TRICKSTER!

Hank Paulson, Treasury Stooge

Monday, in the face of the gravest American banking crisis since the Great Depression, Secretary of the Treasury Henry Paulson will give a speech about a new Bush administration banking regulation proposal.

The speech will introduce the latest legislative Trojan horse of the conservative right--a proposal which would nominally increase financial market regulation but which would, in fact, decrease regulatory oversight over things like new financial instruments.

In the speech, according to The New York Times which was provided with an advance copy, Paulson will say: "I do not believe it is fair or accurate to blame our regulatory structure for the current turmoil."

That statement will mark Paulson as either a lying hack or utter idiot. I'll give Paulson--a former CEO of Goldman Sachs--the benefit of the doubt and kindly accuse him of lying hackery, since everyone with a thorough and sophisticated knowledge of the current banking crisis understands that it was precisely a failure of our regulatory structure that led the US banking system over the past few weeks to the brink of system wide insolvency. And make no mistake, system wide insolvency was exactly what was at stake as Bear Stearns teetered on the brink of failure (its failure would have touched off a domino of defaults that would have swallowed nearly every other major commercial and investment bank).

How did deregulation get us into a the situation where a handful of defaults on a few billion dollars in mortgage loans threatened (and still threatens) to collapse the multi-trillion dollar US banking system?

Here's my oversimplified version of the story. In 1999 Bill Clinton signed a law repealing Glass-Steagall, the law which, since the Depression, had separated the activities of investment banks which dealt certain kinds of securities from those of commercial banks that dealt with mortgage loans and consumer deposits. This act of deregulation placed commercial banks--with their tighter regulatory oversight, significant capital set aside requirements, and limits on their leverage--in direct competition for investment dollars with securities firms like Bear which faced few of the same restrictions. (Investment banks could borrow money to invest without limit, piling on leverage--in Bear's case reportedly as much as 30-to-1--while commercial banks were stuck with regulated leverage limits and the requirement to set aside enough capital to keep them solvent in the face of investment losses.)

At the same time the business of lending, the core business of banks, was changing dramatically, moving away from the practice of institutions extending loans directly to borrowers, towards the practice of institutions investing in asset backed securities which represented an interest in the future stream of income generated by a pool of loans of all sorts: mortgage loans, construction loans, loans to finance leveraged buyouts, just about any kind of loan you can imagine. This kind of securitization, it was proposed, would created greater stability in the credit markets, and wider access to cheaper money, by spreading the risk of lending over the entire system. To a certain degree that worked.

But the system carried with it new risks that were easily identifiable.

First, since the risk was so widely shared the potential for widespread catastrophe, should catastrophe strike, was also greater than before.

Second, since commercial banks were now in competition for returns with less regulated investment vehicles (like hedge funds), the market now contained an incentive for commercial banks--who were barred from piling on the kind of leverage i-banks and hedge funds could--to move more and more of their investments off balance sheet through the use of special purpose entities. By investing through special purpose entities, commercial banks could evade the additional capital set asides that would have been required if those investments had been on balance sheet, providing more competitive returns to investors. But this practice heightened liquidity risk in the market as a whole--there was less money than ever in the system to cover investors if loans went bad--and decreased market transparency--looking at a bank's balance sheet gave investors a very limited sense of that bank's true risk profile.

Third, the securitization system was allowed to "self-regulate" relying on private bond ratings agencies to certify the risk profiles of asset backed securities. But the system had few hard rules or guidelines, and, since ratings agencies were paid by the issuers of securities when those securities were rated for the market, there was, built into the system, a financial incentive for ratings agencies to give securities the highest possible risk ratings with the least friction (as a result, for example, during the height of the structured finance boom, ratings agencies routinely rated subprime piggyback loans--in which first and second mortgage loans are extended at the same time to a low-credit borrowers--as equally safe from default as prime first mortgage loans, an assertion that is absurd on its face).

Fourth, since securitization mean that loan originators were not going to carry loans on their books, but instead sell them into asset pools owned by off balance sheet SPEs, lenders no longer had a market incentive to thoroughly vet the credit risk of the loans they were making--since they would not be at risk if the loans, once sold into pools, failed. Instead, loan originators now had a market incentive to generate as many new loans as possible at the highest possible rates of interest--an environment which led directly to the subprime mortgage boom and bust.

The bank crisis we are currently living through came about when suddenly declining real estate values froze the market for asset backed securities, forcing banks, i-banks and hedge funds to sell other assets to raise cash to replace the money that they were otherwise churning through a system of investment by which they sold short term asset backed securities at a given interest rate and used the proceeds of that sale to invest in longer term asset backed securities at higher interest rates. That system of selling short term debt to invest in long term debt represented nearly all the liquidity that ran the American banking system, and the unregulated investors had become the biggest part of the market.

There is no doubt that the inflation of the structured finance bubble, and the scope of damage from its collapse, was created by deregulation--not only the repeal of Glass-Steagall but also accounting changes that made off balance sheet investing easier and more attractive as well as the lack of firm guidelines for and oversight off private bond rating agencies.

Had the fiscal innovation of structured finance been accompanied by prudent new regulation to address these predictable outcomes, there's no doubt that the damage from declining home values and increasing mortgage foreclosures could have been contained long before the need for the kind of emergency measure the Fed has lately undertaking (like taking bad asset backed securities onto the tax payer's books in exchanged for treasury notes).

Here are just some of the kinds of regulations that might have helped: limiting the amount of leverage allowable for investors in asset backed securities, particularly in areas where the assets in question are crucial to the social good and national economic stability (like mortgage loans); limiting the total value of off balance sheet assets that could be held by investors in those same sorts of loans; providing bond ratings agencies with stricter risk guidelines for defining what constitutes AAA and other ratings levels; setting stricter guidelines for subprime loan eligibility evaluations (at the height of the boom lenders were offering no-income-verification, no-money-down mortgage loans like Halloween candy to trick or treaters).

Yes, these kinds of regulations would have limited the growth of the recent boom and limited the wealth of investment bankers, but they also would have improved the stability of the markets to the benefit of the greater number of Americans perhaps insuring that the economy would still be growing today instead of teetering on the brink of disaster.

In the absence of prudent regulation, all that institutions like the Federal Reserve, Federal Housing Authority, and Treasury Department can do is bale water after the economy starts sinking. In the end bail outs are more socially disruptive and much more expensive to the federal government than prudent regulation.

Sophisticated financial minds understand all this and now favor tighter regulation over the so-called "shadow banking system." Even Larry Kudlow, former Fed and Reagan administration economist and as loud a public voice for laissez faire economics as this nation has, told New York Times columnist Joe Nocera on Friday “I think investment banks need to be regulated.”

But that's not what Hank Paulson will propose tomorrow. Paulson will propose the consolidation of regulating agencies (probably a good thing) but also oversight without teeth over hedge funds and investment banks. Worse, he will propose giving the Federal Reserve more power to intervene in markets but only after markets have collapsed--giving it power to act only after "overall market stability is threatened" instead of proposing the kind of legislative regulatory solutions that could prevent threats to market stability in the first place. The plan would also reportedly call for the industry wide self-approval of trading in new financial instruments without vetting by the Fed or Congress.

For a Secretary of the Treasury to address one of the gravest crises in US banking history by proposing more industry self-regulation and limiting the power of government involvement to after the horses are out of the barn is the height of irresponsibility, a pure, venal effort by one of Wall Street's own to keep the gravy train flowing at any expense to the American people. Paulson ought to be ashamed.

One final note, in this political season, last week all three of the major presidential contenders delivered speeches on economic matters but Barack Obama--confirming again why I support his candidacy--was the only one who displayed a sophisticated understanding of the nature of the current crisis. Where John McCain sounded clueless--arguing that the cause of the problem was reckless speculation by American families buying homes--and Hillary Clinton sounded like someone pandering to her demographic--offering only talk about bailing out mortgage borrowers but no talk about how to address the systemic banking industry problems--Obama offered a six point plan for revamping the regulation of the US banking system. Although the speech, being political, was not a detailed fiscal proposal, it was more detailed and focused than those of the other candidates offering provisions on banking regulation--prepared with advice from Columbia University economist Joseph Stiglitz, former chairman of Bill Clinton's Council of Economic Advisers--that are real solutions that cut to the heart of the actual crisis. You can watch the video or read the text of the speech here.

The Clinton Electability Fallacy

It's time to put to rest this silly and fallacious argument being relentlessly advanced by Mark Penn and the Clinton camp that HRC is more electable than Barack Obama because she has beaten him in large, blue states like CA and New York.

What we encounter in this argument is a classical fallacy based on the presumption that a contest between two democrats in reliably democratic states is equal to a contest between a democrat and a republican in the same states.

You don't need to plumb the depths of that argument to see that A does not equal B. There's a 0% chance that Obama, were he the nominee, would loose, say, New York, Clinton's home state and one of the nation's most reliably Democratic. The Clintonites, without explicitly explaining the scenario, are suggesting that blue collar white Democrats and Democratic women would abandon Obama in these states come November instead staying home or turning out to vote for a GOP candidate who is running on a Reaganomics redux economic platform and a staunch anti-abortion voting record. It's a scenario about as plausible as Billy Crystal being added to the Yankees 40-man roster.

The simple truth is that there's no correlation between Clinton's margin of victory in those states and her relative ability to win an election there in November. Take Ohio, for example, the state that the Clintonites offer as being the perfect case study for this argument.

Clinton beat Obama in Ohio by 10 points in the primary. But in state-by-state head-to-head polls, both Obama and Clinton are polling almost identically against McCain, and none too well at that. Obama leads McCain in the Real Clear Politics average by 0.2 %, Clinton by 0.5%. Since polls are snapshots capturing a moment in time, averages aren't that meaningful. Looking at the most recent head-to-head poll in Ohio (a month old Ohio Poll/University of Cincinnati tally), Obama leads McCain by 1% with 4% undecided while Clinton trails McCain by 4% with only 1% undecided and McCain above 50%. So much for the argument that her primary victory in Ohio is a measure of greater general election electability.

A more credible corollary argument also being advanced by the Clintonites seeks to discount Obama's victories in small, red states, saying that those are states no Democrat will win in November. This is almost certainly true of a state like Utah. But I'm less convinced that it's true of, say, Colorado, Iowa, New Mexico, Missouri or Virginia--a state in which Obama stitched together a remarkable coalition in riding to a convincing primary victory. These are all states in which Bush defeated Kerry, and they're states from which Democrats are going to have to snatch some victories because neither Clinton nor Obama is going to defeat McCain in Florida.

Clearly Obama has a better chance at winning in some of these states than does Clinton. For example, according to the average results of polls reported by Real Clear Politics, Obama bests McCain in Iowa by 10 points while McCain bests Clinton in the state by the same margin.

I and many Democrats continue to believe that Obama will be a significantly more electable candidate come November. Unlike Clinton who, whether fairly or not, polarizes voters and motivates Republicans, Obama offers the kind of crossover appeal that wins elections. The Democrats need Obama's coalition of new voters, black voters, and independents in addition to Clinton's bloc of traditional Dems. By throwing a kitchen sink of negative campaigning at Obama in the closing months of the primary campaign, Clinton may yet pull out the nomination (though it remains unlikely), but her victory may well be Pyhrric: while there's a high likelihood that rank and file Dems will turn out to vote for the party's nominee no matter who it is, the bad blood engendered in recent weeks by the Clinton campaign will make it all but impossible for her to reach out to his voters, particularly those independents who were never likely Clinton voters in the first place.

It seems to me that at this moment Clinton's only path to the White House is to take a popular vote lead over the next few months (she won't catch Obama on pledged delegates) and somehow convince him to join her ticket. But if it comes to that Obama may feel like he has a better chance at the presidency by waiting and running against an aging McCain in 2012.

Voting Obama

After remaining undecided in a presidential race for the longest time since 1992, I have decided in the end to pull a lever for Barack Obama in the New York Democratic primary on Tuesday.

Discount my vote if you will, I'm always the guy who votes Adlai Stevenson and there's more than a little of Stevenson's brainy detachment and Ivy League deportment in Barack Obama. But Obama is a vastly more complex candidate than Stevenson was (or any of his successors, like Bill Bradley, might have been).

Parsing his candidacy means trying to unpack all sorts of American contradictions--black AND white, liberal AND conservative, ambition AND risk aversion. (It's strange to watch a far left group like MoveOn endorse Obama, a candidate who is well to the right of the group's constituency on things like gay marriage and economic policy.) That he's able to embody all this contradictory mess, and thrive because of that morphology, is Obama's greatest strength as a candidate (that and his soaring oratory).

I don't see myself as part of a movement, though my friend Tom, an ardent Clinton supporter, has continually disparaged Obama's supporters as starry-eyed Kool-Aid drinkers. Maybe. Obama certainly is more seductive than Clinton. And Obama and those closest to him may actually believe that he IS the black, Democratic Ronald Regan. Perhaps I'm willing to pull a lever on the chance that he just might be. He is, after all, the candidate who has white Republican men interested in voting for the black Democrat with the Arab-sounding name, a development that I never thought I would live to see.

But those are all things that the sports talk show hosts call "the intangibles." The intangibles may actually be more important to winning an election than anything else, but they're not what motivates the confirmed Stevenson voter.

My swing to Obama rests on more prosaic ground.

First there's economic policy, one of the few policy areas that actually separate Obama from Clinton. Obama, and his chief economic adviser Austan Goolsbee--a left-center economist at the University of Chicago and frequent guest on the great radio show Bloomberg on the Economy--offer an economic approach much closer to Bill Clinton's than to Hillary's--free-trade friendly, not hostile to markets, but relying on the kind of real oversight and regulation that has been sorely lacking over the past 8 years. Nowhere was the contrasting approach made more clear than in the candidates' response to the subprime mortgage crisis, with Obama basically cleaving to the path laid out by Henry Paulson--pushing private refi under federal cover for debtors who can actually afford their houses--and joining with Senate Democrats in a bill to re-write bankruptcy laws to make it possible for debtors to restructure mortgages on their primary residences. Clinton, on the other hand, proposed a moratorium on foreclosures and a federally mandated 5-year freeze on interest rates, policies that not only sound like pandering but also that would prolong the crisis and deepen the housing downturn by raising the cost of borrowing for those seeking new loans.

Second, although it borders on insane to suggest that a black man is the Democrat's most electable candidate, I think in this case it may be true. In a race versus McCain in November, Democratic victory will depend on our candidate's ability to lure white male Regan Dems and independents away from McCain. Many in those demographic slices today will tell you: "If it's Hillary v. McCain, I'm voting for McCain." Not all of them will do that in the end, of course, especially since a vote for McCain is a vote for an open-ended military commitment in Iraq and a federal bench full of Sam Alitos.  But enough might, even after a long campaign in which Clinton is sure to win over some of them. Obama's campaign has deliberately targeted Regan Dems, and successfully too. In the end he may be the Dem best able to draw potential McCain voters way.

Finally, as a tactical matter, the Dems strongest ticket this fall would be Clinton at the top, Obama in the number 2 slot. That would be a huge winner, a happening drawing crowds bigger than those drawn by the Led Zeppelin reunion. I dunno if Clinton would offer the two slot to Obama, and I don't know if he'd take it. But if he can win enough delegates to deny Clinton an easy path to the nomination, then getting himself on the ticket would be his choice. I hope my vote in New York will help put that option on the table.

Sure, Obama's green. In contrast with Clinton, who I'm certain could govern competently and expertly, Obama represents risk. But Obama is like a top prospect in baseball. I'm going with the high ceiling prospect.

Is he up to the job? It's true we don't know, but I also see no evidence that he's not. Just look at his campaign--a brilliant operation for which Obama has not received enough credit. As a national level neophyte Obama has gone toe to toe with the Clintons, raising as much money, staying focused on message,  building a coalition across party factions, kicking ass with the kind of ground game you develop coming up in Chicago politics and avoiding the kind of Willie Horton knock-down campaign that a candidate usually needs when running from behind. I'm flat-out impressed. During my brief, lamented career as a venture capitalist I interviewed a lot of entrepreneurs. One of the things I was looking for was strategic vision, but even more importantly I was looking for the ability to execute tactically on that vision. Obama looks to me like a guy who can execute.

Hillary Clinton: Sotto Voce

Clinton supporters are already overselling Hillary Clinton's 2 point win in NH. It's only an enormous win if you believe the polls which showed a 30 point swing in NH in a week. Not likely. Hillary had a double digit lead in NH a week ago and hung on to a 2 point victory in the face of an Obama bounce.

But Clinton's hold in NH is important not just because it gets a win under her belt and not just because it slows the Obama train but mostly because it was a win achieved by a new Hillary, one who threw over Mark Penn's focus group-tested bullshit message about "change,"  chucking her stump speech, getting choked up for all to see, and most of all, speaking with a new, quiet, intimate voice, her indoor voice if you will. The new, soft-spoken intimacy seemingly borrowed from Mike Huckabee (who coos and purrs on the stump) is fantastic, especially for a woman who's outdoor voice can sound so harsh, pushed, and hard in sound-bytes.

If Hillary won thanks to a new message and sound, she also won thanks to old tactics, winning big among women and union members, although conspicuous by their absence on the podium during her victory speech was Bill and the Clinton era apparatchiks who surrounded her in Iowa (replaced by scrubbed young kids in a bit of stage craft borrowed from Obama). Her next challenge, closing the gender gap.

If America is not ready for a female president, it's not ready for the same reason that little girls will watch an action cartoon with a male hero, but little boys won't watch an action cartoon with a female hero. Hillary needs to be a female hero that little boys will cheer for, especially if she's going to try to win a general election against John McCain. If it's Clinton v. McCain, white male Regan Dem's could be decisive in swing states like Ohio and Florida. Can she turn 'em? Not at the moment.

Meanwhile Obama's still very much in it. with 93,000 votes, he out polled John McCain by more than 10,000 votes in NH. But he's going to need to start speaking to economic issues. The labor report this week showed that a recession is all but inevitable now and bad times are about to move front and center in the presidential campaign. Clinton's moving towards the kind of economic populism that is turning out to be the zeitgeist theme of 2008. Obama will need a counter answer, especially with Hillary's strength among blue collar rank and file Dems.

On the GOP side, Romney's done. He'll hang on until Michigan, but if he loses there there will be no reason for him to throw good money after bad in a race he has no shot at winning. The big question now is can McCain get a bounce and make headway, consolidating his NH win with a win in Nevada and becoming competitive in CA and FL. I don't think Rudy's a real contender. It never seemed likely that the GOP would nominate a pro-abortion, pro-gay rights NYer, never mind one whose own kids hate him. I think it's Huckabee v. McCain from this point forward in the GOP. I still don't think Huck has enough time or money to expand beyond his evangelical base, even with his appealing messages of anti-neo con foreign policy and economic populism, and my money's on a McCain/Huckabee ticket emerging (which would be a very strong one for the GOP). Let's watch McCain's poll numbers in CA and OH and Huck's poll numbers in FL and PA to see.

Huck & Obama: The New Guard Strikes a Blow

It's easy to read too much into the results of something as wacky as the the Iowa caucuses, particularly since the two candidates I expected to win tonight DID win tonight.

Still the surprisingly large margins of victory for Huckabee and Obama, the two youngest candidates in the race, suggest that perhaps the electorate is sending a message--enough with the 1960s, it's time for a post culture-wars election (even though Huckabee, who is as sly as a fox, is a quiet culture warrior and won tonight almost exclusively thanks to huge evangelical turn out).

On the Democratic side, it's hard to overstate the historic nature of a black man going into the whitest of white states and winning not only by a convincing margin but also across the demographic board--among men, among women, among people with household incomes over $100K, among people with household incomes under $100K, among union members! Congratulations to Obama for so handily and convincingly obliterating the color line that is the founding curse of the nation, our original sin.

There's no doubt that Barack Obama has some elusive, zeitgeist-capturing quality. It's not just that he's a charismatic speaker (though he is that), or that he's the perfect pop candidate--a kind of multi-racial, feel good persona like Tiger Woods or Derek Jeter. Obama is also able to motivate young and new voters in a way that American politics haven't seen in a generation. In every cycle some candidate advances a plan to win by engaging new and young voters only to have that strategy evaporate on election day when those new voters don't show up or don't vote as anticipated. Not so with Obama who truly appears to have a Kennedyesque quality. (Democratic caucus turnout was up 82% from last cycle.)

The surprising nature of Obama's victory could be a big momentum builder. In New Hampshire all he needs is a second place finish one or two points off the pace, and then a win in South Carolina where it's hard to imagine the vast black electorate not turning out for this new chapter in American political life, to be well on his way to the nomination. More to the point, there are millions of white Democrats in big states like New York and California, who I suspect would feel really great about themselves in voting for a black candidate.

Hillary Clinton has a near-term challenge now. With the New Hampshire primary just 5 days away she's not in a position to launch a starkly negative campaign against just an historic, feel-good victor and her favored angle of attack--drawing distinctions between hers and Obama's health care plans--is hopelessly wonkish. She needs to make people in New Hampshire feel like she's a bulldog, prepared to lead, ready to be commander in chief, set with plans to make the lives of Americans better on day one, and hope to draw a distinction that way.

Meanwhile, Huckabee's win is a devastating blow to Mitt Romney who spent millions in Iowa and, in recent days, aired an aggressive negative TV campaign aimed at Huck. It also marks the rise, again, of the GOPs evangelical block--which must be feeling its oats after months of suffering through talk of Giuliani and Romney. More interestingly it reflects the amazingly rapid fracturing of the GOP conservative coalition. Once small government libertarian conservatives held their noses and sided with Christian conservatives for the sake of creating what only a few years ago was thought to be a permanent majority. But with his talk of social justice and poverty, his record of raising taxes, and his scathing attack on Neo-con foreign policy, Huckabee offers movement conservatives a platform that looks more like Jimmy Carter's than it does Ronald Regan's.

No one thinks Huckabee can win in New Hampshire. And most certainly the second happiest Republican tonight is John McCain who now gets to take it to a severely wounded Romney in New Hampshire. But the evangelicals will coalesce around Huckabee, and his anti-neocon, economic populist message might also play beyond the evangelical niche. It better be if Huckabee's going to have a chance to stay alive, though it looks now like he's going to be at least very competitive in Florida.

So which secular candidate will become the anti-Huck, pulling together the libertarian right among the GOP? Watch out for McCain if he wins next Tuesday.

Let the Voting Begin!

The foreplay has ended and tomorrow begins the most wide-open presidential election of my lifetime, at least it's wide open with respect to who might become the next prescient. In terms of issues the campaign thus far has been strangely narrow.

With leading Democrats agreeing in essence on nearly every issue that matters to its rank and file, the dialog in their race has consisted largely of arguments over style and electibility. Meanwhile the Republicans have largely fiddled while Rome burns, arguing about who can big the biggest fence on the Mexican border and who owns the most guns--issues that matter dearly to the prime GOP electorate and not a whit to anyone else--while the US housing market enters a depression and America finds itself painted ever more tightly into a no-win diplomatic corner in the Middle East.

Here's the plain truth: The American century is over. The kind of power we took for granted for 100 years--military, moral and economic--is never coming back. And the kind of growth--both economic and demographic--that for more than a century fueled the nation, will no longer bail out a president content to cleave to well-worn policy paths.

The historically minded will argue about how we got to this point and whether we could have done anything to avoid it. Partisans will happily assign George Bush plenty of blame, much of which he deserves. (Ironically is was this, the most imperially ambitious president of the last 50 years, whose policies did the most damage to US influence over the world--eroding the diplomatic force of US moralsuasion and stretching our military power criminally thin through an unprovoked war of aggression). But really, through it's bungling and ideological rigidity, the Bush administration merely has hastened the pace of a secular change under weigh for the past generation.

Twenty five years of supply-side monetary policy designed to flood the nation with cheap credit has devalued the dollar, bloated the nation's debt load at every level (personal, corporate, and municipal), and shrunk our national savings rate to near zero at a time when the baby boomers--the biggest generation of Americans ever--are about to leave the most active economic phases of their lives. The dollar, while it remains A reserve currency, will never again be THE global reserve currency. GDP is now 70% comprised of consumer spending. But we're tapped out: With no savings, huge amounts of debt, an enormous trade deficit, a low-valued currency and a domestic economy that produces almost no goods, growth in America will be hard to come by in the next few generations. (The contrast is stark with other countries like China which makes everything, has a 50% savings rate, huge trade surpluses that mean the country is sitting on billions in cash, and a rapidly appreciating currency; the contrast is also stark with oil producing countries for whom global growth in oil demand means a surplus of cash now being used to buy our capital markets and investment banks via investments from so-called "sovereign wealth funds.")

Like it or not, the next president will be faced with the challenge not only of extracting us from Iraq and trying to stabilize Pakistan, which is the nuclear tinderbox of the world, but also with beginning the essential task of re-engineering the US economy into something that will look a lot more like a European economy--with a graying population; slower growth; a government managed health care system; and an increasing reliance on nuclear, solar, and wind power.

I haven't made a decision about who to support thus far (thankfully the NY primaries are still a month away) in part because I've seen little evidence that any candidate is ready to step up to the plate with the kind of economic leadership this nation so desperately needs after eight years of head-in-the-sand policies that have lined the pockets of a handful of capitalists while wages for hourly workers have stagnated, the US housing market has collapsed, and the dollar has hit an all-time low. From both sides of the political spectrum, the typical political response to our vast economic challenges has been a knee-jerk populism whose real benefits are an illusion.

But I'm sure having fun trying to handicap the race, which is so different from past years because of the early, big-state schedule. If I had to place my bets today on who will be the major party nominees, I'd lay odds on Clinton and McCain. Despite my fondness for Barack Obama, I've never for a moment doubted that Hillary will win the nomination. She's the most famous person running on either side (which in today's politics is a crucial factor) and Bubba will be a huge x-factor. But it will be interesting to see if there's a late rush to Edwards. He's a lightweight, but as the only white male among the top Dem contenders, he could get a rush of late breaking voters who view him as electable.

The GOP race remains tantalizingly wide open, reflecting the sudden shattering of the social conservative/libertarian conservative coalition that has held the party together for a generation.

Romney is holding on with the puncher's chance that unlimited wealth afford him. Some GOP voters also seem to think he's electable because he was a Republican who won the governorship in Massachusetts. But Romney's the worst candidate the Republicans have. He's a big phony (he was for abortion before he was against it), and there's no scenario in which a left leaning independent would choice a candidate like Romney over a center leaning liberal like Clinton. He's the GOP's answer to Michael Dukakis.

Huckabee was my dark horse choice from the start, but it appears that he can't broaden his support beyond the social conservative base to challenge in big states like New York and California. Look for him to make everybody's short list of VP candidates.

Rudy might still be a player if he can survive until February with delegate rich states like NY, NJ in his pocket, but after what are sure to be lousy showings for him in Iowa, New Hampshire, and South Carolina, Rudy will have the stink of the loser about him and supporters in California, Florida and Pennsylvania will be looking for another choice. That choice is likely to be John McCain, who--as the only GOP candidate with any kind of international resume got a huge boost from the tragic assassination of Benezir Bhutto last week. To get to the promised land McCain will have to win New Hampshire (where Romney has a home field advantage), and count on a post-NH bump in MI, PA, FL and especially CA. Otherwise we could have the most fun scenario of all--a handful of candidates w/ delegates and a floor fight at the GOP convention this summer. Now that's entertainment!

Fixing the TV Debate Problem

Tom Watson recaps the "action" at yesterday's MSNBC sponsored, so-called debate among seven Democratic presidential candidates this morning. The event also made A-1 in the NYT.

Frankly I'm surprised that anyone is talking about this event, which, like all recent such events was a debate in name only. What these things have devolved into are the worst kind of platitude-filled candidate forums where well-prepped, pancake made-up automatons disregard softball questions as they quickly scramble to turn answers to pre-approved questions back into excuses to repeat talking points and focus-tested descriptors. The format--more than half a dozen candidates, 30-second answers, no back and forth between candidates--is designed to eliminate any need for the candidates to think on their feet and any opportunity for  the masters of ceremonies (one can hardly call them journalists in this context) to probe issues. There's more content, more follow up, more focus on your average half hour of Hardball or Face the Nation.

The ratings these events pull are hardly surprising. I haven't seen the overnights for yesterday's yawn-fest yet, but MSNBC's highest rated debate previously was a May GOP debate that had a 1.5 rating. So why do these things continue to exist?

Well, they're still good for cable news nets. Although the ratings are woeful compared to top entertainment programming (Dancing With the Stars garnered a 14.5 rating last week, an order of magnitude better than MSNBC's debate), they're huge compared to an average prime time weeknight for cable news (MSNBC's October prime-time average rating was 0.3).

But do they do anything for Democracy? Do they help voters get a sense of how the candidates might react in a crisis or manage the government? Absolutely not. And they're horrible television to boot.

Here's are a couple of suggestions for improving TV's presidential candidate forums:

Comedy Central Hillary Clinton Roast

All the GOP contenders and most of the Dem also-rans have gone on the attack on the putative front runner, Hillary Clinton. As Watson notes, it's hard to watch. Instead I'd rather see a Comedy Central produced, Friar's Club style roast with a dais including not only John Edwards, Barrack Obama, Rudy Giuliani, and Mitt Romney, but also, say, Chris Rock, Dane Cook, and Kat Williams. A roast would get all the oppo research out on the table, it would give the candidates an opportunity to actually be funny, and the format would allow Hillary to tee off in the end on her tormentors. I promise ratings 10X higher than what MSNBC gets for one of its hideous faux debates.

CBS' Candidate Survivor: Sadr City

Wanna see which candidate is best prepared to do the kind of dirty work it will take to dig the US out of the diplomatic hole George Bush has dug? How about dumping all into the heart of Baghdad's anti American Sunni neighborhood and see who is able to scramble out. Who would be able to cut deals w/ opponents, negotiate with Shia death squads, skirt attacks from the Sunni insurgency?

ESPN Candidate World Series of Poker

Which candidate has the balls to go all in on a two-Jack bluff? Who has the luck to pull a straight on the river? Don't you want to hear Ron Paul trash talking as John McCain considers whether or not to call his $100K raise? Want a wild card, how about importing some foreign heads of state--Pervez Musharraf or Vlad Putin. Now that sounds like must see TV to me.

Jeopardy Tournament of Candidates

I'm sorry, Mr. Kucinich but you didn't answer in the form of a question.....   No format would better test a candidate's mettle, especially with questions categories like Nuclear Proliferators, or Foreign Heads of State, or Constitutional Precedents. 

An actual debate

I know this is hard to do at this point in the campaign season when there are more people on stage than at a Polyphonic Spree concert, but presidential "debates" haven't been the same since the format was switched from the true give and take of debates to the candidate forum format which does nothing but give voters more of the the same prepared campaign bullshit. My favorite Western political institution is the UK's Prime Minister's question time. The US would be well served by something similar where politicians actually engage in public discourse with one another.

Old New Music: Cassadaga

This is the time of year when I get caught up on records I missed and my old new record of the moment is Bright Eyes' Cassadaga, released this past spring.

This is an enchanted record. A confessional, grandiose, oratorical, piece of Americana that mixes the pretentious and the personal in the grand, Whitmanesque tradition. It's full of fiddle hooks, great choruses, and romance in the old school sense.

It's a record about spiritual renewal named after a century old camp of psychics in central Florida to which our hero has limped after a doomed affair with an older woman ("She said I kissed her different/That all the men her age are mean") ends with an abortion ("Since the operation I heard you're breathing just for one") and a stint in rehab (Cleanse Song).

Well I went back by rented Cadillac and company jet
Like a newly orphaned refugee retracing my steps
All the way to Cassadaga to commune with the dead
They said, "You'd better look alive"
And I was off to old Dakota where a genocide sleeps
In the Black Hills, the Badlands, the calloused East
I buried my ballast. I made my peace.
Heard Four Winds, leveling the pines

The record alternates between rockers that wheel and lurch on their way to soaring choruses, apparently the work of bass player/guitarist Mike Mogis (think: Rolling Thunder Review) and chamber folk songs intricately orchestrated with woodwinds and percussion by pianist Nate Walcott (think: Five Leaves Left).

But the album's best music comes from the tumbling overflow of words that pour out of singer-songwriter Conor Oberst's mouth. Like early Springsteen, classic Bob Dylan, or hell, ol' Walt himself, Oberst harnesses words for their flow as much as for their meanings, a flow which Oberst achieves through internal rhyme and layers with vivid images:

I keep looking for that blindfold faith
lighting candles to a cynical saint
who wants the last laugh at the fly trapped in the windowsill tape

or, later, in Classic Cars:

I made a new cast of the death mask that's gonna cover my face

Great lines linger in the mind as much as great hooks do ("the whole world loves you if you're a chic chameleon," "I felt nauseous with the truth"), but there are hooks a plenty (Cleanse Song is as irresistible as Donovan's There Is a Mountain), and nice melodies too for a folk rock album.

I'm told this is the most polished album of Conor Oberst's career. It's a career I haven't followed. But that's not unusual, I usually don't pick up precocious indie rockers until they cast off the lo-fi and make a higher-fi, more mainstream move. Maybe it sounds like selling out to some, but it sounds like buying in to me. At least, I'm buy in. Great album.

The La Flor Domincana Double Ligero Chisel Tip

Cigar smoking is among my longest running (25 years and counting) and most deeply cherished vices.

I can still remember the best cigars I've ever smoked--all Cuban, and all predating the Clinton impeachment: a 1989 Partagas D so oily and dense it seemed as if it had been rolled with Redman plug, an early 1990s Hoyo de Monterrey Double Corona from the the personal humidor of NY restaurateur Buzzy O'Keefe, a Bolivar Belicoso I smoked strolling through Paris.

Although there are many excellent cigars available today--both Cuban still unavailable here, and Dominican, Honduran, and Nicaraguan--there seem to be few truly exceptional ones on the market as producers, including the Cuban government, have pushed their best cigars into premium limited edition lines where margins must be mind-blowing given the astronomical retail prices (even before the sickening load of taxes both here and in Europe).

But this summer (smoking cigars is seasonal in my family where smoking indoors is strictly prohibited but thankfully global warming has vastly extended cigar smoking season in the Northeast) I've been puffing my way through a box of excellent cigars, not cigars that reach the class of the best cigars I've ever had, but cigars that nevertheless I would classify as special.

I'm talking about the La Flor Dominica Double Ligero Chisel Tip (the natural wrapper version, not the maduro).

The Chisel Tip is at the vanguard of the new, super strong cigar movement as American taste has changed from favoring the mild, Connecticut Shade wrapped cigars of the early 1990s cigar boom. The push to produce ass-kicking cigars--which parallels a move among US microbrewers to supersize the alcohol content of beers--smacks sometimes of cheap novelty but it has produced some excellent smokes, like the Olivia Master Blend line. But the LFD Chisel Tip is the class of the field.

The Chisel Tip is a whopping 54 ring gauge smoke, with a unique, flat tapered end that provides huge smoke volume with a small, comfortable mouth feel. The cigar features a rustic-looking Ecuadoran sun-grown wrapper, although its kick comes from the two ligero leaves of Dominican tobacco used in the filler (ligero describes the potent leaves at the top of the tobacco plant, milder cigars use fewer leaves--or none at all--from the sun-soaked top of the plant). It opens with a peppery blast but as the ash grows the cigar, while it doesn't exactly mellow, rounds out into a rich, creamy, aromatic smoke so smooth that you can smoke the cigar down to your fingertips, leaving a long finish on the palate. In my experience only the Cuban Bolivars offer the same combination of extreme strength and exceptional smoothness.

The cigars are very well made. I'm more than halfway through a box I bought in August and each cigar has offered the same even burn and flawless, easy draw. At $7.50 a stick, the LFD Chisel Tips aren't cheap, but neither are they mega-bucks burners.

If you're not a fan of strong cigars, the Chisel Tip will definitely be too much for you--although I laid one on my uncle this summer, a fan of milder smokes, and he certainly seemed to be enjoying it in combo with a glowing, mahogany Armagnac.  Still, this is NOT the cigar to bring to a wedding or hand out at the birth of your first grandchild. And don't smoke one before bedtime as the strong nicotine content will definitely keep you up for hours. But after a prime ribeye cooked over an Indian summer charcoal fire I can think of few things better.

BTW, I've tried some of the other sizes in the LFD Double Ligero range, including the maduro-wrapped version of the Chisel Tip (a Connecticut wrapper instead of the claro's Ecuadoran sun grown wrapper from Sumatran seed) , and while they were good cigars none had the special, almost epic quality of the Chisel Tip claro.

Joe Torre: When the Spell is Broken

When the Yankees hired Joe Torre 12 years ago, no one but Yankee higher ups thought it was a good idea.

As a manager Torre had been a schlubby underachiever in a career born out of necessity: Playing out the waning days of his career as third baseman for woeful late 1970s mets, Torre accepted a  gig as player/manager when the Mets fired their at mid-season.

Torre had losing seasons with the Mets (in the shadow of the crosstown 1970s Yankees dynasty), got swept as manager of the Braves in his one playoff appearance, and settled in as the manager in St Louis, fielding teams that were competitive but failed to make the playoffs.

But somebody in the Yankee front office saw something the rest of us didn't see, something that connected Torre to the great threads of New York baseball in the 1950s, the era of the greatest of Yankees dynasties. (Torre had been in the house for one of the great post season miracles of Yankee lore, Don Larsen's perfect game, although Torre, a Brooklynite, was a Dodgers fan.)

We saw the frog, they saw the prince.

And when the spell broke, and the transformation occurred, it happened with the inevitability of a fairy tale-a  hanging slider from Mark Wohlers, a home run by Jim Leyritz, a donor heart from the Bronx for brother Frank in the hospital.

In his 12 years as Yankee manager Joe Torre became a legend, a manager of Stengelian proportions, a Hall of Famer, a champion. He presided over some of the greatest moments in Yankee history--the 1996 comeback, a win in the first Subway Series since the 1950s, Aaron Boone's home run off Tim Wakefield. He also presided over the greatest choke in Yankee history, a choke that broke the curse of the  Bambino after being three outs away from sweeping the Red Sox for the AL pennant. These are great and terrible moments in New York baseball history, and looking back it seems as if Joe Torre was born to play a role in all of it.

Joe Torre's supply of fairy dust ran out this year. In the Grimm's version of the tale, the Yankees would have delivered on the promise of their remarkable second half comeback, riding the kind of wave that Colorado seems to be riding now, to a 27th World Series title, with Torre walking away with a gold watch and pat on the back when it was all done. Real world events were considerably uglier.

On one hand I'm sorry to see Joe Torre go. One could make a reasonable argument that Torre remains the guy most capable of leading the Yankees to a World Series next year.

But a stale and claustrophobic atmosphere has hung over the Yankees for the past few seasons.

You could see it on the diamond in the last three playoff series that Torre lost to younger managers with lesser teams that were better prepared to attack the weaknesses of their opponent. That kind of preparation had once been the hallmark of Torre's championship years with the Yankees, before Joe Torre's beatification.

During the second half of this season a breath of fresh air wafted through Yankeeland. Even with the playoff loss to Cleveland, 2007 remains the most fun season I've had as a Yankee fan in years--a season full of youth and hope, not the crippling weight of reputation. A year of transition. A year that might have ended differently if Philip Hughes, not Chein Ming Wang, had started games 1 and 4. It's a year a lot like 1995, the last year before Joe Torre was hired, when the Yanks lost a playoff series in part because Manager Buck Showalter didn't know yet what he had in a rookie reliever named Mariano Rivera. (Like Torre, the next Yankee manager will inherit a team full of precocious homegrown talent (Hughes, Joba, Kennedy, Cano) and the chance to win that an enormous payroll buys.) 

With Torre gone, Steinbrenner ailing, A-Rod on the verge of opting out of his contract, and an horrific demolition looming for the House that Ruth Built, change is the one thing Yankee fans can count on for next year. Here's hoping what we have here is a case of creative destruction.

In the meantime, I'll raise a glass to Joe Torre, a man who will never have to pay for dinner in New York City again. Thanks for everything, Joe.