Wednesday, October 15, 2008

Sadly now, there can be but one outcome

Remember all those nature shows you watched when you were a pup, specifically the ones showing lions surrounding a zebra, or a wildcat cornering a rabbit? And then the narrator says something like, "Sadly now, there can be but one outcome," and the camera cuts away to avoid the unsettling carnage that follows? Spot was reminded of that narrator when he read this:

Every day (or close to it) until November 4, a series of writers and thinkers will discuss the election over instant messenger for Today, Rolling Stone's Matt Taibbi and National Review's Byron York argue over the headwinds facing McCain, what Phil Gramm had to do with the financial crisis, and the importance of credit default swaps.

M.T.: So how are you feeling about McCain's chances today? [good Matt: no sense beating around the bush]

B.Y.: I've just finished an article for National Review — the actual magazine — about the headwinds McCain faces. I was going to look at three, and then I started to list them. I stopped at ten. New Gallup numbers out today show that George W. Bush's job approval rating remains at 25 percent, while his disapproval rating has ticked up to 71 percent. How hard is it to succeed a two-term president of your own party who is at 25-71? We don't know because it's never been done.

M.T.: Yeah, that's a damned shame, too. I feel really badly for the guy. [bad - Spot says that the state of being calls for a predicate adjective, not an adverb; note that Matt doesn't mind sticking the fork into the still-warm carcass, however] I suppose you think the media coverage is also a headwind?

B.Y.: Actually, I did not list media coverage among the headwinds. I listed the succeed-a-two-term-president problem, the right-track/wrong-track problem, the Republican-Democrat-enthusiasm gap problem, the Republican-Democrat-I.D.-gap problem, the financial meltdown, Iraq, Republican gloom on Capitol Hill, Obama's fund-raising advantage, and McCain's historical problems with the GOP base.

Taibbi and York go on to "chat" about the financial crisis and the role that derivatives (Spot misspelled that first time around and the spell checker helpfully recommended "depravities") called credit default swaps had in creating the mess.

The National Review guy, of course, clings to the canard that it was poor minority people who brought down Wall Street:

B.Y.: Did I suggest that headwinds are unfair? But on the financial meltdown in particular, if you're suggesting that that is a Republican creation, or even more specifically a McCain creation, I think you're on pretty shaky ground.

M.T.: You don't think the unregulated CDS market was a major factor in the current crisis? Were you watching when AIG almost went under? Were you watching the Lehman collapse?

B.Y.: I think that Fannie Mae and Freddie Mac were also major factors. And I believe that many of the problems in the mortgage area can be attributed to the confluence of Democratic and Republican priorities: the Democrats' desire to give mortgages to people, particularly minorities, who could not afford them, and the Republicans' desire to achieve an "ownership society," in part by giving mortgages to people who could not afford them. Again, I believe that if you are suggesting that the financial crisis is a Republican creation, or even more specifically a McCain creation, I think you're on pretty shaky ground.

M.T.: Oh, come on. Tell me you're not ashamed to put this gigantic international financial Krakatoa at the feet of a bunch of poor black people who missed their mortgage payments. The CDS market, this market for credit default swaps that was created in 2000 by Phil Gramm's Commodities Future Modernization Act, this is now a $62 trillion market, up from $900 billion in 2000. That's like five times the size of the holdings in the NYSE. And it's all speculation by Wall Street traders. It's a classic bubble/Ponzi scheme. [italics are Spot's] The effort of people like you to pin this whole thing on minorities, when in fact this whole thing has been caused by greedy traders dealing in unregulated markets, is despicable.

Taibbi goes on to give York a tutorial on credit default swaps, which Spot won't repeat but highly recommends.

Phill Gramm is an interesting character in all of this because he is the godfather of the deregulation of financial services, credit default swaps and the separation of commercials banks and investment banks. He is, not coincidentally, an economic adviser to John McCain.

York is just one of the legions of right wingers trying to pin the meltdown on Fannie Mae, Freddie Mac, the Community Reinvestment Act, the Easter Bunny or anywhere other than where it belongs: the dismantling of a regime of financial regulation that had its beginning in the hard lessons of the Depression.

A thump of the tail to John Cole at Balloon Juice for the link.

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