McCain's Aide's Lobbying for Criminal Failed Mortgage Firm
Michael Tomasky writes:
'The lobbying firm of Rick Davis, the manager, was being paid $15,000 a month by Freddie Mac until last month. That fact is a direct contradiction of words McCain had spoken Sunday night. At that time, responding to a Times story being prepared for Monday's paper revealing that Davis had been the head of a lobbying consortium led by Freddie Mac and Fannie Mae until 2005, McCain said Davis had done no further work for either mortgage giant. Someone's lying – either Davis to McCain, or McCain to the public. I trust you see the problem here.'
What I cannot understand about the Obama campaign is that when I turn on the television I see McCain blaming Obama for the real estate melt down (which is of course ridiculous) but I have to read a British newspaper to see this item put bluntly. I mean, it is not as if it is an unfair smear or something. There are two big issues: 1) big money going to a McCain aide to lobby for firms now under FBI investigation, which helped destroy the US economy and 2) lying about it. Where's the Obama ad making these points?
I don't get it.
posted by Juan Cole @ 9/24/2008 12:32:00 PM
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4 Comments:
It seems to me that the Americans, top to bottom, are getting lost in finding who to blame. Without a full understanding of what real estate bubbles are, the "solutions" sought cannot be real.
Assume that x sold his property to y at the peak and put the proceeds in the bank. The seller now has made real money = the (huge) selling minus original buying costs. The question nobody seems to ask is: where did this real wealth come from? The answer is: from losses the buyer will make as the inflated prices recede.
"Stablizing prices" means that the rest of society pays the buyer to compensate him for his foolish and voluntary purchase, most likely motivated by greed. If the buyer is protected, the end result is that the smart seller has wealth transfered from the tax payers to him!
Now, during a bubble the real economy gets plenty of benefits. Building of new properties expands, employing people and adding to the taxes the state gets. Then you have agents, banks, furnishing etc. If the rise in prices is not considered as a blip, as it should be, but real increase of wealth apparently from thin air, owners can even borrow against the price increase and spend big time making the real economy expand. The US economy may well had contracted in the last few years if it wasn't for the bubble. Basically, the entire country has borrowed money.
The bubble burst eventually. Those who saw their property rise then come back down in price still make some profit because the drop is still not as big as the rise. But the spenders of the imaginary wealth now have to pay it back. If they can't then they will be in trouble.
Wall Street amazingly wants the tax payers to keep the inflated prices high by injecting huge sums of money. This is not just unfair but cannot be done. The rise in the price of the entire US real state has been in the trillions, and it has been spent already.
The other thing the Americans seem to be unaware of is that the basic laws of economics do not work in the case of speculative trade. If prices rise demand goes up as speculaors want to jump in. In the normal economy price rises reduce demand forcing prices down again. This is called negative feedback and leads to a stable system. The speculative system is inherently unstable because of the positive feedback. This also means that falling prices lead to reduced demand as buyers wait for further falls.
This loss of confidence will not be reversed by injecting liquidity. This is what happened in Japan which suffered a decade of deflation and recession. They injected lots of cash but there were no takers, even at zero interest rate!
The US does not have the cash anyway. It wants to borrow huge sums. This money will simply go into the pockets of the institutions, to be repaid by pension funds and future generations. How stupid.
Because in an American election there is no difference between negative campaigning that is true and negative campaigning that is false. If Obama truthfully points out that McCain's people were taking money from Fannie and Freddy up till the bitter end, it's reported the same as McCain claiming Obama wanted to sexualize kindergarteners.
Obama is being smart here. As long as it looks as if he is winning, he should stay on the high road: putting forth solutions, pointing out policy differences. He is appealing to the best in us. Hillary attacked him and the attacks backfired. He kept pointing out the important policy differences between them, and the choice the voters had (diplomacy instead of sanctions and war threats).
It may very well be that McCain didn't lie, but Rick Davis lied to him. The same could happen to Obama, who also has had help from former Fannie Mae and Freddie Mac executives. Who knows who might be on the take because they're close to the campaign? It's not necessarily the candidate's fault. The problem is with McCain's policy.
Obama is trying to win this without alienating too many Republican voters while making the minimum of adjustments necessary to carry key electoral states: he's looking forward to governing.
The rest of us, on the other hand, can point out the utter hypocrisy of McCain's call for change again and again. And you're doing a great job, Juan.
Roger Evans
I believe the GOP/DNC DC Mafia have a smokey back-room understanding: fighting dirty is cool, but don't eviscerate the other party and screw up the cozy power sharing status quo the elite enjoy.
One would think a concentrated aggressive effort to punish the "war party" who are guilty of criminal insults to humanity upon which needless misery has been violently forced on MILLIONS of innocent people based on bold face lies... could obliterate the RNC and drive them from meaningful power.
Too bad there is no fierce independent force out there to point out how complicit BOTH parties have been in the criminal acts committed in our name.. and drive them all out of DC in cuffs.
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