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Armageddon On Wall Street

Updated on September 20, 2008

Wall Street Turmoil Boosts Obama

John McCain had a pretty rough week. I'm sure that when he launched his falsely indignant attack against Barack Obama for the latter's speaking of pigs and lipstick, he must have felt good about the flow of the campaign to that point. But there were storm clouds brewing on the economic horizon, and this could not bode well for a candidate who, by his own admission, is not strong on the economy. Over the weekend, we were wondering who was going to buy Lehman Brothers, as the company looked for a buyer. By Monday, though, the picture looked much worse, as Lehman Brothers filed for Chapter 11 bankruptcy. We also learned that all was not well with Merrill Lynch, which was not a surprise to me.

What was a surprise to me, however, was the news that insurance giant AIG was failing, and an even greater surprise was that the federal government was loaning AIG $85 billion, so they could stay afloat.

Given John McCain's propensity to try to distance himself from Bush Administration snafus, this would have seemed to be the time to stick with his maverick image. Instead, what did McCain do? He threw out a long record of anti-regulation by proposing a new bureaucrat to regulate banks that provide mortgages. That flip flop got the attention of pundits who jumped all over it.

Apparently not satisfied with how his proposal was playing out, McCain decided it was time to play economic tough guy, by declaring that if he were President, he would fire the head of the Securities Exchange Commission, who, McCain alleged, serves at the "pleasure of the President." I can only imagine that McCain thought he had a great sound clip there, at least until the media revealed that his information is incorrect. You see, the SEC is an independent body, and while it is true that the President nominates an individual to fill the post when it is vacant, the President does not have the authority to fire the person. Now, the average guy on the street may not know who fires the SEC Chairman, but John McCain is not an ordinary man on the street. He's a guy who is aspiring to be the leader of the free world, in the highest office in the land. I think it's reasonable to expect that such a man would know details like this.

So What Is McCain to Do?

So this puts McCain in a very difficult position. Either he knew his information was inaccurate and he lied to us because he wanted to make a good impression, or he is as out of touch on economic matters as Barack Obama and others have been saying all along. So now McCain's having a really hard time. Your post-convention bounce is history, and some polls are showing Obama has passed you. What's a desperate politician to do? Of course! Get together with Sarah Palin! It's worked before!

I can only imagine how McCain must have felt when Palin introduced him as her running mate, or how he must have felt when she slipped up and referred to a future "Palin and McCain Administration." John McCain has seen his star fall so quickly that he is rendering himself irrelevant as long as the economy is issue number one with the American public. With financial armageddon rampaging on Wall Street, about the only way an issue could leap frog into the forefront would be a major international crisis or, God forbid, another terror attack on American soil.

Barack Obama, meanwhile, has a golden opportunity to seal the deal on this election by presenting his plan for how the Obama Administration would handle this crisis. Such an exercise would not be purely academic, because the likelihood is that when he takes office in January (we hope) the economic problems that exist today will still be there for him to tackle.

A piece of that plan has already been unveiled, in terms of the tax plan Obama envisions (a tax cut for every taxpayer who makes $250,000 or less). Such a plan makes sense, if a tax cut proposal does make sense, because it gives the tax breaks to the vast majority of the American public, who can really stimulate the economy.

As this election heads into the homestretch, Obama has the opportunity to build a solid coalition that will propel him into history. He needs to take advantage of the opportunities that present themselves between now and November 4.

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    • Chef Jeff profile image

      Chef Jeff 9 years ago from Universe, Milky Way, Outer Arm, Sol, Earth, Western Hemisphere, North America, Illinois, Chicago.

      It reminds me of that Mel Brooks line - "It's good to be king." All Hail King George W. II of America!

      So, I was wondering if some of that worthless paper they're churning out could be sent my way to pay off my mortgage before the monetary system collapses? I will use the remainder for TP - I promise!

    • profile image

      pgrundy 9 years ago

      Chef Jeff, McCain's buddy Phil Gramm, the guy he will almost certainly name as Secretary of the Treasury should he win, the guy who thinks Americans are "a nation of whiners" was responsible for introducting a bill in 1999 that repealed the Glass-Steagall Act, a regulatory law on the books to control speculation on Wall Street. Gutting Glass-Steagall paved the way for the insanity that followed in packaging mortgage backed securites as SIVs and credit default swaps and all kinds of fancy shell game BS that allowed banks to become so highly leveraged they were nothing but a house of cards.

      So while McCain is out there talking tough about regulation, keep in mind that his support of deregulation actually caused this mess, and that not only is he not sorry, he's still best buddies with Gramm (who is one of the meanest SOBs on the planet too, by the way) and plans to make him Gramm lynchpin of his economic policies.

      Yeah McCain is a real man of the people alright. How about that gaff this past week about Spain being in Argentina? That was a good one too.

      BTW, the money for the AIG bail out came from thin air. The Fed actually had to just "print more money", which they can legally do. However, one consequence of just printing more money is inflation. Now they say we need at least $500 billion more for a government agency to buy up the bad debt in the financial system. That's a dream too. I'm waiting to see the plan. I mean, there are HUNDREDS of TRILLIONS of dollars of collateralized debt vehicles and credit default swaps floating around globally. Good luck containing this with half a trillion. Damn, they've aready spent close to a trillion NOT containing it.

      The problem is, at this point they don't have a lot of choice. Left alone the U.S. financial system would be toast as we speak, and the impact would be global--that's how bad it is now. What does that mean? Businesses shutting down because they can't run on a cash-only basis, bank runs, runaway unemployment, bread lines, civil unrest, martial law--name an ugly scenario and include it and you'll be on target.

      We are so screwed, but we are screwed squared if Obama loses. Great hub Crash.

    • Chef Jeff profile image

      Chef Jeff 9 years ago from Universe, Milky Way, Outer Arm, Sol, Earth, Western Hemisphere, North America, Illinois, Chicago.

      I wonder how the government pulled $85 billion out of its hat? Do they have some secret fund hidden away? Too bad Congress (in 2000 - when we all know who were in charge!) decided not to regulate the greedy bastards who precipitated this mess.

      Did anyone else catch that comment on NPR - These greedy pigs like to privatize the earnings but socialize the losses? I guess Bush is now the greatest Socialist of them all! I believe the money paid to nationalize these companies exceeds the GNP of France!

      So when do I get my Fannie Mae and Freddie Mac and AIG stock? Since I am now one of the unwilling stockholders, do I get to vote at the yearly meetings? Any chance I could be a $20 million/year CEO? I'd like my Golden Parachute to be in real gold, please!

    • crashcromwell profile image

      crashcromwell 9 years ago from Florida

      I've heard the term, but haven't gotten the book. I will check it out. Thanks for the comment!

    • Storytellersrus profile image

      Barbara 9 years ago from Stepping past clutter

      Hey Crash, did you by any chance read Obamanomics by John R. Talbott? I just picked it up and it looks pretty impressive- written by the man who predicted the housing and mortgage crisis in his book, "The Coming Crash in the Housing Market." Obamanomics is based on Obama's speeches, campaing policy statements, etc.