One of the more fascinating aspects of the Paulson Plan -- which its own advocates mystifyingly chose to call a bail-out -- is the way that economists and other well-informed people tore into it from around the country. The Internet accelerated, deepened and magnified the response, such as has never been seen before in connection with a financial maneuver of this sort.

The traditional approach sought by Paulson and Bernanke was to conceal the basic nature of the plan, ask for trust, insist on dispatch, and brook no involvement from the outside. Presumably, they called a few people on Wall Street, took counsel from their expert staff, chatted a bit with some senior staffers on the Hill and a few of the members, and believed that when in the fullness of time their actions became transparent to the market, perhaps weeks from now, they would be judged on the results.

It does not appear as if the Internet permits the traditional approach to work anymore. That raises the question of whether such policy making ought to be done in the open. If there are no secrets, why not discuss the whole matter openly, but still expeditiously? Indeed, if Treasury had asked for widespread input over the last few months to the question of dealing with this sort of problem, it is not implausible that it would have come up with a better plan last week -- one that would have been adopted sooner, with less Presidential politicking by the Suspender and a more tolerant public acceptance.

According to the NYT, Lloyd C. Blankfein, Goldman Sachs CEO, was in the room with Henry Paulson (former CEO of Goldman) when the decision to save AIG was made. Why does this matter? According to the NYT, AIG owed Goldman $20 billion. If AIG had been allowed to go bankrupt, Goldman would be in line with all the other creditors, hoping for a few dimes back on each dollar of debt. Because Henry Paulson decided to rescue AIG, Goldman gets paid in full.

Did Goldman's influence with their ex-CEO make a difference in Paulson's decision? I have no idea, but this thing stinks. Can you imagine if clerical workers losing their homes got to sit around with bankruptcy judges deciding the fate of their mortgages? It doesn't work that way where the rest of us live.

It is impossible to exaggerate the corruption of this Wall Street crowd.

The afternoon after, my abiding impression remains that Obama won the debate. He won it with clarity, self-possession, and generosity ("I agree with John"). He won it by not gaffing. (Given how important gaffes have become in our precious national discourse, isn't it about time we got a verb out of the deal?) And not least, he won it by looking friendly--the kind of guy (you might say) whom you can have a beer with and who, when he disagrees with you, still looks you in the eye.

I blogged last night about McCain's weird habit of staring sedulously straight ahead, away from Obama looking at him--McCain with jaw clenched, moreover--and am delighted to see how many others noticed the same thing. On MSNBC, as Josh picked up, Eugene Robinson made the valuable observation that McCain treated his rivals the same way in the Republican primary debates--it must have to do with a propensity to demonize his opponents. Given how many opportunities McCain had to look Obama in the eye, it's not only remarkable how few he took up, it's remarkable that professional observers wouldn't notice.

But not everybody noticed. I've just read all seven debate comments on the National Review website. None of the seven noticed.

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By the end I was demoralized. I thought Obama had allowed himself to be patronized, of all things, regarding America's Middle Eastern wars, diplomacy (or at least, Dr. Kissinger's view of it), "Russia." It was McCain who spoke of building an "alliance of democracies," for God sake, not Obama, who had told 200,000 in Berlin that he was a citizen of the world. A friend sent me this lament by Nora Ephron, with which, at first, I sadly agreed:

I was, by the way, the least pessimistic person in the room where we watched the debate, a room full of blue-state pinkos, and our hearts had collectively sunk as we watched Obama miss opportunity after opportunity to score a knockout punch -- as the men in the room tended to put it.

But then I heard surprising snap polls showing Obama had (narrowly) "won." Without quite meaning to, I actually watched the debate all over again, from the beginning, saw how much better Obama came off than what I had feared--and realized my problem.

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Like many other economists I have been writing about the conditions under which the taxpayers should be willing to hand over vast sums to the Wall Street wrecking crew. This is inevitably involves a game of chicken to some extent. But a properly designed bailout turns it into a simple question of revealed preference.

We give Wall Street terms that require giving up so much equity that the banks really don't want to take the deal. They will take the deal because they have to take the deal, the alternative is bankruptcy.

There is a very simple way to determine whether the deal is the right deal.

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That is evidently what they are competing for, notwithstanding the unmistakable decline of the U.S.A. relative to the rest of the world in terms of economic, political, and military power.

I was impressed by both candidates, though I agree with neither. McCain clearly has his world view together and has honed his opinions on the full gamut of issues. (On foreign policy. On domestic he's a babbling idiot.) He happens to be disastrously wrong about all of them, but he knows what he knows. That's also the problem. From the view of the debate, you can't tell this guy anything. He's a major dick.

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Dennis Myers of the Reno News and Review makes this astute observation about one more item in John McCain's padded resume, wherein repetition often substitutes for evidence:

During tonight's debate John McCain said, "I know the veterans. I know them well. And I know that they know that I'll take care of them. And I've been proud of their support and their recognition of my service to the veterans. And I love them. And I'll take care of them. And they know that I'll take care of them."

McCain has made this argument that he has a special relationship with veterans before. In July, he had this to say to a veteran who was critical of his record: "My friend, all I can say is I don't know what you're pointing to, but I've received every award from every major veterans' organization in America....The reason why I have a perfect voting record from organizations like the Veterans of Foreign Wars, the American Legion and all the other veterans' service organizations is because of my support of them." It turned out that the VFW and the Legion do not have congressional vote rankings.

There are, however, other veteran organizations that do have such rankings. And if veterans have the special relationship with McCain that he describes, their organizations seem unaware of it.

In 2006, Disabled American Veterans gave McCain a 20 percent rating.
In 2006, Disabled American Veterans gave Obama an 80 percent rating.

In 2006 Iraq and Afghanistan Veterans of America gave Senator McCain a grade of D.
In 2006 Iraq and Afghanistan Veterans of America gave Senator Obama a grade of B-plus.

This is some story, one that the netroots needs to get into.

A shadowy Israeli/neocon operation (in cooperation with a Jewish proselytizing outfit) is distributing 28 million racist videos about Muslims and Islam in advance of the US election. The video -- which is a nasty screed -- has been kicking around in far right circles for awhile. But the mass distribution now is intended to defeat Barack Obama.

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Here's what Candy Crowley blogged a while ago:

OXFORD, Mississippi (CNN) -- I think Jim Lehrer gave up trying to get them to talk to each other. It's even weirder in the hall -- they are no more than 8 feet apart from each other and they speak to Lehrer only. But A+ for the effort.

And CNN's own photo shows Obama looking at McCain while McCain stares straight ahead.

McCain: "I don't think Senator Obama understands...."

"I have a record. I have a record."

"I will wear his bracelet with honor."

"We don't want defeat."

Obama: "Are we making good judgments?"

McCain: I've been around.

McCain just said that.

And the consequences of this war? Can any rational person claim that the war has produced anything but increased Iranian influence? Are they not close to nuclear weapons? Are they not riding high via Hamas and Hezbollah? Are they not cocky?

This man is supposed to be knowledgeable about the world?

It's 30 minutes into the debate and I haven't seen McCain look at Obama once. Obama addresses McCain. While McCain speaks, he watches him. He acknowledges his opponent's existence. His manner reflects his nature--he doesn't talk about reciprocity, he exhibits it. McCain refuses to reciprocate. To him, his opponent is a nonentity. Call it fear, call it contempt, call it smugness, call it anxiety--I'm not sure what to call it. But for sure it's downright peculiar.

Talk to us.

At a Harvard panel discussion yesterday, economics professor Ken Rogoff made an interesting point: The liquidity crisis isn't real. Or, to restate it: Any liquidity crisis is caused by the promise of a government bailout. Ken said that his many friends in investment banking said that there is plenty of money to invest in financial services, but right now it is "sitting on the sidelines." Why? Because the financial services industry does not want to pay the terms demanded. As he put it, why do business with Warren Buffett who will negotiate a tough deal, if you believe that the government will ride in soon with cheaper cash?

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Well, gee, John, thanks for agreeing to show up at tonight's debate, now that you've gotten the economy back on track. Oh, you haven't? Well, at least it's not your fault. According to you, John "the Maverick" McCain, the problem was that those damned DC insiders (i.e., your longstanding colleagues) were too busy playing the "blame game" to strike a deal.

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My son, Nate Hundt, is the regional field director for the Obama campaign in Colorado Springs. He sent me this video:

It's not clear how much of tonight's debate will end up being about foreign policy and how much will be about the domestic economic crisis (that is of course creating a global crisis too), but if the Middle East does come up, it would be good if finally there would be reality over rhetoric regarding the urgency with which Israel needs to make peace with the Palestinians by ceding most of the West Bank settlements and the occupation. None too soon. Most Americans probably don't know that Zeev Sternhell, a leading Jewish and Zionist academic-a 73 year old Holocaust survivor--was nearly seriously harmed yesterday when a pipe bomb exploded in front of his Jerusalem apartment, set there by extremist Jewish settlers from the West Bank.

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The Democrats have made good progress in getting the Bush administration to move from the $700 billion blank check proposal that we saw last weekend. The initial draft agreement provides for some real oversight, restrictions on executive compensation, and an equity stake for the government in exchange for taxpayer dollars. It is also includes language committing the government to seek workouts on mortgages that will allow people to stay in their homes.

This is all great progress, however there is still much that is missing.

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So many have already circulated this wacky but uncannily profound piece by Sarah Silverman that Kmer Rouge bloggers have probably already started showcasing it. I want to use it to make a sober, hopeful point in advance of tonight's debate and while Obama is slightly ahead in most polls. In my piece "Obama's Jews" (in the current Harper's), I report that Obama is leading among young people in general (18-29 years old) by some 25 percent. The various pollsters I've talked with put it simply to me: if young people come out in large numbers, Obama can't lose; if not, he may not win, for all the "cultural" reasons and divisions we have analyzed to death since 2000.

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In the coming November elections I will not vote. Unlike other absentees, this will not be due to protest, lack of attractive alternatives, or (as is, regretfully, so common among Americans) apathy. I won't vote for the simple fact that I'm not an American citizen, and therefore have no voting rights. Why should this simple fact bother any of you? Maybe it should not. I think it should, however, because of another simple fact: just like many people around the world I will be significantly affected by the results of this election. Moreover, as a resident of the Middle East, my future prospects depend to a large extent on the American elections.

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The most important issue is coming up now, as our week is winding down, the one Michael Contarino raises in his last posting, namely regarding the role of morality in foreign policy. I could not agree more that the next president must work to restore the "moral credibility" of the United States.

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In yesterday's posts, Professor Ish-Shalom pointed out the dangers of extremists to their own countries. That's invaluable, as we often reduce things to the simple Manichaen dualism of "Us Good, Them Bad." What do we do when "they" become "us"?--or to use Walt Kelly's famous phrase from Pogo, "We have met the enemy and he is us." One of the many reasons that I admire Prof. Etzioni's Security First is the insistence on our own morality. That's the theme that Professor Contarino stressed in his fine post yesterday. I'd like to pick up on that with regard to the Muslim world.

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Okay, and I mean defending it only with the Dem changes, including especially the requirement for oversight and an equity stake in exchange for buying the bad debt.

But here's the thing, buying assets, however toxic, looks to me a far better alternative than alternative suggestions I've seen that amount to various forms of insurance without buying any assets. The reality is that the United States is de facto acting as an insurer of failed institutions, which means the US government is taking on massive risk with almost zero upside possible and less ability to control what's happening. And institutions continue to fail, as WaMu showed.

So contra even some of my lefty comrades who have righteously and rightly condemned the possibility of a giveaway to the corporate pigs, I think the bailout is in the end the lesser evil. Here's why (below the fold):

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In the light of John McCain's Congressional deal-sabotage antics, his fake campaign suspension, his stream of transparent mendacity, the not-so-pretty Sarah Palin show, his long ride on the No Talk Express, etc. etc., his national esteem is tanking, and so are his poll numbers. In the battle for minds, he's lost George Will, leaving him to content himself with David Brooks' vote of confidence, based on Brooks' conviction that in McCain's glory days he looked into the man's eyes and contacted his soul--this from the man who for years had the same confidence that he knew the moral truth, the inner surge, in the mind of George W. Bush.

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We are getting a lot of nonsense on this bank bailout deal and it's coming from all sides. In a largely reasonable editorial, the NYT added this line in support of changing the bankruptcy rules on home mortgages:

"And that would halt the downward slide in home prices, reduce the number of vacant homes -- and the blight that comes with them -- and help preserve equity for all homeowners."

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John McCain bailed on saving the financial system and within hours, Washington Mutual gave up the ghost.

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

My guess is the stock market will tank tomorrow morning. The debt market has been in the tank all week, but because the only number the average American looks at is the Dow, they have not a clue what's going on. Paulson is a bond trader. He knows the market is going haywire.

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The NYT is spreading fear at a very bad time. It told readers that "Credit Enters a Lockdown." The information in the article doesn't back up the case.

Much of the story seems to rest on the experience of a mortgage broker in Cape Coral, Florida. According to the broker, "The underwriters are terrified and they're dragging their feet, and making more excuses not to close loans ... Basically, they just don't want the deals."

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As we've mentioned a few times recently, we're in the process of a three-step site upgrade which should fix all the site problems people have been suffering with for these many months and then also dramatically upgrade the site's features -- including a new and improved blogging/editing interface and improved ability to follow your conversations and your favorite bloggers.

It's in three stages -- 1) we're moving to a new and much more robust server set-up, 2) we're upgrading the software platform and then 3) we're going to roll out the new features.

Last night, we completed step one. We moved over to our new servers. The new server set up won't resolve the log in and forced log out problems. That's where the software upgrade comes in. But the new and faster servers should knock down the posting delays and double posting problems in addition to just making the whole site much, much faster.

But only you can really tell us how it's working on your end. So please let us know what you're seeing. Are the delays diminished? No more double posting problems? Let us know and that will help us moving forward.

Next day update: some folks were reporting HTTP 500 errors. We believe we've fixed that problem, are folks still seeing it? - ag

In an inexplicable move yesterday, Sen. John McCain suspended his campaign for president and announced he would not participate in tomorrow's presidential debate, citing the lack of progress in Washington on the proposed Wall Street bailout plan.

The move is inexplicable for a number of reasons, the first of which is that a mere ten days ago, Sen. McCain pronounced the fundamentals of our economy "strong." Now, such a fundamental misdiagnosis of the state of our economy should not come as a surprise. Last December, Sen. McCain told the Boston Globe "The issue of economics is not something I've understood as well as I should. [But] I've got Greenspan's book ... and I stayed at a Holiday Inn last night."

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In a post today, Amitai Etzioni notes the dangerous credibility vacuum behind John McCain's tough rhetoric on Georgia - and the recklessness of expanding a security guarantee to countries which we cannot realistically defend.

McCain's words raise the question of how he would respond to a Russian grab for Georgia or Ukraine. Would he accept the humiliation of having our impotence exposed? Or would he shoot from the nuclear hip? Sarah Palin, apparently unread on the origins or consequences of World War One, said recently that Article Five would require that we defend our allies even if that meant war with Russia.

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Whenever a major national figure talks about "putting politics aside" for the good of the country, it's time to hang onto your wallet. So it is with John McCain and his suggestion about putting off tomorrow night's presidential debate so that he can ride into Washington and save the economy -- not to mention life as we know it. Barack Obama has put forward the same line (not on cancelling the debate, but on not "politicizing" the bailout), probably in self-defense, to avoid charges that he is a self-serving, unpatriotic, and -- god forbid! -- politically motivated person. Of course, it's all politics: the bailout is politics, the discussions over how to shape the bailout are politically driven, and the process that got us into the mess was shaped by politics. Why pretend otherwise? In the hopes that it might lull people to sleep and divert their attention from the question of who helped get us into this mess in the first place.

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Schwartz argues that America "always" puts freedom before peace [here]. Actually, as today's headlines show yet again, the Bush Administration is falling victim to its own propaganda. It is endangering vital U.S. interests in order to continue pretending that it is promoting democratization.

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Tonight, in his home in Jerusalem, Professor Zeev Sternhell--renowned scholar, vocal criticizer of Israel policy of settlements, and an admired teacher--was the target for a pipe-bomb set-up, probably by right-wing Jewish terrorists. Thankfully, Sternhell was injured only lightly. This internal terror act demonstrates that violence knows no restrictions, and that there is no insurance for a stable democracy.

In Security First Amitai Etzioni discusses two types of people: Warriors and Preachers, or put differently, Extremists and Moderates. The former are those who embrace violence to pursue their aims. The latter are those who eschew violence and use only peaceful means to achieve their aims. These categories extend across nations (and civilizations). Each nation--including democratic ones--has its own warriors and its own preachers, and the warriors only await to forcefully compel their own methods. Extended unjust war and occupation provides a good opportunity for warriors to implement their modus operandi. For example, during the war in Vietnam the United States suffered political and social violence at home, with events such as the Kent State massacre and Watergate.

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Not technically a bail out per se, but Jeffrey Ely (via Sullivan) has a great idea that should warrant more discussion:

True just sending money is not incentive compatible. But there is no reason to bail out homeowners. Just intervene in any mortgage default. Seize the property and continue making the mortgage payments. In the short run rent the property back to the homeowner.

This is what I have been advocating to my colleagues. I don't know why it is not under discussion. Before going with the arbitrary implememtation that Paulson is proposing now there should be some convincing argument that it's more efficient than this alternative. It is clearly the most direct approach and therefore should be the default (so to speak.)

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Thanks to Shuja Nawaz for his report from the border. As someone born in Lahore, I have a personal interest in Pakistan, and am saddened at the violence there. If we want to make changes, we have to do as he suggests. Work with local people. Help them with the basic necessities of their lives. Here, I am thinking of an analogy from missiology. In an earlier age, missionaries were sent to convert people. Build churches, baptize "the heathen". There was no thought to their lives, no thought to the foreignness of what was being imposed (there are no grapes in Indonesia, for example, and people eat rice instead of bread. How then were Indonesians to understand the Eucharist of bread and wine?). Now, we speak not of establishing the "church", but participating in "the reign of God", helping people to better their lives. That's precisely what we are not doing in Afghanistan and Iraq.

Upon hearing the news of McCain's latest gambit -- campaigning/distracting by claiming to "suspend" his campaign and ditch the debate -- a friend of mine suggested it shows his racist attitude toward Obama, his unwillingness to accept him as an equal competitor. McCain has certainly repeatedly showed this disrespect throughout the campaign, and has often tried to insert himself as Obama's manager. But I responded to my friend that the real issue here is McCain's obvious disrespect for American democracy. He is running a campaign in which he and his ridiculously unqualified running mate refuse to answer press questions and confine their appearances to stage-managed events. Now, with a major event that would be partially unscripted and very telling on the horizion, McCain suddenly decides to appoint himself President and "go to Washington to resolve a pressing national crisis." Who does he think he is kidding? He is just trying to avoid laying out his views and taking questions so voters can evaluate him compared to Obama.

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In his response to my original post in this series, Stephen Schwartz objects to my application of the term "narco-terrorism state" to Afghanistan. He claims that I either "misuse the term" or else "libel the government of Hamid Karzai." I let the facts speak for themselves.

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JonusMcCainus: Have I missed it? Have I missed the battle?

Emperor Georgius Bushius: You have missed the war.

Jonus McCainus: Father, congratulations. I shall sacrifice a hundred bulls to honor your triumph.

Emperor Georgius Bushius: Save the bulls. Honor Barnus Frankimus. He won the battle.

Before anyone has any idea how much a bailout might cost, before we even know what the bailout will look like, the enemies of Social Security and Medicare are already using the bailout as a pretext to cut these and other essential programs. Earlier this week, the Washington Post ran a front page "news" article that essentially demanded that the presidential candidates put forward a schedule of spending cuts and tax increases to pay for the bailout. Peter Peterson's crew has also been banging the same drum.

The reality is that a bailout is likely to be expensive, but it does not create a whole new budget world.

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A friend recently sent a note reminding me that back in 2003, when some of us were warning about the dangers of the housing bubble, Alan Greenspan, the person most responsible for the housing bubble, was being knighted by the Queen of England. If we look at the list of banks and financial institutions that have crashed or now threaten to crash, we can find a long list of people who brought their companies and the economy to the brink of disaster and yet have received tens or hundreds of millions in compensation.

We can also find a long list of people in top policy positions, including the current Fed chairman, Treasury Secretary, and President, who celebrated the soaring house prices and loan excesses of the housing bubble. These people now expect to receive even greater authority due to the failure of their policy. This must stop.

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We're happy to announce that as of right now, we've launched onto a new server set-up and so far so good (cross your fingers for us). This should mean that your comments and blog posts should go up very quickly without any errors or repeats. Let us know it that's what you're seeing.

Coming up next (next two weeks is our plan), new software and new tools.

Michael Contarino correctly points out that in discussing democracy promotion, two issues can become entangled. One is what means should be employed. As I stated before, I am all in favor of democracy building by non-lethal means, via education, cultural exchanges, leadership training, fostering civil society projects, and much more. I do have an issue with using cruise missiles, bombers, and the Marines to build democracy.

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What a crock! Senator McCain is suspending his campaign to deal with the economic crisis.

He's not President. He's a senator. One of 100 and one who admits to no economic expertise.

Incumbent Presidents Lincoln and FDR both campaigned in the midst of war as commander-in-chief. Neither ever suggested halting the Presidential election, perhaps because democracy is supposedly what America is all about.

Incredible. One bad Washington Post poll and McCain surrenders. He has disqualified himself

I am delighted to learn from one of the great specialists in the field, Shuja Nawaz, who is just back from the tribal areas in Pakistan next to the border with Afghanistan.

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Jonathan Chait has a worthwhile piece up at TNR on McCain's pattern of lying. Usefully, he lays out abundant examples. He argues that McCain is arousing his base--in both senses--and therefore doesn't care a hoot when his lies are exposed by those googoo filters, The Media. Finally, Chait argues that McCain must think it's honorable to lie because his great cause is himself, his higher destiny--so anything goes.

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Check it out.

According to ABC/Washington Post, a seismic shift has occurred. Obama is now at 52% with McSame at 43. The ABC/Post says that neither Gore nor Kerry ever rose above 50% at any point in 2000 or 2004.

Of course, all the other variables are still in play. Obama should be much higher than this BUT with the economy looking like 1932, it could well be that so will the election returns.

How does "Happy Days Are Here Again" go?

With all the urgency and frenzied debate around the Wall Street bailout, it is important that we not forget to still have some fun. With that thought in mind, let's take a moment to mark the sudden transformation of the Wall Street free trade crowd, led by several of the top figures in the Clinton administration, into the Wall Street protectionist crowd.

As Wall Street free traders, these folks argued that we should get the government out of the economy. They wanted to remove the trade barriers that obstructed the free flow of goods and services (especially goods). If this meant that workers had to lose their jobs, so be it. Because they were nice guys, they promised benefits like job training and wage insurance.

But now the Wall Street crew no longer wants to leave things to the market.

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Treasury Secretary Hank Paulson to the Senate Banking Committee, as shown on the NewsHour tonight:

I'm angered by the things that got us here....It may make you angry, it makes me angry. When you ask about the taxpayers being on the hook, guess what? They're already on the hook. They got put on the hook by the system we have, the system we all let happen, the system that Congress, the administration, future administrations, let exist....

Let's roll that back again: "that Congress, the administration, future administrations let exist."

I thought I'd heard a lot of ingenious buckpassing from these people, but this one about takes the cake, don't you think?

Mr. Ish-Shalom uses the term "reality check" but it is clear to me that both he and Prof. Etzioni are far out of touch with reality. The latter admits to cognitive dissonance when he indicates that people told him, factitiously in the past, that Iraq was the wrong war, and Afghanistan the right war, but then admits that both wars have ceased to elicit major criticism from the two presidential candidates.

Iraq is stabilizing; now the debate is over whether the new, positive phase was brought about by "the surge," or by the inevitable alienation of ordinary Sunnis from Wahhabi jihadism, which I had predicted from the beginning. The latter was "the number one lesson from Iraq," and not anything derived from U.S. policy decisions.

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But will it work? Here's Paulson's and Bernanke's logic, made explicit at the Senate hearing today: There's only a certain amount of bad debt on Wall Street's books, left over from the wild and woolly days of lax mortgage lending. Once removed from the Streets' books, credit will flow again. And once credit flows again, even Main Street can breath a sigh of relief.

P&B failed to mention that bad debts are growing even among people recently considered good credit risks. At end of August, 6.6 percent of mortgages were at least 30 days past due. That's up from 5.8 percent at end of June. We're also seeing a growing amount of credit card and auto payments past due.

The culprit isn't just those sub-prime loans. With jobs and wages are dropping across America, many people who had been able to pay their bills no longer can.

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I just got back from a trip to the border region of Pakistan. We badly need to inject money directly into hands of tribals for projects they identify. In a meeting with 23 Maliks in North Waziristan they asked for help with irrigation, education, and health care. Basic needs. No leakage of aid en route to Beltway Bandits and their local ilk.
Also we need to moderate tribesmen now organizing their own forces to evict militants and "foreigners" (al qaeda) along the lines of the Iraqi Awakening movement.

This is an essay I wish I had written. It's by Prof. Tim Wise who is an expert on American racism and how it works.

Wise spells out what I've been feeling all year: that once again, in 2008, we are discovering that it is not so much guns or religion that millions of Americans cling to but racial superiority, white privilege.

Wise makes the case here. Bottom line: the one thing Obama has going against him is his race and the only thing McCain-Palin has going for them is theirs.

Check it out. Also watch Wise giving a lecture on the subject. He is effing good!

Amitai Etzioni notes with clear-eyed regret that a stable Afghanistan will not be built by some tens of thousands, or even hundreds of thousands, of occupying foreign troops. Military force cannot resolve the deep political divisions of tribal Afghanistan. Like so many guerrilla fighters in so many lands, including earlier generations of Afghans, those who resist the foreign forces know that they win by not losing. An overstretched United States must reassess its objectives and scale back its goals from what we would like to do to what we actually can do. This is not an abandonment of Afghan democracy in principle, but it is a rather sobering recognition of the limits of American power and what we might realistically expect the future of Afghanistan to be.

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At the risk of trivializing the wonderful ending of Casablanca I would say that Professor Amitai Etzioni's last post might be the beginning of a beautiful friendship between his stand and mine. No one in his right mind would expect Iraq to be democratic soon, but no one in his right mind should abandon the hope to see Iraq democratic. This is the kind of middle ground between realism and idealism that I would willingly embrace.

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Journalists have a curious term for newsworthiness: "a story." For example, "Yankee Stadium Shuts Down"--that's "a story." John McCain is about to break a 41-day streak--that's how long he's gone without talking to a national reporter. Streak, hell: He's running a drought of Noah proportions. Why hasn't the drought been "a story"? On the dog-bites-man principle that McCain avoids the press every day, so nothing is new?

According to Sam Stein at HuffPost, a reporter shouted out, "Has your bus become the No Talk Express?" McCain, Stein writes, "offered a smirk at the line but kept on walking."

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Posted without comment, except for: until March of this year Paulson is pretty much clueless about the broader ramifications of the housing bubble bursting. Until then, in fact, he is engaged in efforts to keep the bubble from deflating, including the use of the GSEs (Fannie and Freddy). If I was a combination Stalinist-conspiricist, I would suspect the further injection of liqudity into housing, which supported the much larger sh*tpile of mortgage-backed securities and the like, was preparation for selling this crap to the taxpayers. It is certainly working out that way.

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The critical phrase in Professor Piki Ish-Shalom's valuable posting is "That does not mean that we need to force democracy at gun point." He is surely right that the Neocons gave democracy promotion a bad name. I could not agree more that the ideal of democratization should not be abandoned. The problem, as his key sentence helps us to remember, is that the language traps us, because the phrase "democracy promotion" covers both coerced democratization (which is what regime change means, at least in the Neocon world) and non-lethal support of democratization.

I, like Professor Piki Ish-Shalom, am all in favor of promoting democracy by educational, persuasive means, and indicated how this may be done in Security First. It is the violent type of promotion that I object to.

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Amitai Etzioni serves us a succinct reality check. There are limits to what the U.S. can do in Afghanistan and Iraq and there are limits to what we can expect from the war. One troubling question is how the U.S. has found itself trapped in this situation. A second question is what it should do now. All this is even more important now as the American elections are approaching. However, I am sure that some of the other participants will take those questions head on, especially the second one. I wish to raise another issue that seems to me important. It seems that the neoconservative heritage will leave another victim in its wake: that of democracy promotion as an ideal, as a vision to aspire for.

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We are told all too often that the invasion of Iraq was the wrong war but that the war in Afghanistan is the right one. Indeed, both presidential candidates favor a surge of troops in Afghanistan. However, the attempt to impose a regime change on Afghanistan is failing, all the while causing more and more Afghan, American, and other casualties.

The main reason is that a conventional army is no match for guerrilla forces, especially when they can rely on a safe haven right across the border. The Taliban dress like civilians, are supplied by civilians, and are housed in civilian homes. When the U.S. attacks them, it inevitably ends up killing civilians, including women and children. The notion that if the U.S. used more ground forces, and less planes and artillery, there would be fewer casualties is a valid one--as far as the Afghans are concerned. But many more Americans and allied troops are going to be lost this way. Using airpower undermines the support of the war by the Afghans; using ground troops undermines the support of the war by America's allies, and soon--by Americans.

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As you may have noticed, we've been experiencing more server trouble than usual lately. Our servers are overloaded, and it's creating long lag-times between when a post or comment is submitted and when it shows up on the site. And in the worst cases, the post or comment won't show up at all. We're really sorry about this, and we're working on it. Right now we're moving all of our data over to a new server setup and, if all goes well, we should be launching tomorrow night.

Trust us, we feel your pain-- we're seeing the same lags and server kinks you are. Please try to hang tight for another day or so, and when you blog, avoid reposting immediately-- more often than not, your submission has been recorded, even if you don't see it right away. I'll be posting updates as I get them, and will be in the comment thread to answer any questions. Thanks!

This week at Cafe, we're talking foreign policy in a Book Club with Amitai Etzioni on his recent book Security First. What should the topmost priority of U.S. foreign policy be? (Hint: it's all in the title!) With a more specific focus on the wars in Iraq and Afghanistan, and the upcoming election, it should be a very interesting discussion. Weighing in are Shuja Nawaz, author of Crossed Swords: Pakistan, its Army, and the Wars Within, Stephen Schwartz, director of the Center for Islamic Pluralism, Piki Ish-Shalom, lecturer at the Hebrew University of Jerusalem , Michael Contarino, associate professor of political science at UNH, and Amir Hussain, associate professor at Loyola Marymount university. Join us!

Three years ago, my brother-in-law Ira, an accomplished blacksmith in North Carolina, called to ask my advice regarding a home equity loan. He was considering buying an adjacent property and needed about twenty-five thousand dollars. Ira owned his own small house and forge, which were free of any mortgages or liens, and he was old enough to be pretty much on a fixed income. Now, equity lines go up and down with the prime. So I figured, why not a 30-year fixed mortgage? Then he would know precisely what he'd be obligated for, month-in, month-out, and might even pay off his credit cards.

Ira's local bank, Wachovia, was not willing to hold this kind of paper anymore, which did not exactly surprise me. I had been an editor at the Harvard Business Review in the late 1980s when the securitization of debt, including (after the S&L crisis) mortgage debt, was first being touted as the next big thing for retail banking and the word "global" began to mean something serious. So--purposefully, and with a certain pleasant curiosity about a maturing financial product I had seen at its conception--I started calling around to various mortgage companies: 800-numbers that got me to offices (with the background noise of call-centers) in Texas or Minnesota or Hawaii.

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Chris Dodd, Chairman of the Senate Finance Committee is not going to be rushed into passing some bill written by Paulson on the back of a napkin in four days.

"I suggested strongly to him (Paulson) that he leave this door open, or he is going to find himself facing some significant problems," Mr. Dodd said at a briefing with reporters on Sunday at the Capitol. Mr. Dodd, who met with several of his Democratic colleagues, said that reaching a deal could keep Congress in session past this week, when leaders had hoped to adjourn for the fall elections. "This is of such import that if it takes a little longer to get it right, so be it," he said.

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Just a few quick, disjointed thoughts on the bailout, a plan that I, like others, view as fundamentally flawed.

First, the chutzpah of Paulson and the administration is astounding. They're saying to Congress, "you'd better do this quick, without conditions, or else!"

Hold on a second. The Treasury and the firms they are representing do not, I repeat, do not, have the bargaining clout here. We--the taxpayers and their reps--do. They're coming to us saying, "we've screwed up and need you to pick up the pieces to the tune of $700 billion." And they've got the brass ones to try to muscle us around about it?!? If Pelosi and company can't get the spine to ignore this muscle play and craft a better plan, then they're not doing their jobs.

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I've been wondering if it is possible for Obama to outsmart expectations and win.

I am not sure he can. .

The reason is simple. The McCain camp uses Obama's verbal dexterity and intelligence against him. The whole point of portraying him as "uppity" or "The One" or "the messiah" is to turn his strongest attributes into negatives. This is not unique to Obama. Jews, women, Asians, gays, African-Americans and other "minorities" are often ridiculed for being "articulate" or "smooth" or "good talkers." In a country that now celebrities mediocrity, the worst sin is to be seen as part of an elite. Hence, the Palin phenomenon. Her mediocrity is her biggest (only) strength.

We have four days to help inoculate Obama against this phenomenon. I'm not sure how we do it. I am sure however that the Obama team has a plan. I just hope it understands that Obama really has two things going against him on Friday. One, he is very bright. Two, John McCain clearly isn't.

The financial picture is changing by the hour. Remember way back to this morning when Treasury Secretary Henry Paulson said that if Congress didn't immediately give him a $700 billion blank check the financial system would collapse? He became upset because the Democrats didn't believe him and decided to include conditions like restrictions on CEO pay.

It turns out that the Democrats aren't the only ones who don't believe Paulson. According to the NYT, the financial industry doesn't believe him either. That is why they are seeking to expand the bailout to include a wide range of assets in addition to mortgage backed securities.

In addition to calling into question Paulson's threat, this points out another important problem with the bailout.

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Most big issues are owned by one or the other political party, even though they will find nominal supporters in both. Many Democrats have voted for tax cuts, but the Republicans have owned the issue. Republicans have voted for a higher minimum wage, but that's the Democrats' franchise. Under the pressure of popular opinion, the loser in the argument gets dragged along, like it or not.

In the current campaign, one of the signatures of the Republicans' problem is that they are losing hold of some of their pet issues. It's not the first time. Bill Clinton robbed them of their welfare rants and neutralized them on law and order (not necessarily with good policies). Now the GOP reputation on national security has suffered a well-deserved drubbing. Obama threatens to one-up them on tax cuts. (Remember, this game is not founded on a struggle for good policy.)

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The dirty little secret to last week's crisis is buried in a quote from Henry Paulson in this morning's Times.

"Going back a long time, maybe a year ago, Ben, as a world-class economist, said to me, 'When you look at the housing bubble and the correction, if the price decline was significant enough,' " the only solution might be a large-scale government intervention, Mr. Paulson said. "He talked about what had happened when there had been other situations historically."

Mr. Paulson said he agreed but hoped it would not come to that. "I knew he was right theoretically," he said. "But I also had, and we both did, some hope that, with all the liquidity out there from investors, that after a certain decline that we would reach a bottom."

There is in fact a lot of liquidity out there--in two places--sovereign wealth funds in China, Korea, Russia and the Gulf States--and in hedge funds. But neither the sovereign wealth funds nor the hedge funds want to touch this toxic waste. And so we the taxpayers are being asked to provide the liquidity.

It is a testimony to George Bush's Cowboy Diplomacy, that none of these countries will come to the rescue of American Capitalism. As for his white tie friends in the hedge funds that paid for his political campaigns, they're not taking his calls either.

So much for "Bring it on."

The frame has been set, the die cast. Treasury Secretary Hank Paulson, presumably representing the Bush administration but indirectly representing Wall Street, and Fed Chief Ben Bernanke, want a blank check from Congress for $700 billion or possibly a trillion dollars or more to take bad debt off Wall Street's balance sheets. Never before in the history of American capitalism has so much been asked of so many for (at least in the first instance) so few.

Put yourself in the shoes of a member of Congress, including our two presidential candidates. The Treasury Secretary and Fed Chair have told you this is necessary to save the economy. If you don't agree, you risk a meltdown of the entire global financial system. Your own constituents' savings could go down with it. An election is six weeks away. Besides, in the last two days of trading, since rumors spread that the Treasury and the Fed were planning something of this sort, stock prices revived.

Now - quick -- what do you do? You have no choice but to say yes.

But you might also set some conditions on Wall Street.

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Lila Shapiro graciously allowed us to extend Whatever It Takes week in the TPMCafé Book Club into the weekend. For me, it has been a fascinating discussion, and I'm grateful to Lila and Josh and TPM for having us; to Andy Rotherham, Alex Kotlowitz, and Amy Wilkins for their insightful posts; and to the commenters, for contributing their own stories and bits of wisdom, and for pressing us participants to hone and clarify our thinking.

I want to first take on Alex's important and somewhat disheartening question: Why don't we spend more money on our public schools and on early-childhood education, especially when there seems to be plenty of money around for Wall Street bailouts?

I'm in favor of more government funding of education, and I'm certainly in favor of more equitable funding. (I wrote a bit about it on Slate last week.) But I can also empathize with voters who resist spending more. It's a fact that federal government spending on education has risen sharply under President Bush, and I think voters can be forgiven, when they look at the statistics and the test scores, for feeling that they haven't got their money's worth.

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Frank Rich:

For better or worse, the candidacy of Barack Obama, a senator-come-lately, must be evaluated on his judgment, ideas and potential to lead. McCain, by contrast, has been chairman of the Senate Commerce Committee, where he claims to have overseen "every part of our economy." He didn't, thank heavens, but he does have a long and relevant economic record that begins with the Keating Five scandal of 1989 and extends to this campaign, where his fiscal policies bear the fingerprints of Phil Gramm and Carly Fiorina. It's not the résumé that a presidential candidate wants to advertise as America faces its worst financial crisis since the Great Depression. That's why the main thrust of the McCain campaign has been to cover up his history of economic malpractice.

There's more--read the whole Rich piece--but Sunday morning being a sleepy time, let's sum up. McCain lies, obfuscates, preens, covers up, distracts, diverts, flies high, defends deregulation, and the major media have gobbled it up. For years.

If the media are to earn a stitch of authority--if they are to deserve any repute as diagnosticians and connectors of dots--they need to come clean. If the NYT and WP, to their everlasting credit, felt the responsibility to go public about how they became accomplices to fraudulent Saddam/WMD/al-Qaeda claim, they need to scrutinize how they covered the financial system and the politicians who smiled their way through the bubbles and thrived on its systematic depredations.

Any debate "moderator" who lets McCain off this hook--who fails to explore his career-long penchant for tycoon love--is derelict in his or her duty. Any "news" broadcast that fails to look open-eyed at his record is bankrupt.

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Israel has joined the rest of the world and is now supporting Obama. I say that based on the conversations I had over the past week with all kinds of people, across the political spectrum here in Jerusalem.

Two reasons. The first is Palin. Israelis think she's a moron. One put it to me this way. "Look, we have crazy rightwingers too. Many. But the rightwingers who get involved in politics are not stupid. They are articulate and wrong. She seems stupid and that we don't elect here. Mc Cain chose her and that made Israelis think that he is not qualified to be your President."

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The Bush Administration is asking Congress to give it $700 Billion to buy up toxic mortgage debt based on a 2 1/2 page plan!

The request is just two-and-a-half pages and contains a broad outline of how this new entity would function. The government wanted to keep the plan simple, in part because it wants the flexibility to adjust what its doing as market conditions change, a person familiar with the matter said.

This is the equivalent of giving a venture capital firm a two page summary of your business and asking for $100 million of funding. God help us if Congress gets steamrolled into this. As the Journal writes, there are so many details to fill in.

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