JUDY WOODRUFF: And to the analysis of Brooks and Marcus. That’s New York Times columnist David Brooks and Washington Post columnist Ruth Marcus. Mark Shields is off tonight.
Good to see both of you.
Now we have heard from Paul Solman talking about risky behavior, bailouts.
David, let’s focus right in on the federal, the Bush administration proposal to prop up Fannie Mae and Freddie Mac.
DAVID BROOKS: Right.
JUDY WOODRUFF: What do we think?
DAVID BROOKS: Well, to me, it is the long-term implication that is the most interesting and that Bernanke’s policy comment in Paul’s piece really gets at.
If the government and even a Republican administration is going to clean up a mess and prevent a failure, then does that mean the government is going to want to get involved in the way business is done all the way along the way?
In other words, if we’re cleaning up the mess, we are going to regulate you. And are we at the cusp of a long period of much more intense regulation of the financial markets? And I suspect we are.
JUDY WOODRUFF: Why?
DAVID BROOKS: Well, because the government says, hey, we clean up the mess. You losing money, we have to pay for it. So, we are going to try to prevent you from losing this money. Now, the question will be how exactly do you regulate. But, to me — and the government is really terrible at this — but, to me, the interest in Congress in particular is going to be there to vastly increase the regulation of the financial markets.
RUTH MARCUS: Well, I think that the British comedians really got to the point, which is what we need to do is figure out a way to regulate before the mess, rather than after the mess, because, if you regulate after the mess, you are going to get all the cost of regulation with none of the benefits. And you’re going to have to pay the cost of the cleanup.
What you need to be doing is figuring out a way to find the sweet spot of regulation between a command-and-control government, over-regulation, which we know is going to squelch economic growth, and the laissez-faire — What was the British word? — cock-up that we are experiencing right now.
DAVID BROOKS: I didn’t know you could say that on American TV.
RUTH MARCUS: Am in trouble? I hope not.
JUDY WOODRUFF: Yes.
DAVID BROOKS: I mean I think that is the political direction we’re heading. But it’s not as if Fannie Mae and Freddie Mac were unregulated. They are semi-government institutions. And the regulation has been there in some degree. It just hasn’t been very effective. And it could be, it can’t be very effective.
A push for a stimulus package
JUDY WOODRUFF: Well, is what is happening now, Ruth, on the way to straightening all this out, as you are saying needs to happen?
RUTH MARCUS: Well, it could be on the way to straightening all of this out. I think one thing that we need to understand is that Fannie Mae and Freddie Mac are a problem now. And they were a problem that needed more government regulation, specifically a better overseer beforehand.
But right now, they are actually the collateral damage and a symptom of a bigger problem and a bigger failure of government regulation, which has to do with subprime loans. They did not issue very much in the way of subprime loans. It's the -- they did not issue very much in the way of subprime loans.
It's fallout from this not only foreseeable, but completely foreseen, specifically by Ned Gramlich, the late Federal Reserve governor -- if people had listened to his warnings, we wouldn't be in this mess now.
JUDY WOODRUFF: Any connection -- and we haven't heard much from the presidential candidates on this, this week, David. Why is that, do you think?
DAVID BROOKS: I think -- well, this specific issue, I think, is too esoteric, with Fannie Mae and Freddie Mac. It's too -- they are certainly talking quite a lot about mortgage, which people do feel, especially in key states.
But, you know, frankly, I don't think there is much they can offer. They have talked about speculators. They have talked about the financial markets. They have blamed the mortgage bankers.
JUDY WOODRUFF: But government intervention, government regulation, more government regulation?
DAVID BROOKS: Well, what I just -- in pure political terms, what I see the politicians heading more -- is more toward just a vague stimulus package, which would hit more taxpayers directly. The last one didn't seem to have worked, but we may do another one.
RUTH MARCUS: I think we are going to see a lot of push for a stimulus package.
But the federal -- the presidential candidates and the government-sponsored enterprises, it's not just that it is too esoteric. It's that partly they do not want to be in the position of saying something untoward or uninformed that is going to move these very jittery markets.
This is actually the one problem that I can think of, the one big problem, that President Bush has the prospect of actually clearing up before one of these other two men get into office. And so let's just sort of let him handle that problem.
There isn't -- both candidates actually have said some interesting things, or have the prospect of saying anything things. Senator Obama said on this show last night or the other night that he -- he actually mentioned the moral hazard question. He said he did not want to see the government, as it had been, taking all of the risk, and the government-sponsored enterprises getting all of the benefits.
JUDY WOODRUFF: This was in Gwen Ifill's interview.
RUTH MARCUS: In Gwen Ifill's interview.
And I think there is an interesting move for Senator McCain, who hasn't said too much on this yet, which is, potentially, to listen to some advice from Karl Rove, and actually break with the administration, and talk about the potential harms and the potential problems with a -- quote, unquote -- "bailout."
Obama's image on overseas trip
JUDY WOODRUFF: All right, well, let's turn -- we're talking about the candidates -- Barack Obama, David, making this trip overseas. We don't know exactly where he is right now, but we know he's headed over there. All of this coincides with some very interesting shifts going on inside the Bush administration.
But let's talk about Obama first. What does he have to gain, to lose, from all this?
DAVID BROOKS: Well, it's mostly images. He's not going to learn a lot. He is going to be on the ground for a brief period of time.
But the image of him being cheered by hundreds of troops or thousands of troops would be a great image for the Obama campaign. Network anchors will be there to reflect that image. And, so, it will -- he will begin to look presidential, if he can get that image.
RUTH MARCUS: And it's also risky. He's got the upside that David mentioned. But, unlike Senator McCain, who, when he had a moment where he misspoke about the role of Iran in sending -- in training terrorist troops -- or terrorist activists in Iraq, and got -- he got some heat, but pretty much everybody gave him a pass, because it's presumed that he was just tired or whatever; he knew what he was talking about.
If Senator Obama flubs, it going to be a 24/7 big headline, instant attack ad flub. And that is a risky piece of the enterprise.
DAVID BROOKS: I would also say, I mean, he will confront the effects of the surge. And, you know, Obama went on TV when the surge was being debated. And he said the surge will not reduce violence. The troops just won't do it.
Now he says, you know, I always believed that we would reduce violence with the surge. And this is my pet peeve with all politicians. Admit a mistake. Just once say, oh, I had this judgment.
DAVID BROOKS: It turned out to be wrong. I'm moving on.
And he won't do it.
DAVID BROOKS: I am sort of mystified. But I think in this case, he would benefit to say, I underestimated the surge. It has had this big military effect. It has had a substantial political effect. We're moving on here.
But he absolutely refuses to do that. It has been one of the more dispiriting things...
JUDY WOODRUFF: Does that hurt him not to do that, do you think?
DAVID BROOKS: Well, political consultants are all geniuses. They must know what they are doing.
But I think most people see the surge as having at least a significant success, if not a total success. Acknowledge that fact. Why not be a normal human being?
RUTH MARCUS: Because one of Senator Obama's big arguments is, I had the good judgment early on, before I was in the Senate, to oppose the war.
If he then has to say -- and I'm not a big believer in the flip-flop as the worst thing in the world. I would like a little bit more straightforwardness. And I don't fault people for changing their minds.
But it would go to the question of, OK, you had good judgment one time. Then you had bad judgment another time. Which judgment -- and that was when you were in office, and a little bit more briefed and advised by folks. So, which judgment do we judge?
So, there's arguments for him not to do that.
DAVID BROOKS: Sort of have evolving judgment, I would say.
McCain, Bush administration at odds
JUDY WOODRUFF: Well, so, while Barack Obama is headed over there, the Bush administration, this week -- and Margaret Warner just was doing an interview about it with two analysts -- is shifting position on Iran, of when we sit down and -- the U.S. sits done and talks with Iran, whether it is before, or during or after they have gotten rid of their nuclear program, and then as we just heard on the -- whether you call it a timetable for a troop withdrawal, or a time horizon.
David, is this just a coincidence that this is all happening right now?
DAVID BROOKS: Yes, I think it mostly is. They have had these ongoing conversation. I think the time horizon has more to do with the Iraqi election than with our election.
But what struck me in conversations with tippy-top Bush administration officials is -- I raised the issue of the -- which has been going on in the campaign, where McCain wants to keep bases permanently in South Korea/Germany-style. Obama doesn't.
In the Bush administration, they are actually -- on this particular issue, they side with Obama. They think we cannot have permanent bases there.
JUDY WOODRUFF: Really?
DAVID BROOKS: Those sort sorts of bases are a relic of the Cold War. We're going to phase down to some small advisory presence in the very long term.
And so, in this case, they do not agree with John McCain. And I suspect that's because of pushback they are getting from the Iraqis.
JUDY WOODRUFF: So, what kind of triangle are we talking about here. Ruth?
RUTH MARCUS: It is a very interesting triangle, isosceles, right, who knows.
RUTH MARCUS: But it's because you now have Senator McCain, oddly, at odds with the administration on Iran, here in Iraq with the bases.
I do think, though, that some of the shifting by the Bush administration is sort of less than meets the eye. There's a big difference between a time horizon and 16 months, which is what Senator Obama is talking about.
The horizon, as you may go -- as you get towards the horizon, it tends to recede. And it's all aspirational. And Senator Biden drew a pretty, you know, strong line in the sand this week. I was actually sort of surprised that he drew that line in the sand before he got on the sand in Iraq. And he also laid down some very big markers for an Obama presidency on Afghanistan, where we did see...
JUDY WOODRUFF: ... shifting.
RUTH MARCUS: ... where we did see shifting.
I think, fundamentally, these are two campaigns and a presidency which is, I guess, at this point, somewhat in the middle, with very different world views about the long-term strategic importance of Iraq and how important Afghanistan is in the long-term.
New ads by Obama, McCain
JUDY WOODRUFF: Well, just quickly, before we let go of this, McCain is out today with his first negative ad of the general election, pre-general election period, David. Barack Obama never held a single Senate hearing on Afghanistan. He hasn't been to Iraq in years. He's running it in 11 battleground states and across the country. Is this the kind of thing that voters are paying attention to, do you think?
DAVID BROOKS: I actually think -- to go to the core, to go to the two statements -- McCain has another ad which is so far Web only, where he shows Obama saying, in multiple times, completely opposite things, and saying them with great fervor and confidence.
The ads that work go to the character of the person, not so much the policy. And on the surge, he has been all over the place. And the ads are sort of startling for those of us who sort of watch Obama on the stump.
RUTH MARCUS: And I would actually mildly disagree with David.
I think character ads do work. And people are concerned about character. They are also concerned specifically with Senator Obama. And this is why it's both a kind of smart and risky thing for him to be making this foreign trip. The ad does go to the big issue that people -- or the big question that many voters have about Senator Obama is, does he know enough about foreign policy? Will he keep us safe?
And that is what we are going to hear. That is just the opening shot in a long series of this from the McCain campaign.
JUDY WOODRUFF: Very quick, last crass question, David. Obama raised $52 million in the month of June. What does it say about his decision to opt out of public financing?
DAVID BROOKS: Well, he's got a lot of money. He has got the small money donors. He's got a phenomenal number of lawyers.
If you look at the people giving to his campaign, it's lawyers. It's hedge fund managers. He's got people at the top and he's got people at the top bottom. But, to me, the top, that is what is really kicking in these days.
RUTH MARCUS: I think there are a lot of Democrats -- I ran into some folks it this week -- who were very nervous about whether this was the right thing for him to do, because it is a lot of money to have to raise -- $52 million can quiet some nerves. It's still -- he's going to have to keep that up for several months. And it's not an easy task. But he has shown that it can be done.
JUDY WOODRUFF: Somebody has got to work hard to rake in those -- those bucks.
All right, Ruth Marcus, David Brooks, thank you both.
RUTH MARCUS: Thank you.
JUDY WOODRUFF: Good to see you. All right.