McFail

The NY Times' Frank Rich takes McSame-Palin out back with the literary equivalent of a Louisville Slugger and goes to town.

Given the actuarial odds that could make Palin our 45th president, it would be helpful to know who this mystery woman actually is. Meanwhile, two eternal axioms of our politics remain in place. Americans vote for the top of the ticket, not the bottom. And in judging the top of the ticket, voters look first at the candidates’ maiden executive decision, their selection of running mates. Whatever we do and don’t know about Palin’s character at this point, there is no ambiguity in what her ascent tells us about McCain’s character and potential presidency.

He wanted to choose the pro-abortion-rights Joe Lieberman as his vice president. If he were still a true maverick, he would have done so. But instead he chose partisanship and politics over country. “God only made one John McCain, and he is his own man,” said the shafted Lieberman in his own tedious convention speech last week. What a pathetic dupe. McCain is now the man of James Dobson and Tony Perkins. The “no surrender” warrior surrendered to the agents of intolerance not just by dumping his pal for Palin but by moving so far to the right on abortion that even Cindy McCain seemed unaware of his radical shift when being interviewed by Katie Couric last week.

That ideological sellout, unfortunately, was not the worst leadership trait the last-minute vice presidential pick revealed about McCain. His speed-dating of Palin reaffirmed a more dangerous personality tic that has dogged his entire career. His decision-making process is impetuous and, in its Bush-like preference for gut instinct over facts, potentially reckless.

As The New York Times reported last Tuesday, Palin was sloppily vetted, at best. McCain operatives and some of their press surrogates responded to this revelation by trying to discredit The Times article. After all, The Washington Post had cited McCain aides (including his campaign manager, Rick Davis) last weekend to assure us that Palin had a “full vetting process.” She had been subjected to “an F.B.I. background check,” we were told, and “the McCain camp had reviewed everything it could find on her.”

The Times had it right. The McCain campaign’s claims of a “full vetting process” for Palin were as much a lie as the biographical details they’ve invented for her. There was no F.B.I. background check. The Times found no evidence that a McCain representative spoke to anyone in the State Legislature or business community. Nor did anyone talk to the fired state public safety commissioner at the center of the Palin ethics investigation. No McCain researcher even bothered to consult the relevant back issues of the Wasilla paper. Apparently when McCain said in June that his vice presidential vetting process was basically “a Google,” he wasn’t joking.

This is a roll of the dice beyond even Bill Clinton’s imagination. “Often my haste is a mistake,” McCain conceded in his 2002 memoir, “but I live with the consequences without complaint.” Well, maybe it’s fine if he wants to live with the consequences, but what about his country? Should the unexamined Palin prove unfit to serve at the pinnacle of American power, it will be too late for the rest of us to complain.

We’ve already seen where such visceral decision-making by McCain can lead. In October 2001, he speculated that Saddam Hussein might have been behind the anthrax attacks in America. That same month he out-Cheneyed Cheney in his repeated public insistence that Iraq had a role in 9/11 — even after both American and foreign intelligence services found that unlikely. He was similarly rash in his reading of the supposed evidence of Saddam’s W.M.D. and in his estimate of the number of troops needed to occupy Iraq. (McCain told MSNBC in late 2001 that we could do with fewer than 100,000.) It wasn’t until months after “Mission Accomplished” that he called for more American forces to be tossed into the bloodbath. The whole fiasco might have been prevented had he listened to those like Gen. Eric Shinseki who faulted the Rumsfeld war plan from the start.

In other words, McCain’s hasty vetting of Palin was all too reminiscent of his grave dereliction of due diligence on the war. He has been no less hasty in implying that we might somehow ride to the military rescue of Georgia (“Today, we are all Georgians”) or in reaffirming as late as December 2007 that the crumbling anti-democratic regime of Pervez Musharraf deserved “the benefit of the doubt” even as it was enabling the resurgence of the Taliban and Al Qaeda. McCain’s blanket endorsement of Bush administration policy in Pakistan could have consequences for years to come.

“This election is not about issues” so much as the candidates’ images, said the McCain campaign manager, Davis, in one of the season’s most notable pronouncements. Going into the Republican convention, we thought we knew what he meant: the McCain strategy is about tearing down Obama. But last week made clear that the McCain campaign will be equally ruthless about deflecting attention from its own candidate’s deterioration.

Read the whole thing.

Paulson Lays It Out

Hammerin' Hank Paulson lays out the specifics for the Fannie-Freddie takeover, consisting of four steps:

To promote stability in the secondary mortgage market and lower the cost of funding, the GSEs will modestly increase their MBS portfolios through the end of 2009. Then, to address systemic risk, in 2010 their portfolios will begin to be gradually reduced at the rate of 10 percent per year, largely through natural run off, eventually stabilizing at a lower, less risky size.

1) Throw good money after bad, check.

Treasury and FHFA have established Preferred Stock Purchase Agreements, contractual agreements between the Treasury and the conserved entities. Under these agreements, Treasury will ensure that each company maintains a positive net worth. These agreements support market stability by providing additional security and clarity to GSE debt holders – senior and subordinated – and support mortgage availability by providing additional confidence to investors in GSE mortgage backed securities. This commitment will eliminate any mandatory triggering of receivership and will ensure that the conserved entities have the ability to fulfill their financial obligations. It is more efficient than a one-time equity injection, because it will be used only as needed and on terms that Treasury has set. With this agreement, Treasury receives senior preferred equity shares and warrants that protect taxpayers. Additionally, under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares.

2) Dump the losses on common stockholders, check.

The [next] step Treasury is taking today is the establishment of a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Given the combination of actions we are taking, including the Preferred Share Purchase Agreements, we expect the GSEs to be in a stronger position to fund their regular business activities in the capital markets. This facility is intended to serve as an ultimate liquidity backstop, in essence, implementing the temporary liquidity backstop authority granted by Congress in July, and will be available until those authorities expire in December 2009.

3) Keep more good money around to throw after the bad money, because it will be needed, check.

Finally, to further support the availability of mortgage financing for millions of Americans, Treasury is initiating a temporary program to purchase GSE MBS. During this ongoing housing correction, the GSE portfolios have been constrained, both by their own capital situation and by regulatory efforts to address systemic risk. As the GSEs have grappled with their difficulties, we’ve seen mortgage rate spreads to Treasuries widen, making mortgages less affordable for homebuyers. While the GSEs are expected to moderately increase the size of their portfolios over the next 15 months through prudent mortgage purchases, complementary government efforts can aid mortgage affordability. Treasury will begin this new program later this month, investing in new GSE MBS. Additional purchases will be made as deemed appropriate. Given that Treasury can hold these securities to maturity, the spreads between Treasury issuances and GSE MBS indicate that there is no reason to expect taxpayer losses from this program, and, in fact, it could produce gains. This program will also expire with the Treasury’s temporary authorities in December 2009.

4) Use the good money to buy the preferred shares and hope home prices go up giving us the government the profit while stockholders foot the losses, and we expect this profit to roll in when housing prices go back up which they will any day now, yep, check.

Screw the little guy. And of course Treasury has been so dependably right about the economy so far, we shouldn't worry at all!

Does anyone think Wall Street will buy this? I mean odds are pretty good we'll soon be nationalizing more industries as well pretty soon. Let's be honest here, the government just nationalized the mortgage industry. More will follow.

More Fannie And Freddie Follies

As we await details of the Sunday Night Rescue of Fannie and Freddie, we learn today what prompted action by the Fed this weekend: Freddie's accountants were lying to the American people.

The government’s planned takeover of Fannie Mae and Freddie Mac, expected to be announced on Sunday, came together after advisers poring over the companies’ books for the Treasury Department concluded that Freddie’s accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.

The proposal to place both companies, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies’ debt might not be repaid. Falling home prices, which are expected to lead to more defaults among the mortgages held or guaranteed by Fannie and Freddie, contributed to the urgency, regulators said.

Investors who own the companies’ common and preferred stock will suffer. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives of both companies will be pushed out, according to those briefed on the plan.

The cost of the government’s intervention could rise into tens of billions of dollars and will probably be among the most expensive rescues ever financed by taxpayers.

Got that?

1. Freddie Mac's accountants lied. They were much worse off in reality.
   
2. The housing market will continue to fall, meaning more losses for Fannie and Freddie.
3. Foreign Central Banks will get paid. Stockholders will get wiped out.
4. It will cost billions of our taxpayer dollars.
   

It gets worse.

“We have just had to nationalize the two largest financial institutions in the world because of policy makers’ inaction,” said Josh Rosner, an analyst at Graham Fisher, an independent research firm in New York, and a longtime critic of the government-sponsored enterprises. “Since 2003, when these companies’ accounting came under question, policy makers have done nothing.”

But only the losses are nationalized. The revenues will not be. Holders of preferred stock will continue to get money. Holders of common stock will get wiped out.

We're rapidly becoming a country of socialized losses and privitized profits. And nothing that I've seen from either candidate makes me think anything will change.

[UPDATE 11:28 AM:] Its official, the regulatory agency that monitors Fannie and Freddie, the FHFA, now is running both companies.

And yes, this means common stock in both companies has just been wiped out as worthless paper.

A Day Of Truce

Thursday is the 7th anniversary of 9/11, and both Obama and McSame are planning to take a day off from whaling on each other and will make a joint appearance at Ground Zero.

The Democratic and Republican presidential nominees, in a statement, said they will appear together at the World Trade Center site on Thursday "to honor the memory of each and every American who died" in the 2001 attacks.

The campaigns already had agreed to suspend television advertising critical of each other on Sept. 11. The McCain campaign has said it will air no ads that day.

Both campaigns have been running negative television ads and, at the just-concluded political conventions, pulled no punches in exploiting partisan differences.

Obama and McCain said Thursday will be different.

"All of us came together on 9/11 — not as Democrats or Republicans — but as Americans," they said. "We were united as one American family. On Thursday, we will put aside politics and come together to renew that unity."

What I fear this will turn into is each side pledging it will be the first to bomb Iran into a melted glass parking lot if it looks at Israel cross-eyed.

But then I don't expect that to change no matter who is in the White House, and it would have been the same if it was Hillary, Huckabee, Romney, Edwards, or anybody else running from these two parties.