Bill's Notes

First Nat struck out.

Two outs to go ... single.

C'mon Phils ... one man on, full count. walked him. ugh! two men on, one man out. up, another hit. gave up run. 4-3 one out.

C'mon Phils ... c'mon Lidge. ugh! another hit. bases loaded. still only one out.

DOUBLE PLAY! DOUBLE PLAY! Phils win the division! Phils win the division! Phils win the division!

The Philadelphia Phillies are three outs from clinching their second straight division title. Go Phils!

I just checked out NRO's The Corner and one commentator after another talked about how McCain won.

I thought Obama kicked his ass. Wouldn't be surprised if that was the knockout right there. Don't get me wrong. I wasn't the slightest bit convinced by Obama, but I thought he came across as level-headed, moderate ... even Clintonian.

Meanwhile, McCain was stuttering, repetitive and sarcastic, didn't answer questions and defaulted to talking points which Obama was prepared for. He even sounded tired and a bit confused at points. I was left disappointed that McCain didn't do a better job of defending the conservative case.

I wouldn't be surprised if Obama's up in the polls by 6-7% by the end of the week. The polls have moved steadily in Obama's direction since this crisis started — from nearly a McCain three point lead when the crisis broke to nearly five percent for Obama today. Basically, the GOP is losing one point a day since this happened. This debate didn't help and will likely make things worse.

Bottom line: Unless Obama gets caught in bed with a dead woman or a live psychic ...

UPDATE: Did I see the same debate as everyone else? A lot of folks are saying McCain one. Unrelated topic, Harry referred to McCain's neckwear as a "hypno-tie." Maybe that explains the difference in view.

Goldman Sachs, the quintessential investment bank, decides that it's not a commercial bank. Here is the text of the email to all employees.

******

TO: All employees
FROM: Lloyd Blankfein, CEO and Board Chairman
DATE: Sept. 23, 2008
RE: Cultural changes

You have no doubt heard that Goldman Sachs, the world's premier investment bank, has switched to commercial banking. This change will mean the government will regulate us under different rules — but it also will mean a huge change in corporate culture. In upcoming days, weeks and months we will be communicating with you on how our corporate culture must change. But here are a few starting points.

1. Hours. Many of you are used to working 80 hour weeks in an effort to scrape your way to the top or get the experience necessary to get another banking job. That's why everyone in the financial industries and government has worked, at one time or another, for Goldman Sachs. That time has passed. We don't expect to see any of you in the office before 9 a.m. and after 3 p.m. You are to work hard, but never seem like you're working hard — calm, professional, and in control at all times. Do not take work home.

2. Lunch. Hours of operation includes a minimum 90 minute lunch. Take a client or politician out to lunch, or just go with others in the office. You may eat something if you must, but the important thing is to go out to one of the finer eating establishments for lunch. There is a three-martini minimum, and we expect to see the receipts on your expense reports.

3. A word on martinis. Don't be a bunch of pansies and order a vodka martini, and Heaven forbid, a flavored-vodka martini. A proper martini is made with gin and contains at least an eight-to-one ratio of gin to vermouth. With an olive. Anyone caught with chocolate or strawberries in their martini will be terminated. Note: For friends of Bill W., you may opt out by having your sponsor write a letter to HR. In that case, you are expected to drink seltzer water with a twist of either lemon or lime, so everyone can identify you.

4. Dress. There is a new dress code. Buy a grey flannel suit, white shirts, and wing tips. Express your individual personality in your tie. Make sure, however, you do not demonstrate too much in the way of personality. You are now organization men and women. No more shiny shirts, fancy Italian-designer suits, anything weird or strange. You are now bankers — dress like you imagined your grand-dad dressing in the 50s. The point is to look like you've been here forever and will be here forever. Customers somehow connect sound, conservative dress with honest, conservative accounting. Don't dispel them of this notion.

5. Decisions. Decisions are to be made slowly, after careful consideration and due diligence, and after the traditional fight on the board of directors of your individual branch offices. Do NOTHING without consulting a lawyer. Lawyers, as you know, run the justice system, and judges and prosecutors tend to be merciful to those who run up the billable hours for their law firms. Besides, it's all deductible.

6. Who we need. Oh yes, as it takes about one-tenth the effort to run a commercial bank as an investment bank, most of you are going to be spread out throughout the Main Streets of the U.S. Your assignments will come in a forthcoming email. Please don't complain if you get sent to Nome, AK, or Spearfish, SD. These are lovely towns. Remember, the martini rule and you'll be numb long enough to fit in.

7. A word on cash. Most of you are used to dealing with money-as-numbers-on-a-screen, not an actual, tangible thing. It is normal to make a few mistakes at first when dealing with paper bills and coins. There is a rumor going around that instead of paying bonuses, there is simply a room containing cash in each branch office and you can take what you need when you need it. Alas, if it were only so. In fact, there is such a room and it's known as a "vault." It contains actual money and assorted customer valuables. Unfortunately, all of this cash actually belongs to someone else, and we're responsible for how we use it. Yes, this is true even though that cash is government insured. That said, if a hooded or masked individual enters the bank and waves a gun around, you may give that individual the vault cash. Please call the local police immediately, even if you "don't think that much was taken." This masked individual should not be you.

These are exciting times. We appreciate your immediate buy-in to these changes. Onward and upward!

Look at the latest emails being passed around. This one just arrived in my in-box:



Nice use of Cooper Black, btw, for you font junkies. Glad to see the old guy still has it.

Foxnews has the report.



Now, I think the problem is more complicated than this ... and just one piece of the puzzle. The Mark to Market rule (that's the FASB change I mentioned a few posts back) is also a huge piece of it, and I don't know the back story on that one.

I am NOT blaming the Democrats, nor trying to acquit the Republicans, on this Wall Street financial meltdown. Both parties as well as large swaths of the American public share the blame. That's why it's pointless to point fingers right now. You'd be pointing everywhere (practically).

Even the New York Times says this:

And it should be noted that neither party is solely responsible for whatever neglect led the country to the brink of disaster.

Here's an article debunking the Democrats' innocence. As I've hinted before, I'm not interested in blame, and the GOP certainly gets its share for failing to rein in this problem. It was a failure of leadership. But the Dems were up to their ears in the Fannie Mae and Freddy Mac scandals, including Obama. To ignore the Democrats' deep culpability is, well, a lie. The reason I'm posting this is to counter the lie.

Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission's chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie's position on the relevant accounting issue was not even ``on the page'' of allowable interpretations.

Then legislative momentum emerged for an attempt to create a ``world-class regulator'' that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.

Greenspan's Warning

The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn't be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie ``continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,'' he said. ``We are placing the total financial system of the future at a substantial risk.''

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

Different World

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn't become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn't even get the Senate to vote on the matter.

That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: ``It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.''

Mounds of Materials

Now that the collapse has occurred, the roadblock built by Senate Democrats in 2005 is unforgivable. Many who opposed the bill doubtlessly did so for honorable reasons. Fannie and Freddie provided mounds of materials defending their practices. Perhaps some found their propaganda convincing.

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.

Oh, and there is one little footnote to the story that's worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.

And perhaps this will be the year for the Cubs. Why? Because right now Democrats and Republicans are saying the same thing about Treasury Secretary Paulson's $700 gazillion (that's a lot) bailout plan. Newt Gingrich and assorted other folks on the right think we need to think more carefully about it. Nancy Pelosi thinks we need to think more carefully about it.

And you know what? You don't come screaming to me and ask me for $700 billion NOW and maybe TWO TRILLION then say Congress has NO oversight over how its spent. Sorry. No. That's a hell of a lot of money and we need to think very carefully about it and who you're going to give it, too.

Besides, if we're gonna spend two trillion dollars, I'd rather see it going to repair the nations bridges and tunnels and highways -- that kind of money would generate a heck of a lot of jobs and economic growth. I'm just saying.

So here's to those Democrats and Republicans all saying basically the same thing.

I'm not going to link to Pat Buchanan's latest whining about the decline and fall of the putative American empire. But you can find his complaints on the Web. A link would focus on side issues instead of the underlying premises: Is the United States an empire? If so, did we want to become one and do we want to remain one? If not, what is he talking about?

I think the answer's no, the United States is not an empire. We briefly flirted with one during the early part of the 20th Century, and it was a tragic mistake. Fortunately, we ditched our colonies and encouraged others to ditch their's, ushering in a period starting about 1960 of post-colonialism.

Post-colonialism has its own issues — mostly concerned the ill-adaptability of the western nation state on populations whose underlying culture isn't based on a nation state, but family and tribal obligations. (That's one reason why Africans are such nice people and do a good job of taking care of themselves, and turn into kleptocratic monsters once in charge of a country. They have family and tribal obligations which supersede national ones — and the result isn't pretty.

Anyway, people compare the United States to Rome frequently. But the U.S. isn't Rome. And it isn't Sparta. And it's not a new British Empire, or a European empire of any sort. It's a former colonial nation made up of immigrants and their descendants who are committed to certain principles. Many of those principles have, over the years, changed definitions, and we're having an internal argument about that.

We are also an isolationist nation by nature — dragged into one conflict after another because of other nations' inability to keep the peace and because, often, of atrocities they commit. We never asked to be the world's policeman, and don't particularly like the duty. We'll do it, but our heart isn't in it. We didn't ask for WWI or WWII and the Cold War. But we did what we could.

After the Soviet Union collapsed, I think the U.S. wanted a breather. We'd bailed out the world three times in a century. Problem was, history didn't end. Indeed, it seems that one war planted the seeds of the next one. We fought off Prussian militarism, but that led to the creation of the Soviet Union and eventually, to the creation of German national socialism. We allied with the Soviets and beat the Nazis, and then allied with a variety of nasty fellows including some nasty Muslim regimes, to beat the Soviets, and now we're cleaning up that mess.

Then our dependence on foreign oil, much of it from Muslim lands, and our support for Israel, left us in an unstable foreign-policy predicament. We need one, like the other, but they're enemies and tend to provoke one another.

After the Cold War, we Americans got caught up in an idea known as Globalization. That meant greater economic interdependence worldwide, meaning, once again, that we'll be unable to withdraw within our own borders. Indeed, if there's anything that's changed more than anything else culturally in the past 15 years, it's the amount of business travel Americans do outside the country and a more global attitude. (I'm not judging whether that's good or bad.)

Unfortunately, fighting the clean-up mess from the Cold War (Al Qaeda, Iran, North Korea) while being energy dependent on countries that support our enemies (Arab nations, Venezuela) and economically interdependent on nations that support our enemies (North Korea) while our allies start to resent our long presence (South Korea, Europe, Japan, even though they don't really want us to leave) has left trying to square the circle, or more appropriately, cube a sphere while everyone's yelling at you and immigrants are streaming across the border.

Whatever that situation is, it's not an empire and it was never an empire ...

Some might say — well, how about American hegemony? Isn't that what Buchanan really means. And I'd respond — hegemony? I don't see evidence of massive American global dominance. We've got a big place at the table, but when we sit there we get told to screw off frequently, but we sometimes get what we want.

If not empire, if not hegemony, then what? Well, we're a nation that happens to be able to project the most power abroad right now. In the future, we may be able to project less power. (Or not, but for the sake of argument, let's say we'll lose some power.) Whatever "projecting less power" is, it's a far cry from Death of an Empire. And that kind of hysteria is really annoying.

The economic crisis of the last week -- well, I've read all about it, and like everything else, it's extremely difficult to figure out what's going on. The simplest explanation is that we had a real estate bubble that popped, and it had a severe domino effect in the financial-services industry.

The timing is bad for the GOP -- the fall before an election. But it could be worse. If this had happened three weeks from now, we'd be doomed. As it is, the polls are clearly tipping for Obama. I've watched them in the past week, and the polls have moved away from McCain ever since this crisis started. We've had a five-point swing back toward Obama.

Whether the GOP can recover will depend a lot on events in the next month. If the bleeding stops -- and I mean stops, and we have a month of relative calm, McCain has a puncher's chance of pulling this out, especially in the latter debates. If, on the other hand, the economy continues to roil -- no way.

One issue that's coming up is who to blame? There's two side to this:

(1) Who will actually be blamed, that is, what's the perception?

(2) Whose fault is it actually?

The answer to (1) is likely the Republicans. Like it or not, when you're in charge, you get the blame and occasionally the credit. Coaches like to say when my players win, I'm a genius; when they lose, I'm an idiot. It goes with the territory.

The answer to (2) is, IMHO, a garden of Eden situation: Adam blames Eve, Eve blames the snake, and no one steps up and takes responsibility. Which is another way of saying -- the best I can tell -- it's a lot of people's fault:

* The people who took out mortgages without fulling thinking about the risk they were taking on, and who engaged in poor risk management and personal finance practices.

* The banks who engaged in foolish and predatory lending practices.

* The financial institutions that bought and sold mortgage-backed securities without fully considering their riskiness or their true value, content to merely pass these instruments around and take their commissions.

* The rating agencies, which didn't rate these securities accurately.

* The Fed, which not only allowed this to happen, but apparently, encouraged it.

* The government, both Democrats and Republicans and career bureaucrats, which failed in its oversight function.

However, like it or not for us Republicans, it's the Republicans who controlled Congress during most of this Bubble, and allowed it to blow big and pop. The Democrats had a secondary role, though they wer up to their ears in the mess at Fannie Mae and Freddy Mac.

There was a real failure of GOP foresight and leadership on this -- and I think it's because this real estate bubble allowed the economy to recover from the stock-bust bubble in 2000 and allowed it to continue to grow for years despite companies' being hamstrung by Sarbanes-Oxley. That gave the GOP cover to take credit for the expanding economy. (SOX, by the way, apparently failed -- saddling companies with heavy regulation, but not protecting our companies, anyway.) And if you take the credit, you've got to take the blame, whether or not there were "complicating factors."

*****

The key issues for each party are different. The Democrats will likely succeed if they can make the election about the economy. The Republicans will succeed if the election's about cultural issues. McCain tipped this election in his favor when he nominated Palin and turned the election back into a cultural discussion. That was bad for Democrats. This economic mess turned the election back into a discussion of the economy. That's bad for Republicans. Only if the discussion changes again to either cultural issues or national security do we have a chance.

*****


More later.