30 September 2008

Jeffrey Miron, Harvard, Blames Fannie/Freddie Too

That's why I'm posting his article here. Because he agrees with me. Because I make no secret of my biases. Because I don't try to pretend I'm not biased. Because I haven't duped myself into thinking don't have any biases. It's called confirmation bias and WE ALL DO IT.

Jeffrey Miron in his own words

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.

The bailout has more problems. The final legislation will probably include numerous side conditions and special dealings that reward Washington lobbyists and their clients.

Anticipation of the bailout will engender strategic behavior by Wall Street institutions as they shuffle their assets and position their balance sheets to maximize their take. The bailout will open the door to further federal meddling in financial markets.

So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.

The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.

(emphasis added)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Charles Calomiris & Peter Wallison On Fannie/Freddie & The Democrat Party

Add Calomiris and Wallison to the growing consensus on who is actually to blame for the current financial crisis--known in some parts as Modern Great Depression. Want the 'who's responsible' Spark Notes? Democrats (specifically Barney Frank) for enabling Fannie Mae and Freddie Mac--not Republicans and deregulation.

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

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

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

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

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

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

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

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

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

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

(emphasis added)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Oil Prices Fall & Other Good News

This is the good news, the silver lining, coming out of yesterday's precipitous market drop. Oil prices fell by over $10. And, the dollar had its biggest gain against the British pound in something like 15 years (so Drudge tells me).

Considering that Americans consume roughly 20.73 bbl/day, a $10/bbl savings means [open "Calculator," punch in a bunch of numbers, 20 mins. later ...] that Americans will save $207 million per day. A few more days like yesterday will go a long way towards covering the cost of the Paulson Plan!

American Thinker has an article about the current state of the oil game
here in the United States. Janet Levy's section on "current supply estimates" is particularly instructive.
Although Congress has not authorized a thorough inventory of offshore resources for over 30 years, the American Petroleum Institute estimates recoverable U.S. oil resources at about 86 billion barrels offshore and 32 billion barrels onshore.[7] This estimate doesn't take into consideration technological advancements, unconventional sources and recent discoveries.

Currently, the United States is the only industrialized country in the world not actively seeking to explore new offshore resources. In fact, offshore drilling is allowed in most of the Gulf of Mexico but prohibited on the East Coast, West Coast and Alaska. Only 17% of non-park, non-wilderness federal land is open to energy development and 85% of coastal waters are off limits. Further, since 1983, the amount of federal land available for development has decreased by more than 60%.

Recent assessments of the extent of economically recoverable, conventional oil in two important locations -- the Bakken Formation and the Arctic National Wildlife Refuge (ANWR) -- could increase these estimates considerably.

First discovered in 1953, the Bakken Formation covers part of Montana, North Dakota and Saskatchewan. In April of 2008, the U.S. Geological Survey (USGS) estimated that Bakken contains 3 to 4 billion barrels of technically recoverable oil, a 25-fold increase from the agency's 1995 estimate. Market conditions and drilling and production advances could transform Bakken, the largest continuous oil accumulation in the lower 48 states, into one of the largest producing oil fields in the world.

Meanwhile, petroleum experts have estimated that ANWR contains anywhere from 9 to 16 billion barrels of technically recoverable oil and could prove to be one of the largest oil fields yet in North America. Since current USGS estimates are based on the petroleum geology of adjacent lands, the true potential for oil recovery is uncertain.

Environmental arguments about risks to wildlife and pristine forests have kept ANWR off limits to energy development, even though such risks are unfounded. Drilling in the region would cover a mere tenth of one percent of its 19 million acres. Plus, ANWR is a flat, treeless plain with temperatures inhospitable for most animal species. The area is already home to a village of Native Americans, who support its development. It currently contains an airstrip, power lines, an oil well and a military radar site. Two decades of drilling in the North Slope area has had no negative effects on the ecology of the area and, during that time, the caribou population actually increased sevenfold.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Al Felzenberg On The Debate

I had the fortune of meeting Mr. Felzenberg on Day 1 of the RNC at a reception co-sponsored by National Review. He was friendly and solicitous, providing timely and sound advice as I embark on my PhD program.

In the aftermath of the first Presidential debate, Felzenberg, who knows a thing or two about Presidents, wrote a lucid analysis of the debate.
McCain’s moments to shine came when he treated his opponent and the rest of us to a succinct lecture on linkage between Russia’s aggressive posture in Georgia and its energy interests. These were the thoughts of an agile mind which seriously thinks through problems and understands the interconnectedness of so many.

But when it came to which contender for the nation’s highest office has a better grasp on the nation’s primary security challenges, McCain won this round hands down, and without breaking a sweat, and without showing signs of weakening under strain. The question his team needs to have asked in the days ahead is not “are you better off?” but “which of these two guys has better chance of instilling fear in the hearts of those who plan to do the United States ill?”

The more voters ponder this, the more they will decide that, while Obama might make an enjoyable dinner guest, McCain would make the stronger president. Through his seriousness, sense of purpose, and demeanor, he showed this from start to finish.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Economic Crisis: How We Got Here From There

Call this The Best Simple Explanation Of the Current Crisis I've Read Yet (And I've read a lot).

Chairman of the Blackstone Group, Stephen Schwarzman:
It's a perfect storm. It started with Congress encouraging lending to lower-income people. You went from subprime loans being 2% of total loans in 2002 to 30% of total loans in 2006. That kind of enormous increase swept into the net people who shouldn't have been borrowing.

Those loans were packaged into CDOs rated AAA, which led the investment-banking firms [buying them] to do little to no due diligence, and the securities were distributed throughout the world, where they started defaulting.

When they started defaulting, out of bad luck or bad judgment, we implemented fair-value accounting....You had wildly different marks for this kind of security, which led to massive write-offs by the commercial-banking and investment-banking system.

In the face of those losses...you needed to raise new equity...which came from sovereign-wealth funds, in part, which then caused political resistance to sovereign-wealth funds, who predictably have withdrawn from putting money into the system....It seemed pretty obvious that would happen. We now find ourselves with a liquidity crisis where fundamentally the cost of money for financial intermediaries [such as investment banks] is significantly in excess of their cost of lending it. So several institutions found themselves in a structurally impossible position. ...Goldman reverted to a banking charter for a lower cost of funds, which today is still not low enough for the business.

So that's the story of how we got there.
This pretty much underscores what I've been saying all along--take Fannie Mae & Freddie Mac out of the equation and the economic crisis pretty much goes away. In fact, it doesn't just "pretty much" go away, it literally goes away.

And, Fannie/Freddie are government created institutions, spurred on in their reckless mortgaging by government enablers, backed by the government (now confirmed by fact), subsidized by the government, ergo, the current crisis was government created.

After everything I've read, I can't find a compelling reason for their existence in the first place. They didn't actually provide cheaper mortgages to anybody. In the second place, if they were to have all of these implicit and explicit government guarantees, the government should have made darn sure that they weren't making bad loans and putting the rest of the financial system and therefore the economy at tremendous risk.

But they didn't. Because Barney Frank, the same Barney Frank supposedly leading House Democrats in their efforts to resolve the crisis, stonewalled every attempt to actually, you know, provide some sort of oversight and regulation of Fannie & Freddie so that the crisis didn't occur in the first place.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

1 Of 200: Paola Sapienza On Her Opposition To The Paulson Plan

At this point, I don't think there's any doubt that Congress is going to pass some sort of legislation to forestall what many are calling a Modern Great Depression. To avoid letting the perfect be the enemy of the good, I'm persuaded that something must be done now in order to stave off, to the extent possible, serious socialization that would inevitably occur with a possibly Democrat controlled Congress & White House.

If the Paulson Plan or another one like it can keep us off of The Road to Serfdom, then I'm all for it.

Recently, Paola Sapienza, associate professor of finance at Northwestern, gave an interview to The Chronicle about her efforts to draft a letter, signed by 200 economists, opposing the Paulson Plan.
Q. Your petition was apparently explicitly discussed at yesterday’s White House session. And hundreds of thousands of people must have seen the footage of Richard Shelby waving it in the air. Is that more impact than you’d expected?

A. It’s quite amazing. To be honest, I didn’t know about any of this until I got calls from the press. You never know when these things are going to work. There were a lot of skeptics saying, Ah, they’re not going to listen to us. But we gave it a try because we thought there was some hope.

Q. How did the project begin?

A. A colleague, Luigi Zingales, and I were working on our own research. We just had read the Paulson plan [proposed by Treasury Secretary Henry M. Paulson Jr.], and we started to exchange comments, saying this is really bad, we’ve got to do something. And so it was just an impulsive urge to draft a letter … We went down the corridor to see if other people would contribute. Professor Anil Kashyap gave us some input. And then Bob Shimer and John Cochrane. So the five of us organized the effort.

Q. I assume the 200 signers of the petition have diverse, and probably conflicting, ideas about how to solve the crisis.

A. Very much so. We had that in mind from the beginning, that we wanted it to be very concise. Everyone agreed on the flaws of the administration plan. As for the right way to act, there is a large number of solutions out there.

Q. How fast do you believe Congress needs to act?

A. I think getting it right is very important. And I don’t feel the urgency of making a decision in the next couple of days. All of the signs that we see seem to confirm what I’m saying. Today Washington Mutual went under — but immediately, J.P. Morgan bought all of the assets, and the market received this as very good news. … At the end of the day, these firms still have some very good investments. There is some capital moving out there. Warren Buffett invested in Goldman Sachs this week. …

I’m not denying that it’s possible that the administration knows something that we don’t know about, and they want to intervene based on that. But all the other numbers — I don’t see the need for this urgency. I think it would be a huge mistake to rush.

Because there are so many potential alternatives, I think opening up the debate, holding hearings, taking some time, is the right thing and the democratic thing to do.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Jeff Frankel Grudgingly Supports The Modified Paulson Plan

Frankels is at Harvard (for those of you who care about such things).

Here's his analysis of the plan:
When the Treasury came out with its $750 bailout plan on September 22, I thought it lacked so many necessary ingredients that it deserved a thumbs down.

But in the negotiations between the Treasury and Congressional leaders over the course of last week, most of the missing ingredients were inserted. Starting with the additions that were most necessary on the merits, and moving toward the ones where the necessity was more political, they were:

· Institutionalized oversight of the Treasury, which had previously been startlingly absent.

· Provisions so that the taxpayer would share in the upside potential of banks and other financial institutions, rather than just socializing the losses. These provisions should allow the possibility that the government could recoup most or all of its short-term losses as has often ultimately been true in past unpopular bailouts.

o First, by giving the government equity stakes in the banks that sell their bad loans to the Treasury.

o Second, by having the president in five years submit legislation to recoup the cost from the financial sector if the taxpayer is still in the red at that point.

· Limits on executive compensation, especially golden parachutes, at banks taking advantage of the opportunity to dump their bad loans on the Treasury.

· Dividing the $750 billion into three slices over time, which at least offers the congressional negotiators a little bit of cover.

· A provision for possible government insurance of mortgages instead of acquisition of them. This was a bone thrown to the Congressional Republicans who had blocked the plan several days ago; I don’t know why they would want this provision, but at least it can’t do much harm.

Some other proposed provisions, from both the right and left, were left out, and for good reason in most cases.

(h/t Ryan D.)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Go Rays!

Over at one of the Mariners blogs I frequent, Lookout Landing, we (speaking collectively of the LL community) have been passively supporting the Tampa Bay Rays for a couple of years and, in the wake of the M's compete sucktastic disaster of a season, supporting them actively all of this year.

We like the Rays because they're run by a smart, sabermetrically and cost-benefit inclined front office which eschews all of the annoying baseball cliches--cliches that seem to have found their home in the Mariners front office, which, in addition to being a huge joke, operates based in a 20 year old reality.

Anyway, enough Mariner angst. I'm happy to be on the Rays bandwagon and support them in the playoffs. Few things would give me more pleasure than to see the Rays sweep the Red Sox and their smug fans out of the ALCS.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

More-on Kissinger (UPDATED)

In a follow-up to my debate follow-up regarding the Obama/McCain dust-up over what, exactly, Henry Kissinger had and had not said about meeting with dictators, please see Christopher Hitchens:
But the true farce and disgrace is that this increasingly glassy-eyed old blunderer and war criminal, who has been wrong on everything since he first authorized illicit wiretapping for the Nixon gang, should be cited as an authority by either nominee, let alone by both of them. Meanwhile, I repeat my question from two weeks ago: Does Sen. Obama appreciate, or do his peacenik fans and fundraisers realize, just how much war he is promising them if he is elected? Once again on Sept. 26 in Mississippi—at the end of a week when American and Pakistani forces had engaged in their first actual direct firefight—he repeated his intention of ignoring the Pakistani frontier when it came to hot pursuit of al-Qaida. Out-hawked on this point, as he was nearly out-doved on the Kissinger one, McCain was moderate by comparison. Obama went on to accuse Iran of having built more centrifuges than most people think it has. This allegation has a confrontational logic of its own, above and beyond the minor issues of preconditions and the "level" of diplomacy. I think Obama is to be praised for doing this—always assuming that he does in fact know what he is doing. But as we all press bravely on, the debate would look more intelligent, and be conducted on a higher plane, if it excluded a discredited pseudo-expert who has trampled on human rights, vandalized the U.S. Constitution, deceived Congress, left a trail of disaster and dictatorship behind him, and deserves to be called not a hawk or a dove but a vulture.
Re: Obama's twice-stated position that he would sit down, w/o preconditions, with Ahmadinejad, Chavez, etc.: I remain opposed, regardless of Henry Kissinger.

For two reasons: 1) Meetings should not be conducted with these thugs, at any level, w/o preconditions AND 2) Meetings should not be conducted between these thugs and the President of the United States, except, perhaps, in extreme circumstances.

So extreme and outrageous are the circumstances, that I cannot, at this time, conceive of the events that would have to occur in order for the President to meet with, say, Ahmadinejad. Maybe if he led a democratic revolution in his country and singlehandedly smashed to bits, with a crowbar, his country's nuclear weapon capacity. Then, maybe, I could see the POTUS agreeing to a sit-down.

(h/t Justin W.)

UPDATE 9:38pm MDT: That wasn't the selection Justin W. wanted from the Hitchens article. Presumably, this is the one he was looking for when he sent the link and suggested I share it with my readers:
Henry Kissinger did indeed favor such talks with such regimes "without preconditions." This cannot have been hard to do, since only last week at a forum at George Washington University, consisting of himself and four other former secretaries of state, Kissinger had told his audience: "Well, I am in favor of negotiations with Iran. And one utility of negotiation is to put before Iran our vision of a Middle East, of a stable Middle East, and our notion on nuclear proliferation at a high enough level so that they have to study it." He then added something that can hardly have startled anyone who ever watched him usurping presidential prerogatives during the Nixon and Ford administrations: "I actually have preferred doing it at the secretary of state level" before, as the New York Times put it with uncharacteristic brusqueness, "he trailed off." Nonetheless, asked if such talks should be "at a very high level right out of the box," his response was to say, "Initially, yes," which is as much as to say "yes." He then said: "I do not believe we can make conditions for the opening of negotiations," which would appear to justify the use of the term unconditional in conjunction with "very high level."


Thus for McCain, a full day and night after the exposure of his shaky running mate to such ridicule, to make the same mistake himself in Oxford, Miss., was really something to see. It was even worse if you heard it on radio, as I initially did, than if you saw it on television. (You can hear that geezerish whistle in his pipes much more ominously than when you are looking at his elderly face.) Anyway, on the same question of "without preconditions," he walked into Obama's tersely phrased riposte, which was to quote Kissinger in precisely the same way as Couric had already done. McCain looked and perhaps felt a fool at this point, and may have been only slightly cheered up when Kissinger told the Weekly Standard after the debate that he after all doesn't, at least not for this precise moment, "recommend presidential high-level talks with Iran." Which, when compared with his earlier remarks, makes it seem that he has no idea what he currently thinks and should either be apologized to by, or should apologize to, either Sarah Palin or Katie Couric, or conceivably both.
There you have it. Barack Obama said he would meet with dictators w/o preconditions. Henry Kissinger advocated meeting with dictators w/o preconditions at the SecState level. Seemingly, the only difference is the level at which the talks should be held--though this is a significant difference.

In my opinion, both are dumb positions. Let their low-level hacks meet with our low-level hacks. If Ahmadinejad, for example, wants to cease and desist their nuclear aspirations and quit calling Israel a "stinking corpse" and threatening to wipe her off the map, maybe then they can have a higher level meeting. Otherwise, we have nothing to gain from high level meetings with thugs.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

MSM In The Tankedness For Obama: Worse Than You Think

I know that some of my "progressive" readers think my job at the Media Research Center is a joke. As in, they see no value in exposing the truth about liberal bias in the media. Some of them genuinely think that either a) there is no bias or 2) there is a correspondingly equal amount of conservative bias.

If the first point were true, the MSM would have outed or at least investigated John Edwards' Mistress in October 2007, rather than letting it fester until last summer.

They didn't.

If 2) were true, then the liberal media watchdogs would have a lot more work. As in, as much work as we have at the MRC.

They don't.

The reason calling out the liberal media has become a cottage industry for conservatives is because it is, of truth, so bad.

Take, for example, this email over at Instapundit:
Off the record, every suspicion you have about MSM being in the tank for O is true. We have a team of 4 people going thru dumpsters in Alaska and 4 in arizona. Not a single one looking into Acorn, Ayers or Freddiemae. Editor refuses to publish anything that would jeopardize election for O, and betting you dollars to donuts same is true at NYT, others. People cheer when CNN or NBC run another Palin-mocking but raising any reasonable inquiry into Obama is derided or flat out ignored. The fix is in, and its working.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

29 September 2008

Barney Frank Ought To Win The Fannie/Freddy Blame Game

I'm going to keep banging this drum until the true story is told. This is a government caused problem and the primary sponsors were Democrats and the main Democrats were Senators Chris Dodd, Barack Obama, Hillary Clinton and Rep. Barney Frank. They helped craft the legislation and culture the enabled Fannie Mae and Freddy Mac to tip the economy into crisis.

There should have been better regulation of Fannie & Freddy. President Bush tried to do it in 2003 and John McCain tried to do in 2006--only to be stonewalled by Democrats.

When you have an institution--like Fannie or Freddy--that has overt backing by the federal government, which takes away the risk of bad investments, you must--MUST--couple that with regulation that ensures these pseudo-governmental institutions do not make bad investments that put the whole economy at risk.

Democrats pushed Fannie & Freddy to buy risky mortgages and stonewalled initiatives to regulate Fannie & Freddy so they didn't meltdown.

This is what happens when Democrats' governmental philanthropic whims become public policy.

(h/t DrewM @ Ace of Spades)

UPDATE: David Boaz blogging at Cato @ Liberty hammers on some of the same things I've been writing about for the last few weeks:
A page one Washington Post headline reports, “Credit Crisis Has Given Obama a Distinct Edge.” Which must be really frustrating for McCain, because McCain did try to reform Fannie Mae and Freddie Mac back in 2006. Obama, meanwhile, as I reported at the American Spectator, received more donations from Fannie Mae in four years than any other senator (except Banking Committee chairman Chris Dodd) received in twenty years. That’s quite an accomplishment–more money from a primary creator of the financial meltdown in just four years than senior members of Congress like Nancy Pelosi, Barney Frank, Richard Shelby, Spencer, Bachus, John Kerry, and Roy Blunt got in entire 20 years that the Center for Responsive Politics tallied. And of course, Obama chose former Fannie Mae CEO James Johnson, who was found to have jiggered the books, to head his search for a vice president.

Shouldn’t somebody in the media ask Obama why he was Fannie Mae’s favorite senator?

Hey media elites, how about this: How about you do your jobs and pose this question to Barack Obama?

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

'A Brief Education On The Subject Of Financial Reporting'

Like Matt P., I've heard a lot of people blame "mark to market" and other financial reporting issues for part of the current crisis. I've only taken one accounting class and my brother helped me get through that one. Fortunately, I've got lots of friends with degrees in accounting and one of them (the aforementioned Matt P.) wrote the following for our benefit:
I heard a talk show host blaming "arcane accounting policies" this morning for part of the crisis. I later heard that Rush jumped all over that yesterday as well. Knowing a little bit about the subject of accounting, I sent an email off to one of the hosts. While it is a minor hiccup in the entire financial episode, if you would like to have a brief education on the subject of financial reporting, below is a copy of the email that I sent.

It amazes me that you and other talk show hosts have picked up the newest talking point of the financial "crisis" being exaggerated or even caused in part by the "mark-to-market" accounting, as you call it. As a student of accounting, an employee of an "evil" international accounting firm and having been involved with the financial statement presentation of reputable companies such as CONSOL Energy and UPMC, I feel that I have some limited authority to talk on the subject. I'll admit that accounting standards are far from perfect; however, to blame the marking-to-market of securities as one of the reasons for the crisis is akin to blaming speculators for the spiking oil prices in that it is simply the manifestation of problems that have already or are expected to occur.

Here are a couple of items to think about:

(1) What is the alternative to the "mark-to-market" method of accounting for securities? If accounting principles stated that equity securities should be held at a historical cost, people would be out there berating the accounting world for not telling them what was happening. So we say, "The value of these securities can be reasonably estimated through open market transactions. So let's look at the prices for which they are selling on the exchanges." We went to the open market that says that the securities held by these companies are near worthless. What other basis can you give me that I could reasonably use as a value other than (a) historical cost (which would lead to complaints) or (b) open market transactions (which apparently has led to complaints)?

(2) What about the potential value of the assets behind the securities? Although the market is deciding the value based on the perceived potential value of the assets behind the securities, let's discuss. Contrary to what it seemed you were indicating this morning (admittedly, I was unable to hear the entire segment), the potential value of the assets has no valid basis in accounting. Can you imagine the trouble and liability any firm would take on if it decided to value its assets at the "potential" value? Say I have an old machine sitting in the back that has the potential to produce $10 million in garden gnomes a year. Does that mean I have a multi-million dollar asset that I should have on my books? Not if I can only sell the asset for $1 million and there is no current demand for garden gnomes.

Well, there are millions upon millions upon millions of mortgage-backed securities out there. There's a chance that you could dissolve the securities and sell off the mortgages or properties and get more than what the market says the securities are worth. Sounds like an opportunity for an investor to me, but I'm not going to stake my reputation for faithful representation on a chance. That investor will still be purchasing the security at market prices, which tells me that the market price is all that this security is worth to that firm holding it.

(3) What is it that accounting is really supposed to accomplish? Accounting standards as you are discussing, related to external financial reporting, are a basis for presenting historical (not even real time, let alone future) information. The best public companies still take a number of weeks to pull together full financial statements with a few more weeks of auditing before being able to file with the SEC.

One also needs to realize - as anyone who has taken basic accounting 101 should know - that these investments are held on the balance sheet, which is a snapshot at a point of time, attempting to faithfully represent the assets, liabilities and equity of a firm as of a specific date (see #2). As a result, this is simply a reflection of what the market is thinking now. If the market changes its mind tomorrow resulting in an increase in the value of mortgage-backed securities, then companies would be back in business, right? Take another snapshot and see where it puts you.

At the end of the day a number of companies (upon whom the responsibility lies - along with Washington politicians) made poor operational decisions. To blame the way that accounting rules display the results of these poor decisions is to shoot the messenger and take focus away from where true responsibility lies.

Please don't just jump on the bandwagon.
Thanks to Matt P.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Economic Crisis: Enemy Of The Good

Ace, of Ace of Spades HQ, one of the few blogs I read on everything, thinks conservatives are wrong to oppose the bailout. He is afraid of a New Deal in the aftermath of a modern Great Depression.
Steve Forbes on Michael Medved: "I’ve never been an alarmist…I’ve never seen a situation as dark as it is today...people genuinely don't understand the magnitude of what is before us."

Like I said in the comments: I am not an economic alarmist myself and I get my take from people who aren't economic alarmists.

So when they suddenly become economic alarmists, I'm alarmed.

Incidentally, don't mislead yourselves into thinking I'm unaware that I'm taking an unpopular position and it could cost me traffic, and readers, and therefore salary.

100-1 against. I know this. I know this is a Schiavo-level split, the same sort of split that caused readers to abandon some blogs.

So I do know that I could actually gain traffic and readers by rah-rahing the KILL THE BILL position.

But I can't. Because I honestly think most conservatives are very wrong on this.

And not only are they very wrong, they're very wrong with possibly dire consequences. And not only that, there's the possibility that all faith in capitalism will crater and we'll have three generations of real socialism.

I have to be honest. I cannot be 100% sure, but I'm sure enough that I'll risk losing a lot of readers: We are in trouble. There is a chance that a crisis will not lead to a vicious-circle deleveraging and halt to a lot of economic activity, but the odds that it will seem much greater.

So I'm not taking this position to annoy people. Or because I have money in stocks. I don't own a single stock. And my credit's bad, so, honestly, this kind of doesn't really affect me. I've been on a pure cash personal economy for years.

I'm taking this position because I think it's right.

I can be persuaded that we must do something in order to forestall a far greater socialization of the market in the aftermath of a Modern Great Depression. That's just pragmatic politics.

Whatever plan eventually passes, I maintain my insistence that it be two things: Simple & Targeted. In these instances, where government programs, plans, & policy fits this criterion, government intervention can be effective and, in fact, very successful.

This necessitates that the legislation be simple with a simple mandate.

As the scope of the legislation grows and individual members tack on additional spending initiatives, simple and targeted becomes complex and scattered. It is this type of scenario that will bring the type of unintended consequences to which I have referred in the past.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

The Myth Of Tolerant Liberalism

This is an interesting video--a McCain/Palin march in Manhattan's Upper West Side. I happened to be in NYC last summer and observed one of their many gay pride marches and, uh, the response from the "tolerant liberals" is definitely different. That is to say, they are tolerant of people who think like them, intolerant of people (McCain/Palin supporters) who don't think like them.

(h/t Sister Toldjah)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Bret Baer: History Of A Crisis

(h/t Greg Mankiw)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Stop The Bailout

The more I read the more I'm persuaded against the bailout--in pretty much any form. Greg Mankiw posted a letter from an economist who is opposed to the bailout. The entire letter bears reading because its author, Robert Shimer, does an excellent job explaining the economic ins & outs of the current crisis.

But to my mind, the most compelling graph was the last one. It reads:
In closing, let me mention one other issue that I take very seriously. I recognize that this might not matter much to my Congressman, but in my view it may be the most important issue for global welfare. The U.S. has long been a beacon of free markets. When economic conditions turn sour in Argentina or Indonesia, we give very clear instructions on what to do: balance the budget, cut government employment, maintain free trade and the rule of law, and do not prop up failing enterprises. Opponents of free markets argue that this advice benefits international financiers, not the domestic market. I have always believed (at least since I began to understand economics) that the U.S. approach was correct. But when the U.S. ignores its own advice in this situation, it reduces the credibility of this stance. Rewriting the rules of the game at this stage will therefore have serious ramifications not only for people in this country but for the future of global capitalism. The social cost of that is far, far greater than $700 billion.
I'm a free market/free trade true believer. As such, I cannot support an anti-market solution to a problem that is, to my mind, a government-caused problem. In my opinion, such action will have lasting negative consequences.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Alternative To The Bailout: Fiscal Darwinism

From a historical perspective, here is the doubt I have about today's economic crisis:

I do not believe that policy makers understand the current economic crisis any better than policy makers did before & during the Great Depression.

All I'm saying is that our increasingly complex understanding of the economy is matched by an equally complex economy. If we truly understood our current economy better than policy makers in the past understood theirs, then we would never have market failures, because smarter policy makers would have averted them.

The corollary that flows from this theory is that I do not trust policy makers to do anything that will actually improve the situation or cause the economy to recover better or faster than a natural market correction.

University of Chicago economist Casey B. Mulligan makes sense to me:
In the somewhat more recent past, economists thought that the non-financial sector in a modern economy revolved around financial markets, despite the facts that only 4 percent of the workforce was employed in the financial sector (including insurance and real estate), and even today that sector employs only 6 percent of the total. President Bush and supporters of the recent massive Wall Street bailout plan still believe Wall Street to be the center of the entire economy.

Economic research over the last couple of decades rejects this belief. It has shown that the financial and non-financial sectors experience quite independent changes, especially over the short and medium term. Take for example the promised yield on the best commercial paper. Fluctuations in this yield are critically important to persons in the financial sector (such as money market traders), but have hardly anything to do with activity outside of that sector. Since World War II, the correlation between the inflation-adjusted commercial paper yield and subsequent inflation-adjusted growth of GDP per capita is zero. That is, GDP growth has been high following high yields just as often as it has been low. It is equally hard to detect a correlation between stock returns, long term bond returns, or commodity returns and subsequent GDP growth. Quite simply, history has shown that the non-financial sector can do well when the financial sector does poorly, and vice versa.

In order to find good predictors of non-financial sector performance, and GDP growth generally, we look to the non-financial sector itself. One of those predictors is the profitability of non-financial capital, or the “marginal product of capital” as we economists call it. The marginal product of capital after-tax is a measure of how much profit (revenue net of variable costs and taxes) that each unit of capital is producing during, say, the last year. When the marginal product of capital after-tax is above average, subsequent rates of economic growth (and subsequent marginal products of capital) also tend to be above average.

Since World War II, the marginal product of capital after-tax averaged between 7 and 8 percent per year. During 2007 and the first half of 2008 – exactly the time when financial markets had been spooked by oil price spikes and housing price crashes – the marginal product had been over 10 percent per year: far above the historical average. Compare this to the marginal product of capital in 1930-33 (the years of Depression-era bank panics): 0.5 percentage points per year less than the postwar years and significantly less than in 1929. The marginal product of capital was also below average prior to the 1982 recession (in this case, far below average) and prior to the 2001 recession. Thus, the surprise was not that GDP continued to grow 2007-8 despite the bleak outlook from Wall Street’s corner of the world, but that GDP growth failed to be significantly above the average. More important from today’s perspective is that much capital in America continues to be productive, and that this will likely permit Americans to advance their living standards as they have in years past. The non-financial sector today looks nothing like it did in 1930.

The weak correlation between asset prices and non-financial sector performance and the strong profitability of today’s non-financial capital are two good reasons to scoff at the idea that the non-financial sector will collapse because of the recent events on Wall Street, and even better reasons to scoff at the Bernanke-Paulson-Bush idea that a massive bailout of financial firms is the key to avoiding a non-financial collapse. Wall Street’s woes are and will be largely limited to Wall Street. The Bush administration should not use the power of the IRS to force the rest of us to board Wall Street’s sinking ship.

Of course, six percent of the workforce is bigger than zero, so a Wall Street mess has indirect effects on the non-financial sector as it absorbs former Wall Street employees and finds alternatives to the financial services Wall Street once provided. But, as long as the government does not get in the way, the marketplace will quickly react to provide the non-financial sector with financial services, even if the main players in that marketplace are no longer named Lehman, Merrill, or Goldman. There are two basic obstacles that Washington might create in this process, both of which are included in the Bernanke-Paulson-Bush proposal. One is to pile on regulation and further impede entry by new firms that might provide financial services to the non-financial sector in the years ahead. The second is to impose a heavy tax burden on the non-financial sector to pay for Wall Street subsidies. The Treasury and the Fed should let Wall Street drown alone, to be replaced by new financial service providers who can swim as robustly as are non-financial American businesses.
(emphasis added)

This feels right--it appeals to the fiscal libertarian in me.

We may yet look back on this "bailout" and conclude, as we have in so many other instances, that the prescription was worse than the disease.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Life - Faith - Family

(h/t Matt B.)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

28 September 2008

Constitutional Sources Project

ConSource is a non-partisan effort to collect, digitize and cross reference all the primary source material related to the creation of the Constitution. They seek to make it available to everyone--students, lawyers, judges, teachers, professors--as part of what I consider to be an ongoing effor to Democratize history. It is an excellent cause that, as a student of history, I hold near and dear to my heart.

I've written previously about the good work done by ConSource here, here, here, here, here, here, here, & here.

They recently kicked off a capital fundraising drive and I've happily agreed to do what I can to aid them in their efforts. Longtime friend and friend of this blog, Matt Berry, penned a letter explaining ConSource and their future goals. Please, give it a read and donate if you can. If you can't, please spread the word or do whatever else you can to aid us in bringing off this wonderful national service.

As many of you know, for the past couple of years I have been actively involved with the Constitutional Sources Project—now known across the country as ConSource.

A registered 501c3 non-profit organization, ConSource was founded with the singular goal of created an online, searchable database of all original source documents used by the Founders of this country in drafting our Constitution. And after three years of research, the project is now getting closer and closer to its ultimate goal of containing every constitutional source from antiquity to the 27th Amendment.

With the help of other donors and countless volunteers, ConSource has become an innovation all its own. It offers the only source for searchable text transcripts, high-resolution original images, advanced searching, and scholarly certification standards for its documents. Moreover, no other database in American Constitutional history has allowed for real-time cross-referencing of individual documents within the Constitution.

In offering what it does, ConSource has gained a reputation across the legal community. In the case of District of Columbia v. Heller, the US Supreme Court used the ConSource legal database in their decision—see related article on law.com here: http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202423267162

ConSource was proud to receive official endorsements from former US Supreme Court Justice Sandra Day O'Connor, and current Justices Stephen Breyer and Antonin Scalia—all three of whom have participated in events held on the project's behalf. On the political side, ConSource recently received a bipartisan show of support signed by Senators Harry Reid, Orrin Hatch, Samuel Brownback, and Edward Kennedy.

The project is now housed in Washington, DC on K Street at the renowned international law firm Winston & Strawn, and has close to 200 student volunteers from BYU and Yale working on new source documents. As always, ConSource is forever grateful for the support it receives from the generous donors, supporters, and volunteers. Preserving these documents is vital to the relevance of our Constitution for generations to come.

With the unexpected attention and growth ConSource is proud to announce the preparation for the launch of ConSource 2.0. Along with many aesthetic and user-friendly upgrades, version 2.0 will also include a number of new data search options as well as hundreds of recently added digital papers, including the notes of Benjamin Franklin.

Three years ago we could not have anticipated the amount of attention ConSource has received, and we would have been shocked at the amount of traffic the site would attract—over 200,000 unique visitors each month and growing. It is because of this success that we set out to develop a stronger web platform to handle the volume of users now taking advantage of ConSource.

We need your help in facilitating these upgrades, and introducing more people to the thoughts that built this great nation.

This project would not have happened without the help of our many generous donors, volunteers, and public advocates. As the influence of ConSource has broadened, so has the understanding of our founding principals. We ask that you help us continue this effort in any way you can. To contribute to this vital cause please go to:

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

27 September 2008

Paul Newman, RIP

My fav. Paul Newman film--The Sting. I highly recommend you give it a watch.

Here's the trailer:

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Economic Crisis Video Primer

(h/t Power Line & Ace)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.


Tomorrow, watch for my mega-awesome post about ConSource and their ongoing efforts to preserve and make available that most important of historical documents, the Constitution of the United State of America.

As a preview, read this quote--the inspiration for ConSource--from James Madison:
It has been the misfortune of history that a personal knowledge and an impartial judgement of things rarely meet in the historian. The best history of our Country, therefore. must be the fruit of contributions bequeathed by contemporary actors and witnesses to successors who will make the unbiased use of them. And if the abundance and authenticity of the materials which still exist in the private as well as public repositories among us should descent into hands capable of doing justice to them, the American History may be expected to contain more truth, and lessons, certainly not less valuable, than those of any Country or age.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

NYT: Editorializing Its News Into Irrelevance (Moreso Than Before)

Latest NewsBusters piece is up. This time I address the NYT's coverage of a McCain aide's former employment and its front page coverage vs. $126k worth of campaign donations to Barack Obama and ... the NYT's silence.
More of the Same: NYT Does a Hatchet Job on McCain Campaign

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

Missouri Civil Servants Join Obama "Truth Squad"

And vow to press charges against any ads which bend or distort the truth.
The Barack Obama campaign is asking Missouri law enforcement to target anyone who lies or runs a misleading TV ad during the presidential campaign.
Is this normal that prosecutors and a sheriff--paid employees of the county or city or state government join an Obama "truth squad" to target anyone speaking out against The One? This can't be normal--certainly Orwellian, but not normal.

(h/t Matt B.)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

26 September 2008

McCain's New Ad

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

I Know Henry Kissinger And You, Sir, Are No Henry Kissinger

Barack Obama tried to lecture John McCain about foreign relations by citing McCain's own advisor, Henry Kissinger. McCain pointed out that Obama mischaracterized Kissinger's positions. Who shall we believe? How about Kissinger?

From Stephen F. Hayes at the Weekly Standard blog:
Henry Kissinger believes Barack Obama misstated his views on diplomacy with US adversaries and is not happy about being mischaracterized. He says: "Senator McCain is right. I would not recommend the next President of the United States engage in talks with Iran at the Presidential level. My views on this issue are entirely compatible with the views of my friend Senator John McCain. We do not agree on everything, but we do agree that any negotiations with Iran must be geared to reality."
(h/t Yuval Levin @ The Corner)

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.

2008 Presidential Debate Live Blog

8:42pm: Barack Obama may very well be the smarter of the two candidates. But John McCain, for all his efficiencies, is a much more effective debater. I mean, wow, Obama, when he debates just comes across as lecturing and annoyed. John McCain's debate style is more effective. And he effectively portrayed Obama as young and inexperienced.

Interesting turn here from McCain: He likens Obama's intransigence on acknowledging the success of The Surge to the administration's much-criticized stubbornness.

: Obama is smart and his command of facts is considerable, but he does not marshall them well in a debate. He gets hung up on too many details without allowing for a central theme or narrative.

Obama on nuclear proliferation: "The biggest threat is a terrorist getting his hands on a nuke." My friends in the Intelligence History arena say that it is one of the lessons of history that your enemies get the technology and use it against you.

I hope I never see the day that happens with nukes. Let's leave that stuff to 24.

I'm not sure how well "a commission" plays as a soundbite, but McCain sure seems to like them.

What is on Obama's lip? Kind of distracting.

McCain: "I've looked into Putin's eyes and I saw three letters: K-G-B." Good line.

A reader texts: "Obama just got his [edit] kicked." This is why John McCain is the foreign policy expert.

"McCain: I won't set the Presidential appointment book yet. I don't even have a seal"

Obama repeats what is, I think, an effective talking point: "I reserve the right to meet with whoever whenever if I think it will keep America safe." That's a pretty good way to spin his stated claim that he would meet with Iran without pre-condition.

McCain quickly responds to Obama by saying, 'You'd think that if he cared so much about these issues, Afghanistan, that he would have actually visited these areas.' Effective.

Obama: "You don't muddle through the central front in the war on terror." In my opinion, that was the first very effective line Obama has delivered tonight.

I think listing his record of involvement with national security issues highlights his experiential difference with Barack Obama effectively without even mentioning Barack Obama.

The long-view strategists before the debate said that you wanted to be the person who "hit second." Obama has consistently gone after McCain and McCain has methodically hit back. He hasn't always been as effective or concise as Obama, but he comes across as wiser. At times, talking about "songs about bombing Iran" comes across as a little trite.

McCain: The next President won't have to decide whether or not we invade Iraq.

True. McCain changes the question to how this really will impact the next president--how we leave, when we leave.

Obama: I opposed going into Iraq when it was politically unpopular to do so.

Ah, finally, foreign policy. Lehrer: What are the lessons of Iraq?

"Google for government." That's an interesting idea, Senator Obama.

McCain: "We have to cut spending." That's a good, easy answer. And a jab at Obama for being so far left he can't be bi-partisan.

Lehrer: What will you give up? This is an opportunity for McCain to say he would cut entitlements, cut government spending.

McCain: I want to cut business taxes so businesses will choose to come here and stay here.

McCain pointed out out that Obama sought $900 million for his state before running for President. He needs to pound away on that point--specifically, that though $900 million may not sound like much to Obama, but it does to the people on Main Street. $18 billion is a lot of money.

McCain makes a CSI joke about bears' paternity vs. criminality. He presented it like it were government policy--which means he didn't present it like the joke it was.

I don't like this 5 minute open-ended format thing. What are they supposed to do? Talk to each other? Yell at Jim Lehrer? I think they should yell at Jim Lehrer.

UPDATE 7:06pm MDT:
Obama is retreading his bailout principles. And spouting the usual 'more of the same.' Ugh.

UPDATE 7:03pm MDT:
An Eisenhower quote. Great.

UPDATE 7:00pm MDT:
I don't see a teleprompter on the stage. Barack Obama may be in trouble.

I like Juan Williams. He's liberal AND reasonable.

UPDATE 6:51pm MDT:
Harold Wolfson says that all Obama needs to say is 'I was right about Iraq.'

UPDATE 6:48pm MDT:
Dick Morris: The Democrats don't have the guts to pass their own bill on their own votes--something they could do without the Republicans.

I take this to mean that we might actually get legislation written from a free market perspective.

That's leadership.

UPDATE 6:47pm MDT:
Dick Morris: John McCain can win this election in one night if he contrasts his plan vs. Obama's plan as "I want the companies to pay, Obama wants the taxpayer to pay." We'll see if it's that easy.

UPDATE 6:42pm MDT:
Karl Rove: President Bush tried to reform Fannie/Freddy in 2002 and again in 2005. This would have obviated most of the effects of the crisis we're dealing with today.

UPDATE 6:35pm MDT:
I miss Newt Gingrich as Speaker of the House. Boehner is alright, but he doesn't have the intellectual heft of a Newt Gingrich. Boehner is not enough of a fiscal conservative for me.

UPDATE 6:32pm MDT:
Newt Gingrich has an interesting idea: Force congressmen to raise money away from their own committee--if you oversee Fannie/Freddy (Chris Dodd, Barack Obama, Barney Frank) then you can't take contributions from them.

Makes sense to me.

As I did with my reports from the RNC, I'm going to live-blog this, the first Presidential debate in 2008. As it stands, the debate is set to begin in less than an hour. Before it does, I want to make one comment:

John McCain has taken a lot of criticism from the Obama campaign, saying that his return to DC and suspension of his campaign was nothing more than a stunt. If there is a Senator in Congress who has built up the credibility of putting country before party and election, it is John McCain. He supported Comprehensive Immigration legislation (much to the chagrin of his party), Campaign Finance Reform, and, of course, The Surge.

As a Senator--the elected representative of the state of Arizona--it is his responsibility to do what he can in an economic crisis like this. This is what he is paid to do. As a candidate for President, he has the votes and support of his party. This November he will head the ticket of which the entire House and some of the Senate will be a part. His influence over them in this process cannot be overstated. If there is one person who can bring Republicans to the table and agree to some sort of bailout legislation, it is John McCain. The Democrats are already on board--this is why Barack Obama is superfluous to the whole process.

If you have tips, questions, comments or suggestions, email me at lybberty@gmail.com.