The Enemy of Our Enemies: Well, Al Qaeda has been heard from. In a recording released today, Ayman Al-Zawahiri said, among other things:

Guy's always good for a giggle, huh? The portion of the statement that's drawn the most attention, however, compared Obama unfavorably to El-Hajj Malik El-Shabazz, drawing upon one of his most famous metaphors to label our new president "a house Negro." 

Now, I don't know about you. But when Al-Zawahiri says something, I'm generally inclined to think the opposite. And one of my readers made this point last week - when our enemies start to spout this sort of racist drivel, it's liable to permanently discredit good-old American racism. Who wants to agree with Al Qaeda? Then there's this added bonus - there's a certain degree of overlap between the most bombastic and belligerent patriots and those who, shall we say, retain the greatest reservations about our new President. One of the nice things about America is that we tend to rally to the defense of our own. A few more statements of this kind could go further toward suppressing racism in this country than eight years of an Obama administration.

Reforming Campaign Finance Reform: Word this morning that Republicans are now raising money for Saxby Chambliss in chunks of $65,500; Democrats are raking in donations of up to $38,000. And yes, it's perfectly legal. We saw these joint-fundraising committees during the general election, and they seem set to become a fixture of the political landscape for some time to come. And if you're concerned that this gives outsize influence to a handful of fabulously wealthy donors, well, you're right. And I find that nauseating.

This is a bigger topic than I can treat in a short blog post. But among the most fascinating implications of Obama's revolutionary campaign is that it turned the logic underpinning recent efforts at campaign finance reform on its head. The old view was that the demands of politics posed a double-bind. Set the donation limits too high, and a handful of wealthy donors could warp the process. Set them too low, and candidates would be entirely consumed with fundraising, and challengers might never be able to raise enough money to challenge the power of incumbency (not to mention that they'd be forced to rely on third-party brokers, like business leaders and union officers, to aggregate large enough groups of small donors). The compromise solution was to set the limit at $2,300 - vastly more than all but a fraction of a percent of Americans could generally afford to give, but low enough that hundreds - if not thousands - of donors would participate at an equal level, limiting the influence any one of them might wield. And the limit was set high enough that campaigns could raise most of their funds at relatively few events, putting candidates back out on the trail. Since the limits were passed, we've seen a series of loopholes exploited. Some groups set up 527s and other third-party efforts to influence elections. Ambitious fundraisers bundled donations, receiving credit for hundreds of thousands of dollars. And campaigns established joint committees. But the biggest challenge to the system has come from an unexpected quarter: the internet.

Campaigns which use the internet to raise funds in small-dollar chunks free the candidate to go out on the trail and interact with voters; campaigns that continue to raise funds at big-dollar events tie the candidate down and continue to act as influence auctions. It turns out that most donors who give thousands expect face-time with the candidate or top surrogates; most donors who give hundreds do not. So one easy solution would be to lower the cap on federal donations in a single race from $2,300 to $250. Radically lowering the limit would vastly broaden the pool of donors who can exert equal influence, and since internet fundraising is now the most efficient way to gather these donations, it would also limit the impact of brokers and bundlers. These are complicated questions, and solutions tend to create new sets of problems. Ultimately, we may need to wait for the Supreme Court to recognize that equating speech with money renders the greater part of the public effectively mute. But it's a simple step that could move us in the right direction.

Bailout Madness: I hope to treat this at proper length over the next few days. But I think that the fuss over GM and the auto industry has obscured the really vital economic fight that's been unfolding over the past two weeks. On one side, we have Sheila Bair of the FDIC and Congressional Democrats, led by Barney Frank. And on the other, the Bush Administration and its point-man, Hank Paulson. In a nutshell, Bair and Frank want to redirect a relatively small portion of the $700 billion slush fund toward some sort of reasonably comprehensive foreclosure-prevention program. Bair - who has been the most aggressive and creative federal official during the crisis - wants to renegotiate the terms of some 2.2 million mortgages (although not to reduce their balances), thereby preventing a million and a half foreclosures at the cost of just under $25 billion. Frank was a little less specific, but is aiming in the same general direction. Others would go further: allowing bankruptcy courts to renegotiate loans, taking apart the securitization pools that have impeded the rational functioning of the markets, or reducing principal. 

But Paulson is having none of it. He is adamant that the $700 billion be used only as an investment pool. That's almost amusing. In Paulson's world, pouring hundreds of billions into shaky financial institutions that the government may never recoup is an investment, whereas spending tens of billions to address the root of the crisis, prevent further deterioration, and shore up the financial system is an expenditure. That displays a disturbing degree of literalism. Sometimes the soundest investments a government can make are systemic; building transportation infrastructure is a good example. The returns on highways, ports and railroads, to the nation and to the Treasury, are likely to considerably outstrip a similar investment in the S&P 500. At this writing, there are 61 days, 13 hours, and 37 minutes until the inauguration. We can't afford to wait two months on this one; the drift could be disastrous.