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Shields, Brooks Weigh in on the Week’s Dramatic Bailout Debate

September 26, 2008 at 6:40 PM EDT
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It was a devastating week on Wall Street and a contentious one in Congress as politicians battled over bailout proposals. With the presidential candidates heading to the first debate, political analysts Mark Shields and David Brooks reflect on the developments.
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RAY SUAREZ: And to the analysis of Shields and Brooks, syndicated columnist Mark Shields and New York Times columnist David Brooks.

And, David, John McCain said he wouldn’t debate until there was a deal. There’s no deal, and there is a debate.

DAVID BROOKS, Columnist, New York Times: That’s right. Well, sometimes politicians are not literal. They’re metaphorical.

You know, they’re going to have a deal. I spoke to a bunch of House Republicans today. And like Mike Pence, they’re against the Paulson plan.

But I think they acknowledge that, at the end of the day, probably by Sunday night, there’s going to be a deal.

They’re trapped by a bunch of different forces. There is the popular opinion, which is coming in calls 100-to-1 against the plan to congressional offices. There’s fears fed by Bernanke — and legitimate fears — that the whole system is going to fall down.

And then there’s the incompetence fear, the idea that this plan will not do what it’s going to do, that people don’t understand how the Paulson plan or the Paulson-Dodd plan is going to work.

So they’ve got these three forces they’re negotiating. And House Republicans are very confident that the people are with them, but they do not want to be held responsible for this economy by holding up the whole plan.

So they’re using this public opinion as leverage. But at the end of the day, they will sign onto a plan, and I think we’ll get something Sunday or Monday.

RAY SUAREZ: Do you share your partner’s optimism?

MARK SHIELDS, Syndicated Columnist: I think they will by Sunday or Monday. I do agree that the House Republicans’ position in opposing the Paulson, House and Senate Democrats’, administration, White House, House Democrats’ plan is the most politically popular. There’s no question about it.

There’s a distrust, a skepticism, and a perception that Main Street is bailing out Wall Street and that this is unfair, and also serious questions about whether it will work.

At the same time, I think that, when you ask about John McCain, I mean, John McCain has traveled a rather interesting odyssey in the last nine days, from, “The fundamentals are strong,” to let’s appoint a 9/11 Commission on the economy, to let’s fire the Republican chairman of the Securities and Exchange Commission and replace him with a Democratic attorney general of New York, to let’s get more aggressive in our regulation of the private financial sector, which had not been his — he’s been for more extensive regulation of the public financial sector, in Fannie Mae and Freddie Mac, but not of the private sector — to then calling that this is such a cosmic, urgent problem that we had to call off the debate.

And, you know, so it’s rather remarkable. And I think it was funny to see John McCain pairing up with the House Republicans, who probably have less in common with John McCain than any of the other entities — the Senate Republicans, Senate Democrats, House Democrats — have opposed most of his major initiatives.

But it’s been a fascinating trip. But I agree with David that there will be — there should be an agreement and a vote on Sunday or Monday.

Confusion over McCain's position

David Brooks
The New York Times
I thought it was a mistake for him to say, 'I'm blowing up my whole campaign. We're suspending it. We're not going to do anything. I'm going to go to Washington and fix this.'

RAY SUAREZ: Is Mark right? Did it take McCain awhile to find his feet on this thing?

DAVID BROOKS: Well, everyone likes to hear alternate points of view, and McCain encompassed many alternate points of view in and of himself.

With McCain, it's always "Saturday Night at the Improv." He does improvise, and he has been improvising.

I thought it was a mistake for him to say, "I'm blowing up my whole campaign. We're suspending it. We're not going to do anything. I'm going to go to Washington and fix this."

He should have just gone to Washington. And I think the going to Washington part, without all the histrionics, was effective and a reasonable thing to do, not that at the White House he was very active in that discussion they had the other day, but I think what he did was he said to the House Republicans, "I'm with you, but we need a deal."

So in those meetings with the House Republicans, he said, "I completely understand where you're coming from. I don't like this any better than you do. But we need a deal."

So I think, in some small way, he did -- he has prepared the way for them to compromise in a way the Bush administration has not. The Bush administration and Dick Cheney have gone up there, made the case, and not moved a single vote, because they just have no juice up there anymore.

So McCain played some leadership role that I think the Bush administration doesn't have anymore.

MARK SHIELDS: Well, and let's be blunt, I mean, Obama has been short on specifics throughout this thing, but he's looked like a steady hand on the tiller by comparison in these turbulent seas.

We don't know right now, as we begin the debate in, what, an hour-and-a-half or two, that whether, in fact, John McCain is for -- going to vote for the bailout or is with the Republican plan. He hasn't picked either one.

RAY SUAREZ: Well, has it ever been clear what his outstanding problem was with the compromise that looked like it was gelling among the other parties?

MARK SHIELDS: No. I mean, he came back, he said, because they couldn't reach an agreement. And you heard Roy Blunt quoted, the Republican House whip, saying that they were about to strike a bargain and House Republicans were going to back it, until yesterday.

I mean, it was rather remarkable. I think one of the overlooked factors in this -- there are a lot of politics at work. Democrats are hardly the party of Andrew Jackson here. I mean, this is not a populist position that they've adopted.

But I think they've been convinced that the consequences, the alternative of doing nothing is so drastic and so severe, plus that there would be blood on their hands.

And so, as the governing party, they're kind of stepping up swallowing, not crazy about doing what they're doing. I think the Senate Republicans are in the same position.

And so I think, in this sense, the House Republicans, there's going to be a fight for Republican leadership in the House. Eric Cantor of Virginia is leading the fight at Mike Pence's side that, "We don't want the Paulson plan at all."

And he kind of undercut John Boehner, the Republican leader, who was negotiating with the Democrats, and with the Senate, and Republicans and Democrats, to work the administration plan to pass.

So Boehner all of a sudden got alarmed, and had to back off, and come back to his caucus, so we got caucus politics going on. We've got Election Day politics going on. I think that's one of the reasons an awful lot of Democrats are going to vote for this.

Nobody happy about needed law

Mark Shields
Syndicated Columnist
I think there will be a political backlash when we find out that German, and Japanese, and Chinese banks are being bailed out, as well...what happened was these subprimes got into the system and then Wall Street sold them so they went worldwide.

RAY SUAREZ: Deal-breaker issues emerged during the week, executive compensation, whether the taxpayer would end up owning, in fact, owning an equity stake in these companies that were being bailed out, congressional oversight on the price that the federal government would pay for some of these bum assets.

Didn't it look like there was convergence, that the two sides were taking their differences in, and giving a little here, and giving a little there, and it looked like something was happening?

DAVID BROOKS: On those side issues, on the executive pay, I think there was a lot of convergence. The administration accepted it. When you listen to the substance of what Obama and McCain were saying, there was a lot of overlap.

It's the fundamental issue that the debate is about. It's the fundamental issue of using $700 billion to intervene massively into the markets that the Republicans find ideologically offensive or philosophically offensive.

They also don't know that it's going to work. Floyd Norris of my newspaper had a piece today saying, even if they do go in there, are we sure that the banks, with this infusion of capital, are we sure the banks are actually going to loan after that? How do we know how to price these assets?

So there are substantive concerns. So I'd say, on the periphery, there are all these things they're agreeing on. It's the core issue of how this thing is going to work that people are unsure of.

And I spoke to member after member, Democrat and Republican, who recounted conversations with Paulson or Bernanke and some of the others, and they said, "How exactly is this going to work? What are the odds of it working? What are the odds of it not working? I want to know this before I appropriate $700 billion."

And they were unsatisfied with the answers. So that's an element that's causing everybody to be distrustful of this plan. As a colleague of mine said, this is the least popular bill that's going to pass in recent American history.

RAY SUAREZ: And the optics of this, seeing that cabinet room yesterday with John McCain at one end of the table, Barack Obama at the other end, and the president in the middle, well, the guys at the two ends of the table are thinking, "Wow, in January"...

MARK SHIELDS: This is my...

RAY SUAREZ: ... "it's going to land in somebody's lap."

MARK SHIELDS: "This thing is my headache," you're absolutely right. "And there goes my administration."

I mean, we talked about this briefly last week. But, I mean, I think the consequences of it are even more obvious today, that you're just going to be hamstrung with any new initiatives, national health, whatever.

I mean, John McCain wants to continue the Bush tax cuts. Say good night. You know, John McCain has corporate tax cuts. Say good night. I mean, the money isn't there.

And, you know, I think there will be a political backlash when we find out that German, and Japanese, and Chinese banks are being bailed out, as well, because, I mean, what happened was these subprimes got into the system and then Wall Street sold them so they went worldwide.

I mean, so that -- if you say -- just say for purposes of argument that the poison was put in by Fannie Mae and Freddie Mac, by putting them in subprimes, and they were not a good investment.

Well, they just spread like a virus, like a global virus, by the securitization of them and selling them as securities. And so now you've got all these other financial institutions who have a stake in them.

And David's point about, what do you price them at? I mean, if there's one place where the government ought to be able to exercise some leverage, it's establishing what the price is. I mean, they ought to be able to go in. I mean, they ought to be able to go in low.

DAVID BROOKS: With one bidder, it's hard to get a price. Steve Pearlstein of the Washington Post had a good observation, which is you can either punish Wall Street or you can stabilize Wall Street. You can't do both. We all want to punish Wall Street, but we just can't do it.

And I think the argument for Republicans is, "You may hate this. A lot of people hate this. But serious people like Bernanke, who are not prone to nationalizing industries, think they're in a panic."

And the other thing that's happening today, by the way, is a lot of community banks are calling up their House members. And the tide of opinion may be against this, but among the bankers and increasingly local businesspeople, they are calling up and saying, "You guys better do something."

So there is, at the business level, a counterweight to the tide of opinion against this.

Final stretch, all is on the line

David Brooks
The New York Times
That's why House Republicans matter at all. Democrats have the majority in the House. They could push it through. They just -- they don't need them for the votes. They just need them for the political cover.

RAY SUAREZ: Now, in a time when "gotcha" questions are very much anti-vogue, this is not a "gotcha" question, but I'm just sort of thinking out loud. I can't think of a time when we're so close to an election and so close to the end of a presidential administration where something so big, of such a massive consequence is on the menu. It's really breathtaking.

MARK SHIELDS: Ray, you talk to people on the Hill, which I've done this week, and they say, "Look, nobody wants to cast a vote on this, nobody." I don't care who it is, I mean, Barney Frank or Mike Pence.

Nobody wants to cast a vote on it because it is -- I mean, it's controversial if you do -- I think a vote against it probably gets you through the election OK.

But voting for it is -- you want to avoid difficult, painful, torturous votes, especially this close to an election. And George Bush is a weak ally for the people who are trying to push it. I mean, he hasn't been able to deliver anything.

DAVID BROOKS: That's why House Republicans matter at all. Democrats have the majority in the House. They could push it through. They just -- they don't need them for the votes. They just need them for the political cover.

MARK SHIELDS: They need them for political cover.

DAVID BROOKS: And that's going to -- what's going to make this debate so interesting is, how do the candidates come out? Because they're torn this way, too.

They can read the polls. They know what -- they've been up on the Hill, so they've been hearing from their colleagues. The calls are 100-to-1 against, 200-to-1 against. Are they going to come out for something that unpopular in the debate tonight? That will be interesting to watch.

RAY SUAREZ: Well, I get to watch it with you. Good to see you both.

MARK SHIELDS: OK, looking forward to it.