How Sarah Palin blew it:
Joe Biden and Sarah Palin were talking to two different Americas Thursday night. Actually, that's unfair to Joe Biden; he was trying to talk to everyone. I can say for certain, though, that Sarah Palin was talking to -- and winking at -- her own private Idaho, and for long stretches of the debate, it was an unnerving experience....
But the pit bull in lipstick was back. After her disarming "Hey, can I call you Joe?" Palin was vicious, with a winning smile. After a passionate Biden plea to "walk with me in my neighborhood," in Delaware and Scranton, where "the middle class has gotten the short end," she ridiculed him: "Say it ain't so, Joe, there you go again! Pointing backwards again!"
There were two key moments for me when Sarah Palin blew it badly. One was substantive, one was symbolic. The substantive was her bizarre statement about being happy that Dick Cheney had expanded the powers of the vice-presidency, and wanting to expand the powers more. I think that's what she said, it was one of many moments I didn't entirely understand her point, but I got her overall meaning. Biden came back with a decisive: "Vice President Cheney has been the most dangerous vice president in American history," and he defended the existing limits on vice-presidential power. Point: Biden. Big time.
The symbolic moment Palin flubbed was subjective, of course. But I instant-messaged a friend that she lost the debate when Biden choked up over losing his wife and child in a car accident in which his sons were critically injured -- and she went straight back into "John McCain is a maverick." I truly expected her to express human sympathy with Biden, and her failure to do so showed me something deeply wrong with her. But maybe that's just me. ...I thought Biden and Palin tied for the first third of the debate, that Palin actually won the second third on moxie and charisma, not policy (Biden looked visibly angry at a few points, and that's never good), but Biden cleaned her clock in the last third. He quoted his dad telling him, "Champ, when you get knocked down, get up!" -- and he listened to his father. Biden got up, and he won the debate.
Why would a smart guy like Hank Paulson advance such a dumb, shady plan?
... Let us count the reasons:
No. 1: It delays our national reckoning until after the presidential election.
Paulson first floated a bailout Sept. 18, at the very hour when shares of Goldman Sachs Group Inc. and Morgan Stanley looked like they might go into a death spiral. It's not so much a bailout, as it is a timeout. He had to follow up with something, anything, to stop the freefall from resuming. It didn't have to make sense.
So it doesn't. The plan is about creating the illusion of stronger financial institutions, not strengthening them.
The banks know this. Otherwise, they would have stopped charging each other near-record rates for three-month loans by now. The reason they haven't is because they're still afraid their customers -- other banks -- might go broke.
No. 2: The reckoning will be worse than you can imagine.
If Paulson were serious about recapitalizing rickety U.S. banks, he would infuse them with hundreds of billions of dollars of fresh government money, in exchange for ownership stakes. And if he wanted to create market liquidity for all those troubled assets on their books, he would be ordering banks to disclose everything there is to know about them, so Mr. Market could figure out their present value.
He can't let that happen. Not now. If everyone could see how much the toxic waste is worth, the writedowns would be so huge that many banks would have to be declared insolvent.
Better to let the next administration deal with the clean- up. The trouble is, the longer the government waits to address the banks' lack of capital, the worse it gets, barring a miracle.
No. 3: He's helping his friends.
Is there any doubt? Let's see.
As of yesterday, Morgan Stanley Chief Executive John Mack owned 2.75 million shares of his company's stock, valued at about $67 million. If Mack can get Morgan Stanley to trade reams of sketchy paper for billions of dollars of our Treasury's cash, without diluting any of his stake in the company, who benefits?
Paulson would have us believe it's you.
No. 4: There's an excellent chance the Congress will pass it. Leave someone else to figure out the costs another day.