An Eph connection to the bailout?

Republican Sen. John McCain said he would suspend campaigning to help tackle a $700 billion bailout proposal and called on Democratic rival Sen. Barack Obama to postpone their debate Friday, as the roiling U.S. financial crisis took center stage in the presidential campaign.

Another key event that aides said prompted Sen. McCain’s actions: a roundtable Wednesday morning with some of Wall Street’s biggest names, financial titans who told him that the rescue legislation must be passed soon. “We urged John to get all over it, that this is a national-security crisis,” one financial executive said.

The financial executives, who were told on Tuesday that Sen. McCain wanted to meet with them the next day, included Merrill Lynch & Co. CEO John Thain, J.P. Morgan Chase & Co. Vice Chairman James Lee and private-equity fund owner Henry Kravis.

For Sen. McCain, figuring out how to handle the bailout bill presented a particular challenge because much of the resistance to the plan has come from conservatives alarmed at the cost of bailout and the scope of powers that would be granted to the Treasury secretary.

Sen. McCain, who has never been close to conservatives, has worked hard during the election season to earn their trust. But that could be at risk if he were to support a package that former House Speaker Newt Gingrich called “a dead loser on Election Day.”

Why are so many Democrats in favor of this bail out?

1) A “national-security crisis?” Give me a break! We are already in a recession. Obviously, we all hope that the recession will be brief, but there is no good evidence that this particular plan will do any good. All the smartest observers (e.g., here, here and here) are against it. Haven’t Democrats learned that “national-security crisis” is a smokescreen for policies that they ought to oppose? Just because rates on short term commercial paper are high does not mean that alien invasion is nigh.

2) As much as all good Ephs like Jimmy Lee ’75, don’t Democrats read EphBlog?

Someone at Chase once said, Jimmy is like a crocodile: He sits there with his eyes just a bit above the water saying, “Oh yeah, come just a little bit closer.”

Come a little close John McCain (and the rest of the Washington establishment). Just a little closer.

Jimmy Lee (and John Thain and Henry Kravis and most of Wall Street) have hundreds of billions of dollars of lousy assets, stuff that they value at 50 cents on the dollar but which is actually worth only 25 cents (or whatever). They want the US Government (which means you, future taxpayers) to buy it from them at 50 cents, or even more. I can imagine plutocrat-worshiping Republicans doing that, those shameless lick-spittles, but why would any Democrat be in favor of making Jimmy Lee richer?

Perhaps my Democratic friends can explain this to me. (And don’t even start with “No bailout means financial Armageddon.” That is just bunk, designed to stampede the rubes into action.)

3) And aren’t the politics interesting? Unless something dramatic happens, I don’t see how McCain can beat Obama. But what if McCain demagogued the bailout, as I previously urged Obama to do? Doing so would allow him to be against both Bush and the Washington consensus. He, not Obama, would become the candidate of change. Perhaps such a gambit wouldn’t be enough to win, but it is the only plausible hope as far as I can see.

Print  •  Email