Obama’s pathetic response to the Iranian tyrants pogrom against the disenfranchised voices of dissent, and the Ayotollah’s stormtroopers cracking skulls in the streets of Tehran presents an interesting question for the future:

“Will Obama remain similarly deferential and silent when the “Muslim World” (as he showed in Cairo he is given to dividing up the world along religious boundaries) asks him to speak out against Israel for any action, deserved or undeserved, real or contrived, in the future…after he has been so reluctant and loathe to denounce the Iranian regime?”

Obama has set a precedent for himself as leader, and for the credibility of his Administration when dealing with human rights and liberty.  He claims to be an even-handed leader.  Any future deviance from this course regarding any denouncements of Israel or criticism of Netanyahu will be rightly viewed as duplicity and hypocrisy. The WORLD IS WATCHING…and they are watching Obama.

America’s feckless President seems to believe that speaking out for the universal concepts of human rights, liberty, religious tolerance, democracy, and freedom of expression would constitute “meddling” in Iran’s domestic affairs. Put another way, Obama is worried and concerned that such statements could be interpreted by the tyrannical clerics in the Iranian regime as <i>”meddling”</i>.

Aside from placing himself in a reactive posture with each new development in Tehran, the President has deferred and diminished the unique power of his office, in addition to shattering the pretense of his personal claims to being a transformational leader. This is to say nothing of him turning his back on the “Muslim World” (according to Obama’s Taxonomy) and his fellow “Citizens of the World” that he rhapsodizes about.

The point is this: How can Obama not speak out with clarity now on an issue of fundamental human rights for fear of being accused of “meddling”, but then expect to “negotiate” with this same fraudulent regime about possessing nuclear weapons?

The Iranian regime views their nuclear ambitions as a sovereign right and any interference as “meddling”.

It logically follows then, that Obama has absolutely no chance of negotiating with the Iranian regime on nukes, let alone engage in “tough, hard-headed diplomacy”, because the moment he starts to press for real concessions, the Iranians already know that all they have to do is raise the specter of American “meddling”. As the Iranian regime has seen for the past week, that accusation alone is enough to frighten Obama into his default political mode of timidity, rationalization, explanations, equivocation, and withdrawal.

Obama is right about one thing: The World is Watching…and the world is watching Obama and his limp-wristed response to the Iranian Tyrants.

When the inevitable finally happens and The Bailout passes the Congress later this week, the next question on everyone’s mind will be: what happens next?

I have no doubt that this bailout could provide some short-term relief to the credit crisis, liquidity and recapitalization in the banking system, perhaps even serve as a sort of catharsis to the stress afflicting the credit markets.

I also have no doubt that not only will this be short-lived, but that the long-term damage of this legislation will prove to actually make the problem far worse in the coming months. The politicians who have risked their reputations on this bill are going to lose a lot of credibility with their constituents if/when the economy and the stock market keeps dropping and unemployment rate continues to climb.

The most dangerous part about this bailout is that after putting the nation through a collective panic attack about our financial future, after making the most dire predictions about impending doom if we do nothing, and after admitting that this is not the best way to handle the crisis, but -it’s our only option, and we have to do something – if, after all of that, we find the markets and our economy back in the death spiral mode in a few more weeks or months, then the entire United States government will have lost all credibility.

Especially the U.S. Treasury.

This is dangerous for many reasons. Mostly because unquestioned belief by the world in the “Full Faith and Credit of the United States” is what seperates our nation, its finances, and consequently our high standard of living from the less desirable places to live on this planet. It is what keeps our interest rates low, our lifestyle high, and provides our government with the financial resources to preserve freedom, property rights, and the rule of law.

Without this credibility, a draconian reassessment of our national priorities would have to occur, and we would undoubtedly be forced into an age of austerity that few among our population have ever endured.

I tell you honestly, this will not be the only bailout. There will be more, likely many more. Each one claiming to be the last, and each one larger than the one before.

When the perception of the world’s capital is that the U.S. government is incapable of affecting a positive outcome to this crisis, the Treasury will find itself in a similar position to Lehman Brothers several months ago – in desperate need of more capital, but no confidence in the plans that a solution is near.

The simple fact is that there are $14 trillion worth of mortgage backed securities out there. That is several trillion dollars larger than our entire “official” national debt. To think that $700 billion to $1.3 trillion of Treasury financed debt will be able to solve the underlying problems of price discovery, an illiquid market, and an estimated $3 trillion of deleveraging of the banking system is foolish and naive.

The most dangerous part of all is the notion that a government who created this mess with Fannie Mae and Freddie Mac could run a similar government portfolio of mortgage securities any better – let alone the rhetorical folly of “the taxpayers may actually end up making a profit”.

The only way this thing doesn’t end up cost the taxpayers dearly is if the securities are bought at such a discount to face value that serious solvency issues come into play for the rest of the system. Any premium at all over this will put the taxpayers in the red, even over time.

The housing market has structural and fundamental reasons why it will not be able to reflate to bubble pricing without dramatic inflation and devaluing of the currency. There will not be any more 100%+ financing of mortgages in the future. There will not be sub-prime mortgages. There will be dramatically less jumbo mortgages. There will be very few, if any at all, option ARMs, interest-only, and other adjustable rate mortgages that allow borrowers to obtain low introductory payments without amortization. The future will be 20% down payments, high FICO scores, and very stable employment/income history.

When you factor in such things as a slowdown in the real economy, an increase in unemployment, the supply of unsold homes on the market, and impending bulk of underwater ARMs-reset related foreclosures from the 2005/2006 peak, it becomes hard to envision a day when McMansions in the Las Vegas suburbs or the Inland Empire in Southern California are going to be worth anywhere close to where they were 3-4 years ago. Without that, literally trillions of dollars of capital will be wiped out completely.

The scariest part of all is the thought of an Obama Administration filled with his Chicago Democrat Machine Cronies presiding over, mismanaging, and having fiduciary responsibility over this Paulson Hedge Fund.

This monstrosity will end up being a blank check for Executive Branch corruption that will be the envy of Third World despots.

Newt Gingrich called for two controversial things to happen, and I happen to agree with the Speaker on both of them.

1. He said the President would be better served by having Deputy Treasury Secretary Kimmitt takeover as Treasury Secretary and to fire (or accept the resignation) of Hank Paulson. I completely agree. I have been a staunch supporter of Paulson since he was nominated, and felt he was a vast improvement over Snow and light years better than the fool/backstabber Paul O’Neill. Paulson understand the markets, and I believe him when he said two weekends ago that he “hates that he has to propose this bill”. That said, being Secretary of the Treasury is not like being the CEO of Goldman Sachs, and convincing the American people to go along with what is a very controversial bill in a matter of two weeks is not like taking a company public and trying to convince the Street that it is a hot IPO.

The sad truth is Paulson has not only lost credibility in the way he sold this bill to the Congress and the public, but now he has become a liability for the White House in their attempt to revive this effort.

Kind of how when a salesman can’t close the deal, the firm puts another face in front of the client in the hopes of changing the perception of the deal.

The power that Paulson sought was virtually unheard of in American history. The money he would have been responsible for “investing” in these risky mortgage backed securities – money that would have had to have been raised by issuing a record amount of Treasury bonds to finance such a venture – was absolutely staggering.

The fact that Paulson had his then Under-Secretary Robert Steel (now Wachovia CEO, at least until this morning) work up this bailout plan back in January and February, and then waited until a month before this Presidential election to essentially put a gun to the head of already nervous Congressmen with a “Do Or Die” edict only made me question Paulson’s motives even more.

Newt is right. The President would be best served by Kimmitt taking over at Treasury and Paulson going back to the private sector.

1. SEC Chairman Christopher Cox should come out tomorrow morning and immediately suspend the “mark-to-market” accounting regulations of the Sarbanes-Oxley laws. At least for mortgage backed securities and other Level 3 assets. I have been advocating this for many months now. This arcane regulation has completely distorted the duration gap of capital by requiring long-term assets that are meant to be held to maturity, not traded quarter to quarter, to be accounted for like short-term investments. If pension funds, the Federal Government, or the Social Security Trust Fund used these accounting standards, our entire country would be rendered insolvent and all retirements would be wiped out. It is silly. It doesn’t require the fools in Congress to repeal it. It can be suspended by order of the SEC Chairman tomorrow, and it should be. That would at least allow banks to reflect capital balances on their books that are more consistent with reality and stem some of the panic.

This has the potential to be the Democrats’ Enron of 2008.

The recent troubles of Wachovia are directly linked to its $25.5 billion purchase of Golden West Financial in 2006. Golden West was run by two longtime liberal activists – Herb and Marion Sandler.

Golden West was the holding company for one of the nation’s largest S&Ls: World Savings.

World Savings was one of the largest originators of option-adjustable rate mortgages, dumping $122 billion dollars of these onto the books of Wachovia in the process of the buyout. In addition, World Savings had a huge portfolio of Home Equity Lines of Credit/Loans, that are not entitled to relief in foreclosure auctions on the property they were given unless the auction yields a higher price than the original mortgage. That means many of these Home Equity Loans may end up with zero value.

Herb and Marion Sandler pocketed nearly $2 BILLION from Golden West sale to Wachovia.

Now Wachovia is frantically trying to sell itself to avoid going into receivership – mostly because of the toxic mortgages the Sandlers sold to it in 2006.

The Sandlers donated $2.5 million to MoveOn.org in 2004.

As a married couple, they have donated over a million dollars to Congressional Democrats over the last 4 election cycles, according to Open Secrets.

They pledged $15 million to Human Rights Watch in 2005.

They bankrolled two pro-Obama 527 groups this spring called VoteHope and PowerPac.org.

They created a new “media” organization called ProPublica, hiring out-of-work former journalists to dig up dirt and launch smears against GOP candidates and Conservative media personalities under the guise of “Investigative journalism”.

This is the Democrats’ Enron times a thousand. If Wachovia continues its slide, the Sandlers are the reason why. They knew what they were doing when they sold in 2006. This is true Democrat wealth redistributionism. Sinking a huge super-regional bank by selling it toxic assets, while funneling tens of millions into the coffers of left-wing advocacy groups to further undermine capitalism and promote socialism in America.

One of Barack Obama’s and Charles Schumer’s political moneybag donors dating from very early in both of their U.S. Senate careers stands to make close to $20 million for 17 days on the job for presiding over the largest bank failure in U.S. history.

That’s nearly $20 MILLION DOLLARS for 17 days on the job.

He basically signed the papers delivering the company into government receivership and the depository base of the institution into the custody of JP Morgan Chase. Article here: WaMu Gives New CEO Mega Payout As Bank Fails

This guy is the Ken Lay of the financial crisis. You can bet if he had been a campaign contributor of President Bush, the Democrats would be swarming all over each other to get in front of a microphone and claim that Bush’s cronies are personally enriching themselves from the bailout. Both Obama and Schumer should publicly repudiate Alan Fishman, his compensation package, and call on him to immediately and unconditionally return ALL of the $20 million.

Indeed, this is the same Chuck Schumer who himself caused a run on the bank of the now defunct IndyMac only a few weeks ago by publicly releasing a statement questioning its solvency.

Interesting that so many of the people getting these huge sums of money are Democrats, who maybe not so coincidentally donate heavily to Democrat candidates for Federal office. It’s a self-reinforcing cycle.

As I noted in a previous diary, the first line of regulation and oversight is at the Corporate Governance level. In the case of WaMu, the Board of Directors (who ostensibly approved Fishman’s hiring and compensation) were conspicuously absent in raising any alarm about the growing mortgage crisis and any potential to put WaMu into insolvency.

A quick check of WaMu’s Board of Directors referenced with OpenSecrets.org brings us some interesting facts. WaMu’s Board was full of big-time Democrat donors and well known liberal activists such as:

• ex-Starbucks CEO Orin Smith, a big Democrat campaign contributor who helped bankroll the Democrat money machine ActBlue.

• Regina Montoya, the CEO of New American Alliance, “a 501(C)(6) organization of American Latino business leaders committed to leading the process of Latino empowerment and wealth-building by expanding the forms of capital most crucial for economic advancement, including economic capital, political capital, human capital, and philanthropy.” It was co-founded by a recipient of a Bill Clinton out-the-door pardon, none other than former HUD Secretary Henry Cisneros, also a Board member of mortgage mess culprit Countrywide Financial.

• David Bonderman, a Texas hedge fund manager who has donated campaign contributions to literally ever big-name Democrat in the U.S. Congress for the last two decades. His donations are wide reaching across the Democrat caucus, and he would have to be considered one of their biggest single benefactors.

So along with WaMu’s CEO getting paid $20 million for 17 days of showing up to work and signing the company’s death certificate, the WaMu Board of Directors was filled with bigtime Democrats moneymen and liberal activists.

Time to start telling the American people who really caused this mess. Obama and Schumer should immediately be forced to repudiate their benefactor Alan Fishman and call on him to return the $20 million.

Dovetailing on my other diary about how to win the rhetorical battle with the Democrats over the Financial Crisis, I want to explain a strategy for winning back the House. Keep in mind, the Democrats hold the exact same number of seats we held in 2006, and if we play our cards right the GOP could regain the majority because of this Bailout.

One of the things that I don’t think Pelosi or her Democrat colleagues really thought they would have to do when they came to power is actually govern. Let’s face it, they ran on a Hate Bush platform, discontent over Iraq, and anger over earmarks. They’ve achieved absolutely nothing in 2 years, not even in the eyes of their own base. Their sole economic policy was raising the minimum wage. They lost bigtime to Bush on every Iraq vote. Even when they joined forces with Bush, as they did on the Amnesty Bill, they suffered humiliating losses and looked incapable of serious governance. They figured sometime around the summer of 2007 that they would pack it in and stop governing and legislating with the hopes of a Democrat in the White House in 2009. Since then they have engaged in pure partisan political theater, with occassional tough votes like whether to adjourn to go on vacation instead of dealing with opening up offshore oil drilling.

They have NO IDEAS, NO SOLUTIONS, NO PROACTIVE AGENDA, and NO CLUE.

Now, all of a sudden, they are called upon by the Bush Administration, the Federal Reserve, and the global financial system, to help avert a catastrophe by passing a bill that will allow the U.S. Treasury to arbitrage its AAA credit rating against the toxic mortgage backed securities portfolios of the world’s financial institutions. Admittedly this is a difficult task, and one that in a more bipartisan atmosphere without a monumentous Presidential election a month away would still be a daunting task.

The point is, for the Speaker of the House to come out today and accuse House Republicans of being “Unpatriotic” if they don’t rubber stamp this bailout monstrosity the Democrats and Paulson have created, is tantamount to a declaration of partisan war.

In my estimation, the House GOP has no reason whatsoever to offer Pelosi and her Democrats any political cover at all after her intemperate remarks today.

They had no reason to before, but now they certainly should not. If Pelosi wants to do her job as Speaker and help pass the financial bailout she should get Hoyer and Clyburn together in their caucus and try to count their way to 218 votes. Let her members go back to their districts (many of them quite liberal) and explain their votes to the 60%-80% who disapprove of this bill. Let her Blue Dogs, the ones who put her in power two years ago, go back and face their constituents.

This is the same woman who has repeatedly chastised our side for “questioning the patriotism of fellow Americans”. This is the same woman who went over the Syria wearing a headwrap and appeased Assad while he was building a nuclear weapons facility that was bombed by Israel several months later.

The House Republicans should make Pelosi earn this vote. The Democrats absolutely are looking for a way to either load it up with corrupt kickbacks for ACORN and the like so they can vote for it, or they are looking for enough Republicans to vote for it so they won’t have to suffer the electoral consequences all on their own. I say call their bluff. Make them all have to vote for it, and see if it can get through the Senate intact.

Pelosi should have thought about reaching out to House Republicans before a crisis was upon her.

This vote may well be remembered in history much like the Iraq War Authorization in October of 2002. The Democrats controlled the Senate, they controlled the committees, and they could have blocked it. Thing is, they were afraid of the election a month away. They folded, and half of them voted for the war authorization. They’ve been running from those votes ever since, and some of their careers will never recover. I don’t want to see any House Republicans go through that. If they oppose it and make Pelosi pass it with all Democrats involved, then it becomes A DEMOCRAT ISSUE from now until election day. That way when it doesn’t work, either this month or next year, the Democrats have it hanging around their necks.

The turmoil in the financial markets has without question shifted the political landscape in the last few weeks. Not only should this not – but we should not allow it to – adversely affect the races for the House and Senate. Actually, the opposite should be true.

Much like the spike in oil prices was originally thought to favor the Democrats, once the proposition of expanded drilling and increased domestic production became the centerpiece of the campaign, the liberals went scurrying off on vacation to escape having to answer for being in the back pocket of the greenies. Similar to how we won the “Amnesty” battle last year, and the “Drill, drill, drill” this summer, we can drive this debate and put the Democrats in electoral peril.

The same political success can absolutely be accomplished with the financial crisis and the proposed trillion dollar government intervention to bailout financial institutions. The difficulty is in describing the complexity of the crisis in terms that the average voter can understand or relate to without their eyes glazing over. It’s not that they aren’t capable of understanding it, it’s that the subject can become too easily conflated with housing, GSE’s, credit rating agencies, short selling, credit derivatives, and other complex sidebars that are just too much for most people not acquainted with the way risk is priced and traded.

We need a simple theme that can be conveyed easily to the electorate of why it is Democrats that are responsible for this mess, both the ones in office and their big money benefactors in the banking world.

The best way to WIN this debate over the economy and the crisis is to pull out the baseball bat and start kneecapping the Congressional Democrats. By that, I mean basically use the same tactics they are so fond of against them – for once.

The Democrats are going to try to use the same tactics they did with the oil shock earlier this summer. Blame “Big Oil”, blame Bush and Cheney, talk about how they want to provide relief for the little guy, blah, blah, boilerplate liberal rhetoric. This time they are going to blame “Wall Street Fat Cats”, Bush and Cheney tax cuts for the rich, 28 years of deregulation, and how they are going to help the little guy stay in “his home” by providing mortgage workouts and allowing bankruptcy judges to set interest rates and affect individual neighborhoods’ home prices with arbitrary rewriting of mortgages.

These are all easily torn apart, and the counterpunch we have to send back on the Democrats are like brassknuckles between their eyes.

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