Portfolio.com: Capital

The Case Against Hybrids

Marisa Rindone — Fri, 18 Jul 2008 11:00:00 GMT

The fallout from the collapse of Fannie Mae and Freddie Mac stock continues. Yes, the markets have rebounded somewhat. A little good financials news here and there has prevented another freefall, just like with the Bear Stearns weekend of doom earlier this year. But we're in a weird time. J.P. Morgan Chase announces that its income fell 53 percent and the stock soars because it all could have been so much worse.

In this atmosphere, it's easy to lose track of the big goal with any Fannie Mae assistance plan. The goal is not just to help Fannie and her little brother, Freddie Mac, through the next few weeks, but hopefully to come up with some kind of prescription that will avoid any crises in the future.

A couple of thoughts: One is that we should really think hard about abandoning Freddie and Fannie in their current form. Treasury Secretary Henry Paulson has said that he wants to keep the duo as shareholder-owned companies, but it seems crazy to keep them as such with that implicit government guarantee that suddenly looks a lot more explicit. One option is for the government to just take over the damn things and let them, in fact, become government-run corporations or, in time, government agencies. Sebastian Mallaby of the Washington Post and the Council on Foreign Relations put this forth. His take is that in the long run, we're better off with the feds just running it all. The other way to go is full privatization. Bert Ely, the prescient and persistent Fannie critic has outlined a series of steps that could be taken to more fully privatize the agencies. The same happened with Sallie Mae, the student loan agency. My take is no hybrids—they're great cars, but with agencies like these, it's either in or out for the feds. Any combination of public and private is a recipe to recreate what we've seen thus far—private property and socialized risk.

Larry Summers, the former Treasury Secretary and Harvard University president, who has had the courage to take on liberal orthodoxy in the past, has thoughts on the Creative Capitalism blog today about all of this. He writes:

What went wrong? The illusion that the companies were doing virtuous work made it impossible to build a political case for serious regulation. When there were social failures, the companies always blamed their need to perform for the shareholders. When there were business failures it was always the result of their social obligations. Government budget discipline was not appropriate because it was always emphasized that they were "private companies." But market discipline was nearly nonexistent given the general perception--now validated--that their debt was government-backed. Little wonder with gains privatized and losses socialized that the enterprises have gambled their way into financial catastrophe.

I don't know what the very best way out of the mess is. On balance, it seems like it was the right thing to extend a government hand to Fannie last week. But going forward, the larger restructuring that takes place shouldn't leave us vulnerable to this kind of calamity again.

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Saving Fannie

Matt Cooper — Fri, 11 Jul 2008 14:09:08 GMT

I've been worried about Fannie Mae for a long time. A few months ago I wrote a column about it. More than 10 years ago, when it was riding high, I was worried too. Now I'm really worried. As of 11 a.m. EDT, Fannie shares were off by 32 percent and selling for under $9 a share. Within the past year, shares had sold for over $72 a share.

Fannie—and its sister company, Freddie Mac—always seemed to me to be built on the worst of propositions: private profit and socialized risk. What was supposed to be a nimble hybrid, the ultimate public-private partnership, represented the worst of both worlds.

With the collapse of Fannie stock this morning, the question is what to do now. Henry Paulson did the right thing this morning, saying: "Our primary focus is supporting Fannie Mae and Freddie Mac in their current form. We are maintaining a dialog with regulators and with the companies." That seems like the right response to the sell-off, which seems spurred by the New York Times' irresponsible—I think—A1 placement of a story that regulators are discussing in a hypothetical way how to handle a government takeover of the mortgage giants.

First, Congress really needs to move on a housing bill. It will help the ailing housing market, which is the best thing that could happen to Fannie. It will strengthen Fannie regulation giving more confidence to the markets. And it will allow Fannie, should it fall, to go into a receivership that would prevent its losses from spinning further out of control.

Second, we need a Bear Stearns-like weekend of phone calls with Fannie's regulators from the Office of Federal Housing Enterprise Oversight, the Treasury, the Department of Housing and Urban Development, the Fed, and everyone to be sure they're on the same page come next week. Mind you, I don't think Fannie will collapse. It's adequately capitalized by most standards, and today's sell-off seems to stem more from the Times' decision on where to place the story. But a panic is a panic, and it makes sense for everyone to be ready to go should we be heading into the shitter.

Third, we gotta start to talk about a longer-term solution for Fannie, something that will, when we get past the housing mess, put it on a stronger footing. I like the long-term privatization ideas of Burt Ely, frequent Fannie critic, but that's a longer-term discussion, and it may be that the hybrid model can continue to work.

Fourth, the myriad figures who have checked in at Fannie Mae and built it into a Washington lobbying behemoth ought to be asked their opinion on what to do now. There's Jim Johnson, who recently resigned from Barack Obama's veep search committee after it was revealed he'd gotten a favorable mortgage from Countrywide. There's Franklin Raines. But also Tom Nides of Morgan Stanley (a friend, I should say), Jamie Gorelick at Wilmer Hale, Arne Christensen (former top aide to Newt Gingrich), Tom Donilon (at O'Melveny & Myers), Michelle Davis at Treasury, John Buckley, etc. These folks did quite well at Fannie when it was on a roll. Now that it's not, we need to hear from them. Let's hear from the board including former FBI Director Louis Freeh and current executives like CEO Daniel Mudd and general counsel Beth Wilkinson, wife NBC's David Gregory.

Fifth, the presidential candidates need to weigh in on what to do about Fannie. They've offered some thoughts. John McCain has said it can't be allowed to fail. Barack Obama has supported allowing Fannie to sell a wider variety of mortgages. They need to offer long-term plans.

Fannie and the world of G.S.E.'s, government-sponsored enterprises, once only attracted the attention of finance nerds or investors who liked a sure thing. Now that it's not a sure thing, everyone needs to get involved.

Photo credit: Ken Cedeno/Bloomberg News/Landov

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For McCain's Veep Consideration: Three Women

Matt Cooper — Thu, 10 Jul 2008 18:37:46 GMT

Okay, we're in the silly season of vice presidential speculation. Anyone who knows something isn't talking, and anyone who is talking doesn't know anything. Still, in that spirit, let me suggest three names—all women—who are not getting that much attention as vice presidential possibilities for Senator John McCain. Each is accomplished, but they've been overlooked either because they're considered ideologically impure or they've been overshadowed by someone with a similar background.

I've chosen three women because, while I think a demographic gimmick normally wouldn't work, McCain needs to do something eye-catching to have a real chance in this election. The polls are close, but the terrain favors Barack Obama, who makes history as the first African-American candidate from either party and who benefits through his "change" persona.

A woman would be jarring, in a good way. I've skipped ones without much bona fides, like Alaska's Governor Sarah Palin, who has been mentioned. If McCain is running on an experience-matters premise, he shouldn't pick a newbie. Also, I've skipped Condi Rice because if McCain really thinks the war was dreadfully mismanaged until recently, that surely falls under the watch of the former national security adviser.

Here then, are the Cooper Considerations:

Olympia Snowe: The senior senator from Maine has been in the Senate for 14 years and served in the House before that. She's married to a former Republican governor of Maine. She has close ties to the Bush family, which, of course, has kept a residence in Kennebunkport. She sits on the Armed Services Committee and knows defense policy intricately. She's been overlooked because she's a moderate, pro-choice, and had the temerity to vote against the impeachment of President Bill Clinton.

But while her nomination would surely annoy conservatives, I think the gain with centrists would be offset. She didn't support the Clinton tax hikes, although she didn't back the George W. Bush tax cuts, a position once held by McCain himself. Unless she's for raising taxes now, and she isn't, I don't see why she couldn't pass muster with the fiscal conservatives. Like McCain, she's a spending hawk. On choice, she just has to note that she's supported all of the conservative nominees that McCain has and that she will continue to support them, and while she's personally pro-choice, McCain is president and that's that. It'll be a ruckus, but McCain could stand some ruckus right now.

Meg Whitman: The former eBay C.E.O. is a McCain backer and surrogate after supporting her former Bain & Co. colleague Mitt Romney in the primary. She obviously has real-world economic and management experience. She helped grow a modern internet company. She's reliably Republican. When I spoke to her about Romney last year, she said that she didn't agree with him on all the social issues, which you could take to mean abortion rights, I guess. But as with Snowe, that's a surmountable challenge. There's talk of her running for governor of California in 2010, but why wait until then?

And it's hard to see picking Carly Fiorina over Whitman. Fiorina, for all her strengths, was kicked out of the Hewlett Packard C.E.O. slot by an angry board. Whether that was unfair, as she alleges, or not, what's the difference? Take the chief executive with the better record.

Linda Lingle: Heard of her? Probably not. She's the Republican governor of Hawaii. Jewish. Moderate. A former mayor of Maui. (Okay, that last one is not a presidential qualification.) She's shown a proven ability to win in a heavily Democratic state. She was the first Republican to be elected governor since 1962. She took on the teachers unions over drug testing—the teachers, not the students. Like McCain, she's press-friendly, having once started her own newspaper.

After that, I think the list drops off pretty quickly in terms of women. Senator Susan Collins of Maine has a similarly moderate record to Snowe, but less experience. Representative Candice Miller of Michigan, elected in 2002, served as Michigan's secretary of state for eight years, but is probably too lightweight, along with Representative Marsha Blackburn of Tennessee, to be the veep this time out. Senator Kay Bailey Hutchison of Texas seems to want to be governor of the Lone Star State more than she wants to be in the veep mix.

I realize that none of the Cooper choices will probably get much consideration, but it's a sign of weakness in the G.O.P. that moderates like these can't even be considered, while Obama is encouraged to select the likes of Sam Nunn, the former senator from Georgia who has strong defense credentials. If the G.O.P. wants to win over disaffected Democrats, it needs to consider vice presidential nominees who have a proven track record of winning them over.

Photo caption/credit: Olympia Snowe, left (Darla Khazei/Abaca Press/MCT); Meg Whitman, center (Paul Sakuma/AP); Linda Lingle, right (Ronen Zilberman/AP)

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Michelle, Cindy, and Us

Matt Cooper — Thu, 03 Jul 2008 21:15:03 GMT

Thin and elegant, smart and maternal, Michelle Obama and Cindy McCain, you might think, would be popular figures with an appeal that went beyond that of their dueling husbands. But that's not the case. Polls show that neither is particularly popular, nothing like the beloved Laura Bush or, before that, Barbara Bush. I have a couple of theories as to why that is, and it reflects more poorly on us than on these impressive women.

Historically, first ladies have been liked, even beloved, figures. There have been divisive ones, sure. Eleanor Roosevelt was a hero to many with her advocacy for the common man and civil rights, but she was as loathed by the right as was her husband. Mary Todd Lincoln was considered too highbrow. But for the most part, first ladies have been warmly embraced by the public and seen as above party. No one went negative on Mamie Eisenhower. Even in modern times, their woes have tended to make them more popular. Betty Ford was more revered after her struggles with addiction became known. Barbara Bush was more beloved after she wrote candidly about her depression.

For whatever reason, Hillary Clinton was famously more divisive. Part of it was that she took the most active policymaking role of any first lady ever, and some of her comments when she was first being introduced to the public didn't help. In 1992 she was defending her work as an attorney on behalf of a failed Arkansas Savings & Loan when she uttered her line about how she could have stayed home and baked cookies.

Hillary became a first-name in a way that Barbara and Betty never did. Everyone managed to project his or her fantasies onto her. For the right, she was a leftist Madame Defarge. She was a closeted lesbian. She was having an affair with Vince Foster. Even on the left, any number of feminist writers blew a gasket over her failure to leave Bill over his infidelity or her seeming to be an enabler. She became a Rorschach test for prurient fantasies of all kinds. Bill Maher, the comedian, this year said that he was voting for Barack Obama but added that he couldn't fathom Hillary-hatred. If you hate Hillary the problem is with you, he said. She is not a hateful person.

I buy that, and not just because my wife, from whom I'm separated, played a senior role in her senate and presidential campaigns. You can dislike Hillary for any number of policy reasons or the way she conducted her campaign. But for some people, she's like Kryptonite.

The Hillaryifcation of First Ladydom continues. Teresa Heinz Kerry took her hits in 2004. Once the floodgates are open and a first lady is no longer seen as removed from politics, no one is safe. Thus the right already pillories Michelle Obama.

Granted, Mrs. Obama's ham-handed line about being very, very proud of her country for the first time in her adult life over the presidential bid of her husband struck many as off-putting. But the right making her into a latter-day Angela Davis has twisted that bit of spousal hyperenthusiasm. A cover story on Michelle in the National Review made her out to be a grievance monger. They've made much of her senior thesis at Princeton, where she wrote with great pain about feeling alienated on a campus surrounded by white privilege. Hmmm, you're 21, the daughter of a Chicago water-works man, who, in a great American success story, produced two Princeton kids who went on to remarkable careers (Michelle's brother is the coach of the Brown University basketball team.) You get to Princeton and somehow amidst the eating clubs like Tiger and Ivy and the like, you don't feel totally at home. I'm shocked.

The left hasn't pilloried Cindy McCain in the same way, but there's a lot of whispering. She's plastic. She's a crazy heiress--and worse. But here is what we know: She's worked her tail off to help poor kids around the world, adopting one herself. She came back from a prescription-drug addiction and a stroke that sapped her faculties of speech. She's by all accounts a devoted mother to her own kids, those from McCain's previous marriage.

In a world where the spouse is fair game, the spouse becomes an object of vilification, unhinged from any reality. None of this is meant to deify the woman who will be first lady, but they're points worth considering on their own.

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Scalia's Law

Matt Cooper — Thu, 26 Jun 2008 19:08:01 GMT

Today, after the Supreme Court's rejection of Washington's ban on handgun ownership, I don't feel safer, but I don't feel much worse, either.

I wrote about the ban earlier this year after a friend of mine, Tim Spicer, a young man and aspiring musician and artist, was murdered in the District as part of fatal carjacking. I wrote at the time of my sadness and also my own ambivalence about D.C.'s policy. As a writer and a resident, I thought Washington's 32-year-old gun ban had been a failure; it clearly had not saved Tim or many others like him, although one could argue that Washington's high murder rate might have been higher still without the ban.

Nevertheless, I thought it was draconian and blunderbuss and I had sympathy for David Heller, the plaintiff who was allowed to have a gun at his job as a security guard, but could not own one in his home. Today, Heller can.

On balance, though, I hoped the Court would uphold the ban even though I thought it was stupid. It seemed to me that the people, through their elected representatives, had a right to control firearms. For decades the people of Washington had done that. And while I wouldn't have voted that way as a member of the D.C. City Council, I was glad the people, collectively, had that right to take a reasonable step for public safety.

Now, Antonin Scalia—probably the happiest man in America right now—writing for the majority decrees that the individual right trumps the state right. The Constitution does not allow "the absolute prohibition of handguns held and used for self-defense in the home," Scalia wrote.

It seems to be a decision we can all live with. It is not the decision that the most vocal gun advocates had hoped for. It will not strike down gun-control measures like the federal requirement for a background check. It will not allow an individual to buy a bazooka or a tank. It will not allow the mentally ill or convicted felons to buy a weapon and it will not effect carrying laws outside the home. It would seem to allow continued regulation of the sale of high-powered rifles. Licensing guns is still allowed. And because it is a 5-to-4 decision with a vigorous dissent from both Justices John Paul Stevens and Steven Breyer, it's certainly a decision that an Obama-influenced court—if there is one—could revisit, although that is a remote possibility. The Court took more than two centuries to make this definitive a ruling and has barely touched the issue since 1939.

One thing that's fascinating about the opinion is how much it relies on grammar. The Second Amendment reads: "A well regulated militia being necessary to the security of a free State, the right of the People to keep and bear arms shall not be infringed." The first part, Scalia ruled, is a statement of purpose and the second part of the sentence stands unfettered. You don't need to be in a militia to have a gun. The right of the people, Scalia said, is an individual right. And it's one that's primarily about self-defense, he noted.

This is why the court struck down not only the gun ban but also the District's trigger-lock law. It's no longer constitutional to require persons to keep their guns locked at home. That would inhibit the right, the court ruling said, to self-defense. After today's decision you can only hope that anyone with small children at home will have the intelligence to keep any firearms locked up.

Ironically, the decision probably will bring more of what conservatives hate: legislating from the bench. Now that they've prohibited a legislature from legislating, the Supreme Court and other courts will be in the business of deciding which gun regulations are okay. Instead of being hands-off, the court is now hands-on. This issue isn't resolved.

I guess, as always, the final word is with the market. The Dow Jones index is off about 200 points today, but Smith & Wesson is up 9 percent. There are going to be more handguns in a nation full of them, and the court has now made sure that nothing stands between you and one fully loaded by your bedside.

Photo of Supreme Court Justice Antonin Scalia by Charles Rex Arbogast/AP.

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Obama's Economic Tour

Matt Cooper — Thu, 12 Jun 2008 21:57:36 GMT

There was a time, after the primaries were over, but before the conventions began, when presidential candidates would actually go on vacation. They would not feel a compelling need to keep campaigning frenetically. Of course, those days—like waiting for a newspaper to land at your front door step—seem impossibly nostalgic now.

After forcing Hillary Clinton to capitulate, Barack Obama has not slowed down one bit. He had been on an economic tour to battleground states, trying to show that he's got the right financial ideas for America's future. John McCain, not slowing down either, has taken the week to predictably label Obama as a tax and spender and, in his own fit of nostalgia, to liken Obama to Jimmy Carter. Obama wasn't old enough to vote for Carter when he first ran in 1976; neither was anyone else born after November 1958. Today, it's fair to say that a sizable number of Americans know him best as the author of bestsellers.

Despite his efforts to distance himself from Hillary (not to mention the other Clinton, the one who spent eight years as president), Obama's economic plan has echoes of the 90s. He would raise taxes on upper-income earners and use the money to pay for more public "investments" like health care. He sounds a more skeptical note on trade, vowing to renegotiate Bill Clinton's much touted North American Free Trade Agreement. He has a sophisticated broadband and internet policy owing to advisers like Reed Hundt, the former F.C.C. commissioner; and lots of plans on Work/Life issues, owing to advisers like economist Karen Kornbluh. He's more into behavioral economics, reflecting the interests of Austan Goolsbee, the fellow who got in hot water over some alleged NAFTA comments.

On differences with McCain, Obama tries to paint his Republican rival as pursuing a "full-throated endorsement" of George W. Bush's policies. He points to McCain's wanting to make the Bush tax cuts permanent and adding additional tax breaks for corporations. The two may share goals on climate change and earmark reform, but otherwise the differences seem pretty stark. Remember, McCain once said that he couldn't vote for the Bush tax cuts in good conscience because they skewered benefits to the wealthy and because it was in a time of war.

From a political standpoint, I think Obama has really stepped in it with his proposal to raise the earning caps on Social Security. Right now, you pay taxes on your first $97,000 in wages. Then your obligation to FICA is finished. Obama would raise the cap, but when faced with questions about whether $97,000 is really rich, he suggested not raising it for some range above $97,000, but below some higher number, thus creating a kind of donut hole.

This really doesn't make sense economically. There's no economic rationale for taxing people at lower wages, then exempting them, and then reinstating the tax. That said, his proposal would would raise more revenue for Social Security—which is not nearly in the dire straits that Medicare will be in—in the coming decades. I think it'll allow McCain, perhaps unfairly, to label Obama as tax raiser. I'm surprised Clinton didn't make use of the issue earlier. Of course, Obama should get credit for having some ideas about putting Social Security on a more sound fiscal footing: an idea that makes infinitely more sense than the partial-privatization scheme favored by Bush and McCain.

The policies of McCain and Obama are clear. What both need to do is express, more clearly, a theory of economic growth. For Ronald Reagan, of course, tax cuts and deregulation were the engines of growth. For Bill Clinton it was about investments in education and an embrace of globalization and a reduction of the deficit. For Obama, he needs to be more clear about what he thinks drives the economy and what makes it grow. He's hinted at it here and there, but he needs more of it and less of a laundry list of programs. He's on to it with his talk about "bottom up" prosperity, but he probably needs to go further to show he's really in touch with those blue-collar workers who didn't cotton to his message earlier this year.

Still, with his economic tour, Obama's off to a good start, even if he denied himself and the rest of us a vacation from this long, long campaign.

Photo: Senator Barack Obama kicks off his general election campaign with two stops in Virginia, a Republican stronghold state that has not voted for a democratic presidential candidate since 1964. Barack Obama speaks at a health care themed campaign event in Bristol, VA. Photo by: Scout Tufankjian / Polaris.

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What Hillary Should Do Now

Matt Cooper — Wed, 04 Jun 2008 19:49:15 GMT

With close to 2,000 delegates, 18 million popular votes, and a majority of primary wins since March—along with victories in the most important electoral states—Hillary Clinton has a right to ask the victorious Barack Obama for some things. After all, nations that have been defeated in war have a right to try and negotiate the terms of their surrender. Sometimes they'll get a Versailles, and sometimes it will be something more generous.

Clinton's lost, but she can negotiate the terms of her surrender in a way that will help her and Obama. But what would be appropriate, and what would allow her to end her campaign on a graceful note? A few thoughts:

She shouldn't ask for the veep slot directly. It's probably too big a bridge for Obama to cross to ask her to be his running mate. It's not that the level of personal animus between the two is insurmountable—these are pols, for gosh sakes, they suck it up all the time with people they don't like—but if you're running a campaign about the future, it's hard to affix your fate to one of the biggest family names from the past.

Then there are the logistical issues of Bill Clinton. Leave aside his gaffes on the campaign trail. On balance, you're still much better off with him than not. But if she's veep, he'd have to stop soliciting money from abroad for his foundation and library. He'd have to disclose all the donors and more about his business dealings. Can he do that? I don't know. And Obama would have to be convinced that he could still be the alpha male in that three-way.

Anyway, it's slightly tacky to ask to be chosen as veep. And it makes it look like your whole campaign was about you. So don't ask and maybe you'll get asked. I doubt it. But if you ask to be asked, you won't get asked. Life really is like high school.

(As an aside, I have been saying to keep your eye on Obama picking a former senator as his running mate. Tom Daschle gets a lot of attention because he's a leader in the campaign. But he was an ineffective majority leader and as Clinton's win in South Dakota shows, he couldn't even get his home state behind Obama.

Sam Nunn would be a tempting choice. He has foreign policy and national security credentials but opposed both Bush wars in the Middle East. He's a bland, bespectacled presence, a listless campaigner. But that may be a perfect foil to a charismatic African American at the head of the ticket. For those who think Obama might be too much change, Nunn is a lot of reassurance.

I still like the idea of Bill Bradley, whom I mentioned as early as February. Bradley's got foreign policy points. He's experienced, but not part of the problem, having been out of the Senate for 12 years. He's devoted his career to racial reconciliation. The shot of them playing hoops alone is a good contrast with John McCain. The downsides: no military service, not a stellar campaigner, liberal, aloof and pious, which may be what Obama needs. That said, I still think Bradley's the most Obama-like of candidates. Both were famous young men plucked from obscurity. (It'll certainly be the tallest ticket in memory.)

But back to Hillary. She should ask for large numbers of women to be considered and appointed. Clinton should get Obama's word that he'll consider putting women in top positions. This should be easy for any Democratic nominee, and it reinforces the historic nature of her campaign.

What else should Clinton ask for?

Health-Care Mandate: She should get Obama's commitment that if his health-care plan fails to achieve universal health-care coverage, he'll back her idea for a mandate that people buy health insurance. This was one of the only noticeable policy differences between the two. If she's serious about it, this is the way to ask for it. On most other policy issues, there's either no difference or the two have converged. Their Iraq positions were the same by campaign's end as she scurried to the right. His position on negotiating with Iran and other anti-American regimes has moved much closer to hers.

Poverty Czar: Not only should Clinton ask for Obama to create the position, she should ask that the job go to John Edwards. It would look selfless and smart to call for a poverty czar, especially if a campaign rival (Edwards) adds it to his resume. Something like it will happen anyway, I bet, so why not ask for it now and get some credit for it?

Meet and Greet: Clinton should request that Obama meet with her delegates. That's something Obama should do anyway. Obama should hold meetings with Clinton delegates in the run up to Denver. It'll help mend fences. Everyone will look bigger.

There are probably other things I'm not thinking of. But if Clinton asks for things that are reasonable and helpful to all sides, she'll get them. And that would be much better than just crying uncle after the last ballot in Montana.

People who wanted Clinton to throw in the towel on the night Obama got the number he needed to clinch the nomination once and for all were missing the point—and not just the fact that no one with this many delegates has ever just folded. When you have what Clinton has, it's best to let this play out a bit more. Signal that you know Obama's going to be the nominee, which she is now clearly doing. Signal that you admire him, which she's doing.

But don't simply endorse and tell your delegates to vote for Obama until you've gotten something to show for your efforts. That's not being churlish or a sore loser. That's smart. And even the Clintons' enemies will concede that they're not exactly lacking in intelligence.

Photo: Hillary Clinton speaks to supporters at a final primary-night party June 3 at Baruch College in New York City. Credit: Justin Sullivan/Getty Images

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McClellan, Right and Wrong

Marisa Rindone — Thu, 29 May 2008 17:13:21 GMT

I haven't read Scott McClellan's book yet but, like a lot of people, I'm looking forward to it.

Somewhat infamously, I covered the Bush White House from 2003 to 2006 for Time magazine and got caught up in the C.I.A.-leak case, something that was also a signal moment in McClellan's tenure as White House press secretary. For those who need a refresher course in the leak case, I had two sources discuss Valerie Plame's identity as a C.I.A. employee with me—Karl Rove and I. Lewis "Scooter" Libby. When I called Rove on July 11, 2003, and asked about Ambassador Joseph Wilson, whose New York Times op-ed "What I Didn't Find in Africa" had electrified Washington, Rove brought up the fact that Wilson's wife worked at "the agency." The next day I asked Libby about that and he confirmed it.

A story I co-authored that appeared on Time.com—a few days after conservative columnist Robert Novak had outed Plame—called "A War on Wilson?" noted that the White House was launching a counteroffensive against Wilson's op-ed. Wilson's piece criticized Bush for claiming in his 2003 State of the Union Address that Saddam Hussein's Iraq was seeking uranium in Africa to develop nuclear weapons.

That charge became one of the causes for the war. The piece led to my being subpoenaed as a witness in the leak case—something both me and Time Inc., which was the owner of my notes and emails, fought mightily in the courts to avoid. Eventually Libby and Rove gave me permission to talk and I, like every reporter touched by this case from Tim Russert to Robert Novak to Bob Woodward to Judith Miller, wound up speaking under oath.

I rehash all of this because McClellan famously defended Rove and Libby, saying they had no role in the leak case. He had gone to them and they had, to put it charitably, misled him. McClellan, not exactly a silver-tongued orator, assured the press that they played no role. A defter press secretary would have made a small but crucial distinction by saying: "They tell me they played no role." McClellan, in his book titled What Happened: Inside the Bush White House and Washington's Culture of Deception, now laments that he watched his credibility disappear after it emerged in 2005 that Rove had been my primary source.

I feel badly for McClellan—Libby and Rove hung him out. Now, he not only bashes them in his new book, but he notes seeing them holding an unusual meeting shortly after the case broke, which McClellan speculates was a chance to get their stories straight. Maybe. I don't see how we'll ever know. I think it's doubtful that the Special Counsel in the case, Patrick Fitzgerald, who remains the U.S. Attorney in Chicago, would reinterview Libby, who was convicted on four felony counts of perjury and obstruction of justice, one of which dealt, in part, with his conversation with me. Since Bush commuted Libby's sentence, what's left for Fitzy to do? Restart a new case based on this thin reed of an allegation? As for Rove, he made five grand jury appearances and was reportedly on the verge of an indictment when the prosecutor declined to pursue. I doubt McClellan has given him enough to reignite his case.

What's the larger thing we should take away from What Happened? In a way, both McClellan and his critics are right. Certainly everything McClellan says about the rush to war and the incompetence of the administration has held up over time. He now finds himself with the nearly three-quarters of Americans who disapprove of the president's job performance. But the Bushies do have a point when they note that McClellan did not raise these objections while he was in the White House. There is something unsettling when a George Stephanopoulos or Scott McClellan rides a presidential candidate and then a White House to fame, and then dumps a critical memoir out there.

I have no stomach for Bush hagiography. Karen Hughes' book was exceeded only by Ari Fleischer's in its slovenly kiss of Bush. But there's probably some middle ground between knee-jerk praise and self-serving disclosure. Plus there's a resignation issue. If McClellan was this agitated, didn't he have a duty to quit? It's a fair question being posed.

Those who have left administrations in anger have produced the best memoirs. Bush Treasury Secretary Paul O'Neill's tale was written by journalist Ron Suskind as a reported book, but it was O'Neill's story. My favorite presidential memoir is the late Donald Regan's, For the Record. Regan had been the head of Merrill Lynch and was tapped by Ronald Reagan to be his Treasury Secretary. He amassed an impressive record, including guiding the 1986 Tax Reform Act through Congress. Then he switched jobs with James Baker, who took over Treasury as Regan became White House chief of staff. He ran afoul of Nancy Reagan and her astrologer—whose role in the sainted Reagan White House was astonishing—and took the rap, unfairly, for the Iran-Contra affair. Regan was asked to quit quietly. The former Marine did so loudly and dished out one of the juiciest memoirs ever.

I've yet to read McClellan's take, but I suspect it would have had more impact still if it had the same pedigree.

PHOTO: Scott McClellan walks with President George W. Bush on the South Lawn of the White House during his tenure as presidential spokesman. Credit: Polaris

Sydney Pollack, RIP

Matt Cooper — Tue, 27 May 2008 19:29:16 GMT

Sydney Pollack died yesterday and while the obits all not his achievements as a director and actor, one point should be noted: He was great at playing rich and powerful men. Even in a dog like "Made of Honor," the Patrick Dempsey vehicle which was his last role, he was a rich man with a penchant for younger wives. Perhaps his best two roles as rich men were in Michael Clayton, the head of the evil law firm employing George Clooney and in Eyes Wide Shut where he may or may not have had one of his mistresses killed. In any of the roles, he was simultaneously creepy and charming, a mix of menschy but also mysterious. There's a Yiddish word--Hamish--meaning cozy, familiar. Pollack could convey that at the same time being a boardroom sonofabitch in his roles. In lesser parts, as a political consultant in the dreadful Random Hearts, Pollack could be a bastard but he was best as the charming but merciless executive. The closest I've seen to this is the great Jerry Adler who played Herman "Hesh" Rabkin on the Sopranos. (He was also the main suspect in Woody Allen's Manhattan Murder Mystery.) But Hesh, a one time music industry goniff--thief--who made off with the profits of his black R&B singers is gentle by the time of the Sopranos, content to lie about Morris County, New Jersey with his horses and girlfriend. Pollack's energy was more raw, and less retiring. In the past, films portrayed rich people as Thurston Howell caricatures or Stetson wearing Texans. Pollack personified, and as a Bar Mitzvah boy I feel freer to say this, the rich Jewish executive you'd see at the Short Hills mall sweetly playing with his kids but you know he's a bastard at work. Pollack was never explicitly Jewish in his roles.In fact most of the wealthy characters he played, as in Kubrick's Eyes Wide Shot, were not explicitly Jewish. But Poillack was and his audience knew it and it was etched in his face which showed not a trace of WASP gentility. Of course, by all accounts, Pollack was a lovely guy. But nobody played a better bastard.

All in Moderation: Who Is Best?

Marisa Rindone — Thu, 22 May 2008 18:10:54 GMT

The downsides of a long presidential campaign are many and familiar: It's expensive. It's exhausting. Just after a candidate had completed years of inhuman panhandling, speechifying, airlining, pandering, and attacking, we ask them to take the oath of office and give it their all. The good side is that it tests the candidates in ways that are useful and gives us plenty of time to think about whether they'd be right for the job.

Right now, the election feels like it's gone on forever. The world today is different from when the candidates began their quest a couple of years ago. The situation in Iraq looks better; the economy looks decidedly worse. One of the early columns in Condé Nast Portfolio boldly predicted $50 a barrel oil. Oh, well.

And things may change yet again by the fall. Some unknown natural disaster may beset us like the Chinese earthquake. There could be another subprime-like crisis lurking. But I wonder: From what we know now about the candidates, what's the best case you could make for both Barack Obama and John McCain? By best case, I mean assuming that you're not hyperpartisan, you're moderate, and willing to strip away the hype. By this, I'm saying that you're hopeful that Obama could bring some degree of racial reconciliation and improve America's image overseas but you're not delusional enough to think his mere presence in the Oval Office will bring about an era of good feelings. Who's better?

Age before beauty, let's start with McCain. Is the Arizona senator the reformer of 2000? In many ways, no. He's returned to his roots as a tax-cutting Republican, and less of a deficit hawk (people forget that back in the '90s he opposed the first President Bush's tax cuts). He'd keep the current Bush tax cuts in place and he has a lot in mind, including getting rid of the Alternative Minimum Tax—a bunch of credits so people can buy health care—and a lot of corporate cuts. To me, that seems like a sure way to run up the deficit.

But not so fast. You can make a case that McCain would have the best chance of doing something about entitlement spending. He's left his plans deliberately vague, while Obama has tossed out specific proposals like raising the cap on wages subject to Social Security taxation. McCain's history as a spending hawk, and on any number of bipartisan initiatives, bodes better than Obama's on entitlements—not that Obama hasn't demonstrated some real seriousness on the issue.

On the war, it all depends on how you see it. The McCain case is that we had a crappy strategy for years, but now it's finally working and we should give it time. The Obama case is that it can't work, it's up to the Iraqis, and we have to get out as soon as possible. Who's better? That depends on whether you think the war is winnable and worth the cost. By November, we'll know a lot more.

The economy overall? If you think higher levels of taxation are by themselves deadly, then you want to go with McCain. But Obama, I think, has had more nuanced economic policies on things like tech and the mortgage-and-credit mess, especially the latter, where McCain had a laissez-faire attitude for a long time and came late to the party.

On the social issues, it again depends on what you believe. If the idea of any legal restrictions on abortion freaks you out, Obama's your guy. A McCain court is sure to allow Roe v. Wade to be substantially chipped at or overturned. On the environment, my guess is that we'll get a cap-and-trade bill and some limits on greenhouse gas emissions under either President Obama or President McCain.

One of the lessons of 9/11 is that the world can change overnight. You can't anticipate what the next president will face. So you have to look beyond policy papers and ask how they'd respond in an unforeseen crisis and adapt to new challenges. It goes without saying that by being imprisoned in North Vietnam, McCain met an inhuman challenge and handled it with superhuman courage and dignity. But given what we know about him, would he be better than Obama at dealing with some unseen domestic or foreign challenge? I don't think we know the answer to that.

And it's not unreasonable to ask whether McCain, who would be 72 by the time he took the oath of office, would be up to the task. He's shown enormous physical stamina in the campaign and there's no sign that he's off his game. But 72 is 72, and it's worth seeing what comes out of the medical records released this week to make judgment about what McCain might be capable of handling in a couple of years.

Who'd be a better president? A lot of it depends on your basic beliefs coming into that question. But if your beliefs are centrist, moderated, and infused with doubt, than the answer isn't so clear and the campaign isn't too long.

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