Politics Now

Bush, Paulson talking us into recession?

WASHINGTON — The foundation stone of all business is confidence — confidence that a product will work, that a loan will be paid back, that people will show up for work, that vendors won't cheat.

There is no credit market on "Main Street" without a reasonable assurance that money invested will turn a profit. The question is, how far have President Bush and his Treasury secretary, Henry M. Paulson Jr., gone in undermining American confidence in the economy in order to sell a $700 billion financial bailout?

On Monday afternoon, Paulson reacted to the House defeat of the leadership bill by saying that Wachovia Bank, a massive Eastern states bank, had "collapsed." In a statement made in front of the West Wing of the White House, Paulson linked Wachovia, and Washington Mutual and two major European financial institutions, saying they had all "collapsed."

In earlier times, folks would call Paulson's remarks reckless. He was also totally wrong. Wachovia sold its banking business to Citigroup, after negotiations over the weekend. Washington Mutual was taken over by the Federal Deposit Insurance Corp., and the two European banks had been buttressed by government grants.

Paulson may have become President Bush's new Donald Rumsfeld, the defense secretary whose mistakes and insistent, reckless comments sapped all credibility out of the administration's conduct of the Iraq War.

Bush last week warned that if Congress didn't approve Paulson's rescue bill right away, the economy would collapse. "If money isn't loosened up, this sucker (the nation's entire economy) could go down," Bush said. Sounds a little bit like Bush's "bring 'em on" references to Iraqi insurgents in 2003.

Today, Bush said "we're in an urgent situation and the consequences will grow worse each day" that Congress fails to act.

House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., have pledged to revive the bailout package rejected by the House on Monday.

Not everyone agrees with the Paulson, Bush, and the congressional leadership. Republican Congressman Darrell Issa, Calif., suggested that his party replace the Republican House leadership for its role in promoting the legislation. Two-thirds of the Republicans, along with 40 percent of the Democrats, voted it down on Monday.

Reps. Brian Higgins, D-Buffalo; Louise M. Slaughter, D-Fairport, and Thomas M. Reynolds, R-Clarence backed the bill on Monday. Rep. John R. "Randy" Kuhl Jr., R-Hammondsport, opposed it.

Former House Speaker Newt Gingrich called for Paulson's resignation, saying "having a former chairman of Goldman Sachs preside over disbursing hundreds of billions of dollars to Wall Street is a terrible concept and inevitably will lead to crony capitalism and the appearance of — if not the actual existence of — corruption."

Paulson's initial plan may have doomed Monday's legislation. He originally asked for a standing fund not to top $700 billion at any one time that he would control absolutely. He also sought to protect "golden parachutes" for executives whose firms would get federal tax dollars.

On Tuesday, some Wall Street money managers cast doubt on the accuracy of Paulson's comments that credit had dried up. One manager, who asked he not be quoted by name, noted that while the administration was "selling the line that credit was gone last week, four junk bond loans worth more than $1 billion were sold to investors."

He noted that the United Kingdom has tripled its hold of American dollars in the last year. The second quarter gross domestic product was "revised to 2.8 percent of real annual growth, largely due to a decade-high level of net export growth."

David Sirota, a syndicated columnist, said Paulson picked the "$700 billion figure out of thin air." Sirota wrote the number is "not based on any particular data point," the Treasury said. "We just wanted to choose a really large number."

The conservative advocacy group Taxpayers for Common Sense said Paulson's three-page plan was improved over the weekend by congressional negotiators, "but it still poses a significant risk to taxpayers."

Richard Viguerie, chairman of ConservativeHQ.com, noted that House Republican Minority Leader John Boehner admitted to his GOP colleagues that the bill was "a crap sandwich" but chose to tell them to "eat it anyway."

Only a third of them did. But they may be faced with another version before the week is out.

--Douglas Turner

778 Reasons to Back the Bailout?

    WASHINGTON -- Not long after 228 House members doomed the $700 bailout plan that political and business leaders said is needed to stave off economic disaster, investors gave lawmakers 778 reasons to reconsider their vote.

   That's the number of points the Dow Jones Industrial Average lost in wake of the bailout plan's defeat. That's 778 points, give or take, shaved off of countless 401(K) retirement plans, 778 points shaved off countless nest eggs.

   And that was just one day.

   Ironically, lawmakers were spooked against supporting the bailout plan because so many of their constituents had yelled and screamed about it.

   But you have to wonder: with the markets tanking after the bill's failure, will lawmakers be hearing for another, different group of angry voters on Tuesday?

-- Jerry Zremski

Indy Switcheroo Proves Boost for Lee

   The Independence Party pulled a major but not unexpected switcheroo this week when it substituted Republican Christopher J. Lee for its previous candidate for the 26th Congressional District.
   The political maneuvering included moving Anthony L. Fumerelle, a Kenmore attorney who was the party's previous candidate, to a slot for State Supreme Court in Queens. It is not known whether Fumerelle has ever even been to Queens, but he is now a candidate for judge there.
   In the meantime, state party leaders made the substitution after they basically surveyed the situation and found a candidate they liked after the Democratic primary.
     "We requested that Anthony move off after we found whom we consider to be the best candidate for our line," said state Vice Chairman Thomas S. Connolly. "This is necessary in a very tough situation where we are in the midst of a primary and you can't determine who the candidates will be until after."

   But the move is significant because of the line's importance in past elections. According to the Lee campaign, the line accounted for 9,100 votes or 3.3 percent for Republican Rep. Thomas M. Reynolds in his 2004 victory over Democrat Jack Davis.
   In 2006 when Davis had the line, it accounted for 9,400 votes or 4.4 percent in a contest reynolds won by only about 8,000 votes.
   "We see this as a very positive boost for us," said Lee spokesman Nicholas A. Langworthy. "The minor lines are critical."
   What is your view of the role of minor parties and the maneuvering that resulted in Lee on the often critical Independence line?

   --- Robert J. McCarthy

Bush's magical, mystery money machine

WASHINGTON - Despite all the noise on the networks about President Bush's bailout, the people who will pay the bill for it, the taxpayers, will not get details until weeks from now, if ever.

However, a few scraps of information have fallen from the negotiating table. First, the tab isn't limited to $700 billion. The legislation really doesn't impose a ceiling on the price tag. It says the Treasury secretary's authority to buy "mortgage related" securities "shall not exceed $700 million at any one time."

The bill gives the Treasury secretary absolute power, according to the Washington Post. The legislation says "decisions by the secretary (of the Treasury) pursuant to the authority of this act are non-reviewable and committed to agency discretion, and may not be reviewed by any court or law or administrative agency," the Post reports.

While President Bush's Treasury secretary, Henry M. Paulson Jr., has warned Congress that credit markets are drying up on Wall Street, not all the bankers there agree with him. One prominent New York City money manager, who spoke only on promise of confidentiality, said Thursday that Paulson is not telling the truth about credit.

"No one here is not getting their money," said the Manhattan money manager. The White House plan is getting hit from left to right and center by spokespersons outside the Washington Beltway.

From the left, ACORN President Maude Hurd said President Bush in his Wednesday night speech neglected to take responsibility for the failure of his regulators to prevent the episode. Why trust a president who created this crisis to solve it? Hurd asked.

Conservative Richard Viguerie called the scheme "economic fascism."

"Conservatives must stand up and say, loud and clear, to their senators and representatives: We will not tolerate any bailout of Wall Street millionaires.

"This is going to be hard for almost every member of Congress, given the culture of corruption that prevails in Washington," said Viguerie, a prominent Republican direct mail entrepeneur.

"Since 2002, the financial industry has given more than $1.1 billion to congressional candidates. And that's not including the hundreds of millions spent on lobbying. Now Wall Street is saying: It's payback time.

"If John McCain supports this bailout," Viguerie said, "he will lose all of the goodwill and support he has gained from conservatives by picking Gov. (Sarah) Palin as his running mate."

A Marist survey reported that 68 percent of the voters polled say it is important for Congress and the president to act, but not right away, while 26 percent want Congress to act this week.

A new Los Angeles Times/Bloomberg poll finds that "most Americans don't believe the government has responsibility for bailing out financial firms with taxpayer money, a core part of the rescue plan Congress is considering to halt the near-meltdown of the nation's financial markets."

Asked whether "the government should use taxpayer dollars to rescue financial firms whose collapse could have adverse effects on the economy, 55% of the poll's respondents said they did not believe the government should be responsible for funding a bailout plan."

Comic Jay Leno had his own take on the controversy on Wednesday: "Oh, more bad news from President Bush. Remember those rebate checks from a few months ago? He wants them back. Yeah! We need to give that money to rich people on Wall Street. They need it more than you do!"

--- Douglas Turner

Presidential Debate

McCain aide ducks bailout question.

       WASHINGTON - The Republican presidential campaign of Sen. John McCain of Arizona said it was working with his Democratic rival to delay Friday's debate in order to concentrate on the nation's economic crisis.

    At the same time however, McCain's political director Mike DuHaime deflected questions on why the candidate, former chairman of the Senate Commerce Committee, does not have his own plan to rescue the nation's investment bankers.

   At a luncheon meeting of political reporters organized by the Christian Science Monitor, DuHaime accused a reporter of "baiting" him when DuHaime was asked whether McCain's failure to stake out a stand on the Bush administration's proposed $700 billion bailout plan might show a lack of presidential-style leadership.

    McCain and the Democratic candidate, Sen. Barack Obama, are "both U.S. senators who will have to cast a vote on it." DuHaime said. The aide said McCain wants curbs on compensation for executives whose firms are rescued with federal money, more oversight of financial institutions and "protection" for the taxpayers. But DuHaime declined to elaborate.

Obama has not spoken out against the Bush plan. There was no immediate answer from the Democrat's campaign about the McCain proposal to delay Friday's debate.

  --Douglas Turner
       

What's the rush on the $700 billion bailout?

   WASHINGTON - In March, Treasury Secretary Henry Paulson warned that if the government didn't step in to save Bear Stearns in New York the old investment firm would fail and prompt a financial catastrophe spreading through the nation's banks.

The Federal Reserve Bank of New York stepped in with a 28-day bridge loan, but Bear Stearns collapsed anyway, and its remnants were absorbed by JP Morgan Chase.

In July, Paulson and Federal Reserve Chairman Ben Bernanke warned President Bush that if the government didn't step in and place Fanny Mae and Freddie Mac under federal control the nation's banking system would collapse. The nicknames stand for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, two government sponsored enterprises that guarantee about half the mortgages held in the U.S.

Weeks ago, Paulson and Bernanke warned that if the government didn't guarantee the debts of AIG, a crisis would spread through all of American business, and so the government stepped in.

Now Paulson is warning Congress if they don't act quickly to give him the power to buy up $700 billion in worthless mortgages from banks that are not failing, then a crisis or catastrophe will occur.

Bush is strongly backing everything Paulson is saying to Congress. Isn't this the same process by which Bush led the nation into the Iraq War: Acting precipitously, relying on a very narrow circle of advisers, and creating widespread fear about a sector of society that depends on confidence?

Why not wait until Congress and the public understands exactly what is being purchased, and from whom, precisely? No one has yet described a way to unroll, or dismantle the complicated financial instruments, some called consolidated debt obligations, squared, or CDO2s. Or where they are?

On Tuesday, Paulson told the Senate Banking Committee that discussions about whether reckless bankers' golden parachutes should be limited ought to be "put off for another day."

Paulson has only been treasury secretary for a little more than two years. Before that he was chairman of Goldman Sachs & Co., one of the biggest contributors to federal candidates of both political parties that employed an army of lobbyists to fight government regulation. As of last Sunday, Paulson's old firm no longer exists. It is now merged into Goldman Morgan, and planning to go into the bank holding business.

So why is Bush's man, Paulson, listened to as an authority on how to fix the economy? What are you getting out of these bailouts? What are you telling your senator, or member of the House? The Senate switchboard is 202 224 3121. For the House, call 202 225 3121.

--Douglas Turner

Rep. Rangel's troubles spill into WNY

    WASHINGTON -- House Speaker Nancy Pelosi, D-Calif., told reporters this week that she "sees no reason" why Rep. Charles B. Rangel, left, D-Manhattan, should step away from his job as chairman of the powerful House Ways and Means Committee until the air over his many issues is cleared.

     Apparently Rangel's Democratic colleagues feel the same way. They voted down a measure on Thursday to investigate Rangel while he suspended himself from the chairmanship of the panel that writes the nation's tax laws and controls trade bills and legislation dealing with Social Security and Medicare.

     Democrats Brian Higgins of Buffalo and Louise Slaughter of Fairport voted to support Rangel and Republicans Thomas M. Reynolds of Clarance John R. "Randy" Kuhl Jr. of Hammondsport backed the probe.

     Kuhl said Rangel faces a "growing list of charges, many of which he has personally admitted to, including federal tax evasion, violating state and federal election laws, and gross violations of congressional ethics rules."

     "Today," Kuhl said, "we learn that Congressman Rangel has abused the House parking garage by parking his old Mercedes-Benz for free.  The spot, valued at $290 per month, was not declared on his IRS statement, which is mandated for all Congressional members. The car, which lacks a valid registration and current tags, would have the imputed income of more than $5,000 if it has been parked in the lot since Rangel surrendered his license plate in 2004. This is his sixth scandal to come to light in only three months.”

     Kuhl is calling on his Democratic challenger, Eric Massa of Corning, to return or dispose of $65,000 in campaign gifts Massa has received from Rangel's campaign fund and Rangel's leadership political action committee. Kuhl said Massa should call off a fund-raiser in New York City on Oct. 6 that Rangel is helping to sponsor.

     The Washington Post, Wall Street Journal, the New York Times, the New York Daily News and The Buffalo News all have editorially called on Rangel to resign as chairman.

     In Alaska, Anchorage Mayor Mark Begich, Democrat challenging Republican Sen. Ted Stevens, announced he is donating $10,000 in campaign money -- funds he now considers tainted because he received it from Rangel -- to charity. Stevens is being tried for failing to report $250,000 worth of favors from a contractor he helped.

     Rangel has said he has requested an investigation by the House Ethics Commitee to determine the validity of charges against him. However, because of the committee policy of confidentiality exactly what the charges are will not be known until the enquiry is completed.

     Massa's campaign manager, Justin Schall, issued a statement to The Buffalo News responding to Kuhl's charges:

     “We are pleased that Congressman Rangel has called for an investigation by the Ethics Committee to clear his name. Unlike Congressman Kuhl, who took $20,000 from Congressman Tom DeLay and then voted to kill the Congressional investigation into DeLay's relationship with lobbyist Jack Abramoff, Rep. Rangel welcomes an investigation. That's the same Tom DeLay that was indicted by a Grand Jury on charges of money laundering and the same Jack Abramoff that is now in a federal prison. To this day Congressman Kuhl has refused to return this tainted $20,000. Most folks would find that pretty hypocritical of Randy Kuhl. Here's the bottom line, Rangel called for his investigation and Kuhl voted to block an investigation into a man indicted for money laundering, a man that just happened to give Kuhl $20,000.” 
 
--Douglas Turner

Can Congress be trusted to reform Wall Street?

WASHINGTON - Republican presidential nominee John McCain and his Democratic rival Barack Obama are promising to crack down on Wall Street greed if they are elected. But can either nominee or Congress be trusted to discipline the finance and insurance industries that have been so generous to federal candidates?

The nonpartisan Center for Responsive Politics says that donors from the financial/insurance industries have already given $47.4 million to presidential, congressional and Senate candidates in the 2007-2008 cycle. Sen. Obama, D-Ill., is the biggest recipient, the center says.

Finance/insurance is the third largest industry category. Ranking ninth is "miscellaneous finance" with $20 million in donations in this cycle so far. The largest recipient of this money is Obama.

These industries have been very generous to the Democratic chairs who are assigned to oversee the federal watchdog agencies. Senate Banking Chairman Chris Dodd, D-Conn., received $110,000 from finance and insurance donors to his campaigns. The amount comprised more than 90 percent of all the political action money Dodd got for his Senate campaign committee.

As chairman since January, 2007, Dodd has done little or nothing to question the behavior of the financial giants that have received or are asking for massive taxpayer bailouts. He ran for president instead.

In the House, Financial Services Chairman Barney Frank, D-Mass., has already received $476,000 in campaign gifts from the financial services and insurance industries for his 2008 campaign - representing two thirds of all his PAC contributions. Since 1980, Frank has received $1.8 million from this sector, according to Congressional Quarterly's MoneyLine, another nonpartisan tracking organization.

The Center said Obama's campaign treasury collected about $400,000 from employees of Lehman Brothers, which declared bankruptcy on Monday. McCain's campaign got $145,000 from Lehman employees.

Since 1998, the financial services industry has spent $3.2 billion on lobbyists whose job is is to persuade Congress not to increase regulation of the business, and talk the Clinton and George W. Bush administrations into looking the other way.

Because of Supreme Court rulings, very few limits can be placed on the amount of contributions these industries make to a candidate or the funds spent on lobbying Congress and the administration.

--- Douglas Turner

      

The nice girl finishes first

   For what it's worth, Democrat Alice Kryzan and Republican Christopher Lee are vowing to play nice in their race for Congress in the 26th district.

   And it's no wonder they would, given what playing dirty did to Jon Powers and Jack Davis.

   The air (and mail) war between Powers and Davis was surely one of the most intense in local history, and it left a large plurality of Democrats in the Kryzan camp, even though the Amherst environmental attorney was largely ignored through much of the battle.

   Only a handful of political pros thought Kryzan could win, but she did, and convincingly.

   As for Davis and Powers, they spent Wednesday in undisclosed locations, refusing to concede, in what seemed like an extension in spirit of the kinds of campaigns they waged.

   One has to wonder if the voters will ever hear from either of them again.

-- Jerry Zremski