Sarah Palin is a rather sad, empty and unimaginative person of little real long term importance. Personally she does not matter much to me. But right now she is representative of some real American problems, like why America's education system is falling behind that of so many competing industrial nations and why we turn out Lawyers and financial MBA's instead of scientists and production engineers. But let me just start with Sarah. Why did she resign so suddenly out of the blue?

Josh Marshall has posted the best explanation I have yet seen for Palin's strange and rather shocking resignation as Governor of Alaska. It makes a great deal of sense to me. She is a grifter, and the grift has finished. She is getting out of town while the getting is good. So now we can wait for the announcements of her money-making opportunities. She won't keep such deals from the Paparazzi (in this case mostly political and business reporters) because that kind of publicity is what she needs to extend her celebrity. She'll tell the Paparazzi because she needs them as much as they need her. Her reason for feeding the frenzy will be that the Paparazzi will extend her celebrity and keep her bankable. That dynamic between the celebrity and the press is the core of the entire celebrity culture as well as being the business model of the such journals as supermarket tabloids, People magazine, and the business publications Forbes, Fortune and the Wall Street Journal [*].

My read is that Palin has a single overriding motivation and that is ambition. She has a single major asset for her ambition to ride which is her celebrity status, the result of a lifetime spent chasing celebrity with no apparent significant interest in anything else. That's been her career. Her single asset has reached its apogee and was suddenly sliding away (stolen by her "enemies") so she has taken this opportunity to renew it. She will sacrifice anything to feed her ambition, including honor and the respect that can be earned by living up to your commitments. She has just proven that by her resignation.

Why do I care enough to blog about her? Two reasons. First, like the entire Pop Music scene, she seems to be emblematic of America's long celebrity obsession fueled by greed and the power of publicity experts to milk the public through the developing new forms of mass communications being created since the 1960's. That trend is run by grifters like Sarah Palin. It is a trend that runs counter to the great strengths America has always demonstrated as a solid, hard-working middle class productive nation with a culture centered on the strengths of well-trained and experienced journeyman workers.

The creation of the barely out of her teens Britney Spears is a symptom of the disaster of that celebrity culture. But the celebrity culture to which Sarah Palin now belongs is not isolated in society. It has broader implications. It has meant that America as a society and as an economy has failed to provide adequate rewards to the very many extremely capable people who might be induced to become engineers in college and learn new ways to invent and manufacture improved products. Instead, the best and the brightest are becoming lawyers and MBA's in the hopes of somehow suddenly getting rich by cashing in on a celebrity event of some kind. America's economic rewards are being redirected to celebrity status rather than to production of real goods and services of real value [**].

The second reason is that Sarah Palin's case is a cautionary tale of the utter vacuousness of the modern Republican Party. Their interest is in gaining power, nothing else. John McCain chose Sarah Palin as his running mate, not because she was best qualified if as President he died she would take over and run the country, but because he simply could not be elected to the office that fed his personal ambition and his feeling that he deserved to become the next President. He bought into Palin's celebrity to feed his own unbridled and undisciplined ambition. McCain is the son of American Naval Royalty, and he deserved the job of President more than anyone else by right of birth.

McCain is a conservative in part because it is an excellent justification for laziness. He resists working for his rewards because he feels he is entitled to them by right of birth. He is angry that so many people don't just hand them over because of who he is. Give such individuals a social problem to solve that does not involve their own interest directly and their solution is "Ignore it. If there is someone else with a good idea, skills and some idea how to get rewarded for it, they will solve the problem and we don't have to do any damned thing about it. "They call that the "free market" solution. What it really results in is a statement of "Let someone else do it, I don't want to think about it because I've already got mine. What? You want me to do hard work?"

So what we have is a toxic and unproductive celebrity culture that is taking over America, together with a political party representing and built on that culture that is made up of people who offer an economic ideology that advances that toxic culture. They are in it, like Palin, solely for their own personal benefit. Sarah Palin is just one more example of that culture, together with her national political mentor, Senator John McCain. The results of that culture, both in the failure of America to remain economically competitive against so many other industrial nations and in the clear emptiness and nastiness of the conservatives running the modern Republican Party are very clear.

So tell me. Why should we care about the sad spectacle that Sarah Palin is making of herself? Should I add Governor Mark Sanford?

[*]An interesting side note. I was told by the journalism prof of a public relations course I took that the articles in the Wall Street Journal that had no byline were simply public relations articles written by the company that were their subject. No real independent reporter was involved in writing them. Such an idea gives a very interesting view of such Wall Street Journal news articles.
[**]In a world that is populated by too many people to feed and in which half the worlds population exists on less than a dollar a day, the idea that the national economy that is using up as much as a quarter of the world's resources is using them to create celebrities for export is an ethical issue I will leave you to ponder. It is clearly one that the American conservatives and the free marketers wash their hands of.

Harry Reid has been reported today as telling the Conservative Democratic Senator Max Baucus (very powerful Finance Committee Chairman) to stop trying to compromise with the Republicans on the Health care public option and on the regressive tax on employer-supplied health benefits. This has surprised a lot of people who have a poor opinion of Harry Reid's spinal fortitude. If you are familiar with the way he stood up to Mob intimidation as a prosecutor, ; to Max Baucus shouldn't be a surprise. The real question ought to be "Why has he apparently let the conservatives and Republicans roll him all of this year." That's what is out of character. Here's my opinion.

Things have changed this month. Up until now this year the legislature has been involved in just keeping the government running, and the Republicans have been in the business of obstructing everything the Democrats attempt (which among other things is why so few of Obama's political appointees to fill plum book appointments have gotten votes and why Republican Senators keep putting holds on them.) But this is July. The health care bill is on the table for this month. The health care bill is the main event, unlike everything else that has come up before this month.

Obama, Reid and Pelosi between them have total responsibility to keep the government functioning in spite of the asinine and unified obstructionist actions and language of the Republicans as dominated by the talk show hosts. Obama has done a masterful job of playing the Republicans so that the only positions they could take to oppose him have been more self-destructive than effectively obstructionist on the large issues.

Between Pelosi and Reid, Pelosi has the easier job because of no filibuster. She still has to mollify the Blue Dogs who are almost as skittish as the Republicans because they fear the next primary. So Pelosi has compromised with both the Republicans and the Blue Dogs to a greater extent than any of us like at all.

Reid, with only 59 Democrats until today as well as the filibuster which the Republicans are only mildly hesitant to use, was in much worse situation than Pelosi. I'd bet he has been counting votes very closely and keeping the conservative Democratic Senators mollified.

But two things have just changed. Al Franken was sworn in today and the big initiative - health care - is in the balance. This is once in a lifetime, not just in a political career. I'm more and more convinced that the three top Democrats - Obama, Reid and Pelosi, have been gearing everything to powering the health care bill into enactment this year. That's the reason for the refusal to accept delays, and I think they have allowed some things to be enacted that they hate (I know I do) so as to not waste Presidential power on secondary issues. But now we are in the main bout. If I am right, then the gloves are going to come off.

We'll get only hints of the machinations because they aren't even inside the beltway. They are inside the Senate and House. and the Press mostly hasn't a clue, and the ones who have read Richard E. Neustadt's book "Presidential Power" will find that it runs counter to the permitted media narrative. But some reporter with inside connections on the Hill and the smarts to apply Neaustadt's teachings to the analysis has one Hell of a great book to write, much like Ted Sorenson's "Making of the President."

I won't guarantee this, of course, nor do I have original reporting to confirm it. But I've read Presidential Power and the Modern Presidents, the first edition of which was published in 1960, and which JFK was reported to have read between the election and his inauguration. Neustadt essentially wrote the the President's power is limited, and it grows with each win that he is seen to be responsible for and is diminished by each loss of his major efforts. Obama has essentially kept his hands off of most of the things that come from Congress, so his losses have been minimal as far as his power goes. On the positive side, the three of them (Obama, Reid, and Pelosi) have been carefully setting things up specifically to pass health care. The administrative decision to declare budget bill rules with the Budget powers to avoid a filibuster if necessary is one thing, andso was the rapid ad rigid schedule set so that the bill is dealt with this summer when Obama's power as an incoming President with a solid majority is still at its height. The fact that Reid has not stood for any delays in the schedule for completing health care is an indication of how the three are husbanding their resources.

I really think that the power the three have been husbanding all year is about to come unleashed. When it comes down to the crunch, the health care vote is going to be the first mandatory party-line vote this year. Up until now, the Democratic defectors have gotten a "gimme." Not this time. And for those who go with the Party voting against their own renomination or election but for health care and who find it damages their prospects for surviving their next Primary, the Party will provide the kinds of support needed to get a win in that primary. They did it for Lieberman, to the disgust of many of us. Is this why they did that?

As I say, I won't guarantee this scenario, but I really think I see is coming together. If so, we are about to see it work out. I sure hope I am right.

I hate to disagree with David Kurtz, but I really think that Liddy presented a very good explanation for the bonuses and for calling them Retention Bonuses even though some of the individuals have already moved on.

In fact, it is a better explanation (though much less satisfying) than my earlier conspiracy theory that a bunch of rogue left-over sales traders in AIGFP conducted a scam that suckered both Liddy and the government supervisors Summers and Geithner, then up to and including Obama.

The relevant facts are:

(1) These contracts are each a unique, highly complex, delicate,  internally conherent bundle of individual derivative contracts. The set of contracts inside each bundle apparently are designed to protect each other from almost any change in the relevant markets. But each bundle has to be monitored daily, and the manager has to enter the markets to buy and sell derivatives and financial instruments to adjust the balance of the bundle. Miss one day and the entire bundle can fall apart, putting it into default. In the case of such a default, there are heavy penalties in addition to losing the total investment in the entire bundle. Successfully managing the bundle until its final expiration will result in a profit, probably substantial or they would not have built the bundle in the first place. Each bundle is uniquely designed and someone who understands it in detail has to monitor both the bundle and the markets.

(2) The managers who are managing those bundle are not salesmen. AIG decided to get out of the business about January 2008. The purpose of the bonuses was to keep the very specialized managers on the job managing those bundles until the bundle contract expired. But the job is ending. How do you keep the managers from finding new jobs that need their skills? Substantial  "Retention." bonuses.  The managers are <i>not</i> getting bonuses to sell these bundles because AIG stopped doing that. Once AIG stopped selling those bundles of contracts, it took about two months to negotiate a termination agreement with  Joe Cassano, one which took effect March 31, 2008. The agreement kept him on retainer probably to advise how to deal with one of those bundles if it went bad and no one else could figure out how to keep it out of default. Notice that his consulting contract lasted only for the rest of 2008.

(3) The managers were working themselves out of a job. Without substantial incitement, they were going to immediately be looking for new employment someplace where their skills had a long term future. That was not AIG But someone who knew what was in the bundle had to be on hand <i>every trading day.</i>. Those managers had AIG over a barrel.

(4) Remember also that the contracts were created and signed in January 2008. Everyone, and I mean everyone, was expecting the economic downturn to last another six months and then turn around. Then the economy instead got continually worse into this year. The worsening of the economy has been a direct result of the failure of the government to act to protect the banking system, something none of the financial operators believed then was necessary. The market was supposedly self-correcting without government interference/management. The events in the Fall of 2008 were completely unforeseen, and to true free market believers (all of the top people on Wall Street), unforeseeable.

 (I myself didn't start predicting Depression-level collapse until February 2008 and I was one of the early ones. I also didn't predict Obama's response, which MAY have staved off a real Depression IF the banking system has been saved. Jury's still out on that.)

(5) Were the employment contracts drawn badly? In hindsight, probably, and Liddy specifically stated that he would not have written them the way they were written. Considering how little was understood at that time about the overall systemic financial problems the top AIG people were pretty clearly muddling through as best they could. Overpaying a few people to avoid the massive losses defaults of those bundle contracts when the economy was oprobably going to be improving again when those contracts were completed and paid off would probably have cost a few extra dollars here and there to keep those managers doing their day to day work and staving off the immediate defaults. I don't doubt that it seemed a good bet and  was probably considered worth it. Remember, Liddy did not come on the scene until September. By then a lot more was known and the risks were a lot more clear.  The managers who wrote those contracts were already being replaced by September.

Generally I think I buy Liddy's explanation given Congress today. As I say, Liddy's explanation does explain the currently known facts, including why Treasury (including Geithner) and Larry Summers apparently signed off on paying those bonus payments some weeks ago before anyone realized the hash the media was going to make of the story.

Given the facts as I think I currently know them, and assuming good faith on the part of Liddy (I don't think he is a tobacco ececutive),  I'd say that the AIG execs really did get rid of the bad apples (the Milken protoges) back in the first quarter of 2008 and are peddeling desperately to get AIG totally out of those contracts as rapidly as they can without destroying AIG and the banking system.  Knowing what was learned by last Fall, the government bailout was needed, but if the bundles are well-managed, the taxpayers really are very likely to get their money back and maybe even make a profit.

There are, however,  three groups who are not going to believe this explanation, no matter what. The reason is  cynicism, ignorance of finance, and self-interest. 

Those three groups  are (1) the Republicans, (2) the right-leaning Bush-supporting media, and (3) the cynics who don't speak enough "Finance" to understand what Liddy told them today. That third group includes literally every reporter writing on the subject. Rush Limbaugh won't believe it for all three reasons.

The Republicans probably don't understand it, but even if they do, they don't want to. Darrly Issa? Give me a break. As a group they have here an issue they can ride to the next ballot box. As they have demonstrated with their absolute opposition to anything Obama does, they think they can win through tearing Obama down, and this issue is great for that. Limbaugh can't demagogue acceptance of what Liddy said, and besides the right-wing authoritarians he leads wouldn't accept such a story from him.

Then the public in general will not buy anything except a simplistic explanation, preferably one with clearly defined characters in white and black hats. They want heroes and villains,and they won't buy experts, technicians or bankers as heroes. This is too much inside baseball with technical language that takes a while to assimilate. Who trusts an expert or a banker today?

Finally there are the right-leaning media still pining for Bush/Cheney in office. First they don't understand what they are being told, and second they are looking for the new "Terry Shiavo - Dead White Girl - OJ Simpson" scandal that THEY can ride to the advertisement sales. Accepting Liddy's explanation takes all that away from them, adn no reporter is going to ride to Glory and a Pulitzer by accepting that Liddy knows what he is talking about, especially when there is so much opposition to accepting it already in the media.

Shuja Nawaz writes in the Washington Post that the Mumbai terror attack appears to be likely to derail the recent moves towards a rapprochement between the governments of India and Pakistan. A number of other news reports echo this. But is this apparent common wisdom in the press accurate?

Pakistan has a new government in place since last April, and the terrorists in Pakistan have been attacking there also. Most noticeable was the recent bombing of the Marriot Hotel in Islamabad in September. Both Pakistan and India have suffered numerous smaller terrorist attacks in recent years.

Terrorism is a form of asymmetric warfare. It is being used by Political practioners of Islamism to take down both the governments of Pakistan and India.

The first function of every government is to provide social stability. It is this function of providing a stable society that terrorists use to attack and delegitimize the existing government. The purpose of the terrorism is to weaken the government to the extent that it is forced to accommodate the otherwise unacceptable demands of the terrorists and possibly even to allow the terrorists to take the government over.

The governments of both Pakistan and India are under direct, violent attack by an alliance of terrorist groups often working together. Such attacks do not always delegitimize a government. Sometimes attacks like that in Mumbai and the earlier one on the Marriot in Islamabad can strengthen a government as people and organizations which otherwise would be competing with each other rally around the government to protect the nation. The single greatest failure of the Bush administration was to squander the opportunity to rally all Americans and much of the world around the American government after 9/11.

The attack on Mumbai is very probably an effort to derail the recent efforts of both the Pakistani and the Indian governments to reach a rapprochement. The Mumbai terrorists appear to have started their attack from Karachi, Pakistan, hijacked a boat, and come into Mumbai from the sea. The Pakistani Inter Services Intelligence (ISI)has elements which have supported terrorist organizations which attacked India trying to dislodge Indian control of the disputed Indian state of Kashmir. Similar ISI elements appear to be supporting the Taliban in their efforts to retake control of Afghanistan. Pakistan's government clearly does not control all the territory that is generally internationally agreed to be part of Pakistan, nor does it control all the elements of the government itself. It is exactly the type of poorly controlled nation and unstable government most susceptible to the pressures that the terrorists are applying.

The current President of Pakistan, Asif Ali Zardari, has been trying to gain greater control over the ISI and remove it ant the military from active politics since becoming President in April. He recently disbanded the political wing of the ISI which is reported to have spied on Pakistani politicians in order to intimidate them and rigged national elections. This follows his earlier failed attempt to place the entire ISI under the control of the Minister of Interior instead of under the control of the military.

Zardari's recent efforts to reach a rapprochement with the India government may be in part an effort to lower tensions between the two nations so that the Pakistani people will feel less need for the Army to take over the government again as it has numerous times in Pakistan's 60 year history. If tensions with India are lowered, then Zardari has a better chance to take control of the uncontrolled parts of Pakistan like North and South Waziristan, provinces in which the indigenous people are supporting the Taliban and al Qaeda.

It would be no surprise to learn that the Mumbai terrorist attack was a push-back against Zardari's efforts to rein in the Pakistani military and the ISI.

If that's the case, then the government of India needs to help strengthen Zardari's government by not threatening Pakistan and instead working towards the rapprochement. Threatening Pakistan will have the perverse effect of strengthening the Pakistani military and weakening the civilian government. It is the general weakness of the Pakistani government which is the greatest threat to both India and Afghanistan.

Both the governments of India and Pakistan need to highlight their shared need to defeat the terrorist attacks by the groups which have been attacking them. By showing that they are fighting a shared enemy, they can take advantage of the "rally around the attacked government" effect.

By showing their respective publics that each government is under attack and is asking the help of the other to help defend itself from attackers based in the other's territory, it will become more difficult for the terrorist groups to appeal to the people with a claim that their respective government is being propped up as a puppet by an outside government. It is this appearance of being an outside government propping up an unpopular local government that will be the greatest restraint on any U.S. involvement in the rapprochement between those two nations. No government today wants to appear to be a puppet government supported by the U.S.

This looks like a useful strategy for strengthening the existing governments in South Asia and making them more resistant to the kind of terror attacks that have recently occurred in both Mumbai and in Islamabad. Neither nation can accept that the other is providing a place to launch terrorist attacks on it, either with or without government support. An effective rapprochement between the two governments can give both of them assurance that the other government is not directly supporting attacks, while the strengthening of both governments so that they are able to minimize rogue elements and control their territory will allow the each government to have greater trust in other. The overall result will be to bring about the stability that is always the first function of government.

The Mumbai terror attack, likely intended to drive a wedge between the governments of India and Pakistan to weaken them both, could have the perverse effect of drawing the two national governments closer together and strengthening them both. But as Bush's total failure to use the world-wide desire to help America after 9/11 clearly demonstrates, the direction public opinion takes depends a lot on how the governments of Pakistan and India act.

Alabama Senator Richard Shelby is fighting hard against any bailout for the automotive agency as hard as he can. Instead of a bailout he proposes that they go through bankruptcy.

Of course, The <a href="http://www.edpa.org/industries/automotive.html">automotive industry in Alabama is owned by Mercedes Benz, Honda,  and Hyundai.</a> There are no American automotive companies there, so he doesn't give a rat's ass about Detroit. They're his competition. So he is happy to see them go into bankruptcy.

But wait! If they go into bankruptcy, who buys their assets? It appears that the best positioned candidate to buy Detroit is -- the Chinese. <a href="http://emptywheel.firedoglake.com/2008/11/19/playing-chess-with-the-chinese/">EmptyWheel</a> thinks so too. She quotes from <a href="http://www.thetruthaboutcars.com/breaking-news-chinese-may-buy-gm-and-chrysler/">Bertel Schmitt</a>: <blockquote>"Chinese carmakers SAIC and Dongfeng have plans to acquire GM and Chrysler, China's <a target="_new" href="http://www.21cbh.com/">21st Century Business Herald</a> reports today. [Snip]

The paper cites a senior official of China's Ministry of Industry and Information Technology- the state regulator of China's <a itxtdid="7271913" target="_blank" href="http://www.thetruthaboutcars.com/breaking-news-chinese-may-buy-gm-and-chrysler/#" style="border-bottom: 0.075em solid darkgreen ! important; font-weight: normal ! important; font-size: 100% ! important; text-decoration: underline ! important; padding-bottom: 1px ! important; color: darkgreen ! important; background-color: transparent ! important;" classname="iAs" class="iAs">auto</a> industry- who dropped the hint that "the auto manufacturing giants in China, such as Shanghai Automotive Industry Corporation (SAIC) and Dongfeng Motor Corporation, have the capability and intention to buy some assets of the two crisis-plagued American automakers." These hints are very often followed with quick action in the Middle Kingdom. The hints were dropped just a few days after the same Chinese government gave its auto makers the <a href="http://www.thetruthaboutcars.com/china%E2%80%99s-nine-measures-to-fight-export-malaise-or-make-that-eight/">go-ahead to invest abroad</a>. And why would they do that? <p><span id="more-156041"></span></p> <p>A take-over of a large  overseas auto maker would fit perfectly into China's plans. As reported before, China has realized that its export chances are slim without unfettered access to foreign technology. The brand cachet of Chinese <a itxtdid="7271916" target="_blank" href="http://www.thetruthaboutcars.com/breaking-news-chinese-may-buy-gm-and-chrysler/#" style="border-bottom: 0.075em solid darkgreen ! important; font-weight: normal ! important; font-size: 100% ! important; text-decoration: underline ! important; padding-bottom: 1px ! important; color: darkgreen ! important; background-color: transparent ! important;" classname="iAs" class="iAs">cars</a> abroad is, shall we say, challenged. The Chinese could easily export Made-in-China VWs, Toyotas, Buicks. If their joint venture partner would let them. The solution: Buy the joint venture partner. Especially, when he's in deep trouble.</p> <p>At current market valuations (GM is worth less than Mattel) the Chinese government can afford to buy GM with petty cash. Even a hundred billion $ would barely dent China's more than $2t in currency reserves. For nobody in the world would buying GM and (while they are at it) Chrysler make more sense than for the Chinese. Overlap? What overlap? They would gain instant access to the world's markets with accepted brands, and proven technology."</p></blockquote>Who holds the most dollar-denominated US federal debt? China? Where are dollars most spendable? The U.S. Where can the Chinese get the best bargains in the dollar world? The U.S. Especially if the three U.S. automotive companies are sold at fire sale prices in a bankruptcy.

There are three million American jobs built around the U.S. automotive industry. Do we want them controlled by China? Frankly I really don't.

But apparently, Senator Richard Shelby, who has no problem with the Germans, Japanese and South Koreans owning the automotive industry in the backwards southern state of Alabama has no problem handing the entire U.S. Automotive industry as cut-rate goods to the only foreigners who have enough money to buy it.

I'll agree that the top management of the U.S. Auto industry need to be replaced and the industry needs to be restructured further (they've already moved a long way towards becoming more efficient), but definitely not by Chinese Communists.

Do we really need a bail out deal? <a href="http://www.mcclatchydc.com/227/story/53107.html">Not according to economist James K Galbraith.</a> <blockquote> President Bush and his Treasury secretary, former Goldman Sachs chief executive Henry Paulson, have warned of imminent economic collapse and another Great Depression if their rescue plan isn't passed immediately.

Is that true?

"It's more hype than real risk," said James K. Galbraith, a University of Texas economist and son of the late economic historian John Kenneth Galbraith. "A nasty recession is possible, but the bailout will not cure that. So it's mainly relevant to the financial industry."</blockquote>It's sort of a strange crisis. The banks will currently lend to credit card customers and to consumers, but they won't lend to other banks. So Henry Paulson is asking Congress to tax every American over $2,000 just to bail out the wealthiest bankers in the world. But those superwealthy bankers are in trouble because their fellow bankers are either so stupid or are are such disreputable crooks that other bankers  don't trust them  enough to loan them money.

<a href="http://en.wikipedia.org/wiki/Henry_Paulson">Henry Paulson</a> presented "the Paulson proposal" to Congress in his own name because Bush is so unpopular that presenting it as the Bush Proposal would be a major strike against it. But Henry Paulson is the ex-Chairman of the last of the five largest financial banks, <a href="http://en.wikipedia.org/wiki/Goldman_Sachs">Goldman Sachs</a> to disappear since this Spring. Paulson is not an economist. He has a Harvard MBA. He's primarily a securities salesman. His job has always been to make deals. Someone else was the analyst who explained the overall system. (I know it's not "either/or", but Paulson is still primarily a deal maker.) Paulson is watching the investment banks which have been his career disappear. Sure he wants them saved. But should the rest of American society have to pay to save them? Those banks haven't added that much value to the American economy. $700 billion dollars? And that's just the down payment?

Buying the bad mortgages from the banks simply does not address the central problem. Millions of families have signed crappy mortgages in order to severely overpay for homes. Now Bush/Paulson demand that the taxpayers buy those crappy mortgages at the  inflated prices to keep the banks from having to take the loss that was built into those mortgages when they were issued. Making the taxpayers buy those crappy mortgages  <b>does not address the core problem!</b> It just removes those mortgage contracts from the banks that created them and forces taxpayers to buy them. That allows the banks to avoid taking the loss that was built into the overpriced mortgages when the banks first issued them.

The banks do not want to take the loss when home prices drop to realistic levels. That's why the bankers are calling the proposal that Bankruptcy Judges be allowed to rewrite mortgages to realistic interest rates, realistic payments and total values that reflect what the market will pay for the property. This is a power that the judges already have for second homes and yachts, but the banks consider that provision a deal-breaker for any Congressional bail out legislation.

The core economic problem causing the credit crisis and the bank failures is that the housing bubble (created by Alan Greenspan's Federal Reserve) caused massive overpricing in homes and real estate loans. That real estate was financed by loans that banks made to individuals and businesses who were not going to be able to pay them if the housing bubble burst.  When Greenspan raised interest rates after Bush was reelected in 2004, he burst the housing bubble he had created by lowering interest rates and encouraging bad loan underwriting before the 2004 Presidential election.

A banker who lends money to someone who can't pay it back deserves to fail. Instead those bankers are being allowed to foreclose on the overpriced property, regain ownership and then resell it. But the bankers can't finance that operation unless the other bankers lend them more money, and the other bankers have decided that they don't trust the ones who want to borrow money enough to lend anything to them. Apparently these bankers have suddenly gotten "banking religion." They won't lend money to other bankers who don't look like they can pay the loans back. If the mortgage bankers had been competent and acted the same way, <b>there would not have been a housing bubble!</b> No housing bubble, no credit crisis. There is the cause of this whole mess.

So now the Bush administration wants to tax all of us to bail out the crooked and stupid bankers because if the government won't kick in the money, the bankers themselves don't trust the other bankers enough to lend them money.

Now we get a tag-team match of Henry Paulson going to Congress to tell them "This is a limited time offer! If you don't buy it NOW I can't guarantee your safety tomorrow!" while George Bush went on TV and told the American public "Get Congress to pass this bill NOW or the disaster cannot be prevented!" That's a tag-team match between a salesman, Paulson,  urging everyone " Buy now!"  and a habitual liar and fool, Bush,  saying "Trust me!"

There is going to be a recession. There already is one, but I suspect that the economic statistics published by the Bush administration have been "adjusted" or "fudged" to look better than they really are. No matter what legislation passes, the Recession is going to be a bad one. But the warnings of an economic meltdown are excessive.

Congress needs to take its time and get the bail out legislation right. Most importantly, the bankers who caused this credit crisis must not be rewarded for their stupidity and greed. Especially they must not be rewarded out of taxpayer funds. Any time a sales person/scammer says "You have to buy this NOW or you will lose it!" the best decision is always to walk away.

If there is a decent deal to be made, the salesman will come back to make a reasonable deal. If there is not a reasonable deal to be made, then walking away is the right solution.

Which is going to dominate the closing sprint to election day? The propaganda-based theme-driven Washington political media or the currently growing journalistic feeding frenzy surrounding Sarah Palin and spreading to the McCain campaign?

 

Bush has pulled even or ahead this last week largely because of

 

1. the normal convention bounce.

2. the novelty of choosing Sarah Palin as his running mate.

 

The bounce was extended because Palin permitted the Social Conservatives to abandon their objections to McCain and buy into him as their "leader." The excitement of the Social Conservatives has fed back into the McCain campaign and the campaign is doing whatever it takes to extend that process even further, hopefully for another eight weeks.

 

But the Palin choice was high risk with low vetting and no broad consensus that she could carry as heavy a load in the campaign as has been thrust on her. The secrecy of her selection and announcement was bought at a very high price.

 

Everything now has to focus on shoring her and the social issues she represents up as the central focus of the campaign. It's like shoring up a badly damaged building the inspectors have already declared totaled. That's where all the lies are coming from. They know so little about her that there are no prepackaged defenses for the various faults that keep popping up. So they are reduced to making stuff up.

 

But they are stuck with her, since without Palin the McCain campaign is reduced to explaining why they do not represent four more years of Bush/Cheney. That is clearly a losing position as the recent switch to a campaign theme of "We're for change also." demonstrates.

 

It doesn't help any that the choice of Pain as his running mate is an admission that to get elected President McCain has had to completely surrender to the Republican extremist religious right. The McCain camp has to "dogwhistle" to the right-wing religious extremists in ways that the independents don't catch on to.

 

This is complicated by the fact that the McCain campaign has been unable to roll Palin in under the McCain media themes to protect her. The media really is treating her differently from the way they treat the already "well-known" McCain. By "well-known" I mean that the media already has an accepted set of themes to apply to McCain. Those themes have simply not spread to Palin. 

 

I'd speculate that the McCain camp has been shocked to find that they could not just roll Palin in under the protection of the McCain media themes. But she made too big a splash with her selection and acceptance speech for that to be possible. The news audience wants details and the media (those not tasked with the propaganda function of defending her - FOX, etc.)are trying to meet the audience demand.

 

Now the declining elements of the media who consider themselves to be non-propaganda journalists have found enough blood in the water to begin the journalistic equivalent of a shark frenzy. To counter that the propaganda elements of the media and the McCain campaign are throwing out everything and anything that might tamp down the journalistic frenzy. It's desperation. That's the source of the lying. They have eight weeks and they are in the sprint to get past the finish line before they are buried by their lies.

 

I don't think it is going to work. The same journalistic norms of going along with the pack that make the media themes such a powerful a way to avoid contradictory new information are now beginning to work in reverse. Those norms are escalating the journalistic frenzy.

 

So in the next eight weeks, the real question is which is going to dominate the media? Will it be the journalistic pack frenzy or will the theme-driven propaganda media be able to regain control?

 

In many ways the fate of America and of the world depends on the answer to that question.

McCain's choice of Sarah Palin for Republican Veep candidate meets a major need in the McCain campaign for President. Is the choice going to be worth what it costs him?

McCain's problem is that he has to attract and energize Bush's base of voters to be elected, but at the same time he has to avoid being connected to the immensely unpopular President Bush. McCain's public persona as a maverick Republican takes care of the second part of the problem. But McCain is still "Old Washington" as well as being age 72 and looking like it. In spite of his maverick persona, McCain is still part of the problem. He didn't energize any particular groups of Republicans in the primaries; he just outlasted all the other candidates as they each showed themselves unable to unify the party behind them or self-destructed. What does McCain do about the problem of getting the Republican Party to unify behind him? He hasn't done much since he because the presumptive choice as Republican candidate last March. The choice of a vice Presidential nominee was McCain's last real chance to make a difference.

The Democratic Primary provided a lot of guidance. Two key issues exposed by the long Democratic Primary were change and mobilizing women as a separate political force. Clinton's effort to run on her experience and organization instead of getting on the "change" bandwagon early was a key element in her defeat. But her mobilization of women as a separate political force was key to the close and lengthy race between her and Obama.

Since John McCain has needed to do something to transform his campaign in a way that would mobilize Republican base he took clear note of the change and the year of the woman issues as he decided who his running mate would be. The other recently discussed possibilities - Joe Lieberman, Tim Pawlenty, Tom Ridge and George Romney - offered no real solution to McCain's problems. All any of them offered was a symbol that McCain was going to promise serious, rational and considered governance once he was elected. None of them did anything to actually win the Presidency, and McCain is losing this campaign. His Veep pick needed to do something radical to change the dynamic.

The choice of the young, exciting and telegenic Governor Sarah Palin certainly offered that possibility. Mrs. Palin appears to come alive in the limelight. It loves her and she clearly loves the attention. In addition to her rather exciting persona, Mrs. Palin is also a strong religious fundamentalist who is very attractive to the social conservative Republicans. Her reputation of taking on the Alaska Republican political establishment makes her similarly attractive to the Libertarian Republicans. For the Republican Party McCain's choice of Palin is a unifying choice as well as an energizing one. It doesn't hurt that she was one of a large field of candidates for governor who went on to defeat a sitting governor. She literally came out of nowhere to win the governorship of Alaska.

This is what John McCain was considering when he met Mrs. Palin last Thursday for the third time. The <a href="http://www.nytimes.com/2008/08/31/us/politics/31reconstruct.html?_r=1&amp;oref=slogin">New York Times</a> described McCain's typical decision-making process this way:<blockquote><i>At the very least, the process reflects Mr. McCain’s history of making fast, instinctive and sometimes risky decisions. “I make them as quickly as I can, quicker than the other fellow, if I can,” Mr. McCain wrote, with his top adviser Mark Salter, in his 2002 book, “Worth the Fighting For.” “Often my haste is a mistake, but I live with the consequences without complaint.”</i></blockquote>This is a very appropriate decision-making process for a fighter pilot in combat when the premium is on making a fast decision and taking rapid action. But it runs the risk of overlooking very important factors.  Did McCain overlook important factors in vetting Mrs. Palin, or just consider them them unimportant compared to the benefits?

 A key consideration in the Friday  announcement of Sarah Palin was that the  announcement needed to be a big surprise to the media so that it could suck the media "oxygen" up from Obama's acceptance speech Thursday night. So McCain  kept the vetting process in a very small group and kept it secret from everyone else even in the campaign. The McCain camp did achieve surprise, but the process also meant that there was no possibility of floating a trial balloon in the media well in advance and seeing if Mrs. Palin could survive intense media scrutiny. That strategy depended on the vetting individuals doing a complete job. But if it was incomplete, there was no way for those doing the vetting to be warned they were missing important items. It is now clear that the vetting was quite abbreviated.  It may have been limited to social conservatives who gave her high marks.

Once the Sarah Palin surprise was sprung on the media, the political reporters jumped on her history and reputation. The surprise worked. There has been no discussion of Obama's great acceptance speech since Friday, and the core Republicans have quickly circled the wagons in her support.  But at the same time we have had a new unpleasant surprise each day about Sarah Palin since Friday.

One question is whether the result of the intense media focus will be to "Quaylify" Sarah Palin, and if they do, whether it will cause a backlash among Republicans against the media. Neither of those questions are very important. Her appointment as McCain's veep has both energized and unified the Republican base. It is unlikely to bring in independents and it will certainly not bring in Democrats.

Another question is whether all the negative surprises are over and whether she can survive them. This question will be dealt with tonight in her acceptance speech.  Mrs. Palin seems quite comfortable dealing with the media so the question is whether she can avoid appearing as an intellectual lightweight outside of formal speech-giving situations.  After tonight the vice Presidential Debate will be her biggest test.

The more important question is what the choice and announcement of Sarah Palin means for the McCain image. It already very clearly shows that in spite of his maverick image, McCain has surrendered all independence on important matters to the Republican social conservatives. McCain is no moderate. He is relentlessly a right-wing extremist. The Palin decision also clearly demonstrates that John McCain is every bit as much of a "gut-level" decision maker as George W. Bush and that he does not consider the downside risk of the choices he makes any more than Bush ever has. Until now the media has not dealt with that issue, but the Palin decision exposes it to scrutiny and question.

Many of us are also aware that McCain has staffed his campaign with highly pro-war NeoCons and free-market deregulation economists, but this has not gotten broad traction is shaking McCain's moderate image. It is possible that the very high visibility of Sarah Palin will expose McCain's debt to the Republican social conservatives. This is also a downside risk that McCain accepted when he chose her as his running mate. It appears he was either willing to accept that risk or was unaware of it. It would be difficult to determine which, but either way it exposes how desperate McCain is to become competitive in the last two months of this campaign.

While Mrs. Palin provides a lot of benefit to John McCain's campaign for the Presidency, whether the costs of choosing her are worth the benefits she provides is a question that will be at the top of the issues discussed for the next two months. She exposes a lot of McCain's weaknesses as a candidate to very intense questioning.