Did McCain Kill Bailout?

Numerous reports on what happened in the cranky, late night session that ended with the Paulson bailout plan seemingly dead indicate that John McCain — who you may recall has suspended his campaign to work on the economy — may have pulled the trigger.

Memeorandum links an ABC News report that was originally headlined “Deal May Be Dead:  Democrats Blaming McCain” but has since been retitled “Bailout Talks Go On Amid Presidential Scuffle.”

The talks broke down late Thursday night as rebellious House Republicans “took a walk,” in the words of House Financial Services Chairman Barney Frank, D-Mass.

With the deal in limbo, it was also not clear whether Sen. John McCain and Sen. Barack Obama would hold their first presidential debate on schedule tonight. The debate to be held in Oxford, Miss., but McCain has said he won’t attend if an agreement is not reached on how to deal with the country’s mortgage and credit crisis.

[…]

Before the Capitol Hill meeting began, House Majority Leader Harry Reid, D-Nev., continued to cast blame on Republicans, and specifically McCain, the Republican presidential nominee.

Reid said McCain was “not helpful” by suspending his campaign and heading to Washington, claiming it was difficult to “understand what John McCain said at the [White House] meeting.” He said McCain spoke last and only for several moments, and did not contribute anything. “McCain only hurt this process,” Reid said. Asked if McCain expressed interest in taking part in negotiations on Capitol Hill, Reid said, “No.”

Soon after Reid’s comments, which followed another blast at McCain by Frank, the McCain campaign suggested Obama, the Democratic presidential nominee, was at fault. “At today’s cabinet meeting, John McCain did not attack any proposal or endorse any plan,” said a statement from the McCain campaign. “John McCain simply urged that for any proposal to enjoy the confidence of the American people, stressing that all sides would have to cooperate and build a bipartisan consensus for a solution that protects taxpayers. “However, the Democrats allowed Sen. Obama to run their side of the meeting,” the statement added. “That did not work as the meeting quickly devolved into a contentious shouting match that did not seek to craft a bipartisan solution.”

It seems that McCain’s sin was in noncommittally mentioning that the House Republicans have an alternative plan that calls for much less dramatic government action.  TPM’s David Kurtz observes that, “It is no small irony that after years of being at odds with the right wing of his own party, John McCain is staking his campaign for the presidency on it.”   Kurtz cites without linking a report from The Hill and another from Fox News television that McCain is quietly backing the renegade effort.

“We would prefer a loan or supplying insurance,” Bachus told reporters. “These are the ideas Sen. McCain tried to maximize. He feels strongly we have to design a program where taxpayers won’t lose.”

[…]

The conservative Republicans have been very, very focused on taxpayer protections, and one thing that Sen. McCain has been clear on from the beginning is that that’s absolutely essential. …

Kurtz is shocked: “Strangely, almost inexplicably — or maybe just desperately — McCain has thrown his lot in with the same conservatives who see him as the perfect example of what is wrong with their party.”   But, while McCain has alienated Movement Conservatives in a variety of ways over the years, he’s largely been a fiscal conservative.  While one should never discount political calculation, especially this late in a tight presidential race, it may simply be that McCain is trying to lead this thing to a better outcome.

Frankly, whoever kills off the Paulson plan will deserve a great deal of credit.  Stephen Bainbridge and others have persuaded me that this is genuinely a crisis and one that calls for dramatic government action.  But a hastily arranged, no oversight takeover of a large sector of the economy by unelected bureaucrats isn’t the solution.

FILED UNDER: Campaign 2008, Economics and Business, US Politics, , , ,
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. We can’t confuse the issue here. McCain did not kill off the Paulson plan — which had no oversight,etc. He may have killed off the modified plan build on the Paulson core — a modified plan that included an oversight board and would have doled out the money in increments.

    At issue in the White House meeting was the Frank/Dodd counter-proposal to the Paulson plan, not the Paulson plan itself which was DOA.

    McCain may not have meant to kill this off — or maybe he did. But ultimately, if he was not going to endorse the compromise, he was essentially vetoing the deal. Which is fine. He owns the issue now in a way. If nothing passes, McCain gets the credit if nothing bad happens, and the blame if the markets collapse.

    The GOP alternative does not make any sense. It does not address the challenge in any particular way. Paulson dismissed it out of hand. The House GOP alternative is basically an argument against doing anything… which may be the right thing to do… frankly, I don’t know enough about these issues to make a firm judgment.

    But let’s at least be clear. McCain’s goal in coming to Washington was not to close a deal, it was to close down a deal. I don’t know whether he is doing that out of a considered judgment that no action is necessary or whether he is simply trying to cash in on the anger — on both sides of the aisle — about the need to bailout Wall Street.

  2. Pete Burgess says:

    Read this article and consider what might happen to all the money that the govt. might make. Could it be that the taxpayers might be rewarded with new govt programs, initially funded with the profits, but then saddled with the continued costs of such programs?

    http://online.wsj.com/article/SB122230704116773989.html?mod=googlenews_wsj

  3. Rick Almeida says:

    The reporting I’ve been reading seems to indicate that it’s the House Republicans who are really resisting Paulson’s plan and Dem modifications, probably to their great credit.

    That said, I just read (on TPM?) that Paulson is firmly against the RSG insurance/loan plan, which would seem to make it a non-starter.

    Personally, I am not convinced that we face a cataclysm. I think we face a potentially serious liquidity issue, but perhaps that could be mitigated by providing limited federal funds to buy solvent, but illiquid assets for later resale.

  4. Anderson says:

    JJ, didn’t the Republican nominee for vice-president give a rare interview on foreign policy the other day? To Katie Couric?

    Given the usual topics of this blog, it seems OTB would have something to say about that subject. Hope you find the time. We already know what Dan Drezner thinks ….

  5. Rick: I think you might be right… but why doesn’t McCain just say that? McCain has made himself the central figure of the situation, for good or ill. He nows owes it to the country to actually lead by actually, you know, supporting a particular proposal and trying to build a consensus around it.

  6. Tad says:

    I also think McCain killed the bill and I’m disgusted by it. Ten days into a crisis he at first denied was happening at all, then proceeded to first oppose ever action taken only to flip flop to supporting them after the fact, he now shows up at the end just when a compromise was coming into being, and help bring about it’s demise. Killing WaMu slim chance of survival, and helping put the nail in it’s mostly self imposed coffin. No small feat of leadership.

    All this in combination with the Palin VP disgrace completely destroys my respect for McCain. I simply can’t believe it, I really had no idea this would be how I felt come election time.

  7. The Guy says:

    Good article, Mr. Joyner. I especially agree with the need to avoid undue haste in turning over so much power to so few unaccountable individuals.

    A technical writing note: in the second paragraph you write “but has sense been retitled” should be “has since been”. Just nit picking.

  8. Tad says:

    since it seems relevant,
    http://www.economist.com/world/unitedstates/displayStory.cfm?story_id=12305567&source=features_box1

    The principles of a deal may be emerging. Under these the administration would get $250 billion immediately, $100 billion when the president says that it is needed, and the remaining $350 billion subject to consent by Congress. The treasury secretary would have to “set standards to prevent excessive or inappropriate executive compensation for participating companies”, obtain equity participation from the companies, operate under a “strong oversight board with cease-and-desist authority” and an independent inspector general.

  9. Rick Almeida says:

    Rick: I think you might be right… but why doesn’t McCain just say that?

    Bernard, not to be flip, but I have no insight whatsoever into McCain’s actions or motivations. I have no interest in defending him, but it does seem like the House minority seems to be pretty recalcitrant.

    In this case, at this moment, I am very grateful to them.

  10. Monica says:

    Are the Repubs in the house even needed to pass the bill? If all the Dems vote for it – it should be able to pass without the Repubs.

  11. laura says:

    Why are you promoting the fiction that McCain suspended his campaign ( or were you being sarcastic?).

    During the “suspension” McCain gave intern views, Palin appeared at a major fundraiser, McCain’s surrogates continue to speak on his behalf, all of his field offices stayed open, all of his staffers stayed busy, his campaign aides accompanied him to DC…the only “suspension” was that he pulled a few ads which will go back up on Saturday.

  12. Bill says:

    The Dem’s have the house but are afraid to lead, this is why they will go down as the worst congress in American history.

    Dodd and Franks are up to their eyeballs in this mess and the speaker wants the Republicans to provide cover for them in a vote. THAT’S A JOKE!!

    Good old Nancy has been playing fast and loose with the house rules since she got control of the house, somebody needs to remind her that she is not the minority any more and she has the votes to pass this all on her own.

    That’s if she dares.

  13. Anderson says:

    Re: Bill on the Dems’ lack of courage (sic), I think it’s hard to argue with Paul Krugman here:

    How did we get to this point? It’s the culmination of many past betrayals.

    First of all, we have the Republican Study Committee blowing things up with a complete nonsense proposal — solving the crisis with a holiday on capital gains taxes. How is that possible? Well, if a party runs on economic nonsense for 25 years, eventually many of its foot soldiers will be people who actually believe the nonsense.

    More specifically, though, the failure to get a deal reflects the betrayals of the Bush years. Democrats weren’t going to trust Henry Paulson, because behind him they see the ghost of Colin Powell (and Paulson’s “all your bailout are belong to me” proposal, aside from being bad economics, showed an incredible tone-deafness.)

    And after the way the Bushies and their allies double-crossed the Democrats again and again in the aftermath of 9/11 — demand national unity, then accuse you of being soft on terrorists anyway — there’s no way Pelosi and Reed will do the responsible but unpopular thing unless the Republicans agree to share ownership.

    So what we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch.

    That about sums it up. Sandy Levinson has a point when he complains about the lack of a “no confidence” vote in our system. We would’ve been better off with McCain or Obama in the White House a year ago.

  14. Our Paul says:

    Perhaps a bit of forensic logic might prove healpfull:

    Before the dam broke, McCain was preaching “all is well on the economic front”, but the bump in the political polls following the Convention had dissipated and Obama was once again leading. Of equal importance, there were signs that Sarah Palin might be a real liability.

    When the dam broke, McCain acted “decisively”, the primary thrust was clearly stated: (1) Cancel the Presidential debates and move them to the date of the Vice-Presidential Debates (that took care of the Sarah Palin problem). (2) A challenge to Obama to cancel all campaign activities (that would blunt Obama’s climbing poll numbers). (3) Fly down to Washington to join the fray at the invitation of the President (we know that the President did not consult Congress as to whether this would perturb the negotiations).

    In the above “decisive” McCain’s actions, any delay in adopting a solution to the financial problem would strengthen his hand in trying to force Obama into playing his game “suspending the political campaign”. The immediate prize was much desired: cancellation of tonight’s debate on foreign policy.

    McCain, known to view risk not as something to be considered, but as something to be challenged, rolled the dice convinced that Obama under the rush of events would crack. Fat chance on that one!

    Did McCain contribute to the brake down of the proposed solution? Why did Harry Reid and others firmly state that Presidential Politics should not be playing a part in the negotiations? We had one major bank in California fail this morning, will there be more and can the proposed financial plan prevent them? Why is James Joyner saying

    Stephen Bainbridge and others have persuaded me that this is genuinely a crisis and one that calls for dramatic government action. But a hastily arranged, no oversight takeover of a large sector of the economy by unelected bureacrats isn’t the solution.

    when these concessions had already been fully incorporated into the financial package?

    Who knows, only the Shadow knows. But, a Google search does tells us that Stephan Bainbridge is a Professor of Business Law at UCLA, a wine and food connoisseur and a disdainer of Batman heroics.

  15. Bill says:

    The problem is Pelosi and Reed seem to forget one simple fact…………

    THEY ARE THE MAJORITY!!!

    Regardless of them not trusting this President (Which really is a non-issue). They don’t want to be responsible for the price tag, we’ll that’s just to dam bad.

    They have nooooooo problem getting on TV show after show and saying it’s all the house Republicans and McCains fault that it fell apart. Guess what Nancy and Harry, leaders are elected to lead, YOU have the house and YOU have the Senate.

    If it’s for the good of the country pass the dam thing and show some backbone (That’s what leaders do)!

    But now Frank and Dodd who are to blame just as much as everybody else in this mess IF NOT MORE are putting christmas presents (excess profits to ACORN??? & getting courts to make mortage ajustments on loans) need to put thru a clean bill and take some of the suggestions from the house Republicans which looking at have some valid ideas and get this done.

    My contempt for Dodd and Franks in this mess is heading off the charts!

  16. belloscm says:

    “Are the Repubs in the house even needed to pass the bill? If all the Dems vote for it…”

    Yeah, go ahead all you dems, vote for it. Then you own it. And with that, you will also own the anger of the majority of voters who are opposed to a bail out.

    On this issue, we will not see any courageous and/or principled acts from the Dems. A deal will be cut in order to obtain political top cover (in the form of a guaranteed number of republican votes) from the Repubs.

    The House Repubs have the whip hand on this issue and the Dems know it.

  17. Tad says:

    Bill you seem to be totally unaware that Pelosi and Reed are politicians. There is no way any party at any time in history is going to take on both all the risk and all the blame on a major bill, especially since there is much in it that Dems don’t like in the first place. It won’t happen, ever.

    Bills like this always always always require bipartisan support. Both sides have to swallow bitter pills and get this passed, which looked like it was going to happen until yesterday. The potential costs of failing to do so could easily dwarf 700 billion dollars.

    Another fact to face, it’s not going to be a ‘good’ bill, hell it’s not even going to be close. No massive bill like this could be even if we had years to fine tune it. But it must be done and the longer we wait the more it will cost us.

    House republicans are playing ‘my way or the highway’ with this bill and it’s extremely risky. See WaMu the bank with 300 billion in assets to collapse last night after things broke down. How many more need to collapse before the whole banking industry does, and how many years would it take for the economy to recover?

  18. sam says:

    McCain has said he won’t attend [the debate] if an agreement is not reached on how to deal with the country’s mortgage and credit crisis.

    Well, maybe not. What a leader.

  19. Bill says:

    Tad,
    I understand what you are saying and I am aware that Pelosi and Reed are politicians (which means they have to cover themselves and their party), but you have to admit that after two years of control they have been a disgrace!

    Every time a decision or bill has to be taken care of, they take a pass and get NOTHING DONE!

    They act both in actions and on TV like they are the minority party always crying poor me, Dem’s in control have forgotten how to act like adults. I’m not a fan of Ted Kennedy, but hell I wish he was around right now, somebody needs to tell the children how to act.

    Franks and Dodd both knew dam well that the Republican house did not sign off on this, those two and Reed didn’t want McCain and Obama to take the spotlight from them and they jumped the gun on the deal call. Those two should be involved, one of those two will be knee deep in this mess for their first term.

    If they strip all that added junk the put into it and take some of the house Republican ideas under advisement, they should be able to get this done.

  20. Tad says:

    but you have to admit that after two years of control they have been a disgrace!

    That I certainly do agree to.

  21. Triumph says:

    It seems that McCain’s sin was in noncommittally mentioning that the House Republicans have an alternative plan that calls for much less dramatic government action.

    James, this doesn’t seem to jibe with what Palin said about the bailout. She indicated in her interview with Couric that the bailout needed to have provisions for job creation and health care reform.

    Since there was nothing about job creation or health care in the bill, presumably McCain couldn’t support it.

    Given the ticket’s priorities, it sounds like they wanted to expand the bill’s scope into areas not related to the credit markets which would undoubtedly jack up the costs.

  22. just me says:

    I have to agree with Bill on the assessment of the Pelosi leadership in the house. The reality is if the dems think this is the right solution then they should move it forward and open it to debate, if they do not then they need to propose and vote on what they do think is the right decision, but to do nothing and say “it is the republican’s fault” while pointing fingers shows absolutely no leadership at all.

  23. Grewgills says:

    THEY ARE THE MAJORITY!!!

    but they cannot get enough votes without some republican support. They are not monolithic.

    Franks and Dodd both knew dam well that the Republican house did not sign off on this

    The republicans they were negotiating with did and would have been much more likely to bring enough republicans on board had not McCain brought the circus.

  24. al bee says:

    I didn’t watch the debates. No matter what was said or who won what, the media will skew the outcome to fit their agenda.

    We have not had an honest debate since Lincoln and Douglas. We haven’t had an honest media and/or newspaper since the same time. I would not waste my time!