McCain's Economic-Deathbed Conversion

A decade ago, John McCain embraced the bill proposed by his campaign finance guru, then-Sen. Phil Gramm (R-TX), to successfully push through the GOP-majority Senate the landmark legislation removing the walls between banking, investment and insurance companies.

That bill helped pave the way for companies such as Bear Stearns, Lehman and AIG to become behemoths laden with bad loans and investments. As if that wasn't enough of a boondoggle for his corporate buddies, McCain also continually pushed for less federal government regulation, telling the Wall Street Journal this March.... "I'm always for less regulation... I'd like to see a lot of the unnecessary government regulation eliminated."

But now, after the Lehman collapse and the stock market meltdown this week, he's singing a different tune... "McCain Embraces Regulation After Many Years of Opposition." (WaPo)

Yesterday, Barack Obama mocked "what he called McCain's 'newfound support for regulation' and accused his rival of backing 'a broken system in Washington that is breaking the American economy.'

"In a speech in Golden, Colo., Obama blamed the economic crisis on an 'economic philosophy' that he said McCain and President Bush supported blindly."

" 'John McCain has spent decades in Washington supporting financial institutions instead of their customers,' he told a crowd of about 2,100 at the Colorado School of Mines. 'So let's be clear: What we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed.' "

The "trickle down" philosophy Bush "41" disdainfully labeled "voodoo economics," was fully embraced by his rebellious son Bush "43".... corporate taxes were decreased and enticements given for shipping jobs overseas, regulatory oversights were relaxed or abolished and Ponzi-frenzied oligarchs were given free reign to pillage the populace. Sub-prime was the new platinum parachute to financial riches.... for the few.

While obscene profits trickled up, the financial strength of the country trickled away.

Now, the Bush administration frantically bails with taxpayer money and borrowed hundreds of billions to keep the economy afloat, while the GOP presidential candidate of the party that foisted these ruinous policies on the country.... the-fundamentals-of-our-economy-are-strong McSame.... has found campaign-season economic religion.

Or so he says.

But, as we have seen these past months, McCain's Straight Talk Express has maxed it's credit and is now running on the fumes of distortion and double-talk.

November!

Biden Bites Back....

Today Joe Biden is off of the leash.... and for many who want to hear Obama's VP pick forcefully answer the McCain attack machine .... out of the doghouse.

In Michigan today, flanked by tee-shirted "Fire Fighters-Obama Biden" supporters, Biden delivered a blast at John McCain and the Bush administration's failed policies, broken promises and scurrilous campaign tactics.

Biden says of the promises and policies of McSame.... "We've seen this movie before, folks. But as everyone knows, the sequel is always worse than the original."

Biden says McCain just doesn't get it. Even today while the stock market is plumeting on the news of the Lehman collapse, like a Bush bobblehead McCain said once again... "the fundamentals of our economy are strong."

Biden laments that his old friend McCain not only supports Bush's failed economic policies, but that a McCain presidency would continue those policies..... "Bush 44."

Woof! Let's hear more!

November!

"Ant" Morgan Bails "Grasshopper" Bear

Here's what the rescue of fifth-largest investment bank Bear Stearns amounts to.... a whistling-past-the-graveyard way of getting around banking regulations in order to receive emergency funding backed by the federal government without admitting that Bush's mindless, optimistic mantra about "the fundamentals of our economy".... are actually at Great Depression levels.

After all, The Decider asserted just today.... "The economy is going to be fine," as the dollar plunges, oil prices gush to all-time highs and financial markets teeter on the edge of the precipice.

Whistling.... singing, dancing..... Softshoe Georgie doesn't want the appearance of 1930s-type of last-hope moves to mar his trickle-down-fair-tale legacy. The next guy can clean up the mess.

Here's the deal, Bear was "sold" to commercial banking firm J.P. Morgan Chase at a jaw-dropping bargain of $270 million, which includes Bear's soaring Madison Avenue headquarters, which amounts to $2 per share.... Bear was at $170 a share just a year ago.

The Federal Reserve is providing the financing including "loans" of up to $30 billion or so to Morgan for Bear's "less-liquid assets".... thus allowing Bear access to the cash for an initial period of 28 days as Morgan borrows money from the Fed and relends to Bear.

You see, the Feds lend directly through its "discount window," usually only to commercial banks.... not investment firms. The Feds can work with commercial banks because they are subject to extensive federal supervision unlike investment firms.

However, a law passed in 1932 allows the Federal Reserve to lend outside of commercial banking during Great Depression-type emergencies. Such a move would signal we're on the verge of financial panic and that's the appearance the White House wants to avoid....

So.... the Feds are using commercial bank Morgan as a conduit to bailout Bear because Morgan has access to the Fed's discount window.... and technically the Feds still haven't lent directly to an investment bank and avoids the appearance of a financial earthquake.

A discount window loan to Bear.... which they don't have access to.... would have had to be secured by the highest-quality collateral and Bear's subprime mortgage problems along with the collapse last July of two of their mortgage-related hedge funds left them on the brink of immediate bankruptcy.

Morgan's CEO, Jamie Dimon, has over the last few years been focused intensely on cutting costs, improving technology and preparing the company for an economic downturn.... they emerged relatively unscathed from the subprime crisis.

Bear, on the other hand, liked to live on the edge....

"A throwback to a bygone era, Bear Stearns still operated as a cigar-chomping, suspender-wearing culture where taking risks was rewarded.... "Ace" Greenberg, Bear Stearn's chairman for more than 20 years and a championship bridge player, still regaled its partners over lengthy lunches about gambling with the firm's money in its wood-paneled dining room." (NYTimes)

So where does this leave investors?

The DOW opened down today, and "investors are taking a grim view of the prospects for other investment banks like Lehman Brothers and Merrill Lynch.... Managers of hedge funds and mutual funds say the problems at Bear confirmed their worst fears about the brokerages, that they have relied too much on leverage and have done a poor job managing the risks they took on during the boom." (NYTimes)

Yesterday, Morgan's senior management actually told the finance community that Bear Stearns will continue to live up to its business obligations, as its trading obligations will carry "the full faith and credit of J. P. Morgan." (NYTimes)

Feels like the twilight zone. Didn't that used to be the motto for the U. S. Treasury? Oh, that's right.... it is the U.S. Treasury (taxpayer money) guaranteeing the whole shebang.

Anyway you cut it.... regardless of our forked-tongue Treasure secretary Henry Paulson still saying the administration won't use taxpayer money to help resolve the crisis.... we're in taxpayer bailout country.... Bush-voodoo economics land.

But, the Bear resolution won't be the model for the Big Bailout to come. There aren't enough J.P. Morgans to go around.