Wall Street in Recovery

The New York Times is reporting that Wall Street is having a robust recovery -- thanks to generous financial assistance from the federal government.

Question for the extreme right: What "socialist" would pump money into the very financial institutions that fuel global capitalism? Hint: None!

More on Bailouts, Autos and Banks

Yesterday, I analyzed the differential treatment of the banking and automobile industry. Liberal websites like Daily Kos, however, have pointed out that CEOs at AIG, Fannie Mae and Freddie Mac were forced to leave their jobs as a condition of the companies they managed receiving federal assistance. But the government essentially "took over" these companies and has been running them since that time. The situation with the automobile industry is vastly different.

Today, Eugene Robinson of the Washington Post has joined others who have criticized the disparate treatment. The fact that Robinson has criticized President Obama is far more important than the substance of his criticism, because Robinson has been one of the most loyal supporters of Obama among journalists at major media outlets. As Robinson observes, the automobile industry certainly requires a tough love approach, but so does the banking industry.

The Editors of the Detroit News have also come out swinging against the disparity. The newspaper argues that the ouster of General Motors CEO Rick Wagoner was a political ploy designed to make the President appear tough on bailouts, given the public's anger over Wall Street. According to the Detroit News, the automobile industry is simply the scapegoat in a political game:

Obama has been banged around the last couple of weeks because of the bonus scandal at AIG. His administration, with the help of Congress, botched the aid package to the failed insurance giant, allowing the indefensible bonuses to be paid and triggering public outrage that is increasingly focused on the White House.

Dumping Wagoner lets Obama deflect attention away from Wall Street, where his Treasury Department is still moving through quicksand, and turn it on Detroit.

He can portray himself as being tough on the corporate executives who are ruining America, without having to draw blood from the bankers.

The White House's approach to Detroit, as opposed to the financial industry, applies a clear double-standard. The existence of a double-standard, however, does not mean that automobile manufacturers deserve leniency. Instead, both industries should face restructuring and greater controls.

The banking industry in fact deserves more scrutiny because its reckless behavior was the leading cause of the global financial crisis, and it has received far more federal assistance than any other business sector. Other than the relative political and economic power of Wall Street, it is difficult to understand why the government continues to coddle the banks and pay off their investors, while providing very little direct assistance to consumers and other commercial sectors.

Discriminatory Bailouts? $2 Trillion for Wall Street, Tough Love for Detroit

According to the Associated Press, the White House has demanded that Chrysler and General Motors restructure before the companies can receive additional financial assistance from the government. General Motors CEO Rick Wagoner resigned Sunday at the request of the White House, and federal officials are reportedly pressuring Chrysler to accept a partnership agreement with Fiat SpA. Ford, the third United States car manufacturer, has not received federal assistance and is not subject to White House plans.

Here is a clip from the story:

The White House says neither General Motors nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit that would dramatically reshape the nation's auto industry.

President Barack Obama and his top advisers have determined that neither company is viable and that taxpayers will not spend untold billions more to keep the pair of automakers open forever. In a last-ditch effort, the administration gave each company a brief deadline to try one last time to convince Washington it is worth saving, said senior administration officials who spoke on the condition of anonymity to more bluntly discuss the decision. . . .

Question: Why Does Detroit Receive Tough Love, While Banks Are Waiting for the Next Trillion-Dollar Installment?
The White House approach to domestic automobile manufacturers seems rooted in an understanding that market forces have seriously eroded demand for their products and that management has not adequately responded to this reality. With respect to banks, however, the government has proposed tossing another trillion dollars into the very industry that is largely responsible for the global financial and economic collapse.

Based on the banks' culpability in the economic crisis, the better argument would have the White House make stricter demands on banks than automobile manufacturers. The fact that the banking bailouts dwarf the magnitude of federal assistance for Detroit warrants even greater caution regarding the financial sector.

Experts ranging from Nobel Prize winning economist Paul Krugman to famed Merrill Lynch analyst Richard Bernstein have argued that the government should abandon its heavy subsidization of financial institutions and their investors. They believe that the government should instead offer financial institutions a healthy dose of tough love in the form of either nationalization and restructuring (Krugman) or promotion of greater consolidation within the sector, rather than artificially inflating the price of and purchasing toxic assets (Bernstein). Even former Federal Reserve Chairman Alan Greenspan recently promoted the idea that "It may be necessary to temporarily nationalize some banks in order to facilitate a swift and orderly restructuring.”

Final Thoughts
The reality that the United Autoworkers union is a leading supporter of President Obama could potentially make the White House approach politically difficult. With that in mind, perhaps this is Obama's way of indirectly pressuring UAW to accept concessions. A tough public stance towards management could likely conceal the government's desire that UAW relent on issues such as compensation and benefits. On the other hand, a public standoff between the White House and labor would be politically damaging.

The cost-cutting and restructuring that the White House has demanded of the automobile manufacturers, however, would likely necessitate sacrifices by labor. Offering tough love to management could send a message to union leaders that they should approach negotiations with greater flexibility. Banks deserve the same type of treatment.

PS: I wrote a related article on this subject after Senator Dodd called for the resignation of automobile industry management earlier this year. Also, it seems others are making similar observations: CEO Change Begs Question About Banks.

Update: Some auto workers believe they are being punished because the public is upset with the banking bailout.

Dodd's Discriminatory Bailout: "Regime Change" for Main Street, But Not for Wall Street?

_________________________________________________________________
What the media are not saying about the Chicago workers' sit-in:

* MADE IN IOWA: Did Company in Chicago Sit-In Illegally Discard Its Workers and Quietly Relocate While Liberals Forced BOA to Pay for the Shady Scheme?

* Republic Windows and Doors Received a Bailout from Chicago Before It Bailed Out of Chicago

* Laid-Off Republic Windows and Doors Workers: Pawns in Political Football]
_________________________________________________________________


Regime Change in Detroit?

Senator Christopher Dodd, who chairs the Senate Banking Committee, has argued that Richard Wagoner, the CEO of General Motors, should resign before the troubled automobile manufacturer receives federal financial assistance. And this morning, he has broadened those comments to implicate all automakers: "'[I]t's not my job to hire and fire, but what I suggest is, you need to have new teams in place here . . . if you're going to convince the American public' that the financial relief plan is necessary and justified" (italics added). Dodd also believes that Chrysler and GM will probably have to merge so that both companies can survive. My question for Dodd: Why did you fail to demand "regime change" among Wall Street recipients of federal aid?

President-Elect Barack Obama was less direct when he addressed the issue. During an appearance on Meet the Press, Obama said that the issue of mandatory changes in leadership "may not be the same for all companies." At press conference following the show, however, Obama offered an additional perspective on the issue:

If the management team "that’s currently in place doesn’t understand the urgency
of the situation and is not willing to make the tough choices and adapt to these
new circumstances, then they should go. . .If, on the other hand, they are
willing, able and show themselves committed to making those important changes,
then that raises a different situation . . . .”

Although Obama refused to define what "changes" he envisions or to take a position regarding a specific company or executive, his statements together with Dodd's comments show a new toughness among Democrats towards potential recipients of federal "bailout" assistance. During the general election campaign, members of Congress engaged in bipartisan rhetorical grandstanding and promised to place numerous conditions in the bailout package. The final statute, however, gives very broad discretion to the Secretary of the Treasury (see my analysis here). Now, Democrats have indicated that they might require company executives to step aside as a condition of receiving federal money. That's very tough talk.

Why No Regime Change on Wall Street?

But I am trying to understand why replacing corporate management has only recently become a possible prerequisite to the receipt of federal assistance. The various financial institutions that have received federal assistance face poor economic conditions because they recklessly decided to engage in risky -- but lucrative -- mortgage lending, bundle those mortgages and sell them as securities, or invest in securitized mortgage assets. Citigroup, the recent recipient of the largest financial bailout to date, engaged in all of these practices through its various divisions. Flawed managerial decisions led to these bad investments and to the present erosion of available credit. If Congress wants "heads to roll" before assisting companies, this same logic should apply evenly to all economic sectors.

In many ways, however, the auto industry could be less culpable for its financial woes than the banks were for their own problems. Auto companies lend money to purchasers and probably made poor choices during the recent "easy credit" run. They can also invest in risky mortgage-backed securities. But most of their trouble today results from not having sufficient money to conduct prospective business, rather than from the unraveling of prior investments. They do not have access to credit precisely because the bank crisis has caused credit to tighten. Prospective car purchasers also face difficulty securing loans, which exacerbates the situation (see this article in Forbes on the subject and on a potential remedy). Irrational exuberance in the housing market caused most of this problem. The greatest blame lies with financial institutions, mortgage brokers, realtors, home builders, state and federal regulators, and home buyers. The auto industry does not deserve tougher restrictions than Wall Street.

Then Why Treat Wall Street and Main Street Differently?

The Election is Over
Perhaps the Democrats feel safe taking a tougher position with companies seeking federal assistance now that the election has taken place. Even though most voters disagreed with the banking bailout, they also felt that not supporting the legislation could harm the economy. The House Republicans received a fair amount of criticism for blocking the initial plan. Democrats probably wanted to avoid similar complaints.

Financial Institutions Give Much More Money to Political Candidates Than Automakers
Another, more ominous explanation for the disparate treatment of automakers relative to banks could involve campaign financing. According to research completed by the Center for Responsive Politics, Dodd, who chairs the Senate Banking Committee, tops the donor recipient list of several banking institutions. Furthermore, members of Congress who supported the bailout received far more money in campaign donations from financial institutions than legislators who voted against the bill. In the House, legislators who supported the bailout received 51% more in campaign contributions from banks, and in the Senate they received twice as much (see here and here).

Automakers also contribute to candidates, but they do not donate nearly the same amount as banks. According to data compiled by the Center for Responsive Politics, automakers split their donations among the two major parties during the recent election cycle, but they contributed only a fraction of the money that financial institutions gave (The Center for Responsive Politics website has a tool that permits readers to research campaign donations by industry.). Keep in mind that donations come from individual employees and their political action committees. Auto workers will have less money to donate on average than Wall Street bankers. Car dealers donated more money than automakers, but most of it to Republicans. Furthermore, their donations do not compete with those of financial institutions. Given the role of money in politics, it is difficult to deny some degree of industry capture with respect to regulated entities and regulators.

Update: I have not found any major media coverage of this particular dimension of Dodd's comments, but I did find this entry by Deb Cupples on the Buck Naked Politics blog. Blogs can provide a wonderful alternative to popular news sources.

Out of Left Field: McCain Wants Feds to Purchase Individual Mortgages And Provide Relief for Homeowners!

Senator John Main surprised me during last night's debate, by sounding more Democratic than most Democrats at one point. McCain outlined a plan that would require the government to use 1/2 of the $700 billion bailout money to purchase individual mortgages -- rather than mortgage-backed securities -- and then reissue them to homeowners under more favorable terms. McCain even argued that the government should take into account the diminished market value of the homes when renegotiating the terms of the mortgages. Of course, to some extent, this idea would treat homeowners almost like the bailout treats the banks because it would allow them to escape the consequences of entering into a bad transaction.

Democrats Have Also Sought Homeowner Protection

Democrats have made similar suggestions in the past. During bailout negotiations, for example, Senator Obama said that Congress "should consider giving the government the authority to purchase mortgages directly instead of simply purchasing mortgage-backed securities" and that he would "encourage Treasury to study the option of buying individual mortgages like we did successfully in the 1930s" (see this article ). Obama's statements, however, fall short of making an actual proposal.

One other influential Democrat, Senator Hillary Clinton, also argued for homeowner relief during bailout negotiations. In fact, Clinton was the only lawmaker who came up with a specific plan on this matter during the bailout discussions. Clinton, like McCain, outlined a plan for the formation of a specific governmental entity to buy mortgages from distressed homeowners to help them save their homes.

Bailout Legislation Contains Very Little For Homeowners

The bailout legislation allows the Secretary of the Treasury to buy "troubled assets," and the statutory definition of a troubled asset includes "residential mortgages." Presumably, the Secretary of the Treasury already has the power to provide some relief to homeowners under the legislation. But the legislation only requires the Secretary of the Treasury to come up with a plan "that seeks to maximize assistance for homeowners." The vast majority of the legislation outlines the specific parameters and procedures the government must use to assist banking and corporate entities, not individual homeowners.

Furthermore, the legislation does not allow judges in bankruptcy proceedings to renegotiate the terms of mortgage debt. Currently, bankruptcy judges can do this with all debt -- except for mortgages. Although labor and consumer groups favored including bankruptcy relief in the plan, the banking lobby and Republicans strongly resisted this idea. Key Democrats, including Obama, refused to fight for inclusion of such a provision, which would potentially have alleviated the burdens faced by some distressed homeowners.

Also, most experts expect that the bailout funds will finance the purchase of mortgaged-backed securities, not individual mortgages. Because many other investors, in addition to the government, will likely have a contractual stake in the securities, it is difficult to imagine how the government will be able to alter the terms of the underlying mortgages bundled together to form the securities.

If All of These Big Players Wanted Homeowner Relief, Why Does the Bailout Only Help Wall Street?

Because of the limited attention to homeowners in the bailout legislation, proposals like the ones outlined by McCain and Clinton (and presumably favored by Obama) would provide more concrete assistance to homeowners. This raises a very important question: If such powerful senators as Obama, Clinton and McCain really wanted direct assistance for homeowners, why does the bailout legislation fail to provide such relief? Are these individuals, particularly Clinton and Obama, simply saying what they believe their constituents want them to say? Is McCain simply trying to convince voters that he feels their pain, whether he does or not? Or, are these powerful leaders truly committed to helping consumers, but caved to corporate interests in both of their parties in order to secure passage of the bailout? Perhaps they knew that, despite the grand and moralistic statements by their colleagues in Congress, relief for "Main Street" would have faced much tougher resistance than relief for Wall Street? I'm going with a mixture of all of these things.

Update: A New York Times article, published after I wrote this essay, confirms that McCain borrowed the idea from Hillary Clinton.

FactCheck.Org Confirms What Neither Party Will Admit: Bipartisan Blame for Wall Street Woes

When venerable Wall Street institutions like Lehman Brothers started imploding, liberal blogs and newspapers were quick to blame Republicans. Republicans on the other, said that Democrats caused the crisis. Turns out both are wrong. The nonpartisan website FactCheck.Org has concluded, as I did in a previous post on the financial crisis, that neither party can claim innocence with respect to the financial crisis (nor can the public, for that matter).

Democrats typically point vaguely to "deregulation" as causing the banking crisis. When pressed for specifics, they most commonly blame the Gramm-Leach-Bliley Act of 1999, which allowed traditional banks, insurance companies, and investment banks to consolidate. Republicans often accuse Democrats of resisting tighter regulation of Fannie Mae and Freddie Mac. Neither explanation really works.

Let's start with the Democrats narrative. FactCheck nails it by locating the cause of the crisis in the housing and securities markets. Very low interest rates, the risky mortgage, greed among homebuyers who overextended themselves in order to reap the benefits of soaring home appreciation, and the securitization of bad debt caused most of this mess. The Gramm-Leach-Bliley Act did not effectuate this, and even if it did, many Democrats supported the legislation (including Bill Clinton and Robert Rubin).

With respect to the Republican argument, tighter regulation of Fannie Mae and Freddie Mac might have prevented their troubles, but that certainly cannot explain the poor state of US and world markets. They are just one piece of a very large puzzle. Also some of the proposals that Republicans made on this issue came very late in the game, perhaps too late to prevent the crisis .

Because we are in an election year, public officials cannot resist the temptation to distort this important issue with partisanship rhetoric. But that does not change the fact that blame is everywhere.

Update: The RSS feed for FactCheck.Org now appears in the media section on the left side of the blog. FactCheck is truly a vital resource.

READING THE FINE PRINT: BAILOUT IS STILL A DEAL PRIMARILY FOR BANKERS

I read through the bill and intended to write a full analysis. Fortunately, ABC News has captured some of the same concerns I had: Does the Bailout Ignore Homeowners, Execs?



Although Pelosi, Reed and other members of Congress announced with much fanfare that the legislation would include "relief" for homeowners and cap corporate salaries, the proposed legislation only moderately delivers those promises. For example, the limit on executive salary only applies if the government purchases $300 million or more in assets from the company. Although the bill would prohibit "golden parachutes," it would exempt existing employment agreements from this provision. The proposed legislation would only impose additional tax burdens on companies that pay extremely high salaries; it would not explicitly limit those salaries.



As for homeowners struggling to pay their mortgages, the proposed legislation would only help those persons whose mortgages the government purchases. Also, the legislation only requires the Secretary of the Treasury to write a plan to "mitigate" foreclosures and to help funnel distressed borrowers through existing assistance programs. The bill does not provide any money at all for foreclosure prevention.



I heard Dennis Kucinich rail against the bill today on C-Span. It was a great speech. Also, true conservatives in the House (i.e., those who hate "big government") seem bothered as well. But the Senate seems bent on getting the bill passed. After all, it probably will help the economy somewhat, but most importantly, two members of the Senate are running for president. Their colleagues do not want voters to view their respective parties as responsible for blocking a bill designed to save banks (or was it "the" economy?). Tune in for more updates.

Breaking News: JP Morgan Chase and Bank of America to Buy the United States!

The Associated Press has just released a stunning news item. JP Morgan Chase and Bank of America, the nation’s last two remaining banks, have tentatively entered into an agreement to buy the United States of America. The transaction includes all federally and state-owned real and personal property, natural resources, and prisons. The contract, however, does not permit the purchase of citizens of the United States, because lawyers feared such a provision would violate the constitutional prohibition of slavery. Both companies, however, expect to hire many U.S. workers to run the government and would likely pay them "slave wages." When asked what this meant, company officials said that "employees would earn the minimum wage." The constitution does not explicitly prevent employers from paying "slave wages."

Another provision would release all incumbent political officials from their respective offices. A source close to the transaction said angrily that "this bunch of yahoos has absolutely no damn business presiding over such a huge and complex economy as the U.S.A." He said that their "mismanagement and shenanigans have landed the country on the ‘clearance’ table at Wal-Mart. Buying it was a no-brainer. It’s a great financial opportunity for us."

One heavily negotiated provision would allow the candidate who wins the upcoming presidential election to serve as president, although the companies expect to refashion the presidency into a symbolic leadership position. A spokesperson for one of the banks who wished to remain anonymous said that the president would "become more like the Queen of England – adored and important – but not having a bit of power over what we say or do."

Both presidential candidates have responded to the shocking news. The Obama campaign said that "Now, as a result of this unprecedented transaction, no one can doubt or deny that if Barack Obama is elected as President of the United States, the presidency and the nation will have changed dramatically. In fact, things will change beyond our wildest expectations."

The McCain team said that "As a former POW and decorated veteran, John McCain is well prepared to guide the country through this difficult period of readjustment." The McCain campaign also said that the "proposed reduction of the president’s role should finally put to rest those nasty fears spread by our opponent concerning Sarah Palin being a ‘heartbeat away from the Oval Office.’"

President Bush has also released a statement responding to the transaction, which his administration reportedly helped negotiate. President Bush says that "I’m outta here anyway, so it don’t mean a hill of beans to me." Bush’s statement also attempts to calm likely anxiety among voters over the idea of two banks owning the country. Bush says that "People need to just relax and get used to it. At this point, these guys own about everything of value in the country anyway, so this is the next logical step." Members of Congress are recuperating from actually having to work last week to complete the bailout negotiations. Consequently, no member of Congress has responded to requests for comments.

Dissenting Justice will have more analysis of the situation as it develops. Although this is a satire, you never know what might happen!

Bringing Back Welfare As We Knew It: My Indignant Take on the Wall Street Bail-Out

Bill Clinton’s 1996 "welfare reform" made him (and his wife) the enemy of the left and a hero to moderates and conservatives who apparently believed that single black mothers on welfare were the greatest threat to American taxpayers. Of course, AFDC payments constituted only 1% of the federal budget, and a majority of welfare beneficiaries were (and still are) white. Nevertheless, the "welfare queen" became a rallying cry for opponents to welfare. Welfare recipients, according to the royal rhetoric, are lazy, make bad choices, have ample opportunity for economic advancement, and are incentivized to idleness and pathology by governmental subsidies. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 required recipients to work, curtailed benefits to unmarried individuals (under the false assumption that marriage ends poverty), and placed a lifetime limit on benefits. By contrast, the unconditional bail-out for Wall Street, as it currently stands, marks a return to welfare as we knew it.

Earlier this year, I wrote a column questioning why the Bear Stearns bail-out failed to trigger a discourse concerning the pathology of Wall Street’s "welfare kings." See (http://www.blackprof.com/?p=2002). Although some liberal commentators have attempted to blame the present financial unrest on "deregulation," most financial experts believe that reckless investment decisions created this havoc. Historically low interest rates in the early in 2000s made it very easy for banks to obtain money to lend (at a profit). The wide availability of credit increased demand for housing which caused rapid price appreciation. Banks, wanting to fatten their coffers, engaged in reckless lending, using "creative" products such as adjustable rate mortgages and no-income verification loans to finance home purchases for individuals with poor credit ratings or "A-credit," but insufficient income. Homeowners used their homes as ATM cards, dipping into their equity to purchase cars and other consumables. Investment banks purchased mortgages, bundled them together as securities, and sold them as assets to investors wanting a fixed return.

Ultimately, market fundamentals could not sustain this excess, and the Federal Reserve began raising interest rates to bring the market back to reality. Adjustable rate loans caused payment shock for borrowers, and foreclosures soared. Suddenly, mortgage-backed securities became risky and unstable assets, and financial institutions that held these securities or traditional mortgages began to suffer huge losses. Lenders refused to extend credit to holders of these assets or to purchase them due to their risk. Essentially credit dried up. Foreign sources of money also ran from the United States, exacerbating the unavailability of credit. Bear Stearns, Lehman Brothers, and other venerable Wall Street institutions hit the dust. And the story continues to unfold.

In response to recent events, the Bush administration has requested $700 billion to allow the Secretary of Treasury to purchase mortgage-backed securities from troubled financial institutions. The companies would receive "market value" for the securities (whatever that is) and would presumably have a better credit rating without the risky assets. In addition to infusing capital into troubled firms, this plan, if successful, would help stabilize financial markets, attract foreign and domestic sources of credit, and prevent steep economic decline. Because a private-sector solution to this madness seems out of reach, governmental intervention is necessary.

Still, we need to label this intervention honestly: it is a handout to people who engaged in highly irresponsible behavior. Not only was their behavior reckless, but they, as financial professionals, had greater knowledge of the risks and consequences of their behavior than the average homeowner, who lacks sophistication concerning financial markets and lending parameters. Although many commentators have bashed "sub-prime" borrowers, which I view as the new "welfare queens" (http://www.blogger.com/(http://www.blackprof.com/?p=2002)) they have not similarly critiqued the companies which had the capital and power to create the current situation – and the financial expertise to avoid it!

The fact that this problem has intensified during a presidential election makes things even more dramatic. Democrats and Republicans are rightfully calling for more conditions placed on the receipt of federal money (and this seems inevitable). Hillary Clinton has even proposed that the government purchase individual mortgages and reiussue them to distressed homeowners under more favorable terms; a similar course of action took place during the Great Depression. But neither side can claim "clean hands" on this issue -- although Democrats have tried to do so. Liberals, in particular, have blamed the current mess on "deregulation," citing to several pieces of legislation, but most often, the Gramm-Leach-Bliley Act of 1999. That legislation allowed commercial banks, investment banks, and insurance companies to consolidate. This statute, however, did not create financial chaos; risky investments did. Countrywide and Washington Mutual are strictly commercial banks. The former has already folded into Bank of America, while the latter is on life support. Bear Sterns and Lehman Brothers were strictly investment banks, and they have both died. AIG is exclusively an insurer, but it too needed a federal rescue. On the other hand, JP Morgan Chase is a consolidated investment and commercial bank, but it is among the strongest of the remaining financial institutions in the country. Furthermore, Bill Clinton signed the legislation into law, and Robert Rubin (former head of Goldman Sachs, now Chairman of Citicorp), his Secretary of Treasury, lobbied for it. Democrats also voted for the measure in large numbers.

Recently, Obama called Rubin for "advice" on the economic crisis, and he initially chose James Johnson, a former managing director of Lehman Brothers and Vice President at Fannie Mae, to head his Vice President vetting team. Johnson resigned after the Republicans politicized his connection to Fannie Mae and his receipt of millions of dollars in "loans" from the troubled company. In the past, Democratic Senators Charles Schumer and Christopher Dodd have both rejected stricter regulation of financial institutions, as has Representative Barney Frank. All of these men sit on congressional banking and finance committees. And Fannie Mae employees gave Dodd, Obama, and Clinton most of their campaign contributions this year. No one is innocent.

McCain has "suspended" his campaign, but, ironically, this move is just a campaign strategy designed to delay having a presidential debate during this chaos. Polls have begun to shift towards Obama during the turmoil, proving the old maxim that "it’s the economy stupid." Statistical data indicate that voters tend to blame the incumbent’s party for economic distress. Obama says the show must go on and that presidents have to "multi-task." That’s a great response to McCain’s gimmick. But at the end of the day, both candidates, as leaders of their respective parties, need to endorse the solution. Because it is an election year, expect to hear emotional (and nauseating) appeals to bipartisanship – so that neither side will become vulnerable to charges of "playing politics" with the solution.

Ultimately, both candidates will ceremoniously help craft and endorse the legislation, which will likely have some conditions placed upon the Secretary of the Treasury and the companies that receive governmental assistance. But I do not expect "the people" to benefit directly from the legislation, in terms of mortgage-payment assistance or reissuance with more favorable terms. Nor do I expect that the "conditions" in the law will involve things like job training for financial professionals, a lifetime limit on the receipt of subsidies, or other similar conditions that were all placed in welfare reform legislation. Welfare as we knew has made a triumphant return.