican side — rebelled in light of polling that showed the American public is deeply skeptical about a planned $700 billion bailout for the financial industry.

With just over one month left before the November election, politicians of both partisan stripes are concerned primarily about one thing: their own political futures. [continued…]

Why the bailout bill failed
By Ben Pershing, Washington Post, September 29, 2008

So how could a major bill described by the president and both parties’ leaders as critical to well-being of the nation’s — and the world’s — economy go down to defeat?

There are no easy answers here, as the House’s stunning defeat moments ago of the financial bailout legislation is putting us into seemingly uncharted territory. But while the final tally, with 133 Republicans and 95 Democrats voting no, was a surprise — all morning, Hill sources were predicting narrow passage — the signs were there that the measure was in trouble: [continued…]

Bailout plan splits free-market backers
By Donald Lambro, Washington Times, September 28, 2008

A furious family squabble is raging among free-market advocates over the Bush administration’s economic-rescue plan, between those who say let debt-ridden businesses fail and those who warn of a deep recession if government doesn’t bail them out.

The fight has divided conservatives as well their grass-roots supporters, who make up a large part of the Republicans’ political base and threaten to undermine party unity in the middle of a close presidential election. That grass-roots backlash has to a large degree fueled House Republican opposition to the Treasury’s bailout plan.

Lawmakers say they have been inundated by a wave of voter anger to the proposed bailout of troubled banks and other financial institutions. Republican Sen. John Cornyn of Texas says his offices “have received more calls and e-mails on this issue in a short period of time than were logged even on the contentious immigration issue in 2007.” [continued…]

Obama goes to rural Virginia
By Peter J. Boyer, The New Yorker, October 6, 2008

Barack Obama’s September 9th trip to Lebanon, Virginia, in the southwestern hill country, came at a moment of deep unease among Democrats. John McCain’s selection of Sarah Palin as his running mate, eleven days earlier, had yielded rich results, in Republican enthusiasm and in polling numbers. Several polls showed McCain pulling ahead of Obama, and some Democrats worried that Obama’s slogan of “Change” was a frail substitute for an emphatic message spelling out just what change he hoped to bring about. It seemed that the Obama camp had been knocked off balance by the Palin factor. Some Democrats feared that Obama himself—cool, cerebral, aloof—was a problem, reflected by the campaign’s apparent inability to counter McCain’s bold communications strategy effectively. Most disturbing, polling revealed that voters were increasingly inclined to trust McCain on the economy—an issue on which the Democrat should have the advantage.

If Obama was feeling deflated, he did not show it when he bounded onto the stage that afternoon in the Lebanon High School gymnasium. The crowd of about two thousand had been warmed up by Cecil Roberts, the fire-breathing president of the United Mine Workers of America (who offered the observation, which was making the rounds that week, that “Jesus was a community organizer”). Obama, shedding his suit jacket and rolling up his shirtsleeves, worked the crowd hard for more than an hour. He joked about the hubbub surrounding McCain’s choice of running mate (“I’ve been to forty-nine states now. The only one I haven’t been to is Alaska, and I realize now that maybe I should have gone up there”), and then began a performance that was as populist in theme and as personal in style as a Harvard lawyer could credibly deliver. He portrayed an America that had lost its dream, becoming a nation whose people stood in unemployment lines as their homes were being foreclosed on. He decried C.E.O.s who “give themselves million-dollar bonuses, even as they’re closing down a plant.” And he portrayed John McCain as being hopelessly out of touch.

“I don’t think John McCain is a bad man,” Obama said. “I just think that he doesn’t get it. I just think that he doesn’t understand what the American people are going through right now.” Obama attacked Republicans for their trickle-down economic theories, and McCain for buying into them. “They call it the ownership society in Washington,” he said. “What they really mean is, You’re on your own. Your plant closes up and you lose your job, you’re on your own. You’re sailing along, trying to look after your kids, if you want to go back to college, you’re on your own. You’re a poor kid, lift yourself up by your bootstraps, you’re on your own. . . . Now, I guess if you think that somebody making four million dollars is still middle class, maybe you think it’s worked. But if you’re like an ordinary person, making thirty or forty or fifty thousand dollars, then you realize how tough things are. And that’s why I’m running for President, because that’s what I come from, that’s where I’ve been.” [continued…]

Union leaders confronted by resistance to Obama
By Steven Greenhouse, New York Times, September 29, 2008

When Mike Pyne and other union foot soldiers knock on doors to promote Senator Barack Obama, they often confront a tricky challenge: how to persuade union members to vote on the basis of their wallets rather than on issues like abortion, gun rights and race.

In battleground states like this one, union voters could be vital to the outcome of the election, and the labor movement has mounted a huge push on behalf of Mr. Obama, the Democratic presidential nominee, built largely around the message that with unemployment rising, the financial system reeling and gasoline and food prices soaring, the nation cannot afford to have another Republican in the White House.

The labor effort appears to be making headway. Social issues have moved to the background while the economy is foremost in the minds of many voters, and Mr. Obama appears to be benefiting politically. People like Tom Crooks, an electrician at a paper company’s research center, are telling union canvassers that they are “definitely leaning” toward Mr. Obama because they are worried about their financial well-being. [continued…]

McCain decides to participate in debate
By Patrick Healy, New York Times, September 26, 2008

Senator John McCain’s campaign said Friday morning that he will attend tonight’s debate with Senator Barack Obama at the University of Mississippi, reversing his earlier call to postpone the debate so he could participate in the Congressional negotiations over the $700 billion bailout plan for financial firms. [continued…]

Editor’s Comment — As John McCain effortlessly polishes his image as a maverick, he seems to have overlooked what should be obvious: the value a maverick serves is in bucking authority and challenging conventions, yet these are not qualities that most people are looking for when they choose a president.

What McCain has accomplished is to invert the equation that would have cast him as the seasoned and more reliable leader by instead cultivating the impression that it is he — not Obama — who is the unknown quantity. Indeed, the more McCain displays his appetite for unpredictability, the more reason there is to believe that this tendency would be accentuated — not tempered — by high office.

Have a passion for rolling dice? Vote McCain!

What the world wants to know
Leaders and writers pose questions for the presidential candidates, New York Times, September 26, 2008

How would you work with America’s allies in the Muslim world to turn around the widely held misperception there, as evidenced in opinion polls, that the global war against terrorism is actually a war against Islam?

— ASIF ALI ZARDARI, the president of Pakistan

***

Many developing countries — mine included — have made sacrifices to carry out tough economic reforms and have sought “trade and not aid.” To succeed, we need to compete on a level playing field with more developed economies. Is the United States ready to shoulder some of the burden by advocating the elimination or tempering of protectionism and subsidies? The United Nations by itself, with its faults and many achievements, does not lead. Nation-states do. American commitment and leadership is a must for effective multilateral cooperation. Will you demonstrate a renewed commitment to multilateralism and the rule of international law? Will you negotiate actively to agree on a post-Kyoto treaty on global warming and seek to join the United Nations Human Rights Council? Lastly, what would you do to regain the trust of your allies who would like to see the United States engaging in respectful dialogue and leading the way in the fight not merely against terrorism — which must be done — but also against world hunger, poverty, inequality and disease?

— MICHELLE BACHELET, the president of Chile [continued…]

McCain resurrects an old stunt
By Matt Welch, Los Angeles Times, September 26, 2008

No wonder John McCain “suspended” his presidential campaign Wednesday to focus in a bipartisan manner on a grave national crisis — he’s been pulling the same stunt for nearly a decade now, boosting his poll ratings by pretending not to care about them.

You probably remember his suspension of the Republican National Convention’s first day of business in order to raise funds and awareness for the victims of Hurricane Gustav (a move that, besides allowing umpteen convention speakers to praise McCain’s selfless patriotism, neatly airbrushed the unpopular sitting president and vice president from the proceedings).

But McCain first used the tactic to spectacular effect way back in March 1999, when — even though his White House run had been chugging along for five months — he postponed the “official announcement” of his candidacy so that the nation could focus as one on the week-old war in Kosovo. “It’s not appropriate at this time,” the somber senator said then, “to launch a political campaign.” [continued…]

Where are the grown-ups?
By Paul Krugman, New York Times, September 26, 2008

Many people on both the right and the left are outraged at the idea of using taxpayer money to bail out America’s financial system. They’re right to be outraged, but doing nothing isn’t a serious option. Right now, players throughout the system are refusing to lend and hoarding cash — and this collapse of credit reminds many economists of the run on the banks that brought on the Great Depression.

It’s true that we don’t know for sure that the parallel is a fair one. Maybe we can let Wall Street implode and Main Street would escape largely unscathed. But that’s not a chance we want to take.

So the grown-up thing is to do something to rescue the financial system. The big question is, are there any grown-ups around — and will they be able to take charge? [continued…]

Government seizes WaMu and sells some assets
By Eric Dash and Andrew Ross Sorkin, New York Times, September 26, 2008

Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history.

Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual, the nation’s largest savings and loan, to JPMorgan Chase for $1.9 billion, averting another potentially huge taxpayer bill for the rescue of a failing institution. [continued…]

Palin talks to Couric — and if she’s lucky, few are listening
By James Rainey, Los Angeles Times, September 26, 2008

A global financial crisis and a not-quite-suspended presidential campaign dominated newspaper front pages and television reports over the last couple of days.

Bad news for America. But good news for Sarah Palin.

The economic crisis and John McCain’s surprising response have drawn attention away from the Republican vice presidential nominee just as she has started to answer more pointed questions from the media.

Her third nationally televised interview, with CBS anchor Katie Couric, found Palin rambling, marginally responsive and even more adrift than during her network debut with ABC’s Charles Gibson. [continued…]

An Open Letter to the American People
By 61 Nobel Laureates, , September, 2008

This year’s presidential election is among the most significant in our nation’s history. The country urgently needs a visionary leader who can ensure the future of our traditional strengths in science and technology and who can harness those strengths to address many of our greatest problems: energy, disease, climate change, security, and economic competitiveness.

We are convinced that Senator Barack Obama is such a leader, and we urge you to join us in supporting him.

During the administration of George W. Bush, vital parts of our country’s scientific enterprise have been damaged by stagnant or declining federal support. The government’s scientific advisory process has been distorted by political considerations. As a result, our once dominant position in the scientific world has been shaken and our prosperity has been placed at risk. We have lost time critical for the development of new ways to provide energy, treat disease, reverse climate change, strengthen our security, and improve our economy.

We have watched Senator Obama’s approach to these issues with admiration. We especially applaud his emphasis during the campaign on the power of science and technology to enhance our nation’s competitiveness. In particular, we support the measures he plans to take – through new initiatives in education and training, expanded research funding, an unbiased process for obtaining scientific advice, and an appropriate balance of basic and applied research – to meet the nation’s and the world’s most urgent needs.

Senator Obama understands that Presidential leadership and federal investments in science and technology are crucial elements in successful governance of the world’s leading country. We hope you will join us as we work together to ensure his election in November.

Signed,

Click here [PDF] to read the original with signers]

Pakistan warns U.S. troops after exchange of fire
AP, September 26, 2008

Pakistan warned U.S. troops not to intrude on its territory Friday, after the two anti-terror allies traded fire along the volatile border with Afghanistan.

Thursday’s five-minute clash adds to already heightened tensions at a time the United States is stepping up cross-border operations in a region known as a haven for Taliban and al-Qaida militants.

The clash — the first serious exchange with Pakistani forces acknowledged by the U.S. — follows a string of other alleged border incidents and incursions that have angered many here. [continued…]

Pakistan says 1,000 militants killed near Afghan border
AFP, September 26, 2008

Pakistan said Friday that troops have killed 1,000 Islamist militants in a huge offensive, a day after President Asif Ali Zardari lashed out at US forces over a clash on the Afghan border.

Five top Al-Qaeda and Taliban commanders were among those killed in a month-long operation in Bajaur, currently the most troubled of Pakistan’s unstable tribal areas along the porous frontier, a top official said.

But in a further sign of the instability gripping Pakistan since the bombing of the Marriott Hotel in Islamabad last weekend, three suicide bombers blew themselves up in a shootout with police in Karachi. [continued…]

Israel asked US for green light to bomb nuclear sites in Iran
By Jonathan Steele, The Guardian, September 25, 2008

Israel gave serious thought this spring to launching a military strike on Iran’s nuclear sites but was told by President George W Bush that he would not support it and did not expect to revise that view for the rest of his presidency, senior European diplomatic sources have told the Guardian.

The then prime minister, Ehud Olmert, used the occasion of Bush’s trip to Israel for the 60th anniversary of the state’s founding to raise the issue in a one-on-one meeting on May 14, the sources said. “He took it [the refusal of a US green light] as where they were at the moment, and that the US position was unlikely to change as long as Bush was in office”, they added.

The sources work for a European head of government who met the Israeli leader some time after the Bush visit. Their talks were so sensitive that no note-takers attended, but the European leader subsequently divulged to his officials the highly sensitive contents of what Olmert had told him of Bush’s position. [continued…]

Editor’s Comment — Israel — with the support of many American political leaders — likes to burnish it’s image as a free and unpredictable player in the Middle East but when it comes to its options on confronting Iran the idea that Israel might “go it alone” is a fantasy only given life by those who want to use the idea as a political tool.

Even if Bush’s exchange with Olmert was a closely guarded secret, he actually made it quite clear that the military option — forever present, though well bolted down, on that proverbial table — was not going to be used while he remained in office.

The president told The Jerusalem Post yesterday that before leaving office he wants a structure in place for dealing with Iran.

That was on May 12. Bush has subsequently not been pressed to explain what this structure might look like, but as I’ve previously speculated, if the president wants to salvage some sort of legacy, then it could well take a diplomatic form through an opening to Iran. As an “October surprise” that would undermine McCain, but I wouldn’t discount the possibility that it comes as a November surprise, right after the election.

As the New York Times said a few days ago:

Secretary of State Condoleezza Rice had hoped to salvage at least part of President Bush’s legacy, and her own, by brokering an Israeli-Palestinian peace deal before Mr. Bush leaves office. That’s looking ever less likely. Ms. Rice could still make history if she got on a plane to Tehran to deliver an offer of a grand bargain.

She could prove that she was serious by proposing to immediately open an American interests section in Tehran — an idea her aides floated a few months ago that seems to have disappeared.

We don’t know if any mix of sanctions and rewards can persuade Iran’s leaders to abandon their nuclear program. But without such an effort, we are certain that Tehran will keep pressing ahead, while the voices in the United States and Israel arguing for military action will only get louder.

Stopping a financial crisis, the Swedish way
By Carter Dougherty, New York Times, September 23, 2008

A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?

It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent.

But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing. [continued…]

A bailout we don’t need
By James K. Galbraith, Washington Post, September 25, 2008

Now that all five big investment banks — Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley — have disappeared or morphed into regular banks, a question arises.

Is this bailout still necessary?

The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They’re called “loans.”

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn’t, the FDIC has the bridge bank facility to take care of that. [continued…]

Save the world? Hank just didn’t have a clue
By Anatole Kaletsky, The Times, September 25, 2008

The Emperor has no clothes. If you want to know why American capitalism is on the brink of disaster, but also want to understand what will save it, then log on to the C-Span congressional website and watch the interrogations of Henry Paulson, the US Treasury Secretary, by the Senate and House banking committees.

Until last week, I was in a minority of one in arguing that Mr Paulson was personally responsible for suddenly turning the painful but manageable credit crunch that had been grinding away 18 months in the background of the US economy into a global catastrophe. Mr Paulson’s appearances on Capitol Hill, marked by the characteristic Bush-era combination of arrogance and incompetence, are turning my once-outlandish view into conventional wisdom: Henry Paulson is to finance what Donald Rumsfeld was to military strategy, Dick Cheney to geopolitics and Michael Chertoff to flood defence.

Mr Paulson may be a former chairman of Goldman Sachs, but as US Treasury Secretary he does not know what he is doing. His recent blunders, starting with the “rescue” of Fannie Mae, have triggered unintended consequences around the world, resulting in the death-spiral of financial values. But last Friday Mr Paulson outdid even these Rumsfeldian achievements, when he demanded $700 billion from Congress for a “comprehensive and fundamental” solution to the global financial crisis, without apparently having any idea of what he would actually do. [continued…]

U.S. appeals abroad fall flat as leaders see no crisis at home
By Steven Mufson and Anthony Faiola, Washington Post, September 25, 2008

As the world watched Congress struggle yesterday with a plan to bail out the U.S. financial system, foreign leaders balked at similar fixes for their own economies, a few even dismissing the credit meltdown as an American problem. Some foreign investors who had previously provided crucial injections of capital remained on the sidelines.

Senior U.S. officials, notably Treasury Secretary Henry M. Paulson Jr., have in recent days urged the leaders of other industrialized countries to help prop the global financial system. But the appeals have fallen short. While policymakers and economic analysts in Europe and Latin America said yesterday that they recognized the severity of the challenge facing the global financial system, they saw little need at the moment for major rescue packages in their own countries.

“The situation we face here in Europe is less acute, and member states do not at this point consider that a U.S.-style plan is needed,” said Joaquín Almunia, the European Commissioner for Economic and Monetary Policy in Brussels. [continued…]

Bush aides linked to talks on interrogations
By Mark Mazzetti, New York Times, September 25, 2008

Senior White House officials played a central role in deliberations in the spring of 2002 about whether the Central Intelligence Agency could legally use harsh interrogation techniques while questioning an operative of Al Qaeda, Abu Zubaydah, according to newly released documents.

In meetings during that period, the officials debated specific interrogation methods that the C.I.A. had proposed to use on Qaeda operatives held at secret C.I.A. prisons overseas, the documents show. The meetings were led by Condoleezza Rice, then the national security adviser, and attended by Defense Secretary Donald H. Rumsfeld, Attorney General John Ashcroft and other top administration officials.

The documents provide new details about the still-murky early months of the C.I.A.’s detention program, when the agency began using a set of harsh interrogation techniques weeks before the Justice Department issued a written legal opinion in August 2002 authorizing their use. Congressional investigators have long tried to determine exactly who authorized these techniques before the legal opinion was completed. [continued…]

The time has come for a final report on the 43rd president of the US
By Timothy Garton Ash, The Guardian, September 25, 2008

As the two men who would succeed him train like Olympic athletes for tomorrow’s foreign policy debate, pause for a moment to complete your final report on the 43rd president of the United States. What would you say?

I would sum up his two terms in four words: hubris followed by nemesis.

Remember the mood music of eight years ago. The greatest power the world has ever seen. Rome on steroids. An international system said to be unipolar, and Washington’s unabashed embrace of unilateralism. The US as “Prometheus unbound”, according to the neoconservative commentator Charles Krauthammer. Wall Street investment bankers bestriding the financial globe as Pentagon generals did the military globe and Harvard professors the soft power one. Masters of the universe. Personifying that hubristic moment: George Walker Bush.

And now: nemesis. The irony of the Bush years is that a man who came into office committed to both celebrating and reinforcing sovereign, unbridled national power has presided over the weakening of that power in all three dimensions: military, economic and soft. [continued…]

As crime increases in Kabul, so does nostalgia for Taliban
By Pamela Constable, Washington Post, September 25, 2008

Mirza Kunduzai, 58, a slight man with a short white goatee, had almost reached his house after a day of trading in the capital’s open-air currency market when his taxi was forced to stop by six heavily armed men dressed in Afghan National Army uniforms.

For the next week, Kunduzai recounted, he endured one horror after another — beaten unconscious, hooded and handcuffed, strung up by his wrists and ankles, dumped in a filthy latrine — while his family frantically tried to raise the kidnappers’ astronomical ransom demand of $2 million.

“I was 95 percent sure I was a dead man,” Kunduzai said last week. “They said if my family went to the police, they would chop off my fingers and send them to my wife. I begged them to be reasonable. I offered them my house and my farmland back home. Finally, they agreed to settle for $500,000 and released me. I am poor again, but I am thankful to be alive.” [continued…]

Iraq passes provincial elections law
By Erika Goode, New York Times, September 25, 2008

After months of negotiation, Iraq’s Parliament passed a crucial election law on Wednesday, but only by setting aside for future debate the most divisive political issues.

The law could clear the way for provincial elections to take place in much of the country early next year. The elections are viewed by many Iraqi and American officials as crucial for the nation to heal its deep-running political and religious fissures and also to shore up the fragile security gains that have been achieved in recent months.

The question of how to settle a fierce dispute over control of the ethnically mixed and oil-rich northern city of Kirkuk, however, was given to a committee for further study. And an article in an earlier version of the law that provided a limited number of provincial council seats for Iraq’s Christians and other minorities was eliminated from the new bill, stirring outrage among the groups. [continued…]

Contact man’s murder delays Syria nuclear probe: IAEA
AFP, September 25, 2008

The UN atomic watchdog’s probe into alleged illicit nuclear work in Syria has been delayed because the agency’s contact man in Syria was murdered, IAEA chief Mohamed ElBaradei revealed Thursday.

“The reason that Syria has been late in providing additional information (is) that our interlocutor has been assassinated in Syria,” ElBaradei told a closed-door session of the International Atomic Energy Agency’s 35-member board. A recording of his remarks was obtained by AFP.

He did not provide any further details about the identity of the man or circumstances of the assassination. [continued…]

FBI investigating companies at heart of meltdown
AP, September 23, 2008

The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout plan by the Bush administration, The Associated Press has learned.

Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.

The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said. [continued…]

Buyout plan for Wall Street is a hard sell on Capitol Hill
By Mark Lander and Steven Lee Myers, New York Times, September 24, 2008

Treasury Secretary Henry M. Paulson Jr. received an angry and skeptical reception on Tuesday when he appeared before the Senate Banking Committee to ask Congress to promptly give him wide authority to rescue the nation’s financial system.

Mr. Paulson urged lawmakers “to enact this bill quickly and cleanly, and avoid slowing it down with other provisions that are unrelated or don’t have broad support.”

The Federal Reserve chairman, Ben S. Bernanke, who appeared with Mr. Paulson, said the financial system “continues to be very unpredictable, and very worrisome,” and that inaction could lead to a recession. [continued…]

House GOP rises up against Cheney
By Daniel W Reilly and Patrick O’Connor, Politico, September 23, 2008

There was a time when Dick Cheney could turn back a Republican revolt on Capitol Hill.

That time is gone.

House Republicans rose up en masse against their vice president on Tuesday morning to blast an administration proposal that would grant Treasury historic authority to start buying hundreds of billions of dollars in devalued mortgage-related assets, according to members present.

The lines to speak were long, the questions many and sentiment in the Cannon Caucus Room Tuesday swayed heavily against the Treasury proposal. [continued…]

Getting real — and letting the cat out of the bag
By Paul Krugman, New York Times, September 23, 2008

Whoa — it seems that Ben Bernanke ditched his prepared testimony and, instead, let the cat at least partly out of the bag.

I believe that under the Treasury program, auctions and other mechanisms could be devised that will give the market good information on what the hold-to-maturity price is for a large class of mortgage-related assets. If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits.

First, banks will have a basis for valuing those assets and will not have to use fire sale prices. Their capital will not be unreasonably marked down …

As I wrote earlier this morning, the whole “take these assets off the balance sheets” line is fundamentally disingenuous; the key question is what price Treasury pays for the assets. And here we have Bernanke effectively saying that it’s going to pay above-market prices — prices that allegedly reflect “hold-to-maturity” value, but still more than private investors are willing to pay. [continued…]

Abrams as McCain’s top foreign policy aide?
By Jim Lobe, Lobelog, September 22, 2008

Not terribly surprising, but I have it from a reliable source that Elliott Abrams, currently Deputy National Security Adviser for Global Democracy Strategy who also heads the NSC’s Near East office, is regularly briefing the McCain campaign — Randy Scheunemann appears to be the main contact — and has told friends and colleagues that he is confident that he will get a top post in a McCain administration. Now, assuming Abrams is not talking through his hat, I very much doubt that a Democratic-majority Senate would confirm Abrams, who pleaded guilty to essentially lying to Congress during the Iran-Contra affair, to any position that required confirmation (especially as long as Chris Dodd, who clashed frequently and bitterly with Abrams when the latter served as Assistant Secretary of State for Inter-American Affairs under Reagan, remains alive). That would leave his current abode — the NSC — as his most likely destination. But he is already a deputy national security adviser. Does that mean that he thinks he will be THE Deputy National Security Adviser — in charge of the day-to-day operations of the NSC — or even THE National Security Adviser in the McCain White House? [continued…]

Obama’s foreign policy advantage
By Matthew Yglesias, The American Prospect, September 18, 2008

A funny thing happened on the morning of July 19 — Prime Minister Nouri al-Maliki of Iraq endorsed Barack Obama’s plan for a 16-month withdrawal timeline from Iraq in an interview with Der Spiegel magazine. In a stroke, the entire conservative argument on Iraq was demolished. Withdrawal, they’d been telling us, was abject surrender and the abandonment of our Iraqi allies. The conservative counter that this was merely political posturing by Maliki made no sense — if the reason Maliki was calling for withdrawal was the overwhelming demand for withdrawal on the part of the Iraqi public, that was all the more reason for us to leave. And, of course, looking backward John McCain was (and is) still committed to the idea that, even in retrospect, invading Iraq was a good idea. It looked to me like the election was in the bag. Democrats were going to win the national-security argument, and hence, the election. [continued…]

Ten national security myths
The Nation, September 17, 2008

The Iraq War is a testament to the great damage a foreign policy based on myths, lies and distortions can do to our nation’s security and well-being. As the election draws near, a new set of myths and fallacies as misleading as those that led the Senate to support George W. Bush’s invasion of Iraq have become embedded in our foreign policy discourse. Many of them are being perpetuated by the very same political forces that peddled the myth of mushroom clouds coming from Saddam Hussein’s Iraq. Others are the product of muddled thinking on the part of both Republicans and Democrats. If left unchallenged, these myths and fallacies could influence the outcome of the election and shape policy in the next administration. In this special feature, put together by Nation editors with Sherle Schwenninger, a frequent Nation contributor and director of the Global Economic Policy Program at the New America Foundation, we dissect ten of them and offer what we believe is a more accurate depiction of what is at stake for the United States and the world. [continued…]

Poll: Most Americans think U.S. is losing war on terrorism
By Steven Thomma, McClatchy, September 22, 2008

A majority of Americans think the United States isn’t winning the war on terrorism, a perception that could undermine a key Republican strength just as John McCain and Barack Obama head into their first debate Friday night, a clash over foreign policy and national security. A new Ipsos/McClatchy online poll finds a solid majority of 57 percent thinking that the country can win the war on terrorism but a similar majority of 54 percent saying that the country is NOT winning it.

The poll came just days before the two major-party candidates meet for the first of three debates, a 90-minute showdown Friday on foreign policy and national security at the University of Mississippi.

Jim Lehrer of PBS will moderate the debate between Republican McCain and Democrat Obama, which will be televised nationally starting at 9 pm EDT. [continued…]