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<DIV><FONT face=Arial size=3>
<DIV><FONT face=Arial size=3>Scrutiny of important bills is always a good
idea! </FONT></DIV>
<DIV><FONT face=Arial size=3></FONT> </DIV>
<DIV><FONT face=Arial size=3>And I agree wholeheartedly that the Patriot Act was
passed too quickly with too llittle debate, and that Butch Otter was right to
vote against it. </FONT></DIV>
<DIV><FONT face=Arial size=3></FONT> </DIV>
<DIV><FONT face=Arial size=3>I was writing primarily to advance two notions:
first, that this financial bailout plan is very complicated, hard to
understand, and not to be solved in an instant without adequate debate and
reflection; and second, that Senator McCain ought to debate tonight, regardless
of whether a deal had been reached.</FONT></DIV>
<DIV><FONT face=Arial size=3></FONT> </DIV>
<DIV><FONT face=Arial size=3>Happily, Senator McCain has agreed to appear and
debate tonight.</FONT></DIV>
<DIV><FONT face=Arial size=3></FONT> </DIV>
<DIV><FONT face=Arial size=3>Bruce</FONT></DIV>
<DIV><FONT face=Arial size=3></FONT> </DIV>
<DIV><STRONG><FONT size=5>With McCain in fold, White House debate is
on</FONT></STRONG>
<DIV id=ynmain><!-- BEGIN STORY BODY -->
<DIV id=storybody>
<DIV class=storyhdr>
<P><SPAN>By John Whitesides, Political Correspondent </SPAN>16 minutes ago </P>
<DIV class=spacer></DIV></DIV><!-- end storyhdr -->
<P>OXFORD, Mississippi (Reuters) - <SPAN class=yshortcuts id=lw_1222447707_0
style="CURSOR: hand; BORDER-BOTTOM: #0066cc 1px dashed">Republican John
McCain</SPAN> ended the suspense and said he will attend the first of three
debates with <SPAN class=yshortcuts id=lw_1222447707_1
style="CURSOR: hand; BORDER-BOTTOM: #0066cc 1px dashed">Democrat Barack
Obama</SPAN> on Friday, setting up a showdown that could help decide a tight
<SPAN class=yshortcuts id=lw_1222447707_2>White House
race</SPAN>. <NOSCRIPT></NOSCRIPT> </P>
<P> </P>
<P><A
href="http://news.yahoo.com/s/nm/20080926/ts_nm/us_usa_politicsnews_8">http://news.yahoo.com/s/nm/20080926/ts_nm/us_usa_politicsnews_8</A></P></DIV></DIV></DIV></FONT></DIV>
<BLOCKQUOTE
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B>
<A title=sunilramalingam@hotmail.com
href="mailto:sunilramalingam@hotmail.com">Sunil Ramalingam</A> </DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A title=vision2020@moscow.com
href="mailto:vision2020@moscow.com">vision2020@moscow.com</A> </DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Friday, September 26, 2008 9:35
AM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> Re: [Vision2020] Debate about
the bailout</DIV>
<DIV><BR></DIV>Bruce,<BR><BR>I won't pretend that I have an understanding of
this issue. But I do have a memory, and I recall this administration
rushing a major piece of legislation through: The 'Patriot' Act. Without
much (if any) review Congress abdicated their responsibility and
rubber-stamped the bill. The sky was going to fall if it didn't get
passed. Butch Otter gets credit for voting 'No' on it.<BR><BR>Now again
there's a rush to get this through. This time it doesn't affect anything
as meaningless as our rights, it's money, so it's getting more scrutiny.
Good. <BR><BR>I'm not saying that perhaps it isn't necessary. I do
want Congress to examine it and debate it before they pass
it.<BR><BR>Sunil<BR><BR>
<HR>
Date: Fri, 26 Sep 2008 07:47:44 -0700<BR>From:
jeanlivingston@turbonet.com<BR>To: vision2020@moscow.com<BR>Subject:
[Vision2020] Debate about the bailout<BR><BR>The nation has tried to rush to a
bailout solution based on the seeming consensus that the financial markets,
credit in particular, will collapse or freeeze to our great and lasting
detriment if a "deal" is not obtained this week.<BR><BR>Senator McCain
"suspended" his campaign and refuses to participate in tonight's scheduled
debate unless the deal, or at least an agreed structure of the deal, is
reached before it is time to fly to Mississippi for the debate. He, too,
seems to accept the concept, touted by bureaucrats and Wall Street economists
alike and reiterated by politicians of all stripes, that an immediate
agreement upon a deal is absolutely crucial.<BR> <BR>We are trying in one
week to structure and agree upon the largest financial deal in our
history. George Will aptly termed this phenomenon as acting like
"lemmings in reverse," as everyone rushes pell mell away from the proverbial
cliff, from which lemmings suppose! dly leap as they blindly
follow the lemming in front of them. It seems to me that getting a
deal of this magnitude done well in a considered fashion is more important
than getting it done this week. That idea of "getting it right" seems to
be taking root. Note the article reprinted below, which talks at length
about the split in "expert" opinion on how to structure the bailout.
<BR><BR>All that being said, it appears that a deal may not be
reached this week due to the complexity of the situation and well meaning
politicians, conservatives and liberals alike, now struggling to "get it
right." In my opinion, debate on this issue and "getting it right"
is paramount. <BR><BR>For me, the importance of "debate" on the issue
also means getting the two presidential candidates discussing it openly
in public for the nation to hear, tonight. <BR><BR>If a deal in Congress
is reached today in time for the deb! ate tonight, wonderful. If a deal
is not reached, I think Senator McCain ought to hop on that plan and attend
the scheduled debate, notwithstanding his offer to "put the nation first" by
sitting in Washington. Certainly, getting the deal done right
in Congress is important. But skipping an hour and a
half presidential debate -- when the financial markets will be
closed for the next two days -- makes no sense to me. Skipping the
debate does not materially advance getting the deal done right in a time frame
that matters. We need to hear what Senator McCain has to say,
and why his ideas are better or worse than Senator Obama's. As debate
grows about the wisdom of the structured bailout deal being proposed, the need
for debate by our presidential candidates likewise grows.<BR><BR>Bruce
Livingston<BR><BR><STRONG><FONT size=5>Away from Wall Street, Economists
Question Basis of Paulson's Plan<BR></FONT></STRONG><BR><FONT size=-1>By Neil
Irwi! n and Cecilia Kang<BR>Washington Post Staff Writers<BR>Friday, September
26, 2008; A01<BR></FONT><BR><BR>The Bush administration's pitch for a sweeping
bailout of the financial system has centered on two simple premises: that the
economy could suffer a crippling downturn if action is not taken very quickly
and that this action should consist of the government buying troubled mortgage
securities from banks and other institutions.<BR>But many of the nation's top
economists disagree with one or both of those ideas, even as many top
political leaders have swung behind them.<BR><A
href="http://www.washingtonpost.com/ac2/related/topic/Wall+Street?tid=informline"
target=_blank>Wall Street</A> economists have mostly endorsed Treasury
Secretary <A
href="http://www.washingtonpost.com/ac2/related/topic/Henry+M.+Paulson?tid=informline"
target=_blank>Henry M. Paulson</A> Jr.'s plan, or a variation thereof.<BR>But
almost 200 academic economists -- who aren't paid by the institutions that
could directly ! benefit from the plan but who also may not have recent
practical experience in the markets -- have signed a petition organized by a
<A
href="http://www.washingtonpost.com/ac2/related/topic/University+of+Chicago?tid=informline"
target=_blank>University of Chicago</A> professor objecting to the plan on the
grounds that it could create perverse incentives, that it is too vague and
that its long-run effects are unclear. <A
href="http://projects.washingtonpost.com/congress/members/s000320/"
target=_blank>Sen. Richard C. Shelby</A> (Ala.), ranking Republican on the
Budget Committee, brandished that letter yesterday afternoon as he explained
his opposition to the bailout outside a bipartisan summit at the <A
href="http://www.washingtonpost.com/ac2/related/topic/The+White+House?tid=informline"
target=_blank>White House</A>. The petition did not advocate any specific
plan, including that offered yesterday by House Republicans.<BR>Economists
tend to agree that the nation's economy is at serious risk as the flow of
credit threatens! to freeze. Just yesterday, the interest rate at which banks
lend to each other rose steeply, as it has every day this week, suggesting
that lenders are hoarding cash. History shows that when this happens, a broad
economic crisis can follow, for instance, the Great Depression and Japan's
decade-long recession in the 1990s.<BR>"If nothing is done, the potential for
these markets to seize up in a big way is definitely there," said Frederic S.
Mishkin, an economist at <A
href="http://www.washingtonpost.com/ac2/related/topic/Columbia+University?tid=informline"
target=_blank>Columbia University</A> who was a <A
href="http://www.washingtonpost.com/ac2/related/topic/U.S.+Federal+Reserve?tid=informline"
target=_blank>Federal Reserve</A> governor until last month. "When you look at
the history of these crises, when things spin out of control, the cost to fix
it later goes up exponentially."<BR>But many others with a deep theoretical
knowledge of finance and experience in government are ske! ptical of the
structure of Paulson's plan -- and the speed with which it has been
crafted.<BR>The critics can be roughly divided into two camps. One group
thinks money should be directly infused into banks, which should allow it to
trickle down through the financial system to borrowers. A second group thinks
the government should buy individual mortgages, thus helping ordinary
Americans more directly, with the benefits trickling up to the banks.<BR>The
plan promoted by Paulson and <A
href="http://www.washingtonpost.com/ac2/related/topic/Ben+Bernanke?tid=informline"
target=_blank>Fed Chairman Ben S. Bernanke</A> is somewhere in between: buying
up packages of mortgages and hoping that the benefits spread both up to banks
and down to households.<BR>"The plan is a trickle-down approach from banks to
Main Street," said Alan S. Blinder, a professor at <A
href="http://www.washingtonpost.com/ac2/related/topic/Princeton+University?tid=informline"
target=_blank>Princeton University</A>. "But if you! reduce the flood of
foreclosures and defaults" -- which he would have the government do by buying
loans directly and then renegotiating the terms -- "it will make
mortgage-backed securities worth more."<BR>That might help ordinary Americans
but would be extremely difficult to administer. The government would have to
make decisions on the foreclosure and resale of individual houses all over the
country. Still, many economists with left-of-center political views favor some
variation of this approach to the plan endorsed by Bush.<BR>"There is a kind
of suggestion in the Paulson proposal that if only we provide enough money to
financial markets, this problem will disappear," said Joseph Stiglitz, a Nobel
Prize-winning economist. "But that does nothing to address the fundamental
problem of bleeding foreclosures and the holes in the balance sheets of
banks."<BR>Coming from the other direction, more conservative economists worry
that by having t! he government buy mortgage securities, the Paulson plan
would manipulate prices in that market without getting at the nub of the
problem: that banks do not have enough capital and are having difficulty
raising any on private markets.<BR>In a sign of how the debate over the
economy has shifted in recent weeks, some conservatives, even as they argue
for a relatively limited government role, are calling on the government to
invest public money in private banks.<BR>"The root of the issue is
recapitalizing banks," said Glenn Hubbard, dean of <A
href="http://www.washingtonpost.com/ac2/related/topic/Columbia+Business+School?tid=informline"
target=_blank>Columbia Business School</A> and a former chairman of <A
href="http://www.washingtonpost.com/ac2/related/topic/White+House+Council+of+Economic+Advisers?tid=informline"
target=_blank>President Bush's Council of Economic Advisers</A>. "That could
be done more efficiently through the government injection of preferred equity.
Then the market coul! d figure out the prices of the assets."<BR>Many of these
critics don't care for the assumption behind the administration's plan that
the market is now pricing these mortgage securities incorrectly, a problem
that the government intervention aims to fix.<BR>"The premise appears to be
that the market is irrationally pessimistic," wrote Greg Mankiw, a <A
href="http://www.washingtonpost.com/ac2/related/topic/Harvard+University?tid=informline"
target=_blank>Harvard University</A> economist and another former Bush
economic adviser, on his blog this week. "That might be so. Nonetheless, one
has to be at least a bit skeptical about the idea that government policymakers
gambling with other people's money are better at judging the value of complex
financial instruments than are private investors gambling with their
own."<BR>Some conservatives are now arguing, notably, that the government
should be investing in banks.<BR>Many economists fault the Bush administration
and C! ongress for moving so quickly on the bailout package without allowing
more time for debate. That sentiment was reflected in the petition organized
by John Cochrane of the University of Chicago. (None of the economists quoted
here were signatories.)<BR>"I totally disagree that this needs to be done this
week. It's more important to get it right," Blinder said.<BR>Moreover, some
economists said the proposed $700 billion may not be enough to address all the
problems stretching across the financial landscape. "You only show up if you
can win, and this is not that package," said Simon Johnson, a professor at <A
href="http://www.washingtonpost.com/ac2/related/topic/Massachusetts+Institute+of+Technology?tid=informline"
target=_blank>Massachusetts Institute of Technology</A> and former chief
economist at the <A
href="http://www.washingtonpost.com/ac2/related/topic/International+Monetary+Fund?tid=informline"
target=_blank>International Monetary Fund</A>. "This cannot be the ultimate,
deci! sive solution if you are not addressing the underlying cause."<BR>The
plan is short on details, instead giving the Treasury secretary wide latitude
to determine how to execute the purchases of mortgage securities.<BR>"I'd like
to see how they see the evolution of an end game. There are still many
questions," said Myron Scholes, a retired professor at <A
href="http://www.washingtonpost.com/ac2/related/topic/Stanford+University?tid=informline"
target=_blank>Stanford University</A> and Nobel Prize winner. He said how long
the government holds the assets and how they are later resold would be the
keys to determining whether the plan works.<BR> <BR><BR>
<P>
<HR>
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