Economy -- The New Hoovers

September 18, 2008

by Faiz Shakir, Amanda Terkel, Satyam Khanna, Matt Corley, Benjamin Armbruster, Ali Frick, and Ryan Powers

ECONOMY

The New Hoovers

This week started off rough. In fact, Monday was the first "Black Monday" of the century, comparable, as the Center for American Progress's Andrew Jakabovics notes, to "the 20th century's signature day in financial history back in the Fall of 1929." By the end of the day, the Dow Jones had dropped 504.48 points, "the biggest decline since Sept. 17, 2001 -- the day the index reopened after the 9/11 terrorist attacks -- when it fell 7 percent, or 684.81 points." Topping that off were the failures of Fannie Mae, Freddie Mac, Lehman Brothers, and AIG, as well as new worries over Goldman Sachs and Morgan Stanley. "What we are witnessing may be the greatest destruction of financial wealth that the world has ever seen -- paper losses measured in the trillions of dollars," writes the Washington Post's Steven Pearlstein today. Presiding over this chaos was President Bush, who has consistently chosen to deny that anything was wrong with the markets. Sen. John McCain (R-AZ) has also been there cheering on this disasterous de-regulation, and is only now trying to pretend that he had always favored more robust oversight. House Speaker Nancy Pelosi (D-CA) has ordered a probe of Wall Street and in the coming days, and she plans to demand testimony from various Bush administration officials and other Masters of the Universe.

HOOVER 2.0 -- GEORGE BUSH: As recently as a few months ago, when it was already clear that the financial markets were in turmoil, Bush was trying to continue his do-nothing economics. "The President's hands-off attitude is reminiscent of Herbert Hoover in 1929 and 1930," Sen. Charles Schumer (D-NY) said in March. Last year, Bush was telling reporters that he wasn't very good at economics since he received only a "B in Econ 101" (in reality, he received the equivalent of a C-). However, this hands-off approach is what has propelled the current financial crisis. According to the Washington Post, both Republican and Democratic lawmakers alike "said the crisis is in part result of insufficient government regulation on Wall Street." "Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke need to face squarely the vast array of mistakes made by the Bush administration's financial regulators over the past eight years," notes Jakabovics. Last year, instead of aggressive measures to help home mortgage borrowers, lenders, and investors work out payment problems with federal supervision, the Bush administration embraced Paulson's "voluntary debt workout plan, called Hope Now, which (let's be frank) failed to help homeowners or the larger home mortgage marketplace," Andrew Jakobovics of the Center for American Progress observed.

HOOVER 3.0 -- JOHN MCCAIN: McCain often says he tries to model himself after President Teddy Roosevelt, but perhaps Hoover might be a better comparison. Over the past year, McCain has described the economy's fundamentals as "strong" at least 18 times. He said it most recently on Black Monday: "Our economy -- I think still, the fundamentals of our economy are strong." His rhetoric echoes what Hoover said on Oct. 25, 1929, a day after what is now known as Black Thursday : "The fundamental business of the country, that is the production and distribution of commodities, is on a sound and prosperous basis." McCain is now trying to portray himself as a financial wizard, someone who believes "in excess government regulation" and "warned" federal officials of a potential subprime mortgage crisis as far back as two years ago. In reality, McCain has been clueless about the economy. "I'd like to tell you that I did anticipate it," McCain said in November 2007 of the financial crisis, "but I have to give you straight talk, I did not." In fact, he has been a leading advocate of deregulation. New York Times columnist and Princeton economics professor Paul Krugman has pinpointed Phil Gramm as one of the architects of the current financial crisis and the "odds-on favorite to be the Treasury Secretary" in a McCain administration. Gramm orchestrated the Gramm-Leach-Bliley Act in 1999, which "destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies." He also pushed the Commodity Futures Modernization Act in 2000, which made legal "the mortgage swaps distancing the originator of the loan from the ultimate collector." The Nation writes that "those two acts effectively ended significant regulation of the financial community."

MAKING THE COUNTRY SAFE: In order to restore confidence in the financial markets, policymakers need to "protect homeowners and communities by preventing the continued acceleration of home foreclosures and by restoring confidence in the credit markets," the Center for American Progress notes. With this goal in mind, earlier this year, the Center for American Progress proposed a Saving America's Family Equity (SAFE) program, which recognizes that "both borrowers and investors, and ultimately taxpayers, are better off when loans are restructured rather than allowed to proceed to foreclosure." This plan would "promptly facilitate the bulk transfer of mortgages into the hands of new private owners with the incentive and ability to modify or refinance the loans." The housing bill recently passed into law reflects these principles, mandating a Treasury study of mortgage pools base on the SAFE program. As Jakabovics writes, a first step for the Bush administration would be to accelerate this study so that "regulators can get down to the real business at hand -- finally fixing the problem in the mortgage marketplace at its source."

EDUCATION -- FEDERAL PELL GRANTS TO FACE $6 BILLION SHORTFALL: The Bush administration has warned Congress "that the most important federal [college] aid program, Pell Grants, may need up to $6 billion in additional taxpayer funds next year." As of July 31, "800,000 more students had applied for grants than on that date last year," an increase that is "one of the largest ever year to year." According to the Department of Education, "Congress appropriated $14 billion for the grants for the current fiscal year, but because of the increase and because of accumulated shortfalls from previous years, lawmakers will need to add $6 billion in new funds next year or cut the size of the grants." "It's the mother of all shortfalls," said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. "There's more unmet need than anyone predicted." Federal aid applications of all kinds are rising, as "in the first six months of 2008, almost nine million students nationwide completed the federal aid application required for federal grants and loans, a 16 percent increase over last year," the New York Times noted.

ADMINISTRATION -- AS BUSH'S VP VETTER IN 2000, CHENEY SIDESTEPPED 'THE SCRUTINY HE IMPOSED ON OTHERS': In July 2000, after serving as the head of then-Texas governor George W. Bush's vice presidential search committee, Dick Cheney became the Republican vice presidential nominee. As the vice presidential vetter, Cheney required at least 11 potential candidates to fill out "an extraordinarily detailed, 83-question form" delving into their backgrounds. Bush's staff assured the press at the time that Cheney "subjected himself to the same kind of scrutiny" as the other contenders. But a new book by Washington Post reporter Barton Gellman reveals that Cheney "never filled out his own questionnaire." "At the time, when Cheney's selection was announced, the campaign's spokespeople claimed he did put himself through the same process as everyone else and I've established that that's simply not true. He didn't fill out the questionnaire, which would have called for a giant box load of documents to be delivered," Gellman said on Tuesday. In 2000, the Bush campaign claimed that it was "Bush himself who did the final, most sensitive background check" on Cheney while then-campaign manager Joe Allbaugh "oversaw the examination of Mr. Cheney's voting record and public history." But Cheney refused to turn over much of the pertinent information. In an interview with Harper’s, Gellman describes Cheney’s selection process as “a kind of prologue to the play of the Bush-Cheney years.”

AFGHANISTAN -- GATES TO REVIEW AFGHANISTAN STRATEGY AMID INCREASING VIOLENCE: NATO and allied military leaders in Afghanistan "had hoped to seize the initiative from Islamic militants" this summer. But the heavy fighting there "has instead revealed an insurgency capable of employing complex new tactics and fighting across a broad swath of Afghanistan." In fact, "over the last three months, insurgents have exacted the most punishing casualty tolls on Western forces since the Afghan war began nearly seven years ago. The numbers of foreign troops killed have exceeded U.S. military deaths in Iraq." The changing situation in Afghanistan is now leading the Bush administration to seek a change in war strategy. Citing the change in Iraq strategy last year, Defense Secretary Robert Gates said yesterday that "you have an overall approach, an overall strategy, but you adjust it continually based on the circumstances that you find," adding, "We did that in Iraq. We made a change in strategy in Iraq and we are going to continue to look at the situation in Afghanistan." When asked for details of the potential change, Gates would only say, "We're looking at it."

U.S. Chinook helicopter crashed in Iraq early Thursday, killing all seven American soldiers who were aboard the aircraft. The cause of the crash is still unknown, "but hostile fire has been ruled out."

Judges around the world "have long looked to the decisions of the United States Supreme Court for guidance, citing and often following them in hundreds of their own rulings since the Second World War." But now "American legal influence is waning" as a "diminishing number of foreign courts seem to pay attention to the writings of American justices."

As the nation enters "a period of tight credit -- which could mean jobs lost, retirement plans pruned, college deferred and lifestyles diminished," Americans have taken notice. A new USA Today/Gallup poll has found that "nearly one-quarter of adults -- 23% -- believe the U.S. economy is in a depression." "That's nearly double the 12% who said so in February.

President Bush canceled a planned fundraising trip to Jupiter, Florida and Huntsville, Alabama so that he can "consult with his economic advisers." In his place, "Vice President Dick Cheney will attend the Huntsville fundraiser."

The American Psychological Association announced yesterday that its members have voted "to prohibit consultation in the interrogations of detainees held at Guantánamo Bay, Cuba, or so-called black sites operated by the Central Intelligence Agency overseas." In a mail-in balloting that concluded Monday, the group's members voted 8,792 to 6,157 in favor of the prohibition.

And finally: The Department of Homeland Security is enlisting Sesame Street in its family preparedness plans. "We all want our children to feel safe in this world," said Meryl Chertoff, wife of Homeland Security Secretary Michael Chertoff. "And who better to do that than our Sesame Street friends, Grover and Rosita!" The pamphlet's introduction has this message for kids: "I, your furry, blue friend Grover, have a story to share. Are you wondering what it is about? ...Do you want to get ready, too? You do? Oh, I am so pleased. Then read this story with me, and let us get ready together!"

The House passed legislation directing courts toward a more generous application of the Americans With Disabilities Act's "definition of disability, making it clear that Congress intended the ADA coverage to be broad and to cover anyone facing discrimination because of a disability."

THINK PROGRESS: MSNBC's Chris Matthews pushes Rep. Eric Cantor (R-VA) on President Bush's handling of the economy: "He's pulling one of these Katrinas again."

WONK ROOM: Treasury Secretary Henry Paulson repeatedly called the U.S. banking system "safe and sound."

YGLESIAS: The real fundamentals of the economy: middle class income.

TPM ELECTION CENTRAL: Fact-chceking Washington Post's Chris Cillizza article praising Matt Drudge's influence.

WASHINGTON: State may ban driveway car washing because runoff contains soap, chemicals, and oil.

CALIFORNIA: "A constitutional amendment that would ban same-sex marriage in California has lost support during the past two months and now trails by a 17-point margin."

CIVIL RIGHTS: High turnout and new procedures may mean an "election day mess."

"Secretary Cheney told me he subjected himself to the same kind of scrutiny [as other vice presidential candidates]."
-- Bush-Cheney '00 spokesman Karen Hughes, 7/28/00

VERSUS

"[Cheney] never filled out the vetting form. ... He didn't fill out the questionnaire, which would have called for a giant box load of documents to be delivered."
-- Washington Post's Barton Gellman, 9/16/08

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