Bill Manzi.com

A new Obama ad criticizing the McCain record on support of alternatives to oil. It is ironic that Republicans are willing to use the tax code to not only promote oil (see tax breaks for oil companies) but to promote a whole host of other favored industries. And yet McCain simply resists the notion of using the tax code to help develop alternatives that would help stop this countrie’s addiction to oil. That addiction has created the largest transfer of wealth in the history of the world, from the United States to countries that in many cases are hostile towards us.

Rasmussen is now doing a “battleground state” survey that will be released every Monday. The latest polling in the key State of Virginia shows McCain and Obama in a dead heat at 48% each. From Rasmussen:

One week ago, McCain had a modest 49% to 47% lead over Obama. Neither candidate has led the race by more than two percentage points since June, making the historically Republican state one of the biggest toss-ups in this year’s election.

Virginia has not voted Democratic since LBJ in 1964, but there has been some real movement here, with a Democratic governor in place and a U.S. senate race that is looking like a rout in favor of the Democratic candidate. In that Senate race ex Governor Mark Warner (D) is taking on ex-Governor Jim Gilmore (R). From Rasmussen:

Former Democratic Governor Mark Warner’s lead continues to grow over former Republican Governor Jim Gilmore in Virginia’s race for the United States Senate. The latest Rasmussen Reports telephone survey in the state finds Warner on top 59% to 33%. Last month, Warner enjoyed a 57% to 34% lead.

When “leaners” are included, the Democrat now leads 61% to 35%.

A truly key state in this presidential race. I have assigned Virginia to Obama in my electoral map exercise, and will likely leave it there for now. But it truly is to close to call.

Obama makes the case on the economy.

John McCain calls for change and decries the “greed” of Wall Street in his latest ad. But what would McCain be calling for change from? Is he signaling that the Bush economic policies have failed the country? Does he now call for additional regulation of Wall Street after he voted in favor of the massive deregulation of Gramm-Leach-Bliley? And what is Gramm-Leach-Bliley anyway? Lets further look at that law, and what it changed. From Daily Kos:

Gramm-Leach-Bliley effectively repealed the second Glass-Steagall Act which, among other things, barred investment banks and retail banks from merging. Gramm-Leach-Bliley effectively removed this restriction, allowing a single institution to both create a debt-based investment, and then facilitate its sale. Previously, with two institutions involved in that process (Three if you count the investment rating company – Moody’s for example), there would have to be a high degree of clarity involved. One institution (Investment bank) wouldn’t just buy, repackage, and re-sell another institution’s (Retail bank) products without first understanding exactly what it was. It would also be far less likely to hold those assets and count them as capital.

With a single institution operating on both the commercial and investment banking fronts, the motive for clarity was eliminated.

I guess McCain was for the change embodied by Gramm-Leach-Bliley. I am not sure what change he advocates for now. Even some of his strongest supporters over at the Wall Street Journal editorial page are cringing over McCains description of Wall Street “greed”. From the ed page of the Journal:

One whiff from Barack Obama about “the mountain in Sedona where he lives,” and by day’s end Senator McCain was ranting about “corruption” and how he was going to “reform the way that Wall Street does business.” Yesterday Senator McCain’s inner populist had cooled enough to admit the existence of “honest people on Wall Street,” but it still sounded as if this week’s version of the McCain Presidency would be more about restructuring private financial markets he doesn’t understand than fixing the Washington he knows.

Flip-flopping between assertions that the economy is fundamentally strong and populist promises to rip apart its financial plumbing creates confusion about what exactly Mr. McCain really thinks. His opponent, meanwhile, stayed on message, explaining Monday’s events with the sort of dogged persistence reflected in the headline across the front page of yesterday’s New York Times: “Wall St. in Worst Loss Since ’01 Despite Reassurances by Bush.”

The Journal is correct about something that John McCain has candidly acknowledged: He does not understand financial markets.

I guess Carly Fiorina believes that Sarah Palin is not the only person on the Republican ticket who could not run H.P. In this video clip she digs the hole even deeper, explaing that her comments on Palin also applied to McCain. Who will be McCains next economic spokesperson? He seems to be going through them pretty quickly these days.

http://www.msnbc.msn.com/id/22425001/vp/26741004#26741004

The Federal Reserve, faced with the imminent failure of insurance giant A.I.G., effectively nationalized the company by giving an 85 billion dollar loan to the company in return for 80 percent of its stock. In a statement the Fed Board said:

“The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance,” the Fed said in a statement.

The washington Post reports that the government felt that a failure of AIG at this point could have potentially dire consequences in markets where AIG has become a major player. From the Post:

Government officials drew two distinctions between AIG’s situation and that of Lehman. First, ever since the demise of Bear Stearns in March, the government and private firms had been drawing up contingency plans for easing the collateral damage from a Lehman bankruptcy filing. AIG’s failure was a surprise — the company first went to the government for help Friday — and its sheer size and complexity made it impossible to quickly prepare for its collapse.

The other difference is that AIG does business in ways that get to Americans’ pocketbooks. Its short-term debt is held by institutions all over the world, including money-market mutual funds, and its overnight collapse could have caused big losses in those funds, perhaps even risking a run on them.

As the carnage continues on Wall Street both presidential candidates talked of the need for effective government regulation. But how did we get into this mess in the first place? We are here at least in part due to this ideological zeal to do away with government regulation of financial markets. The Gramm-Leach-Bliley Act of 2003 gave significant relief from traditional government regulation of financial markets, and tore down walls of separation designed to avoid the type of calamity we are facing today. From the Washington Post:

Three years earlier, McCain had joined with other Republicans to push through landmark legislation sponsored by then-Sen. Phil Gramm (Tex.), who is now an economic adviser to his campaign. The Gramm-Leach-Bliley Act aimed to make the country’s financial institutions competitive by removing the Depression-era walls between banking, investment and insurance companies. That bill allowed AIG to participate in the gold rush of a rapidly expanding global banking and investment market. But the legislation also helped pave the way for companies such as AIG and Lehman Brothers to become behemoths laden with bad loans and investments.

Deregulation designed to lift the sleepy and safe rate of returns that for years had been satisfactory to financial investors across the world. In return for the potential greater upside the government allowed a degree of risk into the system that has brought us to today. When ideology trumps good policy the results are not often pretty.

I wonder if the theory that we can run fiscal deficits of 500 billion a year as well as enormous trade deficits forever without impact is now going to be examined as well.

John McCain continued to take heat for his comments that the “fundamentals of our economy are strong”. With the candidate and his chief economic advisors Phill Gramm and Carly Fiorina imploding every time they speak the Democrats should hope they continue to speak freely on the economic meltdown occurring on Wall Street.