Editore"s Note
Tilting at Windmills

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September 16, 2008

MCCAIN'S NEW-FOUND DISDAIN FOR WALL STREET.... In a speech this afternoon in Tampa, John McCain hammered Wall Street, condemning bankers and brokerage firms for "reckless conduct, corruption, and unbridled greed." He added, "Too many people on Wall Street have been recklessly wagering instead of making the sound investments we expected of them.... Too many people on Wall Street have forgotten or disregarded the basic rules of sound finance.... Too many firms on Wall Street have been able to count on casual oversight by regulatory agencies in Washington."

It was, to put it mildly, terribly odd to read all of this. McCain has always supported the casual oversight he's now railing against. He's never lifted a finger to rein in Wall Street's excesses -- indeed, he's actively opposed anyone who tried.

But Ezra raises an even more important point, and connects McCain's comments to his Social Security policy.

John McCain's contention is that Wall Street has, for years, been rotting in a toxic mixture of greed and overreach and corruption. Simultaneously, a 70-year-old regulatory structure has proven inadequate at checking the institution's excesses. This is, in other words, a crisis composed of trends, rather than a singular, unpredictable, catastrophe.

Three years ago, John McCain signed on to George W. Bush's efforts to privatize Social Security. He surveyed Wall Street and decided that it was a stable enough institution to entrust with the nation's pension funds. Three years ago. And this wasn't just an attempt to cozy up to Bush: McCain was arguing for privatization in 1999. So McCain's argument is that Wall Street is built atop an unstable regulatory foundation and is shot through with most of the seven deadly sins. That the situation has been allowed to fester so long is evidence that "people were asleep at the switch." Even so, McCain has consistently argued that much of Social Security should be turned over to ... Wall Street. Either he wanted to tank the nation's pensions funds or he was one of the people asleep at the switch. But those are really the only two options here.

Exactly. I'd just add that McCain didn't just endorse Bush's privatization scheme three years ago, McCain also touted a system of private accounts three months ago.

Maybe now would be a good time for the McCain campaign to clarify McCain's willingness to trust Wall Street when it comes to Social Security.

Steve Benen 3:05 PM Permalink | Trackbacks | Comments (37)

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Comments

I can't get over the wealth of information your blog provides. Thanks so much for the breath of fresh air and sanity during such a bizarre time.

Posted by: on September 16, 2008 at 3:11 PM | PERMALINK

Next up: How did Obama cause this Wall St meltdown? How did he get us into this mess? Vote the incumbent President Obama out of office and put in a real reformer, McCain!

Posted by: Speed on September 16, 2008 at 3:14 PM | PERMALINK

So he gave what amounts to a scolding? I'm sure they will snap right back in place.

Posted by: coral on September 16, 2008 at 3:14 PM | PERMALINK

Both McCain and those who criticize his remarks today miss the point. The current crisis cannot be simplified down to the "fat cats" theory that McCain propounds, nor it is accurate to chalk it up to favoritism showed to the financial services industry.

The most accurate portrayal of all of this is, at the end, Obama's much criticized usage of the phrase "economic philosophy." What we're seeing now is the inevitable outcome of a overheated economy fueled by the deregulatory instructs of those like Greenspan that zealously promote "free market" economics. You make credit too cheap in a country where real estate is the cornerstone of most investment portfolios, and you'll drive up housing demand, encourage banks to create exotic debt instruments, etc. You refuse to regulate the securitization of risky mortgages, and refuse to provide oversight into reporting standards for untraceable bad assets, and you will have a total loss of investor confidence.

The great irony, of course, is the blatantly socialist solution that the Fed has embraces in bailing out Bear, Fannie/Freddie, and (maybe soon) AIG.

Who's right at the end? In my opinion, those who understand that a competitive economy CAN be regulated, and regulation CAN encourage competition while keeping in check things like bubbles. Republicans may wish that we have economic growth like China (10%+ a year), but realists understand that the U.S. is a mature economy that has long-term potential. I'm happy if we grow 2-4% a year, as long as we keep growing and keep competing.

This is one of the reasons why I'm voting for Obama this fall. His words, and the people that he chooses to surround himself with, convince me that he gets it.

Posted by: reader1 on September 16, 2008 at 3:17 PM | PERMALINK

Since Merrill Lynch is McCain's biggest contributor, I would add this to the "lies" list rather than the "flip-flop" list, but that's a judgment call.

Posted by: danp on September 16, 2008 at 3:19 PM | PERMALINK

So much ad material, so little time.
Get to work Obama camp.

Posted by: ckelly on September 16, 2008 at 3:21 PM | PERMALINK

Now's the time for Obama to run ads in Ohio, Florida, Pennsylvania, etc to let voters know McCain's plan for gutting Social Security and tax their health care benefits.

Posted by: msw on September 16, 2008 at 3:22 PM | PERMALINK

If McCain wins this election the entire population of the United States will be eligible for a Darwin Award.

Posted by: Stephen Stralka on September 16, 2008 at 3:23 PM | PERMALINK

Obama should hammer McCain with Ezra's points, all of them, and maybe make an ad out of it.

Posted by: Spero Melior on September 16, 2008 at 3:23 PM | PERMALINK

"reckless conduct, corruption, and unbridled greed."

Isn't this precisely what a steady regimen of corporate de-regulation, the snuffing out of consumer protections, and handing over our government to big business gets you? And here stands the party in charge for the last eight years wondering "what has happened to all the good, honest folk on Wall Street?"

McCain's comments make it sound like the sour market is the result of a few bad eggs bucking the system. I wonder how many voters realize that the system was thrown out long ago, so that our corporatocracy could flourish free from the concerns of, say, the People.

Forget separation of church and state. We need to separate business and state, too!

Posted by: chrenson on September 16, 2008 at 3:24 PM | PERMALINK

Isn't it kind of nice to see McCain's campaign stuttering and sputtering and generally being out of sync?

pass the popcorn T.O! This is getting f-u-n!

Posted by: neilt on September 16, 2008 at 3:25 PM | PERMALINK

Steve, I think it would make an interesting blog to discuss the cynicism with some commentators like Candy Crowley and others in her group.

I find it appalling. So many analysts seem prone to automatically qualify every comment by saying "We've seen this before, I hate to tell you...".

I remember the such and such election and this is what happened...yeah, McCain is doing nothing new...blah blah..."

Yeah? Well, neither are YOU!

Almost as though there is no opening for a new vision or possibility, almost like folks are afraid to sound hopeful..Almost as though they are protecting themselves and others from the disease of daring to care...Almost like they'd rather be right than suggest or encourage or hope for real change.

Almost like they've given up.

Maybe we should move to re-elect our analysts every four to eight years along with our officials! I'm serious--

It's a culture of hard-core cynicism out there that is unbelievably revolting to my better sensibilities. It's one I've not quite seen before, frankly.

Posted by: on September 16, 2008 at 3:27 PM | PERMALINK

speed, speed. come now, you obviously don't know how to read the tea leaves.

where is this crisis happening? New York. who in New York are affected mostly? smart rich white people. can you name a smart, rich white guy in New York? right, Bill Clinton. Q.E.D.

Posted by: northzax on September 16, 2008 at 3:27 PM | PERMALINK

Let us not forget that the whole point of privitization was to kill Social Security once and for all. What we're seeing on Wall Street is utterly irrelevant to the goals behind privitization. I wouldn't be a bit surprised if some of our "conservative" friends aren't gnashing their teeth because Social Security could not be punted to Wall Street in time for it to be utterly destroyed by the current crisis.

Posted by: Roddy McCorley on September 16, 2008 at 3:28 PM | PERMALINK

What an absolute hack. My God. I never thought I would find a candidate that makes George W and his disgusting and infantile campaigns actually look kinda good, but McCain 08 has done it. The guy will literally say ANYTHING to get elected. I don't even know how to react to this clown anymore.

Posted by: GiggsisGod on September 16, 2008 at 3:29 PM | PERMALINK

The ad should emphasize the disingenuous time scale of McCain's dander. Put his "for too long" right next to the "3 months ago".

Posted by: Jeffrey Davis on September 16, 2008 at 3:32 PM | PERMALINK

USA Today had a sub-headline: US sees $700 billion in wealth disappear.

I wonder if that had anything to do with McCain's sudden disdain.

Trickle-up is a bitch, Senator. Now you know how the rest of us feel.

Asshole.

Posted by: MsJoanne on September 16, 2008 at 3:45 PM | PERMALINK

I want to point out that what we have today is not a 70-year old regulatory structure, but more like a 10 year old one. Glass-Steagall was repealed and opened the doors to our current mess. It's my understanding McCain stayed away from that vote (that's pretty mavericky of him), but Phil Gramm was the major player in getting the G-S Act repealed and of course Gramm is a major part of McCain's economic team.

So, yea, I think our 70-year regulatory structure, properly enforced, would've put us in a much better position than we are now in.

Posted by: Joshua on September 16, 2008 at 3:45 PM | PERMALINK

Steve, I think Ezra raises an even more important point in suggesting that McCain, as "a 70-year-old regulatory structure, has proven inadequate at" demonstrating the judgment necessary for the presidency.

Posted by: Sara v Sarah on September 16, 2008 at 3:56 PM | PERMALINK

If McCain wins this election the entire population of the United States will be eligible for a Darwin Award.

Nah, just the 51%.

Posted by: ckelly on September 16, 2008 at 4:04 PM | PERMALINK

Steve, I think Ezra raises an even more important point in suggesting that McCain, as "a 70-year-old regulatory structure, has proven inadequate" for the needs of the American people in the 21st century.

Posted by: Sara v Sarah on September 16, 2008 at 4:05 PM | PERMALINK

Steven - you're doing a great job since you took over washingtonmonthly.com. I visit this site several times a day and I am thankful for what you're doing.

Also I would like to encourage others to support the blog when donations are requested and to subscribe to the magazine (I've been a reader since the mid-1970s).

Posted by: MuddyLee on September 16, 2008 at 4:07 PM | PERMALINK

There are enough multi-partisan fingerprints on this mess that most everybody on both the Senate and House banking committees from both parties should resign.

This is truly Congress' mess.

Posted by: Neo on September 16, 2008 at 4:12 PM | PERMALINK

"reckless conduct, corruption, and unbridled greed."

Wall Street? Good gods---I thought he was talking about that Moosylvanian he picked for his VP!

I wouldn't trust McCain to run a blue-ribbon committee to investigate a rainy-day bingo game in a third-grade classroom during lunch-hour....

Posted by: Steve on September 16, 2008 at 4:16 PM | PERMALINK

Privatizing SS was always about destroying it, grabbing the 100s billions of dollars and then squandering it on endless wars, worthless real estate, and using the monies to execute financial shenagins for profit until market forces caused the greedy folks to turn to the taxpayers to bail them out.

Wait. Didn't we already do that with our surplus from 2000?

Social Security. Don't let the money-changers destroy it. We've all seen how well privatization works in the military, storm relief, etc.

Thank goodness cooler heads have prevailed when it comes to SS.

My pension has tanked. Why would privatizing my SS dollars be a good move????? I want to know. Show me the money.

Posted by: Tom Nicholson on September 16, 2008 at 4:16 PM | PERMALINK

At least we now know why Obama didn't pick Evan Bayh for VP.

Posted by: Neo on September 16, 2008 at 4:17 PM | PERMALINK

This Federal Reserve Board Bail out stuff is not complicated at all; it works for those in power and not for the electorate. All which begs a simple explanation in the economics of the banking system that was created by the rich secretly on Jekyll Island in 1913.

Simple example of the Jekyll Island economics now called the Federal Reserve Board navigated by Allen Greenspan recently, seems like it was for ever. Actually almost a century in existence and deemed by many an absolutely unfair practice in economics.

America, here, is some simple reasoning, take Bear and Stearns bailed out with fifty billion tax dollars, your money and mine. Highly and likely dividends and probable profits will go to the company operators. What does the tax payer get? Actually they really don’t suggest that or even follow up to see if these bail out are repaid. Here, is were the Mainstream Media has been complicit with big money too, so little talked about in terms of what is reported by the Federal Reserve Board, like who audits their books. All we do is hear from Allen Greenspan nobody seems to buckle down and crunch his numbers.

Consider this when these companies do business with each other they exchange an “owning interest.” When the tax payer ponies up billions there is no owning interest. Very out of balance folks.

Did you get that “An Owning Interest” but when American tax payers are handing money through the Federal Reserve window there is no ownership even if it is temporary in the time of the loan, no possible receipt of dividends, no bonus checks if everything works out, The guys who take our tax money collect and keep the profits. Is that fair? Heck no. especially if you got some who thinks
like Bush and Company “You with me or Against Me”.

But if it was fair and say the ownership value of fifty billion balanced to the proper ownership for the tax payer, America we own essentially half of Bear and Stearns, the electorate should receive returns on investments. Meaning why doesn’t the electorate receive the real portion of profits, or dividends? Were as we the people bought into this deal. Loophole, yes the long time economics that ditched the American people.

Heck if one makes retro active estimates likely all baby boomers likely could retire with vary satisfactory living wage accounts. Take it a step further, if it was done fairly, poverty could be erased in a generation at least in America, and all those who worked for a living could retire with living wages that would likely create the largest consumer economic prosperity generations ever recorded in history.

But no, just a few work this casino of government tax dollars and look what we have. The worst economic leadership in history on a rant, here, McCain saying we won’t let this happen again.

Of course not vote Democratic 2008,

Hockey is O.K. but let’s talk Obama to pick Hillary as our “Economic Mom”…

For me I would feel a lot better…



Posted by: Megalomania on September 16, 2008 at 4:21 PM | PERMALINK

Nobody, but nobody, in the great U.S. of A was troubled in the slightest at Wall Streets' investment policies just as long as the money kept rollin' in. Well, having said nobody, I guess I mean nobody I read - and even that isn't strictly true: hey, lying is easy!! No, seriously, Paul Krugman did sound occasional notes of warning that America's overall financial philosophy under the current government was unsustainable in even the medium run. But nobody else, and that includes The Great Greenspan when he was still Mr. Money.

Whenever a major disaster like this comes along, the lack of preparation comes back again to the myth of American exceptionalism; that America can succeed where others have consistently failed, and that Americans are not subject to the governance of checks and balances and market forces as other people are.

It's a nice thought, and there have been occasions in the past when it was even true. However, it's a hell of a shaky foundation on which to build a fiscal policy.

Posted by: Mark on September 16, 2008 at 4:29 PM | PERMALINK

Florida is key, and is moving increasingly toward McCain. It is critical that Obama use the object lesson provided by Bear Sterns, Fannie, Freddie, Lehman, etc and tie it to the Republican love of privatizing Social Security - with ads saturating Florida post haste. This is a killer issue.

Also, I'm sure I know the answer to this, but if anyone here is certain let me know: since McCain so very strongly believes Wall Streeters are greedy and evil (and presumably he would want to send the right signals and not reward their greed and evil), where was McCain, exactly, on the proper tax rate for income of hedge fund managers?

Posted by: zeitgeist on September 16, 2008 at 4:44 PM | PERMALINK

You forgot a few things to balance things out:


1. Biden's pivotal role in passing the awful bankruptcy bill.


2. Obama and the Democrats raising so much money from Lehman, Freddie/Fannie, and Wall Street. Obama has raised more money from Wall St than McCain. Let's just say money doesn't usually come without strings.


3. The Democrats have resisted efforts to reform Freddie/Fannie, and by most independent accounts those agencies have leaned towards the Democrats over the years.


The fundamental problem is that both parties continue to raise huge sums of money from special interests - with Obama outraising McCain in the the financial services sector. How can Obama claim he is an outsider/reformer with a moneytrail like this? To add insult to injury, he chose to forgo public financing, and is apparently off to Hollywood for a $28K per person fund raiser. Wow!

Posted by: daniela on September 16, 2008 at 4:50 PM | PERMALINK

You forgot a few things to balance things out:


1. Biden's pivotal role in passing the awful bankruptcy bill.


2. Obama and the Democrats raising so much money from Lehman, Freddie/Fannie, and Wall Street. Obama has raised more money from Wall St than McCain. Let's just say money doesn't usually come without strings.


3. The Democrats have resisted efforts to reform Freddie/Fannie, and by most independent accounts those agencies have leaned towards the Democrats over the years.


The fundamental problem is that both parties continue to raise huge sums of money from special interests - with Obama outraising McCain in the the financial services sector. How can Obama claim he is an outsider/reformer with a moneytrail like this? To add insult to injury, he chose to forgo public financing, and is apparently off to Hollywood for a $28K per person fund raiser. Wow!

Posted by: daniela on September 16, 2008 at 4:50 PM | PERMALINK

So he gave what amounts to a scolding? I'm sure they will snap right back in place.

He sat them down and told them to "cut the bullshit".

I'm sure it will work great! Problem solved.

Posted by: NonyNony on September 16, 2008 at 4:52 PM | PERMALINK

George W. Bush made a promise to Wall Street when running for his 1st and 2nd term that he would deliver to them a privatized social security system. Fortunately his efforts ran into a buzz saw of opposition and failed. In view of the failing investment banks and brokerage firms toppling like dominoes, just think of what the IRAs, 401(k)s, Keoughs and Roths would be worth had he succeeded.

Posted by: Danny on September 16, 2008 at 7:25 PM | PERMALINK

I think Social Security privatization is dead for at least 2 generations. So is Reaganomics and the idea that government is the problem and if we'd only leave it to the magic of the marketplace everything would be just wonderful.
It appears Franklin Roosevelt was right.

Posted by: aline on September 16, 2008 at 8:17 PM | PERMALINK

There's a story about a snake which promises not to bite, but does anyway. When asked why he broke his promise the snake says, "I'm a snake. That's what I do."

John McCain says Wall Street is too greedy. What does he expect them to be? That's what they do.

Maybe this is at the heart of why John McCain doesn't understand how the American economy works.

John McCain isn't a person Americans can afford to have as President in 2009.

Posted by: MarkH on September 16, 2008 at 8:26 PM | PERMALINK

Obama & Ezra really must tie this to something:

(NYTimes 9/11/03)
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
{...}
"These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
Representative Melvin L. Watt, Democrat of North Carolina, agreed. "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing," Mr. Watt said.


Posted by: tao9 on September 16, 2008 at 10:17 PM | PERMALINK

Obama & Ezra really must tie this to something:

(NYTimes 9/11/03)
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
{...}
"These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis," said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. "The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
Representative Melvin L. Watt, Democrat of North Carolina, agreed. "I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing," Mr. Watt said.


Posted by: tao9 on September 16, 2008 at 10:17 PM | PERMALINK




 

 

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