McCain’s version of “getting in their faces” *UPDATED*

At Iowa, McCain “gets in your face” mano a mano (that is, he doesn’t delegate his surrogates, but gives a speech to America, Obama included), and he focuses on the facts.  This is a very concrete speech, which appropriately boasts his virtues and clearly exposes Obama’s failings:

U.S. Senator John McCain will deliver the following remarks as prepared for delivery in Cedar Rapids, IA, today:

I’m happy to be introduced by Governor Palin, but I can’t wait until I introduce her to Washington. Let me offer an advance warning to the big spending, greedy, do nothing, me first, country second crowd in Washington and on Wall Street: change is coming.

We need reform in Washington and on Wall Street. The financial markets are in crisis. Times are tough. Enormous strain is being put on working families and individuals in America. I know that the events unfolding can be difficult to understand for many Americans. The dominos that we have seen fall this week began with the corruption and manipulation of our home loan system. The reason this crisis started was the abuses that took place within our home loan agencies, Fannie Mae and Freddie Mac and within our home loan system.

Two years ago I warned this Administration and Congress that regulations for our home loan agencies, Fannie Mae and Freddie Mac, needed to be fixed.

But nothing was done.

Senator Obama talks a tough game on the financial markets but the facts tell a different story. He took more money from Fannie and Freddie than any Senator but the Democratic chairman of the committee that regulates them. He put Fannie Mae’s CEO who helped create this disaster in charge of finding his Vice President. Fannie’s former General Counsel is a senior advisor to his campaign. Whose side do you think he is on? When I pushed legislation to reform Fannie Mae and Freddie Mac, Senator Obama was silent. He didn’t lift a hand to avert this crisis. While the leaders of Fannie and Freddie were lining the pockets of his campaign, they were sowing the seeds of the financial crisis we see today and enriching themselves with millions of dollars in payments. That’s not change, that’s what’s broken in Washington.

There was no transparency into the books of Wall Street banks. Banks and brokers took on huge amounts of debt and they hid the riskiest investments. Mismanagement and greed became the operating standard while regulators were asleep at the switch.

The primary regulator of Wall Street, the Securities and Exchange Commission (SEC) kept in place trading rules that let speculators and hedge funds turn our markets into a casino. They allowed naked short selling — which simply means that you can sell stock without ever owning it. They eliminated last year the uptick rule that has protected investors for 70 years. Speculators pounded the shares of even good companies into the ground.

The Chairman of the SEC serves at the appointment of the President and has betrayed the public’s trust. If I were President today, I would fire him.

We cannot wait any longer for more failures in our financial system. Structures like the resolution trust corporation that dealt with the failed savings and loan industry were designed to clean up the system and worked. Today we need a plan that doesn’t wait until the system fails. I am calling for the creation of the mortgage and financial institutions trust — the MFI. The priorities of this trust will be to work with the private sector and regulators to identify institutions that are weak and take remedies to strengthen them before they become insolvent. For troubled institutions this will provide an orderly process through which to identify bad loans and eventually sell them.

This will get the treasury and other financial regulatory authorities in a proactive position instead of reacting in a crisis mode to one situation after the other. The MFI will enhance investor and market confidence, benefit sound financial institutions, assist troubled institutions and protect our financial system, while minimizing taxpayer exposure. Tomorrow I will be talking in greater detail about the crisis facing our markets and what I will do as President to fix this crisis and get our economy moving again.

Senator Obama has never made the kind tough reform we need today. His idea of reform is what his party leaders in Congress order him to do. We tried for bipartisan ethics reform and he walked away from it because his bosses didn’t want real change. I know how to make the change that Senator Obama and this Congress is afraid of. I’ve fought both parties to shake up up Washington and I’m going to do it as President.

Those same Congressional leaders who give Senator Obama his marching orders are now saying that this mess isn’t their fault and they aren’t going to take any action on this crisis until after the election. Senator Obama’s own advisers are saying that crisis will benefit him politically. My friends, that is the kind of me-first, country-second politics that are broken in Washington. My opponent sees an economic crisis as a political opportunity instead of a time to lead. Senator Obama isn’t change, he’s part of the problem with Washington.

When AIG was bailed out, I didn’t like it, but I understood it needed to be done to protect hard working Americans with insurance policies and annuities. Senator Obama didn’t take a position. On the biggest issue of the day, he didn’t know what to think. He may not realize it, but you don’t get to vote present as President of the United States.

While Senator Obama and Congressional leaders don’t know what to think about the current crisis, we know what their plans are for the economy. Today Senator Obama’s running mate said that raising taxes is patriotic. Raising taxes in a tough economy isn’t patriotic. It’s not a badge of honor. It’s just dumb policy. The billions in tax increases that Senator Obama is proposing would kill even more jobs during tough economic times. I’m not going to let that happen.

I have seen tough times before. I know how to shake-up Wall Street and Washington. I will get this economy moving. I will lead us through this crisis by fighting for you, and when I am President we will be stronger than ever before.

UPDATE: McCain’s there. Congress is not. For a good analysis of the Democrat Congress’ pusillanimous conduct with regard to the current economic situation, please go here. The only saving grace in their show of cowardice is that, given their political/economic views, it’s probably better for the economy if they run away.

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  • BrianE

    gd, or should I say dg, why are you so intent on defending fannie mae? I noticed that in your posts last week.
    Do you have a vested interest in fannie and freddie or do you think they have been unfairly targeted?
    As to mark to market rules, the SEC requires publicly traded companies to comply with GAAP, and they could just as easily institute new rules, so it’s not quite fair to say these are just accounting rules.

  • gd

    BrianE, I do not like people telling inaccurate stories for political purposes. If I thought that the GSEs were truly responsible for the crisis, then I would be a louder (and more formidable) critic than anyone on this site. As it happens, they are not, so I argue otherwise. It is important for people to understand what is going on rather than picking a side and inventing a story to support it. By the way, the SEC does enforce accounting rules but doesn’t write them, so the implication that the marks taking down banks are somehow tied to Clinton, which was the clear implication of Mike Devx’s comments, is simply not true. Perpetuating this false meme might delight conservatives, but it really hurts America since our democracy needs voters who are enlightened and informed.

  • McLaren

    “…this is an indictment of the pure-market form…”

    The phrase “pure-market” would intimate a void of goverment regulation, would it not?

  • gd

    Not really. If you have go back and reread Milton Friedman or Arthur Laffer or Friedrich Hayek, then you would recall that these men are not advocating a system with no regulation when they speak of pure-market forms. But they do advocate a very, very limited government role. For example, Friedman was against having an SEC to guard against even blatant forms of insider trading. As Warren Buffett powerfully argued in 2002, this low level of oversight in the capital markets inevitably creates weapons of mass distruction because the market generates massive counterparty risk, opaque securities and insane amounts of leverage. Clearly, Friedman, Laffer and Hayek either did not forsee these system-threatening risks generated by an unregulated market or they thought that a Great Depression was preferable to even moderate levels of government intervention. Both are now being viewed as dubious positions. Hence, my earlier comment that conservatives likely will need to have a rethink…

  • BrianE

    Can we agree that this meltdown couldn’t have happened at a worse time, during an election cycle (as if there were something other than an election cycle), since the worst possible solution will be pushed for political expediency rather than sound fiscal policy.
    Also, I don’t think anyone was suggesting that Fair Value Accounting caused the crisis, but it is certainly making it worse. Former FDIC chairman Issac’s proposal to use discounted cash flow might ease some of the pressure on financial institutions that are otherwise healthy.
    I wonder to what extent we are seeing distortions caused by the Basel Accords–which resulted in too much leverage if I understand it correctly?

  • BrianE

    Five Key Players In Washington who had chances to prevent the Financial Crisis but who, by their actions or inactions helped to bring down Wall Street.

    Senator Christopher Dodd,

    Democrat from Connecticut. Dodd has been in the Senate for 28 years. Dodd has served as Chairman of the Democratic National Committee. Dodd is Chairman of the Senate Banking Committee. As Chairman he had responsibility for acting as a “watch-dog” of Fannie Mae and Freddie Mac. Dodd has responsibilty for assisting in the selection of the CEO’s who run Fannie Mae and Freddie Mac. Dodd was a leading contender to be Obama’s Vice Presidential selection until his receipt of VIP loans from Countywide Financial were disclosed. http://www.nydailynews. com/news/us_world/2008/06/14/2008-06- 14_dems_deny_knowing_loans_had_vip_rates.html

    It has been reported that Dodd received $7,000,000 in loans from Countywide. Dodd’s Committee was responsible for overseeing Banks in the United States. Countrywide is one of the leading culprits responsible for the lending policies that brought on this Crisis. Countrywide is under FBI investigation for Securities Fraud. http://www.nydailynews.com/news/us_world/2008/06/14/2008-06-14_dems_deny_knowing_loans_had_vip_rates.html

    The Government Watchdog Group, The Center For Responsive Politics, reports that Senator Dodd received more campaign contributions from Fannie Mae and Freddie Mac than any other Senator.

    Dodd voted against two proposed laws that would have strengthened oversight of Fannie Mae. Laws that could have stopped the current crisis long before it reached this proportion. http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190 http://www.washingtonpost.com/ac2/wp-dyn?pagename=article&node=&contentId=A58272-2002Jul11&notFound=true

    Dodd was a consistent opponent of the attempts to increase regualtion over Fannie Mae and Freddie Mac. Dodd opposed similar legislation that would have prevented the Enron collapse. Enron & Fannie Mae are examples of what happens when proper Accounting Practices are ignored. Both organizations collapsed. Dodd opposed accounting practices that would have prevented “NINJA” or “Liar” loans. To read about specific accounting practices see: http://www.foxnews.com/story/0,2933,424945,00.html

    Wikipedia, a non-partisan web site, states the following about Dodd; The Center for Public Integrity criticized Dodd for “being the leading advocate in the Senate on behalf of the accounting industry.”[11][12] Political consultant and commentator Dick Morris wrote that Dodd had received more from accounting firm Arthur Andersen than any other Democrat and bore responsibility for trying to shield accounting firms from investor fraud liability in cases such as the Enron scandal.[13] Arthur Anderson was forced to surrender its license to conduct CPA business in the US. http://en.wikipedia.org/wiki/Christopher_Dodd.

    Read about the other 4 here:

    http://mcauleysworld.wordpress.com/2008/09/21/the-fannie-mae-five-five-key-players-who-broke-the-system/

  • BrianE

    Obama continues to blame the current financial crisis on “deregulation”. Either Obama knows that claim to be false or he is ignorant of how this crisis evolved:

    The path to our current cirisis started with these steps;

    Step 1). Mortgage Underwriting standards were lowered – begining in the early 1990’s. http://www.foxnews.com/story/0,2933,424945,00.html

    The Federal Reserve’s Board of Governor’s created a new set of standards to govern Mortgage Lending practices. http://www.foxnews.com/story/0,2933,424945,00.html

    The Federal Reserve’s involvement in creating this problem gives one reason to question if the Public should trust the Federal Reserve to oversee the proposed bailout.

    The lowered standards minimized the importance of a borrowers Credit History, Downpayment, Job History or Income. These “tried and true” criteria were called “outdated”. The Boston Federal Reserve created a Manual outling the ”new criteria” in 1992. http://www.foxnews.com/story/0,2933,424945,00.html

    These rules were “pushed” by Fannie Mae to the extreme. Those who co-operated were rewarded.

    One lender singled out by Fannie Mae for special praise for following these new criteria was Countrywide:

    Countrywide tends to follow the most flexible underwriting criteria permitted under [Government Sponsored Enterprises] and FHA guidelines. Because Fannie Mae and Freddie Mac tend to give their best lenders access to the most flexible underwriting criteria, Countrywide benefits from its status as one of the largest originators of mortgage loans and one of the largest participants in the [Government Sponsored Enterprises] programs. When necessary — in cases where applicants have no established credit history, for example — Countrywide uses nontraditional credit, a practice now accepted by the [Government Sponsored Enterprises].

    Or take a 1998 sales pitch from Bear Stearns, which also followed the Boston Fed manual:

    Credit scores. While credit scores can be an analytical tool with conforming loans, their effectiveness is limited with [Community Reinvestment Act] loans. Unfortunately, [Community Reinvestment Act] loans do not fit neatly into the standard credit score framework… Do we automatically exclude or severely discount … loans [with poor credit scores]? Absolutely not.

    Given these lending practices mandated by the Fed and encouraged by Fannie Mae and Freddie Mac, the resulting financial problems for financial institutions such as Countrywide and Bear Stearns are not too surprising.

    Noted Economics Professor Stan Liebowitz, University of Texas – Dallas states, “such reckless behavior by [Fannie Mae and Freddie Mac] has lead to their financial meltdown and to the financial problems for the whole country. During Franklin Raines’ chairmanship of Fannie Mae, they were a major proponent of relaxing standards.”

    Step 2). Congress blocked suggested reform aimed at correcting the crisis early on. Take a look at Congressman Barney Frank, Chairman of the House Financial Services Committee, Wikipedia Biography. http://en.wikipedia.org/wiki/Barney_Frank The Bio not only claims that, “ Frank “sits at the center of power.” but boasts, “In 2003, Frank opposed Bush Administration and Congressional Republican efforts for the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis of 1980’s. Under the plan a new agency would have been created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. “These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis,” Frank said. He added, “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” http://en.wikipedia.org/wiki/Barney_Frank

    Read the rest here:

    http://mcauleysworld.wordpress.com/2008/09/22/obama-deregulation-caused-this-crisis-an-ignorant-claim-or-political-spin/

  • BrianE

    Here’s a plan by Newt you can get behind. Sorry for the lengthy copy and pastes, but they deserve to be read.

    Before D.C. Gets Our Money, It Owes Us Some Answers [Newt Gingrich]

    Watching Washington rush to throw taxpayer money at Wall Street has been sobering and a little frightening.

    We are being told Treasury Secretary Henry Paulson has a plan which will shift $700 billion in obligations from private companies to the taxpayer.

    We are being warned that this $700 billion bailout is the only answer to a crisis.

    We are being reassured that we can trust Secretary Paulson “because he knows what he is doing”.

    Congress had better ask a lot of questions before it shifts this much burden to the taxpayer and shifts this much power to a Washington bureaucracy.

    Imagine that the political balance of power in Washington were different.

    If this were a Democratic administration the Republicans in the House and Senate would be demanding answers and would be organizing for a “no” vote.

    If a Democratic administration were proposing this plan, Republicans would realize that having Connecticut Democratic senator Chris Dodd (the largest recipient of political funds from Fannie Mae and Freddie Mac) as chairman of the Banking Committee guarantees that the Obama-Reid-Pelosi-Paulson plan that will emerge will be much worse as legislation than it started out as the Paulson proposal.

    If this were a Democratic proposal, Republicans would remember that the Democrats wrote a grotesque housing bailout bill this summer that paid off their left-wing allies with taxpayer money, which despite its price tag of $300 billion has apparently failed as of last week, and could expect even more damage in this bill.

    But because this gigantic power shift to Washington and this avalanche of taxpayer money is being proposed by a Republican administration, the normal conservative voices have been silent or confused.

    It’s time to end the silence and clear up the confusion.

    Congress has an obligation to protect the taxpayer.

    Congress has an obligation to limit the executive branch to the rule of law.

    Congress has an obligation to perform oversight.

    Congress was designed by the Founding Fathers to move slowly, precisely to avoid the sudden panic of a one-week solution that becomes a 20-year mess.

    There are four major questions that have to be answered before Congress adopts a new $700 billion burden for the American taxpayer. On each of these questions, I believe Congress’s answer will be “no” if it slows down long enough to examine the facts.

    Question One: Is the current financial crisis the only crisis affecting the economy?

    Answer: There are actually multiple crises hurting the economy.

    There is an immediate crisis of liquidity on Wall Street.

    There is a longer time crisis of a bad energy policy transferring $700 billion a year to foreign countries (so foreign sovereign capital funds are now using our energy payments to buy our companies).

    There is a longer term crisis of Sarbanes-Oxley (the last “crisis”-inspired congressional disaster) crippling entrepreneurial start ups, driving public companies private, driving smart business people off public boards, and driving offerings from New York to London.

    There is a long term crisis of a high corporate tax rate driving business out of the United States.

    No solution to the immediate liquidity crisis should further cripple the American economy for the long run. Instead, the liquidity solution should be designed to strengthen the economy for competition in the world market.

    Question Two: Is a big bureaucracy solution the only answer?

    Answer: There is a non-bureaucratic solution that would stop the liquidity crisis almost overnight and do it using private capital rather than taxpayer money.

    Four reform steps will have capital flowing with no government bureaucracy and no taxpayer burden.

    First, suspend the mark-to-market rule which is insanely driving companies to unnecessary bankruptcy. If short selling can be suspended on 799 stocks (an arbitrary number and a warning of the rule by bureaucrats which is coming under the Paulson plan), the mark-to-market rule can be suspended for six months and then replaced with a more accurate three year rolling average mark-to-market.

    Second, repeal Sarbanes-Oxley. It failed with Freddy Mac. It failed with Fannie Mae. It failed with Bear Stearns. It failed with Lehman Brothers. It failed with AIG. It is crippling our entrepreneurial economy. I spent three days this week in Silicon Valley. Everyone agreed Sarbanes-Oxley was crippling the economy. One firm told me they would bring more than 20 companies public in the next year if the law was repealed. Its Sarbanes-Oxley’s $3 million per startup annual accounting fee that is keeping these companies private.

    Third, match our competitors in China and Singapore by going to a zero capital gains tax. Private capital will flood into Wall Street with zero capital gains and it will come at no cost to the taxpayer. Even if you believe in a static analytical model in which lower capital gains taxes mean lower revenues for the Treasury, a zero capital gains tax costs much less than the Paulson plan. And if you believe in a historic model (as I do), a zero capital gains tax would lead to a dramatic increase in federal revenue through a larger, more competitive and more prosperous economy.

    Fourth, immediately pass an “all of the above” energy plan designed to bring home $500 billion of the $700 billion a year we are sending overseas. With that much energy income the American economy would boom and government revenues would grow.

    Question Three: Will the Paulson plan be implemented with transparency and oversight?

    Answer: Implementation of the Paulson plan is going to be a mess. It is going to be a great opportunity for lobbyists and lawyers to make a lot of money. Who are the financial magicians Paulson is going to hire? Are they from Wall Street? If they’re from Wall Street, aren’t they the very people we are saving? And doesn’t that mean that we’re using the taxpayers’ money to hire people to save their friends with even more taxpayer money? Won’t this inevitably lead to crony capitalism? Who is going to do oversight? How much transparency is there going to be? We still haven’t seen the report which led to bailing out Fannie Mae and Freddie Mac. It is “secret”. Is our $700 billion going to be spent in “secret” too? In practical terms, will a bill be written in public so people can analyze it? Or will it be written in a closed room by the very people who have been collecting money from the institutions they are now going to use our money to bail out?

    Question Four: In two months we will have an election and then there will be a new administration. Is this plan something we want to trust to a post-Paulson Treasury?

    Answer: We don’t know who will inherit this plan.

    The balance of power on election day will shift to either McCain or Obama. Who will they pick for Treasury Secretary? What will their allies want done? We are about to give the next administration a level of detailed control over big companies on a scale even FDR did not exercise during the Great Depression. Is this really wise?

    For these reasons I hope Congress will slow down and have an open debate.

    And in the course of that debate, I hope someone will introduce an economic recovery act that makes America a better place to grow jobs. I hope the details will be made public before the vote.

    For more details on my action plan for getting the American economy back on track and building long-term economic prosperity, you can read this message recorded yesterday to American Solutions members.

    This is a very important week for the integrity of the Congress.

    This is a very important week for the future of America.

    If Washington wants our money, then it owes us some answers.

  • BrianE

    I need to correct something I said about naked short selling. It is true that the person doesn’t own the shares he’s selling, but during the three day settlement period, assuming the share price does go down, shares are purchased at some lower price, delivered at the end of the settlement period and the difference is profit.

    Please read post #58, an opinion piece by Newt. What the government is proposing needs to be pondered. The democrats played it close to the vest, letting the administration chart the course. This gives them, of course, cover to criticize it later.

    As related to mark to market rules, I ran across this written last November on a financial website:

    Relatedly, and not to get all obscure and accounting geek-ish, but it’s hard not to wonder if FASB Rule 157, which comes into force this Thursday, will turn out to be the fire that lights the final fuse here. While it’s laudable and all to force transparency and push market pricing, when everyone is forced to find a market price for illiquid instruments simultaneously during a credit crisis the result is a regulation-imposed death-spiral, with devastating implications all around.

    This is why beauracracies and dangerous to your health. They are unable to make adjustments as conditions change.

    Here are 14 questions for Paulson and Bernanke. Read it here:
    http://bigpicture.typepad.com/comments/2008/09/10-questions-fo.html