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Robert Samuelson says it turns out our modern economics is bankrupt.

… A hallmark of the crisis has been the stark contrast between the “real economy” of production and jobs and the tumultuous financial markets of stocks, bonds, banks, money funds and the like. Even with the 60 percent drop in housing construction since early 2006, the real economy has so far suffered only modest setbacks. Yes, there are 605,000 fewer payroll jobs than there were in December; still, 137.5 million jobs remain. Meanwhile, financial markets verge on hysteria. The question is whether this hysteria will drive the real economy into a deep recession or worse — and what we can do to prevent that. …

And Supply and Demand Blog doubts financial problems will sink the rest of the economy.

… The weak correlation between asset prices and non-financial sector performance and the strong profitability of today’s non-financial capital are two good reasons to scoff at the idea that the non-financial sector will collapse because of the recent events on Wall Street, and even better reasons to scoff at the Bernanke-Paulson-Bush idea that a massive bailout of financial firms is the key to avoiding a non-financial collapse. Wall Street’s woes are and will be largely limited to Wall Street. The Bush administration should not use the power of the IRS to force the rest of us to board Wall Street’s sinking ship. …

Mark Steyn returns for interviews at Hugh Hewitt. Dean Barnett does the honors.

DB: Now Mark Steyn, what percentage of the United States Senate do you think knows what a credit default swap is?

MS: I would imagine it’s a very, very small number. One of the amusing things, well, it isn’t amusing, really, it’s tragic in a way, but one of the strange things about this is that whenever anything goes wrong in the economy, the fault is always blamed on capitalism, red in tooth and claw. And in this case, both candidates tend to blame greed, untrammeled greed. Well, greed is writ in the human heart and is embedded in our DNA, and has been since the beginning of time. So clearly, greed itself is not the factor, and in most cases, if you actually eliminate the lame-o class warfare thing, it turns out, as in this case, to derive from some previous round of government regulation and its unintended consequences. So now we’ll pile, we’ll have corrective government regulation to correct the last sort of government regulation, and that in turn will have another lot of unintended consequences. To be honest, I would rather take a flyer on a new depression. …

DB: Actually, now it’s old news, but since you bring up the sniffers at Sarah Palin, have you ever seen anything like that Charlie Gibson interview, who was seemingly channeling a metrosexual schoolmarm the way he was looking over his glasses with such fury at Sarah Palin?

MS: Yeah, I know, and I don’t, I just don’t get it. I mean, I don’t understand why he thinks he’s, that’s in his interest. You know, you and I make our living from talking and giving opinions, and very often, as in this whole sub-prime business, Lehman Brothers, on stuff we know nothing about. Let’s face it, that’s what we do. If it wasn’t Lehman Brothers in the news, and there was instead a coup in Azerbaijan, as professional commentators, we would be within three minutes instant experts on Azerbaijan and the coup situation. That’s what pundits do. They chatter about stuff all day long. And I think it behooves us to have a respect for people who actually run things and do things like the Governor of Alaska. And why Charlie Gibson thinks he would come out, some worthless twit who reads a teleprompter for a living, would come off looking good being condescending to a woman who runs a state, I’ve no idea. …

More on financial affirmative action from American Spectator.

When the history of the Great Economic Meltdown of 2008 is written, in-your-face shakedown groups like the Greenlining Institute will be held to account.

Greenlining, headquartered in Berkeley, California (where else?), is a left-wing pressure group that threatens nasty public relations campaigns against lenders that refuse to kneel before its radical economic agenda. Its principal goal is to push politicians and the business community to facilitate “community reinvestment” in low-income and minority neighborhoods.

The Greenlining name is a play on the unlawful practice of “redlining.” That’s when financial institutions designate areas, typically those with a high concentration of racial minorities, as bad risks for home and commercial loans. The Institute wants banks to give a green light to loans in these areas instead.

Recently profiled by John Gizzi, Greenlining uses carrot-and-stick tactics to blackmail public agencies, banks, and philanthropists to achieve its objectives. The Institute brags it has threatened banks into making more than $2.4 trillion in loans in low-income communities.

Was this a good idea? …

Peter Wehner has a good summary of the race.

… 5. The truth is that Senator McCain, facing a considerable uphill struggle, has made the race closer than it ought to be, given all the advantages Democrats have this year. And one thing this campaign has taught us is that a new dynamic can be injected in the blink of an eye. We still have five weeks before the election. But then again, we only have five weeks to go before the election. And the task Senator McCain faces is to alter, in some fundamental way, the trajectory of the race. Friday’s debate certainly didn’t do that; if anything, his job is now harder.

John McCain has faced far more difficult challenges in his life than he does now. But politically speaking, the race, never an easy one, looks considerably more difficult. Senator McCain can still prevail, but at this point, he may need an assist from outside events or from Barack Obama. And one thing Senator Obama has shown is that, for whatever flaws he has, he doesn’t make many glaring, stupid, and unforced errors. He’s hard to knock off stride. Obama and his team, while certainly not flawless, have run a very impressive campaign for 20 months. To hope they’ll badly slip up in the last five weeks is asking for a lot. As we’ve seen this year, a lot can happen, including in a short period of time. But for McCain it needs to happen, and soon. …

P.J. O’Rourke writes about coming down with cancer.

… I have, of all the inglorious things, a malignant hemorrhoid. What color bracelet does one wear for that? And where does one wear it? And what slogan is apropos? Perhaps that slogan can be sewn in needlepoint around the ruffle on a cover for my embarrassing little doughnut buttocks pillow.

Furthermore, I am a logical, sensible, pragmatic Republican, and my diagnosis came just weeks after Teddy Kennedy’s. That he should have cancer of the brain, and I should have cancer of the ass … well, I’ll say a rosary for him and hope he has a laugh at me. After all, what would I do, ask God for a more dignified cancer? Pancreatic? Liver? Lung? …

Pickerhead wonders if we are going to keep building bigger and bigger until one leans over too far, and fails to right itself.

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As we hit send, it appears the GOP has stopped the Bush/Dem bailout. That is a good thing. We will have some short term difficulties, but we’ll be over them faster if the government does not help us. Remember the scariest words in the language are; “I’m from the government and I’m here to help.”

Want to know where the Fannie/Freddie problems came from? Watch the video linked by Kathryn Jean Lopez at The Corner. It is pieces of C-Span tapes of a House committee hearing on problems discovered by federal regulators from The Office of Federal Housing Enterprise Oversight. Watch as committee Dems gang bang regulators who had the audacity to report on near criminal activity at Fannie.

Ralph Peters comments on the latest success in Iraq.

LAST week, Iraq passed another milestone on the difficult road to political maturity: Its parliament unanimously approved a new election law insuring broader participation than ever before.

In early winter, Iraqis will vote in regional elections in the country’s 14 Arab-majority provinces (the Kurds are ahead of the cycle – as they are in most things). Only the tricky status of Kirkuk must still be resolved.

Despite legions of international nay-sayers, democracy worked. After posturing for their own party bases, Iraqi politicians compromised on critically important issues. The result is the most enlightened electoral blueprint between Israel and India.

The systemic clout of religious blocks and parties has been reduced. A quarter of the contested seats are reserved for women. Safeguards promise the most honest balloting ever held in an Arab-majority state. …

Spengler continues his comments on the “bail out.”

The US Congress went into labor this weekend, and gave birth to a gnat. With some cosmetic adjustments, Treasury Secretary Henry Paulson’s US$700 billion bank bailout plan will be adopted this week. Markets barely budged on the news, which was punctuated by government bailouts of two giant banks – America’s Washington Mutual and Belgium’s giant Fortis group. A third rescue, of Britain’s Bradford and Bingley, sees it taken over by the government.

Paulson’s plan likely will provide temporary relief to the stockholders of some American banks, whose balance sheets do not look all that different from Washington Mutual’s. But this has nothing to do with the larger problem, namely the de-leveraging of the American household. …

ChiTrib editors on the credit crisis.

… When this crisis has settled down, Congress and the president are welcome to consider if the experience indicates the need for some precise and prudent changes in the law governing financial institutions. But it’s more likely a careful examination will prove that the biggest failures were ones of too much government, not too little.

Bill Kristol on how McCain can win.

John McCain is on course to lose the presidential election to Barack Obama. Can he turn it around, and surge to victory?

He has a chance. But only if he overrules those of his aides who are trapped by conventional wisdom, huddled in a defensive crouch and overcome by ideological timidity.

The conventional wisdom is that it was a mistake for McCain to go back to Washington last week to engage in the attempt to craft the financial rescue legislation, and that McCain has to move on to a new topic as quickly as possible. As one McCain adviser told The Washington Post, “you’ve got to get it [the financial crisis] over with and start having a normal campaign.”

Wrong. …

Zev Chafets wrote a profile of Rush Limbaugh which was in Pickings July 7, 2008. He is mining that vein again in an LA Times Op-Ed which reports on the value Rush has to the McCain campaign.

… A satisfied Limbaugh means an enthusiastic Limbaugh, and an enthusiastic Limbaugh could be the difference in a close race. Between 14 million and 20 million people listen to him every week, by far the largest audience in talk radio. His show energizes the Republican base, but, even more important, it appeals to a great many conservative Democrats and independents of the kind McCain needs to win swing states.

Senior Republican strategists have seen Limbaugh do this before, especially in the 1994 congressional races that gave the House to the GOP for the first time in decades. Limbaugh was so important to that victory that the GOP declared him an honorary member of the Republican House of Representatives’ freshman class.

Fourteen years later, Limbaugh’s influence is greater than ever. No single Republican — not Karl Rove or Roger Ailes, James Dobson or Sean Hannity — has his reach and clout. Certainly President Bush doesn’t. Limbaugh is, very simply, the single most influential conservative voice in America. …

The Economist’s bellwether state this week is Michigan.

ECONOMIC gloom is no stranger to Michigan’s cities. A house in Detroit was recently sold for one dollar. But now despair extends to the suburbs, too. Orchard Lake, a main drag of shops in Farmington Hills, has “for lease” signs planted like tombstones on the side of the road. The national unemployment rate reached a dismal 6.1% in August. Michigan’s rate is almost three points higher, at 8.9%.

It is not surprising then, that in the war over which candidate can revive America’s economy, Michigan is the front line. On a recent rainy night in Farmington Hills, Barack Obama tried to persuade voters that Michigan could be pulled out of the gloom. The crowd cheered wildly—“I’m absolutely positively sold on Obama!” gushed Ninevah Lowery. But not everyone is so convinced. Al Gore won Michigan by five points, John Kerry by just three. Mr Obama leads in the polls, but victory is by no means certain.

Much of Michigan’s bleak outlook is caused by the car industry, which remains at the heart of the state’s identity. Each August residents line Woodward Avenue, which runs north of Detroit, to watch the Dream Cruise, when vintage cars buzz by and conjure memories of glories past. The present is more of a nightmare. Since 2000 Michigan’s car industry has shed more than 300,000 jobs. Within the past year, Ford and GM have posted their worst quarterly losses ever, with dire effects for suppliers and small businesses. …

Part 2 of the National Geographic article on Neanderthals.

… But then things changed. When the coldest fingers of the Ice Age finally reached southern Iberia in a series of abrupt fluctuations between 30,000 and 23,000 years ago, the landscape was transformed into a semiarid steppe. On this more open playing field, perhaps the tall, gracile modern humans moving into the region with projectile spears gained the advantage over the stumpy, muscle-bound Neanderthals. But Finlayson argues that it was not so much the arrival of modern humans as the dramatic shifts in climate that pushed the Iberian Neanderthals to the brink. “A three-year period of intense cold, or a landslide, when you’re down to ten people, could be enough,” he said. “Once you reach a certain level, you’re the living dead.”

The larger point may be that the demise of the Neanderthals is not a sprawling yet coherent paleoanthropological novel; rather, it is a collection of related, but unique, short stories of extinction. “Why did the Neanderthals disappear in Mongolia?” Stringer asked. “Why did they disappear in Israel? Why did they disappear in Italy, in Gibraltar, in Britain? Well, the answer could be different in different places, because it probably happened at different times. So we’re talking about a large range, and a disappearance and retreat at different times, with pockets of Neanderthals no doubt surviving in different places at different times. Gibraltar is certainly one of their last outposts. It could be the last, but we don’t know for sure.”

Whatever happened, the denouement of all these stories had a signatory in Gorham’s Cave. In a deep recess of the cavern, not far from that last Neanderthal hearth, Finlayson’s team recently discovered several red handprints on the wall, a sign that modern humans had arrived in Gibraltar. Preliminary analysis of the pigments dates the handprints between 20,300 and 19,500 years ago. “It’s like they were saying, Hey, it’s a new world now,” said Finlayson.

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David Harsanyi writes on Iran and Ahmedinejad.

Iranian “President” Mahmoud Ahmadinejad rejects American ideas — all of our ideas, that is, but nuclear fusion.

When Ahmadinejad told a crowd at Columbia University in 2007 that the United States must investigate “who was truly involved” in 9/11, students may have confused the speech with ethnic studies class.

There should be no confusion.

It’s bad enough this bird-brained troglodyte was again walking the streets of America’s greatest city this week, a place teeming with women, Christians, Jews and gays. Ahmadinejad has something to offend all. Holocaust denier. Misogynist. Religious fanatic. Terrorist enabler. Homophobic inquisitor — though, Ahmadinejad does claim, “In Iran, we don’t have homosexuals, like in your country.” …

Foreign Editor of The Australian says Iran is a bigger problem than Wall Street.

IRAN is a problem from hell. The next US president, be it Barack Obama or John McCain, is going to have plenty to worry about: the Wall Street financial crisis, the war in Afghanistan, Pakistan’s internal crisis, the relentless military build-up of China and the temptation it will soon have of trying to retake Taiwan militarily. But you can be sure of this. At some stage during the next presidency, Iran will blow up into a full-scale crisis that will dominate global politics and that may indeed be more important even than the other problems listed above.

The new president will have one modestly useful extra resource, a bipartisan report commissioned by two former US senators and written primarily by Middle East expert Michael Rubin of the American Enterprise Institute. The Weekend Australian has obtained a copy of the report, to be released later this week. Before I got the report, I had a long discussion with Rubin.

Rubin is a Republican, but the report he wrote was the consensus work of a bipartisan taskforce that includes Dennis Ross, Obama’s key Middle East adviser.

The report is sobering and in some ways shocking reading. It begins baldly: “A nuclear weapons capable Islamic Republic of Iran is strategically untenable.”

It points to the disastrous consequences of an Iran with nuclear weapons: “Iran’s nuclear development may pose the most significant strategic threat to the US during the next administration. …

John Fund on how the crisis took hold in our economy.

We will look back on the failure of Congress to reform the government-sponsored enterprises at the heart of the mortgage meltdown as one of the most expensive derelictions of its duty ever. Fannie Mae and Freddie Mac used their lobbying clout, political contributions and even charitable largesse to charm or bully anyone demanding reform in their lending practices. …

Jeff Jacoby with similar details.

… Because while the mortgage crisis convulsing Wall Street has its share of private-sector culprits they weren’t the ones who “got us into this mess.” Barney Frank’s talking points notwithstanding, mortgage lenders didn’t wake up one fine day deciding to junk long-held standards of creditworthiness in order to make ill-advised loans to unqualified borrowers. It would be closer to the truth to say they woke up to find the government twisting their arms and demanding that they do so – or else.

The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and “redlining” because urban blacks were being denied mortgages at a higher rate than suburban whites.

The pressure to make more loans to minorities (read: to borrowers with weak credit histories) became relentless. Congress passed the Community Reinvestment Act, empowering regulators to punish banks that failed to “meet the credit needs” of “low-income, minority, and distressed neighborhoods.” Lenders responded by loosening their underwriting standards and making increasingly shoddy loans. The two government-chartered mortgage finance firms, Fannie Mae and Freddie Mac, encouraged this “subprime” lending by authorizing ever more “flexible” criteria by which high-risk borrowers could be qualified for home loans, and then buying up the questionable mortgages that ensued.

All this was justified as a means of increasing homeownership among minorities and the poor. …

IBD editors back the “rescue” plan.

… Watching the same politicians who created this mess grill Mssrs. Paulson and Bernanke yesterday about what they intend to do about it was almost surreal.

Where, for example, does Chris Dodd, chairman of the Senate Banking Committee and the leading recipient of Fannie Mae campaign cash, get off acting so self-righteously when he and his panel were asked to move quickly on the administration’s $700 billion rescue plan?

“I understand speed is important,” Dodd huffed, “but I’m far more interested in whether we get this right.”

Get this right? Who is he kidding? …

Richard Epstein does not.

… It had been my devout wish to write a set of disinterested columns about labor markets to illustrate the power of the presumption against state regulation of voluntary agreements. But the financial meltdown of the past week has rudely interrupted my plan to pillory the minimum wage.

Instead, I shall turn on a dime to address two connected questions: How did we get to that sorry state where great institutions topple, and what should be done?

On both questions, our bipartisan consensus is holding true to form. In a system that is chock-full of heavy regulation, they instantly blame the current collapse on the excesses of the free market, for which a still heavier dose of regulation supplies some supposed cure. That indictment contains few particulars. It typically rests on a populist broadside whose centerpiece is greed on Wall Street, but never on Main Street–where there are more voters. …

Same with David Warren.

… President Bush might as well be a Democrat in this pantomime. The package he commissioned from Mr. Paulson was, naturally, designed to pass quickly through a Democrat-controlled Congress. It was arguably the only responsible thing for him to do, given the pressure of time.

I may be in a minority of one, however, by further suggesting that John McCain was in fact showing real leadership by dropping everything and rushing to Washington — for the express purpose of contributing to an agreement between the “hard knob” and “the rest.” We’ll see how badly this blows up in his face — while Barack Obama stands by doing, as usual, nothing of consequence, but “looking presidential.”

National Geographic with the latest efforts to solve the Neanderthal mystery. This is Part 1 of 2. Since we were earlier speaking of the troglodyte Ahmedinejad, it seemed appropriate to include this interesting piece from NatGeo.

In March of 1994 some spelunkers exploring an extensive cave system in northern Spain poked their lights into a small side gallery and noticed two human mandibles jutting out of the sandy soil. The cave, called El Sidrón, lay in the midst of a remote upland forest of chestnut and oak trees in the province of Asturias, just south of the Bay of Biscay. Suspecting that the jawbones might date back as far as the Spanish Civil War, when Republican partisans used El Sidrón to hide from Franco’s soldiers, the cavers immediately notified the local Guardia Civil.

But when police investigators inspected the gallery, they discovered the remains of a much larger—and, it would turn out, much older—tragedy.

Within days, law enforcement officials had shoveled out some 140 bones, and a local judge ordered the remains sent to the national forensic pathology institute in Madrid. By the time scientists finished their analysis (it took the better part of six years), Spain had its earliest cold case. The bones from El Sidrón were not Republican soldiers, but the fossilized remains of a group of Neanderthals who lived, and perhaps died violently, approximately 43,000 years ago. The locale places them at one of the most important geographical intersections of prehistory, and the date puts them squarely at the center of one of the most enduring mysteries in all of human evolution. …

Division of Labour post shows petty officious government bastards are always with us.

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WSJ Op-Ed builds on the Woodward book to point to the generals who led us astray in Iraq.

… According to Mr. Woodward’s account, the uniformed military not only opposed the surge, insisting that their advice be followed; it then subsequently worked to undermine the president once he decided on another strategy.

In one respect, the actions taken by military opponents of the surge, e.g. “foot-dragging,” “slow-rolling” and selective leaking are, unfortunately, all-too-characteristic of U.S. civil-military relations during the last decade and a half. But the picture Mr. Woodward draws is far more troubling. Even after the policy had been laid down, the bulk of the senior U.S. military leadership — the chairman of the Joint Chiefs of Staff, Adm. Mike Mullen, the rest of the Joint Chiefs, and Gen. Abizaid’s successor, Adm. William Fallon, actively worked against the implementation of the president’s policy.

If Mr. Woodward’s account is true, it means that not since Gen. McClellan attempted to sabotage Lincoln’s war policy in 1862 has the leadership of the U.S. military so blatantly attempted to undermine a president in the pursuit of his constitutional authority. It should be obvious that such active opposition to a president’s policy poses a threat to the health of the civil-military balance in a republic.

John Stossel wants to know what happened to market discipline.

Barack Obama says, “[Today's economic problems are] a stark reminder of the failures of … an economic philosophy that sees any regulation at all as unwise and unnecessary” .

What? Does that mean that until last week the Bush administration embraced the free market? Nonsense. Governments at all levels have regulated and subsidized the housing and financial industries for years. Nothing changed under President Bush.

The government-backed Fannie Mae and Freddie Mac were created precisely to interfere with the housing and mortgage markets. In effect, Freddie and Fannie diverted money to people who wouldn’t have qualified for mortgages in a real private market.

Had actual private companies performed these activities, they would have been subject to market checks. But they were not. The results were predictable.

Now that it’s all tumbling down, the politicians and pundits blame the free market.

It’s not simply misunderstanding. It’s demagoguery by people who will never admit that their “progressive” social policies have spawned a taxpayer bill that boggles the mind.

This is a story not of private enterprise but of cynical political opportunism. Moral hazard — the poisonous mix of private profits and taxpayer-covered losses — is what you get when politicians indulge their hubris to redesign society. The bailout of those companies holding bad mortgages — big-business socialism — sets us up for the next crisis.

David Warren has similar thoughts.

… Any reader who has followed me for some time will guess that I am appalled by the (purported) $700 billion bailout that U.S. President George W. Bush and Treasury Secretary Henry Paulson have organized, yet cannot reasonably oppose it at a moment when the markets are close to a true meltdown. I am further appalled by the spectacle of the Democrats in the U.S. Congress, exploiting the emergency to affix massive quantities of poorly disguised pork to the blunderbuss bill.

And finally, appalled by the media and chattering heads calling the whole mess a “crisis of capitalism” when the plain facts show the opposite. The whole “subprime mortgage” instrument was invented by bankers specifically to assuage heavy-handed Congressional demands to swell the number of minority and low-income homeowners, 20 years ago. Fannie Mae and Freddie Mac were already bloated quasi-government bureaucracies, dangerously freed from many conventional market disciplines. And among the chief beneficiaries of the current bailout are the most extravagant contributors to the Democrat Party.

As one of my more knowing correspondents put it: “Wall Street loves money but hates free markets, because free markets distribute economic benefits to those who earn them, rather than to those best able to seize them.”

The capitalist investment bankers stand accused, rightly, of having invented brilliant kiting schemes — ultimately to deliver credit to customers who hadn’t earned it. Their “greed” is irrelevant — everyone is trying to make money. The point is that the schemes themselves were basically unsound. The lesson is that when home ownership is considered a “right” instead of a privilege, it is not only the housing market that goes bottom up. …

Power Line spots a 2003 NY Times article on Fannie/Freddie.

… ”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” …

As usual, David Harsanyi has interesting thoughts.

Politicians expend a considerable amount of energy trying to prove they are just like you or me. Well, it turns out, they aren’t lying. Just like you and me, they have absolutely no clue what’s going on.

And watching these people endeavor to “rescue” us from financial apocalypse only crystallizes, once again, that Washington is the preferred destination of the ethically disabled.

Take John McCain’s reaction to the recent financial emergency. It was a progression of platitudinous canards brimming with crowd-pleasing words like “greed,” “speculators” and other assorted bogeymen.

McCain claimed that he would have fired Christopher Cox, the chairman of the Securities and Exchange Commission, for having “betrayed the public’s trust.” The fact that Cox didn’t actually break any laws or write any regulations is immaterial when a presidential candidate is stalking a scapegoat.

Then, in a bizarre moment during a “60 Minutes” interview, McCain the Maverick raised the possibility of tapping New York Democrat Andrew Cuomo to whip Wall Street into shape. “This may sound a little unusual,” McCain said. “I think he is somebody who could restore some credibility, lend some bipartisanship to this effort.”

Unusual, indeed. It did not go unnoticed by many onlookers that as the secretary of Housing and Urban Development under President Bill Clinton, Cuomo was one of the people who supported lending practices that allowed Fannie and Freddie to monopolize the sub-prime markets with risky loans and precious little oversight.

Ready to fire. Ready to hire. Ready to lead? …

The Economist reports on the privatization of Alaska halibut fisheries.

BEFORE 1995 the annual fishing season for Alaskan halibut lasted all of three days. Whatever the weather, come hell or—literally—high water, fishermen would be out on those few days trying to catch as much halibut as they could. Those that were lucky enough to make it home alive, or without serious injury, found that the price of halibut had collapsed because the market was flooded.

Like most other fisheries in the world, Alaska’s halibut fishery was overexploited—despite the efforts of managers. Across the oceans, fishermen are caught up in a “race to fish” their quotas, a race that has had tragic, and environmentally disastrous, consequences over many decades. But in 1995 Alaska’s halibut fishermen decided to privatise their fishery by dividing up the annual quota into “catch shares” that were owned, in perpetuity, by each fisherman. It changed everything. …

BBC News covers fishing privatization in other parts of the world.

Giving fishermen long-term rights to catch fish is key to keeping stocks healthy, scientists conclude.

A global survey found that fisheries managed using individual transferable quotas (ITQs) were half as likely to collapse as others. Long-term quotas give fishermen a stake in conserving fish stocks. The study was published in the journal Science just a day after the European Commission announced a major review of EU fisheries policy.

“Under open access, you have a free-for-all race to fish, which ultimately leads to collapse,” said research leader Christopher Costello from the University of California at Santa Barbara (UCSB). “But when you allocate shares of the catch, then there is an incentive to protect it.”

The principle of ITQs is straightforward. A safe level of catch is set for a given species or group of species in a prescribed area, and that catch is shared out between individual boats or fleets. The total allowable catch can rise or fall from year to year according to what scientists judge to be sustainable. But the shares are guaranteed for a set number of years. They can be traded or transferred, but no new shares are allowed. …

WSJ reports on study of regional personality traits.

Certain regional stereotypes have long since become clichés: The stressed-out New Yorker. The laid-back Californian.

But the conscientious Floridian? The neurotic Kentuckian?

You bet — at least, according to new research on the geography of personality. Based on more than 600,000 questionnaires and published in the journal Perspectives on Psychological Science, the study maps regional clusters of personality traits, then overlays state-by-state data on crime, health and economic development in search of correlations.

Even after controlling for variables such as race, income and education levels, a state’s dominant personality turns out to be strongly linked to certain outcomes. Amiable states, like Minnesota, tend to be lower in crime. Dutiful states — an eclectic bunch that includes New Mexico, North Carolina and Utah — produce a disproportionate share of mathematicians. States that rank high in openness to new ideas are quite creative, as measured by per-capita patent production. But they’re also high-crime and a bit aloof. Apparently, Californians don’t much like socializing, the research suggests. …

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There’s a good picture here of Pickerhead on the job. It’s at the start of the humor section in back.

Max Boot says don’t sell America short.

… What the pessimists ignore is that the fundamentals of the U.S. economy remain strong. Indeed, the World Economic Forum has ranked the United States as the world’s most competitive economy for the last two years. (The new survey comes out next month.) Its statistics show that per-capita gross domestic product in the U.S. consistently has grown faster than in other developed economies since 1980.

Looking deeper at the causes of American competitiveness shows that we score especially strongly not only in domestic market size (No. 1 in the world) but also in such areas as time required to start a business (No. 3), venture capital availability (No. 1), the cost of firing an employee (No. 1), ownership of personal computers (No. 2), university/industry research collaboration (No. 1) and quality of scientific research institutions (No. 2). The availability of venture capital might be affected temporarily by the market turmoil, and we should worry if Democrats gain control of both ends of Pennsylvania Avenue in November because they might exacerbate what the survey found to be the two most “problematic” issues for doing business in the U.S. — high tax rates and cumbersome tax regulations.

But whatever happens in the next few months, most of the other advantages that have been powering the U.S. economy forward for decades will remain unchanged.

So too will another vital statistic: population growth. According to federal statistics, the fertility rate in the U.S., where each woman has on average 2.1 children, is now the highest among major industrialized economies. We are above replacement level while Europe, Japan and other industrialized economies have long been beneath it. That means that, even as our major competitors have to cope with graying populations, declining productivity and increasing pension costs, our population will remain relatively youthful and vibrant, notwithstanding the retirement of the baby boomers. This advantage is enhanced by our ability to attract and integrate hardworking immigrants from around the world. …

Tony Blankley writes on the media’s Obama cheering sections.

The mainstream media have gone over the line and are now straight-out propagandists for the Obama campaign.

While they have been liberal and blinkered in their worldview for decades, in 2007-08, for the first time, the major media consciously are covering for one candidate for president and consciously are knifing the other. This is no longer journalism; it is simply propaganda. (The American left-wing version of the Volkischer Beobachter cannot be far behind.)

And as a result, we are less than seven weeks away from possibly electing a president who has not been thoroughly or even halfway honestly presented to the country by our watchdogs — the press. The image of Obama that the press has presented to the public is not a fair approximation of the real man. They consciously have ignored whole years of his life and have shown a lack of curiosity about such gaps, which bespeaks a lack of journalistic instinct. …

Power Line posts on the latest poll showing 9 points up for Obama. Here’s some old wisdom from Pickerhead; figures don’t lie, but liars figure.

In 2005 there was an opportunity to attack the problems at Fannie/Freddie. Kevin Hassett at Bloomberg News has the story.

The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.

Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.

But really, it isn’t. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.

Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. …

Christopher Hitchens wants to know if Obama’s another Dukakis.

… The Dukakis comparison is, of course, a cruel one, but it raises a couple more questions that must be faced. We are told by outraged Democrats that many voters still believe, thanks to some smear job, that Sen. Obama is a Muslim. Yet who is the most famous source of this supposedly appalling libel (as if an American candidate cannot be of any religion or none)? Absent any anonymous whispering campaign, the person who did most to insinuate the idea in public—”There is nothing to base that on. As far as I know“—was Obama’s fellow Democrat and the junior senator from New York. It was much the same in 1988, when Al Gore brought up the Dukakis furlough program, later to be made infamous by the name Willie Horton, against the hapless governor of Massachusetts who was then his rival for the nomination.

By the end of that grueling campaign season, a lot of us had got the idea that Dukakis actually wanted to lose—or was at the very least scared of winning. Why do I sometimes get the same idea about Obama? To put it a touch more precisely, what I suspect in his case is that he had no idea of winning this time around. He was running in Iowa and New Hampshire to seed the ground for 2012, not 2008, and then the enthusiasm of his supporters (and the weird coincidence of a strong John Edwards showing in Iowa) put him at the front of the pack. Yet, having suddenly got the leadership position, he hadn’t the faintest idea what to do with it or what to do about it.

Look at the record, and at Obama’s replies to essential and pressing questions. The surge in Iraq? I’ll answer that only if you insist. The credit crunch? Please may I be photographed with Bill Clinton’s economic team? Georgia? After you, please, Sen. McCain. A vice-presidential nominee? What about a guy who, despite his various qualities, is picked because he has almost no enemies among Democratic interest groups? …

Steve Malanga in City Journal with report on the new crop of urban pan-handlers.

Barbara Bradley, an editor with the Memphis Commercial Appeal, moved into the River City’s reviving downtown about a year and a half ago, loving its “energy and enthusiasm.” But a horde of invading panhandlers has cooled her enjoyment of city life. Earlier this year, she recalled in a recent column, as she showed some visitors around the neighborhood, “a big panhandler blocked the entrance to our parking area and demanded his toll.” Now a nervous Bradley avoids certain downtown areas, locks her car when fueling up at local gas stations, and parks strategically, so that she can see beggars coming before getting out of her car. “When I hear someone call out ‘ma’am, ma’am’ anywhere in downtown or midtown, I run.”

She’s not alone. Cities have overcome myriad obstacles in revitalizing their downtowns, from lousy transportation systems to tough competition from suburban shopping malls. But nearly 15 years after New York City mayor Rudolph Giuliani and his police chief, William Bratton, vanquished Gotham’s notorious squeegee men and brought aggressive panhandling under control, other cities are facing a new wave of “spangers” (that is, spare-change artists) who threaten their newfound prosperity by harassing residents, tourists, and businesses. Unlike their predecessors in the seventies and eighties, many of these new beggars aren’t helpless victims or even homeless. Rather, they belong to a diverse and swelling community of street people who have made panhandling their calling. …

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Chicago Tribune editors introduce us to Tzipi Livni. She’s about to become a prime minister. No, not Finland. Israel.

Iran is rushing ahead with its nuclear program, overcoming technical challenges and daring the world to stop it. The terrorists of Hamas are tightening their grip on Gaza and eyeing the West Bank. Hezbollah radicals are ascendant in Lebanon. And peace talks with the Palestinians are lurching along, yet to yield any major results.

Enter Tzipi Livni, the woman who likely will be Israel’s next prime minster.

If that name’s not familiar to you, it will be. Livni won election Wednesday as the new leader of the Kadima party, which was founded by her political mentor, the former Prime Minister Ariel Sharon. She now will try to form a coalition government that would replace disgraced Prime Minister Ehud Olmert. He is stepping down after a series of damaging corruption investigations. …

Jim Kramer provides concise cogent background for Wall Street’s troubles.

Frank Capra would have loved the ongoing demise of Wall Street as we know it. How could he not? He correctly presaged it 62 years ago in It’s a Wonderful Life. Except in the 2008 sequel, not only does the Bailey Bros. Building & Loan survive, but it vanquishes Potter’s sorry, bloated operation, and the evil banker’s empire gets dismantled and sent to the eponymous field! This time around, George Bailey gets played not by Jimmy Stewart but by another quiet, unassuming individual, Ron Hermance. He’s the CEO of the homegrown Hudson City Bancorp, a modern-day replica of the Bailey Bros. Building & Loan. Never heard of Hermance or Hudson City? Under the avuncular and down-to-earth Hermance, this once-tiny Paramus, New Jersey, savings bank is now the largest savings and loan in the country. Who gets cast as the vicious, scheming Mr. Potter? We’ve got tons of candidates vying for that role these days, but only Richard Fuld, of the bankrupt Lehman Brothers, can truly fill Lionel Barrymore’s wingtips, given his arrogance and greed. How fitting is it that the day Lehman Brothers ceased to trade, because of Fuld’s inability to grasp how truly rotten Lehman had become, Hudson City hit its 52-week high? The cause of Lehman’s death? A mortgage portfolio of deadbeat loans that may prove to be worth even less than Fuld and his minions eventually acknowledged.

Hudson City’s secret is that, just like good old George Bailey in the movie, Hermance never saw the world outside his hometown, never went to exotic places like Santa Barbara, South Beach, or Europe. So unlike Fuld, or the executives at the defunct Bear Stearns, the merged Merrill Lynch, and even the now-seized American International Group, Hermance never lent money, gave mortgages, or promised to pay off on guarantees to anyone outside of his bailiwick. In other words, unlike those other guys, Hermance actually knew his borrowers and has been paid back on virtually every loan he has ever made. Hudson City’s default rate is virtually nonexistent compared with that of every one of these fallen behemoths. That’s how good the firm’s lending standards are. His model couldn’t have been more the opposite of the Potter-like plan, which, at its core, meant crafting mortgage-backed securities together from billions of dollars in residential loans of dubious quality that vastly overstated the value of the property underneath them and had no hope of ever being repaid unless housing continued to appreciate. No wonder Hudson City’s thriving while Potter’s field is filled with the graves of those who worked at Bear, Lehman, and Merrill.

The ascendancy of Hudson City, and the destruction or succumbing of so many of the once seemingly invincible investment banks or insurers, is no coincidence. There’s a fundamental change going on, and Hudson City’s riding it while almost everyone on Wall Street is being swamped by it. The change involves risk and the need to avoid taking it; it involves funding and the need to have a steady source, through sticky deposits, not hot slimy hedge funds; and it involves simplicity, not complexity. A mortal can actually understand how Hudson City makes its money; nobody can possibly even fathom all of the ways that Lehman or Bear or Merrill or AIG found to lose money. …

Spengler’s cynicism may not be the tonic for now, but he has a point.

Why should American taxpayers give US Treasury Secretary “Hank” Paulson a blank check to bail out the shareholders of busted banks? Why should the Treasury turn itself into a toxic waste dump for their bad loans? Why not let other banks join the unlamented Brothers Lehman in bankruptcy court, and start a new bank with taxpayers’ money? Or have the Treasury pay interest on delinquent mortgages, and make them whole? Even better, why not let the Chinese, or the Saudis or other foreign investors take control of failed American banks? They’ve got the money, and they gladly would pay a premium for an inside seat at the American table.

None of the above will occur. America will give between US$700-$800 billion to the Treasury to buy any bank assets it wants, on any terms, with no possible legal recourse. It is an invitation to abuse of power unparalleled in American history, in which ill-paid civil servants will set prices on the portfolios of the banking system with no oversight and no threat of legal penalty.

Why are the voices raised in protest so shrill and few? Why will Americans fall on their fountain-pens for their bankers? If America is to adopt socialism, why not have socialism for the poor, rather than for the rich? Why should American households that earn $50,000 a year subsidize Goldman Sachs partners who earn $5 million a year?

Believe it or not, there is a rational explanation, and quite in keeping with America’s national motto, E pluribus hokum. Part of the problem is that Wall Street, like the ethnic godfather in the old joke, has made America an offer it can’t understand. The collapsing the mortgage-backed securities market embodies a degree of complexity that mystifies the average policy wonk. But that is a lesser, superficial side of the story. …

WaPo story on Hillary fan who now supports McCain because of the Palin pick.

Lynette Long’s friends can barely sputter their objections. “How could you?” they say. “What about the environment? What about gay rights? What about Roe v. Wade?”

Long’s son calls, flabbergasted. And her patients in affluent, liberal Bethesda? They can hardly fathom it.

Lynette Long — psychologist, feminist, Democrat, Dupont Circle dweller, Whole Foods shopper, George Bush hater, Hillary Clinton supporter (to the max) — is not just voting for John McCain and Sarah Palin, she even took the stage at their rally in Fairfax to trumpet her decision to the world.

Long got the call from the McCain campaign at 10 the night before the rally this month. With a twinkle in her eye, the struggle for women in her heart and a bit of mischief in her mind, she agreed to be a warm-up speaker for the Republican ticket.

She had never been to a candidate’s rally before. She had voted for the Democrat for president in every election except for the elder George Bush’s first time, against Michael Dukakis in 1988. Sure, she had demonstrated against the Vietnam War, but she basically wasn’t the political type. That is, until Hillary Clinton came along.

All of a sudden, Long saw hope. As she told her son: “How would you feel if every day all the people you saw in authority were men, all the statues in Washington are all men, the money in your pocket, all pictures of men — and then finally, a woman comes along and she could be president? How would you feel? I would vote for her.” …

Ralph Peters on the charms of Sarah Palin.

… Speaking of Reagan (Eureka College, Illinois), every chief executive we’ve had since the Gipper snapped his final salute as president has had the imprimatur of an Ivy League university. And we’ve gone from bad to worse:

* George Herbert Walker Bush: Yale.

* William Jefferson Clinton: Georgetown, Oxford, Yale Law.

* George W. Bush: Yale and Harvard Business School.

The first lacked the sense to finish the job in Desert Storm; the second lacked the guts to go after al Qaeda when it was just a startup – and the third, well, let’s just say he disappointed our low expectations.

Now we have the Ivy League elite’s “he’s not only like us but he’s a minority and we’re so wonderful to support him” candidate, Sen. Barack Obama (Columbia and Harvard Law).

Our country can’t afford another one of these clowns. Harvard isn’t the answer – Harvard’s the problem.

So here’s the message Palin is sending on behalf of the rest of us (the down-market masses Dems love at election time and ignore once the voting’s done): The rule of the snobs is over. It’s time to give one of us a chance to lead.

Sen. John McCain‘s one of us, too. He raised hell at Annapolis (quadruple ugh: military!), and he’ll raise the right kind of hell in Washington.

McCain’s so dumb he really loves his country.

Jeff Jacoby on the drilling bill that’s against drilling.

Q: Says here the House of Representatives approved a bill to allow offshore oil drilling, but nearly all the Republicans voted against it. Weren’t Republicans the ones chanting “Drill, baby, drill!” at their convention last month?

A: Yep. That’s why they voted against this bill. It isn’t a drilling bill, it’s an anti-drilling bill. If it becomes law, nearly all the oil and gas in the Outer Continental Shelf would be off-limits forever.

Q: Huh? This story says the bill “would allow offshore drilling as close as 50 miles from the Atlantic and Pacific coasts.” It quotes House Speaker Nancy Pelosi: “It’s time for an oil change in America, and this bill represents that.” That’s anti-drilling?

A: C’mon: A few weeks ago, Pelosi was implacably opposed to letting the House vote on lifting the offshore drilling moratorium. “I’m trying to save the planet!” she told Politico. “I’m trying to save the planet!” You really think someone so sanctimoniously hostile to drilling just six weeks ago is all for it now?

Q: But this bill -

A: This bill permanently bans all drilling within 50 miles of the US coast, which just happens to be where most of the recoverable oil and gas reserves are. …

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Robert Samuelson on Paulson’s “confidence” game.

It’s doubtful that Princeton University economist Ben Bernanke and former Goldman Sachs CEO Hank Paulson imagined what awaited them when they took charge of the Fed and the Treasury, respectively, in 2006. Since then, they have put their agencies on a wartime footing, trying to avert the financial equivalent of an army’s collapse. As in war, there have been repeated surprises. As in war, the responses have involved much improvisation — for instance, the $85 billion rescue of American International Group. But last week their hastily built defenses seemed to be crumbling, so Paulson proposed a radical solution of having the government buy vast amounts of distressed debt to shore up the financial system.

It’s all about confidence, stupid. Every financial system depends on trust. People have to believe that the institutions they deal with will perform as expected. We are in a crisis because financial managers — the people who run banks, investment banks, hedge funds — have lost that trust. Banks recoil from lending to each other; investors retreat. The ultimate horror is when everyone wants to sell and no one wants to buy. Paulson’s plan aims to avoid that calamity. …

David Harsanyi reacts to Biden’s claim it’s patriotic to pay taxes.

The Boston Tea Party be damned. This week, Democratic vice presidential candidate Joe Biden unleashed the most absurd remark of his illustrious career, claiming that taxes were “patriotic.”

Biden claims that wealthier Americans should pay more in taxes because, “It’s time to be patriotic . . . time to jump in, time to be part of the deal, time to help get America out of the rut.”

Oh, the injustice of American society!

When exactly did taxation transform into a form of charity? Biden, it seems, has a difficult time differentiating between coercion and generosity. The distinction is simple: When one fails at altruism, he is a louse; when one fails to pay taxes, he ends up in the slammer.

But anyone can “jump in” at any time. Biden and his wife, who would be considered wealthy under an Obama/Biden tax plan, for instance, gave an average of $369 a year to charity during the past decade. So you can see that by “help,” Biden means assistance with your money. …

Columnist for Toronto Globe and Mail writes on the incredible shrinking Obama.

How’s Barack Obama’s narrative going?

Journalists used to tell stories, now they plumb narratives. Narrative is a pretentious borrowing from the abstraction-clotted world of academic criticism, where texts are interrogated, authors are dead and high-toned fatuousness is king. I’ll see your postmodern and raise you a meta.

Mr. Obama’s campaign, however, has renewed narrative’s trendy fizz. It is the very Perrier water (or is it San Pellegrino now?) of the better campaign reportage. Take no hike up Pundit Mountain without it. From the moment, the Obama surge took forceful shape, everyone – reporters, the scholars of blogland, the partisan howler monkeys of cable-news cage matches – has chattered on about Mr. Obama’s narrative.

Trouble is, most of the story of the campaign isn’t so much coming from the candidate himself as it is created by all those who, most in worshipful terms, have talked, written and reported on or about him. The Obama campaign is one great text generator, the grand fable of his fans.

In one sense, this is not surprising. He has a quicksilver quality. Even after two autobiographies, Mr. Obama remains something of a floating, uncrowded presence. His story (and he is so impressively self-aware as to have made the most acute comment on it) is temptingly open-ended, very much a page to be written on. He himself has written, most memorably: “I serve as a blank screen on which people of vastly different political stripes project their own views.” …

Noemie Emery has a lot of fun calculating the Palin effect.

Now that the dust is beginning to settle from the whirlwind descent of Hurricane Sarah, it may be time to stand back a little and assess in perspective what the moose-hunting beauty from Wasilla, Alaska, has wrought. Things will change between now and November, but she has already had a sizeable impact, and four major themes do stand out:

1. Call off the funeral. Three weeks ago, the wisdom was that the conservative movement was over and done with. It had burned itself out, taking the Republican party down with it, and setting the stage for the biggest explosion of liberal governance since perhaps the New Deal. Ever since November 2006, when the roof quite deservedly fell in on the Republican Congress, liberals have declared that the Reagan Era–first pronounced dead in 1982, then in 1986, then in 1988, then in 1992, then again in 1998-2000, and of course dead for good in 2006–was at long last finally going to receive the burial it deserved. …

Yesterday we had Larry Sabato on the state of the race. Today Jay Cost from Real Clear Politics takes a turn.

There’s been a lot of talk about this dynamic race – “game changers” and “moments” and things of that nature. Regular readers of mine know that I don’t subscribe to the view of politics inherent to that kind of analysis.

As an alternative to discussing Fannie, Freddie, lipstick on pigs, hacked emails, and patriotic 1040 filers – I thought I would put some simple numbers on the board to give us a sense of exactly what has changed since June 3rd.

I’ve broken the national polling into two sorting categories. First, we sort by pollster. We group the Gallup polls together, then the Rasmussen polls, then the remaining polls.

Second, we sort by date. We group the polls for June, then for July, then for August prior to the conventions, then for today. …

John Fund points out one of the reasons we’ll have to hold our noses.

Peter Robinson looks for Barack’s sense of humor.

Work your way down a checklist of the attributes a presidential candidate needs and you’ll see that Barack Obama possesses all but one.

Is he intelligent? Obviously. A quick study, capable of ingesting and then disgorging immense quantities of boring information about public policy? That’s how he got elected president of the Harvard Law Review. Good with words? Very. Just read his first book. (His second, a campaign book, was written not to be read but to be placed on coffee tables.) Determined? Resilient? He prevailed in a contest with Hillary Clinton that proved more grueling than the 12 labors of Hercules.

What Barack Obama lacks is simple–and a lot more important than it might seem: a sense of humor. …

James Taranto posts on the media’s cavalier attitude towards the hackers who broke into Sarah Palin’s computer.

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Charles Krauthammer writes on Bush and the historical perspective to come.

For the past 150 years, most American war presidents — most notably Lincoln, Wilson and Roosevelt — have entered (or reentered) office knowing war was looming. Not so George W. Bush. Not so the war on terror. The 9/11 attacks literally came out of the blue.

Indeed, the three presidential campaigns between the fall of the Berlin Wall and Sept. 11, 2001, were the most devoid of foreign policy debate of any in the 20th century. The commander-in-chief question that dominates our campaigns today was almost nowhere in evidence during our ’90s holiday from history.

When I asked President Bush during an interview Monday to reflect on this oddity, he cast himself back to early 2001, recalling what he expected his presidency would be about: education reform, tax cuts and military transformation from a Cold War structure to a more mobile force adapted to smaller-scale 21st-century conflict.

But a wartime president he became. And that is how history will both remember and judge him. …

David Warren has thoughts on the strengths of our culture when dealing with difficulties.

… Not Canada alone, but the English-speaking peoples flourished through the course of the last few centuries from a cultural inability to be carried away.

We recall the wartime accounts of the British under aerial attack, getting up each morning to go calmly about the business of clearing the latest mess. We recall the way in which our own parents and grandparents stolidly proceeded through the Great Depression. And we may wonder, practically, if the same qualities are still in us — or if, rather, we have lost our sang-froid.

Politicians cannot help us when times get very rough. The people themselves must be equal to the challenge. We must be ready to do our part, without whining; without indulging in self-pity, or engaging in the excitable sport of choosing scapegoats. The attitude must be that of my admired banker friend: “This has happened. We must deal with it.”

And deal with it in the knowledge that there are no more “quick fixes” now, than there ever were. It is the belief in quick fixes that created the problems. The world, to those who have any wisdom, is a place that repays diligent labour, when it gives any repayment at all; and routinely punishes those who shirk — together with everyone around them. …

David Leonhardt in the NY Times with his ideas on the origins.

… How did this happen? For one thing, the population of the United States (and most of the industrialized world) was aging and had built up savings. This created greater need for financial services. In addition, the economic rise of Asia — and, in recent years, the increase in oil prices — gave overseas governments more money to invest. Many turned to Wall Street.

Nonetheless, a significant portion of the finance boom also seems to have been unrelated to economic performance and thus unsustainable. Benjamin M. Friedman, author of “The Moral Consequences of Economic Growth,” recalled that when he worked at Morgan Stanley in the early 1970s, the firm’s annual reports were filled with photographs of factories and other tangible businesses. More recently, Wall Street’s annual reports tend to highlight not the businesses that firms were advising so much as finance for the sake of finance, showing upward-sloping graphs and photographs of traders.

“I have the sense that in many of these firms,” Mr. Friedman said, “the activity has become further and further divorced from actual economic activity.”

Which might serve as a summary of how the current crisis came to pass. Wall Street traders began to believe that the values they had assigned to all sorts of assets were rational because, well, they had assigned them. …

Larry Sabato from UVA gives his take on the electoral college as it stands today.

In early summer, the Crystal Ball took its first look at the likely November 4th Electoral College map. Our assessment was that, in the College at least, the contest appeared close. John McCain had 174 solid or likely electoral votes to Barack Obama’s 200 solid or likely. The lead switched once we added in states that were “leaning” to one or the other: McCain had 227 votes to Obama’s 212, with 270 needed for election. Fully 99 electoral votes in eight other states (CO, MI, NH, NV, OH, PA, VA, and WI) remained in the toss-up category.

We based our map not just on current polling but also the recent historical record in presidential elections. To some degree, this explained the differences between our map and those of some other analysts. As we revise it in this essay, we will once again add a dose of history to current trends, and at least tentatively, we will attempt to narrow the number of toss-ups.

Just think about all that has happened since early July. Obama took his European trip, hailed in some quarters and condemned in others. The McCain campaign came alive for the first time in months, attacking Obama as “the biggest celebrity in the world” after his travels–a hint of the strategy that was to come. Polls narrowed between Obama and McCain, as Obama lost some of his earlier luster. The Democratic Convention in Denver temporarily revived Obama’s survey numbers, producing a small convention bounce, mainly on the strength of Obama’s closing night speech. Much of the rest of the week had been consumed by intrigue about what the Clintons would or would not do, and Obama’s choice of Joe Biden as Veep-nominee was met with general approval but no special enthusiasm. It avoided any controversy but was not, in the overused term of 2008, a “game changer.”

Then the presidential contest got its real shake-up. …

Rush Limbaugh calls Obama on his racist ads in the Hispanic community.

I understand the rough and tumble of politics. But Barack Obama — the supposedly postpartisan, postracial candidate of hope and change — has gone where few modern candidates have gone before.

Mr. Obama’s campaign is now trafficking in prejudice of its own making. And in doing so, it is playing with political dynamite. What kind of potential president would let his campaign knowingly extract two incomplete, out-of-context lines from two radio parodies and build a framework of hate around them in order to exploit racial tensions? The segregationists of the 1950s and 1960s were famous for such vile fear-mongering. …

John Fund with more on that ad.

Corner post on the subject also.

… The other thing to note about this episode is the force and speed with which Limbaugh responded. The moment the television ad was up, Rush began an effort to correct the record through his radio program, comments to reporters, and now his Journal editorial. It has succeeded, and an ad that was supposed to help Obama may well turn out to hurt him. As Limbaugh wrote, Barack Obama, in appealing to racial divisions, is playing with political dynamite. It is a very unfortunate turn for the candidate who once promised to be a unifying figure and source of civic and racial comity.

Barack Obama has tangled with the wrong fellow. There’s a reason Rush has been on top for two decades. This latest episode helps demonstrate why.

Steve Hayward says Sarah is a natural.

Lurking just below the surface of the second-guessing about Sarah Palin’s fitness to be president is the serious question of whether we still believe in the American people’s capacity for self-government, what we mean when we affirm that all American citizens are equal, and whether we tacitly believe there are distinct classes of citizens and that American government at the highest levels is an elite occupation.

It is incomplete to view the controversy over Palin’s suitability for high office just in ideological or cultural terms, as most of the commentary has done. Doubts about Palin have come not just from the left but from across the political spectrum, some of them from conservatives like David Frum, Charles Krauthammer, and George Will. Nor is this a new question. To the contrary, Palin’s ascent revives issues and arguments about self-government that raged at the time of the American founding and before. Indeed, the basic problems of the few and the many, and the sources of wisdom and virtue in politics, stretch back to antiquity.

American political thought since its earliest days has been ambiguous or conflicted about the existence and character of a “natural aristocracy” of governing talent. If the ghosts of Thomas Jefferson and John Adams are watching the storm over Palin, they must surely be revisiting their famous dialogue about America’s governing class. Adams’s widely misunderstood argument that there should perhaps be an explicit recognition and provision for an aristocratic class finds its reprise in the snobbery that greeted Palin’s arrival on the scene. It’s not just that she didn’t go to Harvard; she’s never been on Meet the Press; she hasn’t participated in Aspen Institute seminars or attended the World Economic Forum. She hasn’t been brought into the slipstream of the establishment by which we unofficially certify our highest leaders.

The issue is not whether the establishment would let such a person as Palin cross the bar into the certified political class, but whether regular citizens of this republic have the skill and ability to control the levers of government without having first joined the certified political class. But this begs an even more troublesome question: If we implicitly think uncertified citizens are unfit for the highest offices, why do we trust those same citizens to select our highest officers through free elections? …

Susan Estrich takes a look at Alaska’s “first dude.”

… There may be only one truly regular guy, a guy regular enough that he doesn’t begin to have the arrogance to believe he speaks for anyone other than himself, in this race. And therefore, of course, he does.

He is not fancy. He is not elite. He is not a single one of the things that Barack Obama has been criticized for. He is from a town even smaller than the one he grew up in. He was secure enough to marry a smart and ambitious girl, a girl he has always thought had great things in her.

A Beverly Hills dinner with 300 best friends at $28,500 apiece is not where you would ever place him, much less ever imagine him to be. The Democrat is the guy in Beverly Hills, as comfortable as he could be, even if he didn’t grow up there. He has the pedigrees. So does his wife. So does his opponent, and his opponent’s wife. So ultimately does a 36-year member of the Senate wherever he is from. It is the Republican guy who is real not rich, hard-working not fancy, so All Alaskan that he is in fact much more in touch with what he is, which is a whole lot easier for a very lot of he voters who are likely to decide this election. …

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Abe Greenwald looks at a cast of international characters and wonders if Obama is up to dealing with them.

… But what common purpose can we find with the above-mentioned leaders. While there are natural resource dimensions to some of our problems, the heads of Russia, Iran, North Korea, and al Qaeda are driven, above all else, by messianic totalitarianism. (As Peters points out, even Putin’s sense of Russian destiny is informed by a delusional mysticism). Obama went to Berlin and told hundreds of thousands of Germans that “Partnership and cooperation among nations is not a choice; it is the one way, the only way, to protect our common security and advance our common humanity.” It’s a nice thought, but humanity, as such, is far less common than Obama realizes.

Good WSJ OpEd on the accounting rules that rile markets.

… The current meltdown isn’t the result of too much regulation or too little. The root cause is bad regulation.

Call it the revenge of Enron. The collapse of Enron in 2002 triggered a wave of regulations, most notably Sarbanes-Oxley. Less noticed but ultimately more consequential for today were accounting rules that forced financial service companies to change the way they report the value of their assets (or liabilities). Enron valued future contracts in such a way as to vastly inflate its reported profits. In response, accounting standards were shifted by the Financial Accounting Standards Board and validated by the SEC. The new standards force companies to value or “mark” their assets according to a different set of standards and levels.

The rules are complicated and arcane; the result isn’t. Beginning last year, financial companies exposed to the mortgage market began to mark down their assets, quickly and steeply. That created a chain reaction, as losses that were reported on balance sheets led to declining stock prices and lower credit ratings, forcing these companies to put aside ever larger reserves (also dictated by banking regulations) to cover those losses. …

Ed Morrissey posts on McCain’s 2006 attempt to dig into the Fannie/Freddie mess.

With the financial sector in turmoil today, the media and the politicians have started throwing around blame with the same recklessness as lenders threw around credit to create the problem.  Politically, the pertinent question is this: Which candidate foresaw the credit crisis and tried to do something about it?  As it turns out, John McCain did — and partnered with three other Senate Republicans to reform the government’s involvement in lending three years ago, after an attempt by the Bush administration died in Congress two years earlier.  McCain spoke forcefully on May 25, 2006, on behalf of the Federal Housing Enterprise Regulatory Reform Act of 2005 (via Beltway Snark): …

WaPo Op-Ed says exports saved us from recession in the past year and are should do the same this year.

From the way the presidential candidates have been talking, you might think that American factories and workers are unable to compete in the global economy. John McCain has promised to open new markets for American goods and provide help for workers who lose their jobs. Barack Obama has expressed doubts about past trade agreements and has proposed changes in tax laws that he says now encourage companies to ship jobs overseas.

The candidates deserve credit for recognizing the challenges posed by trade and foreign investment. But their tone obscures a major success story: the dramatic improvement in our balance of international trade. This export boom has saved us from recession over the past year and, despite the recent financial turmoil, is likely to continue doing so. It is generating at least 2 million new and high-paying jobs, about half of them from increased foreign sales by the beleaguered manufacturing sector.

Fresh evidence of the trend came last month, when the second-quarter growth rate for the U.S. economy was revised upward, to 3.3 percent. A record surge in net exports accounted for almost all of that expansion. Since the housing and financial crises erupted in mid-2007, there has been a decline in final domestic demand. We would have been in recession throughout this period had we relied wholly on internal economic forces.

International trade has saved the day. Our external balance has improved by more than $200 billion as calculated for gross domestic product (GDP) purposes, cutting the previous deficit by more than one-third. This dramatic progress has kept the overall economy growing by modest amounts. The prophets of recession ignored the international engagement of the U.S. economy. …

Karl Rove says Obama should sell himself and pass on the McCain attacks.

… It is a mistake for Mr. Obama to spend a lot of time attacking Mr. McCain. In the past week, he, his surrogates or his ads have mocked Mr. McCain’s inability to use a keyboard (an activity, like combing his hair or tying his tie, that Mr. McCain has difficulty with because of war wounds), claimed his administration would be riddled with lobbyists, tried to make an issue of his age and successful cancer treatment, missed no chance to suggest he’d be President George W. Bush’s third term, and called him “dishonorable.” This last charge is particularly foolish. It’s one of the last things voters will believe about John McCain.

The people who can be won over by shouting “McCain is Bush” long ago sided with Mr. Obama. That message does not resonate with undecided voters. The Democrat should instead spend every moment spelling out what he would do to address the country’s challenges.

This election is not fundamentally about Mr. McCain. It is much more about people’s persistent doubts concerning Mr. Obama. The only way to reassure them is to provide a compelling, forward-looking agenda. That sounds obvious, but the Obama campaign seems to be betting on making Mr. McCain an unacceptable choice by striking at his character. Mr. McCain has absorbed many harder blows than anything the Obama campaign can throw his way. …

Laura Ingraham defends Sarah Palin against nay-sayers on the right.

In today’s New York Times, David Brooks launches a critique of Sarah Palin, essentially concluding that her populist appeal is dangerous and ill-conceived. He yearns for the day when “conservatism was once a frankly elitist movement,” one that stressed “classical education, hard-earned knowledged, experience, and prudence.” Brooks, like a handful of other conservative intellectuals, believes Palin “compensates for her lack of experience with brashness and excessive decisiveness.”

Well, at the risk of appearing brash, let me say that I am glad to see my old friend finally pushed to the point where he has to make an overt defense of elitism, after years of demonstrating covert support for elitism. We conservatives who believe Governor Palin represents a solid vice-presidential pick should be extremely comfortable engaging this issue.

Brooks’s main argument against Palin is that she lacks the type of experience and historical understanding that led President Bush to a 26 percent approval rating in his final months in office. Yet the notion that the Bush Administration got into trouble because it didn’t have enough “experience” is absurd. George W. Bush was governor of Texas for six years. His father was president. His primary advisors on matters of foreign policy were Dick Cheney, Don Rumsfeld, and Colin Powell. …

Lets have a look at the David Brooks column.

… Palin is the ultimate small-town renegade rising from the frontier to do battle with the corrupt establishment. Her followers take pride in the way she has aroused fear, hatred and panic in the minds of the liberal elite. The feminists declare that she’s not a real woman because she doesn’t hew to their rigid categories. People who’ve never been in a Wal-Mart think she is parochial because she has never summered in Tuscany.

Look at the condescension and snobbery oozing from elite quarters, her backers say. Look at the endless string of vicious, one-sided attacks in the news media. This is what elites produce. This is why regular people need to take control.

And there’s a serious argument here. In the current Weekly Standard, Steven Hayward argues that the nation’s founders wanted uncertified citizens to hold the highest offices in the land. They did not believe in a separate class of professional executives. They wanted rough and rooted people like Palin.

I would have more sympathy for this view if I hadn’t just lived through the last eight years. For if the Bush administration was anything, it was the anti-establishment attitude put into executive practice. …

Jake Tapper of ABC’s Political Punch reports on Obama’s dishonest Spanish language ads.

… The greater implication the ad makes, however, is that McCain is no friend to Latinos at all, beyond issues of funding the DREAM act or how NCLB money is distributed. By linking McCain to Limbaugh’s quotes, twisting Limbaugh’s quotes, and tying McCain to more extremist anti-immigration voices, the Obama campaign has crossed a line into misleading the viewers of its new TV ad. In Spanish, the word is erróneo.

LA Times story on the guilt of the Rosenbergs.

Julius and Ethel Rosenberg were executed 55 years ago, on June 19, 1953. But last week, they were back in the headlines when Morton Sobell, the co-defendant in their famous espionage trial, finally admitted that he and his friend, Julius, had both been Soviet agents.

It was a stunning admission; Sobell, now 91 years old, had adamantly maintained his innocence for more than half a century. After his comments were published, even the Rosenbergs’ children, Robert and Michael Meeropol, were left with little hope to hang on to — and this week, in comments unlike any they’ve made previously, the brothers acknowledged having reached the difficult conclusion that their father was, indeed, a spy. “I don’t have any reason to doubt Morty,” Michael Meeropol told Sam Roberts of the New York Times.

With these latest events, the end has arrived for the legions of the American left wing that have argued relentlessly for more than half a century that the Rosenbergs were victims, framed by a hostile, fear-mongering U.S. government. Since the couple’s trial, the left has portrayed them as martyrs for civil liberties, righteous dissenters whose chief crime was to express their constitutionally protected political beliefs. In the end, the left has argued, the two communists were put to death not for spying but for their unpopular opinions, at a time when the Truman and Eisenhower administrations were seeking to stem opposition to their anti-Soviet foreign policy during the Cold War.

To this day, this received wisdom permeates our educational system. …

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David Warren comments on Wall Street’s problems.

… Lehman Brothers went down over the weekend; A.I.G. is falling as I write. Their assets get dumped, the value of other companies’ similar assets is reduced accordingly, and this in turn erodes the capital base under the entire banking system. The collapse of Lehman has, moreover, just kicked away the argument that some firms are, by nature, too tall to fall. And all because of a few million dicey consumer loans, that no one thought twice about at the time.

The problem must be solved, or so everyone says, by increasing government regulation. Am I perhaps alone in observing that this regulation is already as dense and complex as the industry, and that it might well make more sense to make the regulations not denser and more complex, but rather, simpler, more transparent and effective. For to my mind, we ought to have learned by now that the more complex a system grows, and the farther removed from the hard facts of nature, the more susceptible it becomes to catastrophic failure.

Over several generations we have rebuilt an economy that once rested on goods, services, and tangible assets. It now depends also on kiting, with wonderfully sophisticated credit instruments — like a postmodern building, supported as much from above as below. In the longer view, it is well that gravity asserts itself the sooner, and we reacquire the benefit of a solid foundation.

In the meanwhile, consider Matthew 5:45. The sun rises alike on the evil and the good, and the rain falls on the just and the unjust. To which we might add, that it is usually the unjust who are whining.

Robert Samuelson columns on Wall Street’s unraveling.

… How Wall Street restructures itself is as yet unclear. Companies need more capital. Merrill went to Bank of America because commercial banks have lower leverage (about 10 to 1). It seems likely that many thinly capitalized hedge funds will be forced to reduce leverage. Ditto for “private equity” firms. In time, all this may prove beneficial. Financial firms may take fewer stupid and wasteful risks — at least for a while. Talented and ambitious people may move from finance, where they were attracted by exorbitant pay, into more productive industries.

But the immediate effect may be to damage the rest of the economy. People have already lost their jobs. States and localities, particularly New York City and New Jersey, that depend on Wall Street’s profits and payrolls will face further spending cuts. Banks and investment banks may tighten lending standards again and impede any economic recovery. The stock market’s swoon may deepen consumers’ pessimism, fear and reluctance to spend. There may be more failures of financial firms. It’s hard to know, because financial crises resemble wars in one crucial respect: They result from miscalculation.

John Stossel writes on racism and privilege.

Complaints about racism still dominate media discussion of the disparity between black and white success. Comedian Chris Rock tells white audiences, “None of ya would change places with me! And I’m rich! That’s how good it is to be white!”

I assumed that the success of Barack Obama, as well as thousands of other black Americans and dark-skinned immigrants — many of whom thrive despite language problems — demonstrates that America today is largely a colorblind meritocracy. But a white campus lecturer, Tim Wise, gets tremendous applause from students by saying things like, “[W]hite supremacy and privilege continue to skew opportunities hundreds of years after they were set in place” and in America, “meritocracy is as close to a lie as you can come.” His message is in demand — he is invited to more than 80 speaking engagements a year.

But black writer Shelby Steele argues that whites do blacks no favors wringing their hands about white privilege.

“I grew up in segregation,” Steele told me. “So I really know what racism is. I went to segregated school. I bow to no one in my knowledge of racism, which is one of the reasons why I say white privilege is not a problem.”

Steele claims, “the real problem is black irresponsibility. … Racism is about 18th on a list of problems that black America faces.” …

von Mises Institute asks if hurricanes cause shortages.

The Huntsville Times reported on September 12 that, in response to the looming threat from Hurricane Ike, Alabama Governor Bob Riley declared a formal state of emergency. The governor’s declaration of emergency activated the state’s price-gouging law, which makes “unconscionable pricing” illegal during times of emergency. The Times quoted Riley as saying that he thinks “a threat to public health is a strong possibility due to the shortage of fuels.”

Hurricanes don’t cause shortages, however.

Price controls do. …

WSJ editors destroy other economic nonsense.

It was said to be the year of speculators gone wild. Seemingly everyone in Washington, including Barack Obama and John McCain, decided that oil prices were soaring because profiteers and middlemen were manipulating the futures markets. “Speculators” were spotted everywhere this side of the grassy knoll.

The only problem is that there’s no evidence to support the conspiracy theories — and sure enough, federal regulators dismantled this Beltway consensus late last week. In one of the broadest and most authoritative studies to date, the Commodity Futures Trading Commission has offered hard statistical data that financial trading hasn’t been driving price moves. The CFTC conducted an unprecedented Wall Street data sweep and scrutinized millions of transactions worth billions of dollars between January and June of this year. …

The American reports on trends in micro-finance.

Over the past two decades, “microfinance”—the extension of small loans and other financial services to individuals in poor countries—has become a darling of the international development community. The movement’s founding father, Muhammad Yunus, was awarded the Nobel Peace Prize in 2006; the United Nations says that microfinance can help countries achieve the Millennium Development Goals.

Given the newness of the industry and the informal nature of many microfinance institutions (MFIs), relatively little is known about the size and quantity of the lenders, the kinds of loans that are disbursed, or the conditions under which clients are served—but the available data tell an impressive story. According to the most recent figures from the nonprofit Microfinance Information Exchange, more than 2,200 MFIs are currently lending to around 77 million borrowers worldwide. The Microcredit Summit Campaign reckons that the numbers are even higher: it counts more than 3,300 MFIs serving 133 million clients, including 92.9 million of the world’s poorest people (representing an increase of over 700 percent from 1992). In 2006, capital investment in MFIs eclipsed $4 billion, more than triple the level in 2004. The global MFI industry has also attracted hefty amounts of U.S. aid, including $245 million in 2008. …

LA Times editors think the sun should shine on CA bar results.

Americans have been debating the fairness and efficacy of racial preferences in college and graduate school admissions for more than 30 years. Now a UCLA professor is seeking to test his hypothesis that affirmative action programs actually hurt the career prospects of minority law school graduates. But he has been hampered in his research by the indefensible failure of the State Bar of California to provide the statistics he needs. …