That is the question, as the housing market's decline accellerates, commodity prices soar, consumer confidence crashes, and the question of what to do about it seems to stump just about everyone.

President Bush said this morning there'll be no recession, and rejected calls from governors around the country for a second stimulus package that would focus on (job-creating) infrastructure and transit improvements. And Treasury Secretary Paulson says the Bush Administration does not support a taxpayer funded bailout of the mortgage banking industry/overwhelmed borrowers. Here's the quote: (bookmark it) "I don't think I've seen any scenario where the American taxpayer needs to be stepping in with more taxpayer dollars." And to think it was just a few months ago that Secretary Paulson, his boss President Bush and Fed Chairman Bernanke all said raising the portfolio caps of giant mortgage Government Sponsored Enterprises Fannie Mae and Freddie Mac would not happen, at least not without significant regulatory reform. Ahem. More on the GSEs below.

First, the whole "what to do about the crashing housing market" thing. There are lots of proposals circulating on Capitol Hill, and the first one up has as its centerpiece something known as "cramdowns." I guess the poetic name comes from the fact that it involves lenders having modifications of loans crammed down their throats. Tanta is for them, which is probably all you need to know. But the Bush Administration says this is a lender bailout. Which is rather puzzling considering the Mortgage Bankers Association is against it. Housing expert Elizabeth Warren might be on to something when she guesses the bankers' opposition might be related to a hope that a much bigger bailout could be coming.

And what form would that take, you ask? Check this out: both Alan Blinder, who was on President Clinton's Council of Economic Advisors, and analysts at the American Enterprise Institute are advocating re-creating a 1933-era program to buy mortgage debt from banks and re-lend it to borrowers facing foreclosure, with taxpayer-backed guarantees. The agency was called HOLC, the Home Owners Loan Corporation. Setting aside for a moment the fact that Alan Blinder and the AEI agreeing on something is a bit of a scary development, here's what both are ignoring: by 1933, home prices had already fallen 30% nationwide from 1925 peaks. NOW, prices need to fall ANOTHER 30% to get back to levels that held for generations in this country (median home price = 3X median income). Bank of America and Credit Suisse are also floating a bailout scenario: make no mistake, it's a bailout geared to LENDERS, not borrowers.

But hey, why wouldn't banks be looking for a helping hand from taxpayers: bank failures are coming.. which we've talked about in this space and Chairman Bernanke affirmed today. I guess we could have taken the hint from the WSJ confirming that the FDIC is hiring retirees to handle a coming increase in workload. At least there's one growth industry out there. Oh here's another hint: bank earnings fell 83.5% in Q4 from the prior year.

And an interesting Marketwatch story that you can file under: those who refuse to learn from history are doomed to repeat it.

Now to those GSEs. On the same day Fannie Mae reported horrible 2007 results (a $3.6B loss in Q4), they also announced that regulators were suddenly allowing Fannie and Freddie Mac to lift their portfolio caps and expand their business. This on the heels of the stimulus package which raised conforming loan limits. Flashback for some background: Yves Smith as NakedCapitalism did his usual bang-up job of getting to the heart of the matter back in October. Moody's expects FNM to lose a lot of money in coming months. Bloomberg's Jonathan Weil looks at Fannie Mae's precarious position. And blogger Mike Mish Shedlock looks at systemic risk at Fannie.

And speaking of systemic risk, economist and NYU professor Nouriel Roubini testified on Capitol Hill yesterday, and if you want to ponder the downside risks to the global financial system, take a look. (Hat Tip: finance professional with integrity Scott Gerstein.) 

But since we like to get all points of view around here, here's businessman Sam Zell, who unloaded his real estate empire at the top tick, saying the real problem with the economy is that the Democrats are talking it down.

One last topic: the announcement this week that the agency that guarantees pension funds is reaching for yield by putting more if its assets in the equity markets. If that makes you feel uneasy, try this on for size: the GAO says pension plans investments in hedge funds have grown from $3.2B in 2001 to $50.5B in 2006. And this might not be the worst idea ever, but it's up there: the 401K debit card.

And hey if you really want to understand the mortgage crisis, and don't mind bad language, here's your primer, right here.

Confidential to my buddy Tom Lea. See ya tomorrow.

Hi. More stuff on the stock market (a wilder ride than anything at Six Flags); the credit markets (harder to decipher than a Paul Thomas Anderson film); and the plot point no economic meltdown is complete without: the rogue trader (dude, where's my $7 billion?)

Between the Federal Reserve, the Executive Branch, Congress (working together.. gasp!), state regulators, the Government-Sponsored Enterprises (FannieMae, FreddieMac), Jim Cramer and Larry Kudlow, the powers-that-be are throwing everything including the kitchen sink at the equity markets, which have been tip-toeing a little too close to the abyss lately. Huge, surprise Fed Funds rate cuts, 2-minute drill stimulus packages, bond insurer bailout tirades and meetings, hikes in conforming loan limits, it's all coming, rapid fire. Will it be enough, or did the excesses of the past few years create so many problems that even the kitchen sink can't put out all the fires? Let's start with the bond insurers.  

A couple of months ago, I spent a bunch of time trying to understand what a Structured Investment Vehicle was and whether the Treasury Secretary's idea of setting up a Super-SIV so banks could pool bad stuff they had parked in their SIVs in one place. A lot of reasonable people writing about the issue said the Super-SIV would never get off the ground, and it turned out, it didn't. No one wanted to invest in the Super-SIV, so the banks started repatriating what was in their off-balance sheet SIVs onto their books, and we all saw giant write-downs at bank after bank in Q4. Now there's talk of a bailout of a group of bond insurers called monolines, which used to provide plain-vanilla coverage to municipalities, but branched out into exotic credit derivatives during the last few years. That included insurance for bonds based on mortgage debt, which has now gone bad. The fear is that if the insurers default, it will have a really nasty ripple effect throughout the entire global financial system. The downgrade of one of those insurers, Ambac, on Friday may have been what triggered the global stock market freakout Monday and Tuesday. 

So here's the state of play: yesterday, the Financial Times reported on a meeting of banks and representatives of the bond insurers, organized by New York State's insurance commissioner. The report hinted that a possible bailout of the insurers by a consortiuim of banks was in the works. As the original FT story came out, the Dow rocketed from down 340 points to up 299. (Coincidence? Uhhh...) But today, CNBC's Charlie Gasparino pours some icy cold water on yesterday's optimistic take, arguing that not only was yesterday's meeting of little consequence (no agreement from the banks on substance), it may have materially affected the companies' ability to actually be bailed out by some private equity bottom-feeders who were eyeballing them when their stock was at $5.00 a share. After yesterday's news, the bond insurers' stock prices took off like rockets, and private equity is not so interested at $14 a share. So to make a really long story only sort of long, it might be a reasonable conclusion to draw, that a monoline bailout makes about as much sense as the Super-SIV. It may not happen. But like the Super-SIV plan, the prospect that it might happen was enough to keep equity and credit markets out of the pit of despair, for the time being at least. Advocates of a bailout point to the Long-Term Capital Management hedge fund fiasco, as a template. The WSJ raised it.. and there was more today from NakedCapitalism. On the other hand, Felix Salmon at Portfolio doesn't think the monolines are all that important. And by the way, the subplot of all this is that when all the news about the monolines started hitting critical mass awhile back, Warren Buffett stepped in and said he'd be opening up his own bond insurance shop. Show of hands: do you think Warren Buffett knows what he's doing? Don't you think if the existing monolines were save-able, he woulda bought one of them? OK, hands down.  

Back to more basics now and Existing Home Sales for December. CalculatedRisk has the latest ugly installment. In summary: December sales fell 2.2% to a 10 year low, down 22% year-over-year; prices fell 6% year-over-year; for the year 2007, median prices fell for the first time in 40 years. Here's a fun quote from March, 2003 to go with that last stat: "It is, of course, possible for home prices to fall as they did in a couple of quarters in 1990. But any analogy to stock market pricing behavior and bubbles is a rather large stretch. First, to sell a home, one almost invariably must move out and in the process confront substantial transaction costs in the form of brokerage fees and taxes. These transaction costs greatly discourage the type of buying and selling frenzy that often characterizes bubbles in financial markets. Second, there is no national housing market in the United States. Local conditions dominate, even though mortgage interest rates are similar throughout the country. Home prices in Portland, Maine, do not arbitrage those in Portland, Oregon. Thus, any bubbles that might emerge would tend to be local, not national, in scope." Who said it? (Answer at the end of this blog post, but not upside-down cause I don't know how to do that.) 

Now to the stimulus package that the White House and House leaders announced today. Tax rebates, business tax cuts, and somewhat controversially, an increase in the conforming loan limits for the FHA, and government-sponsored enterprises Fannie Mae and Freddie Mac. Mike "Mish" Shedlock made the case against stimulus before the final details were announced (see especially the part about conforming loan limit increases being DOA, as they should be. Double-oof.) Paul Krugman says the Democrats caved on providing stimulus to those most likely to spend it.  Yves at NakedCapitalism (again) weighs in on the monetary side. And just as a reminder that piling up more debt might not be the best solution to a debt crisis in this country.. here's David Leonhardt's NYT piece about the "good times" we've just experienced.

And what would a global stock market meltdown be without a rogue trader? France's second-largest bank, Societie Generale, fell victim to a "brilliant" 31 year old who managed to hide $7 billion worth of bad bets on the direction of various stock markets until late last week. The fact that SocGen had to unwind this guy's trades into the wicked selling that was already taking place Monday is being chalked up to "Murphy's Law" according to the bank's president. Oof. Oh well, at least the kid who lost $31,000 and posted his trades on YouTube Sunday night can get a little per-SPEC-tive!

GUESS THAT QUOTE ANSWER: The Maestro, Alan Greenspan.  

Hi. Hoo boy, the past few days make me wish I could just noodle around on this blog instead of attending to my actual job. We live interesting times, and this morning's stock market open was more exciting than a Giants field goal attempt at Lambeau (sorry Williams boys-- your boys are going down!) Since this space has been in an obessive-compulsive mode over the economy and the financial markets since last July, we'll just dispense with the obvious and start digging into what's under the surface. There's are big questions about what's really going on in the banking system and the financial markets now, and we'll try to ferret out the best the internet has to offer for some answers.

The obvious: the Fed (with one absent and one dissenter) cut the Fed Funds target rate by a whopping 75 basis points this morning, an hour before the stock market opened. It was the first emergency Fed Funds cut since September 17, 2001 and the biggest one since the FFT became the fed's main policy tool back in 1990. Was it a surprise? Sort of.. there was certainly a lot of speculation they'd do it based on the mondo-world-sell-off from the day before. Did it work? Well as we all saw, the Dow plunged 464 points then reversed, made it all the way to -38 and has been holding in the -100 points or so range for much of the day. So, stick save by the Fed.. an outright crash averted for today. (And the second time the market seemed to be heading into the abyss and was "saved" by an emergency cut-- the last one was the surprise Discount rate cut August 17. By the way, that was 1,108 Dow points ago.) But lots of question about what the Fed may really be looking at as it slashes away at the FFT, especially with demand for bank credit way, way down. Trying to parse what's going on behind the scenes, Russ Winter of the Wall Street Examiner channels Jerry Maguire and wants the banks to "Show Me the Moneeeeey!" And the Financial Armageddon blog take the deflationist side of the argument, which would explain agressive rate cuts in the face low interbank demand, high commodity prices and consumer inflation. On the fundamentals front, Bank of America and Wachovia reported earnings today. Or "earnings" might be more appropriate since they were bascially zero for the fourth quarter.

Backing up a bit, Jared Bernstein and Dean Baker writing at TPMCafe take a look at where we stand. Brian Wingfield writing in Forbes, with a skeptical eye toward the Fed's move. The Economist sniffs the air and finds a whiff of Fed panic. And Randall Forsyth of Barron's welcomes us to The Great Crash of '08.

Another big risk area that we've talked about before, the bond insurers, comes up in most of the links above. It certainly seems like Friday's ratings downgrade of Ambac at least contibuted to if not triggered the global selloff yesterday. Bloomberg sums up how the sleepy, profitable business of municipal bond insurance morphed into the monster that ate the world's financial markets. Nat Worden at thestreet.com wrote about the hazard over the weekend. And in light of all that, this blast from the past from Business Week on the father of mortgage securitization is a good read. (hat tip: Enfinity at TickerForum) 

Looking forward now, CalculatedRisk posted today about the "jingle mail" phenomenon (the amount you owe on your mortgage exceeds the value of your home. You mail the keys to the bank and leave.) Whether this is going to become a socially acceptable thing to do as more and more borrowers find themselves in this position is a growing worry for banks, which came up on Wachovia's conference call this morning.

And here's another post from Financial Armageddon on who won't be suffering in the recession: lawyers. The NYT has more of the same.

How bad was Sunday night for newbie-type day-traders dabbling in electronic futures? Scroll down to the post: THE STOCK MARKET RUINED MY LIFE to watch a youg'n lose $31,000 in real time. (Caution: foul language. Seriously. Nothing but foul language.) [UPDATE: YouTube took the video down. I told you it was foul language!]

Hey kid, here's some advice, old-school style.

Well, since you can no longer see the trading guy video, here's another dose of harsh.. courtesy of Jim Kunstler.

Hi. After a break over the holidays, this twice-weekly tour of the internet and the blogosphere in particular is back. Did anything happen while I was out?

Oh yeah. People actually caucused and voted! Since you can get your fill of horserace and tactics coverage from innumerable sources, I'll just stick to the relentless and deserved bashing the media is taking in the wake of New Hampshire. Salon has two representative offerings up: Joe Conason takes the overall view of media hostility toward Hillary Clinton boomeranging (a phenomenon which has shown itself in the 800+ comments posted to Brian's essay on this very blog.) And Rebecca Traister looks at it from the female voters' point of view.

And Josh Marshall looks at Karl Rove's offering on Obama in today's WSJ and points to the "dog-whistle" words embedded therein.

Fed Chairman Ben Bernanke says the Fed is ready to aggressively lower the fed funds rate because "downside risks to the economy have become more pronounced." See Citi/Merrill below for more on the nature of the downside. BUT! (and there's always an ever-lovin' but, isn't there) the Chairman acknowledges that inflation pressures may be putting the fed's ability to slash at will into a nasty box. QUOTE:  "...any tendency of inflation expectations to become unmoored or for the Fed's inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank's policy flexibility to counter shortfalls in growth in the future." To quote a great American philosopher: D'oh!Read Bernanke here.

Oh and by the way, Wall Street may have its collective opinion about the dire need to slash the Fed Funds rate,  but Fed Funds has its own marketplace, and that freely-traded free market is NOT indicating the need for a rate cut. See for yourself. (Note the difference between the TARGET rate and the daily (EFFECTIVE) Fed Funds rate. Hint: there isn't one.) 

And then there was today's big "news" that Bank of America may, or may not, buy troubled Countrywide. At least Bloomberg's version of the story is less heavy on the may/may not than the WSJ item that broke the news. I'll try to find the stat I saw that the value of Countrywide's Real Estate Owned (REO-- foreclosed houses that end up on the lender's balance sheet) is approaching the value of the entire company. Oops.. found it. 

Alan Abelson's Barron's column is a good read this week-- with an important note that I've highlighted here in the past: the Bureau of Labor Statistics "birth/death model" and its distortion of the jobs numbers in this country. QUOTE:  "All told, supposedly 18,000 jobs were added. We might note right off the bat that there were no fewer than 66,000 mythical jobs added, courtesy of the infamous birth/death adjustment; save for that curious confection, the total would have gone considerably negative. That handy adjustment, incidentally, was responsible for 89% of all the reported payroll additions in 2007. Unemployment jumped to 5%, from 4.7%. And the big losers were widely dispersed, paced by construction, where 49,000 jobs vanished last month and manufacturing, which lost 31,000. Apart from health-care and restaurants and bars, there were virtually no conspicuous gainers. As Philippa and Doug quip: "Our new economic model: eat, drink and check into the hospital." And here's the whole thing.

Citigroup and Merrill Lynch are hitting up foreign investors before hitting the confessional to discloses Q4 loses that could top-- ahem - rrrrr - cough, cough-- 25 billion dollars. WSJ page 1 today. (sub req. for full article)

The housing/mortgage/economy blog CalculatedRisk has gotten a burst of MSM attention lately, including links in Paul Krugman's blog (niiiice!). And I'm proud to say this space has been a longtime proponent of CR and Tanta's work. Here's today's link to CR's post Goldman Sachs' 2008 recession call. [And by the way, here's a shameless plug: CR and Tanta have started a subscription newsletter on housing and mortgage issues. If you are thinking of buying or selling a house, or if you just want to stay on top of this vital economic issue, you can click on the link at the top of the site to subscribe. I already feel like I've gotten my 60 bucks worth. OK plug over.]

Hi. Starting out today with the most interesting political story of the day, Republican presidential candidate Ron Paul's monster one-day haul of $4.2 million, all from a viral fund-raising campaign on the internet. Also, some bad news from some big banks, and the new must-have accessory for lazy geeks everywhere.

The Ron Paul haul took everyone by surprise, and Glenn Greenwald has a trenchant post about why so many people would flock to a long-time Congressman with highly unconventional views on a lot of issues-- Greenwald points out that his candidacy allows those who are deeply dissatisfied with the Washington Beltway establishment "to read into (his candidacy) whatever they want to see -- even if it isn't really there -- and to use the candidate as a proxy for their otherwise ignored and stigmatized causes." And outsidethebeltway rounds up a lot of the coverage from today and says the haul won't catapault Paul into actual contention for the nomination, but I'd argue that's not really the point.

Now it's on to the perils of Citigroup, beginning with a nice overview of the whole mortgage/credit meltdown situation from the Financial Times. Mike Mish Shedlock blogs at Minyanville about Citi's regulatory filing yesterday.  And Dean Baker at the American Prospect points out that Citi's interim Chairman Robert Rubin made an eyebrow-raising request to his former colleagues at the Treasury Department just before Enron blew up.

What else to we have to be concerned about? Business Week's Matthew Goldstein on bond insurers. And Mish again, writing on his own blog Global Economics on how commercial real estate could be the next domino to fall.

One of the posters at MarketTicker pointed out a blog called Bits of News last night-- love it. Here's a droll essay on dinner roll economics. And a cogent argument on the latest batch of government numbers (GDP and job creation) titled: "How to Hide a Recession."

And if you're persuaded by Ian Welsh at the Agonist, the presidential candidates of both parties might want to be careful what they wish for, because according to his analysis, the next president will be the next Herbert Hoover.

And on that cheerful note, my longtime friend and colleague Brett Holey calls to our attention an item that's a must have for the 40 year old virgin in your life. Talk about the ultimate pop up!

Hi. So the stock market didn't hear the Halloween BOO! until this morning, but it was clear from the opening bell that fear is back, and Citigroup is wearing the scariest mask. Also, ganging up on Hillary Clinton, the AG and the torture debate, and Boston, you're my home.

The NYTimes reports on an analyst's estimate that Citigroup is facing a $30 billion capital shortfall which might lead it to cut its dividend or sell assets. And Reuters reports on Credit Suisse Q3 profits. After writedowns? Zero. Which puts them near the top of the Q3 class. Uh-oh Washington Mutual. Now it's criminal. Calculated Risk picks up on the New York Attornety General's investigation of the country's largest real estate appraisal company and Washington Mutual, allegedly conspiring to inflate propert values. And that's on top of THIS. And the NYPost's John Crudele (what makes me think they won't be booking him as a guest on FBN any time soon?) on the SEC poking around Goldman Sachs' miracle third-quarter profits that came from shorting mortgage debt (some of which they had a hand in originating) while the rest of the I-Banks were getting crushed.

The RealtyTrac foreclosure numbers are out and as you'd expect they were awful. Common Sense Forecaster has the release. And here's an interesting sign of the times on what it takes to seel your house these days.

A bunch of people took issue with yesterday's gangbusters GDP report, noting that the inflation measure contained therein was, ummm, not exactly credible. Crudele (again) sums up in plan language. Thanks to the BigPicture for introducing the term "quantum bogosity" in relation to this.  But here's another more disturbing theory.

And everybody who was arguing after yesterday's GDP report and Fed Funds rate cut that the U.S. is in a "goldilocks economy," the American people don't seem to agree.

The Hill reports on a conference call of Hillary Clinton supporters, post-debate.

Sidney Blumenthal writes about AG nominee Michael Mukasey's short journey from restorer of integrity to waffler on torture. Macsmind doesn't think waterboarding is illegal, and thinks the Democrats are just posturing.

And finally, is this the greatest year any city has ever had, sports-wise? (JINX!)

Hi. Will this end up being the most prescient blog post of the year? Even as the Bush Administration keeps saying, for the record, that they want diplomacy not war when it comes to Iran, the noise level on the war option keeps getting louder. Plus, a little politics, and when bad financial news is good.

The New Yorker's Sy Hersh started reporting on the possibilty of war with Iran in April of 2006. His latest update raises a scenario in which the U.S. strikes in a limited way against Iran's Revolutionary Guard Corps (who've just been designated a terrorist organization by the U.S. Congress) -- (P.S. We'll see your Guard and raise you one CIA) This is a scenario which Hersh's sources argue can be "sold" to the American people because of the Bush Administration's contention that the Guard is "killing our boys in Iraq." And speaking of Iraq, Hersh looks at the surge and sees it as a U.S. acceptance of ethnic cleansing. Mark Silva at Tribunes' The Swamp notes the White House reiteration of diplomacy not war in reaction to Hersh. And Downing Street denies it's on board.

The (London) Telegraph has the latest on alleged war preps: an air war training center set up in the UAE. And pronounces that the Neocons are on the march again. Chris Weigant games out what could happen after U.S. airstrikes. 5th Estate at Newshoggers takes a look at the big picture as well. The Jerusalem Post says Iran is threatening to attack 170 U.S. targets if it is hit. Glen Greenwald picked up on something the Washington Post's Dana Priest said last week.. that the only thing standing in the way of a military strike on Iran may be the military itself. Oh and the rollout goes Prime Time. And a Kos Diarist says make Congress decide.

Syrian President Assad told the BBC the target of Israel's mysterious strike was an unused military building.  Here's AP's writeup of the interview. And Syria's Vice President comes right out and says the air raid was aimed at justifying a future attack. (Hat Tip: SyriaComment) Global Research says war is on the front burner. And here's a view from Israel (Hat tip: Cee in No Quarter comments)

And how ugly is the discourse over this getting? Check out Glen Greenwald's latest post, and the psychology behind the criticism of it. An speaking of ugly discourse.

Ben VanHeuvelen writes in Salon today about Blackwater's ties to the Bush Administration and the Christian Right.

Politics: while we're on the subject of the Christian Right, BulldogPundit muses on the threat to take their ball and go home. And the WSJ's Jackie Calmes reports on Page 1 today that all the focus on those social issues has changed the GOP brand.

Barack Obama, marking the 5th anniversary of the vote to authorize the war in Iraq, made some interesting points about the media in his speech today, which Greg Sargent picked up on.

It's a crazy world indeed when the biggest bank in the world announces its Q3 profits are taking a 60% hit and the Dow rallies to new all-time highs on the news. Ah yes-- now we can put all that credit crunch stuff behind us.

And the Mets historic collapse has inspired ESPN.com's often-inspired Sports Guy Bill Simmons to update his classic "levels of losing." Oh the pain!

Hi. Last night's debate on MSNBC has a lot of people using the words "Hillary" and "Inevitability..." but remember what the Sage of Montana Tom Brokaw always, always says about politics: UFO! the UnForseen will Occur! Also: looking back and forward on Iran, and the housing meltdown gets worse.. punctuated by a news report from Miami that's acheived instant icon status on the internet. 

Salon's Tim Grieve lays out the moment where he thinks Hillary really turned into the front-runner (which included her endorsement of the Israeli strike on the alleged Syrian-North Korean nuclear facility. At least she "thinks" she knows that's what it was.) By the way, Senator Clinton also "thought she knew" Saddam Hussein had weapons of mass destruction and a nuclear weapons program back in 2002. Just sayin'. (and P.S. not "everybody" believed that stuff at the time.) Hugh Hewitt looked at the same exchange Tim Grieve looked at and pronounces Clinton "feckless." Powerline makes an argument heard in several places this morning: Clinton is running out the clock. But Andrew Sullivan thinks the perception of Clinton as Bionic Woman Who Cannot Be Stopped is overblown. Ed Morrissey at Captain's Quarters thinks the reason the Democrats wouldn't commit to leaving Iraq by-- gulp-- 2013 is because of... General Peteraus. And Blackfive points to a poll showing Americans disapprove of the General Betray-Us ad and tells the "haters on the anti team" to talk to the hand.

Joe Conason reflects on Mahmoud Ahmadinejad's trip to New York and offers a prescription for dealng with Iran: "Engage the regime, draw Iran into the world economic system and penetrate its closed borders peacefully to strengthen its civil society and weaken its overgrown theocratic state. Stop making heroes of the villainous mullahs and their puppets, and start dividing the pragmatists and reformers from the fanatics. And mute the threats that in Iranian eyes justify a nuclear weapons program. That would be the beginning of wisdom." Daniel Ellsberg of Pentagon Papers fame thinks the coming war with Iran will lead to a police state here at home. Oy. the NYSun's Eli Lake talks to former Cheney aide David Wumser about those allegations that he's behind the "new product rollout (war with Iran). Oh and SpookInTheMachine sees a battle brewing bewteen the President and Vice President and the head of CentCom.

An interesting take on yesterday's Pentagon request for $190 billion more for Iraq.

If you're wondering where Vice President Dick Cheney is, ThinkProgress sort of knows.

David Brooks got quite a bit of attention on his column on how the "netroots" is really irrelevant .. including from Glenn Greenwald. Ouch.

Bill Curry makes a case against Rudy Guiliani.

James Fallows explains why we sould be saying Burma instead of Myanmar. (Hat Tip: Instapundit).

Provocative Questions Department: Is Dan Rather right? (Hat Tip: Cursor.org)

Housing/Mortgages/the Economy now: David Ignatius writes about the dark shadow over global financial markets. CalculatedRisk has a chart-fest on the dismal new home sales number out this morning. The LATimes' LALand blog on the massive glut of unsold homes across the country. (Hat Tip: Implode-O-Meter) Bloomberg quotes Fannie Mae's CEO saying the housing slump will extend through '08 and beyond. And the original "Economic Eeyore" Nouriel Roubini now says he was way too opitimistic on the housing crash. And this YouTube video of a news report of the Miami condo market has been posted everywhere this week... selling real estate at 50% off seems to get people's attention. (Hat Tip: Patrick.net)

Hi. Lots to catch up on today.. including a Presidential Q&A, the counter-argument on criticizing General Petraeus, and lots of assurances that the econmy is A-OK.. except if you're talking about the value of the dollar. First a quick apology for the unplanned hiatus from this space. Last week it was 4 1/2 hours of work vanishing into a blog black hole (who knew you could time-out of a session with no warning? Ummm.. Not me.) And Tuesday it was every family's nightmare: the sick nanny. Thank you Dale F. from Cambridge for taking note.

So the President led off his newser this morning with an attack on Democrats over the children's health insurance program known as S-CHIP (State Children's Health Insurance Program). Congress has already passed a bill that would expand the program to cover more children, funded by a hike in tobacco taxes. Read down in the NYT's take to see that many influential Republicans are not on the President's side on this one.  John Kerry answers via the Democratic Daily.  TownHall has the Bush angle. And reaching back a bit, cyber-buddy N=1 at UniversalHealth posted a thorough state of play on S-CHIP via the Kaiser Daily Health Policy Report.

More health care news: Joe Conason writes today at RealClearPolitics about how Hillary Clinton's health care plan is helped by the fact that she's co-opting everyone else's good ideas.. including those of right-wing think tanks.

Iraq: So what's the tab? The Congressional Research Service listened to President Bush talk about Iraq last week, did some figurin' and says keeping the U.S. going in Iraq will cost trillions. Kos links to the study.  And BarbinMD at DailyKos posts on how the benchmark of turning over security in the provinces to Iraqis has been pushed back, again.

And the President finally gets to go on the record (on video) with his "disgust" at the MoveOn ad critiquing General Petreaus. Glenn Greenwald, who as we've chronicled in this space before is no fan of the General, says the way the Mainstream Media have treated the debate over the ad is "limitless" in its wrongness. And perhaps this is completely futile, but MediaMatters tries to call attention to the actual substance of the critique of Petreaus below that "Betray-Us" headline. RedState doesn't like that Senate Democrats are equating the MoveOn ad with the Swift Boat and Max Cleland attack ads. And USAToday polls and finds for all the sound and fury, Petreaus didn't move the public opinion needle.  And hey, if you agree or disagree with Paul Krugman, you gotta read him-- and now not only is he out from behind the torn-down TimesSelect wall, he's blogging too! And he makes the style over substance point about Petraeus.

Will Bunch picks up on a new contention on the right: that the CIA won't leave the Green Zone without its Blackwater minders, which is part of a plot to defeat the surge by Iran.

The LA Times Levey writes up the Republican filibuster of the Webb Amendment, which would have mandated that U.S. troops spend as much time at home between tours as the tour itself.  The Carpetbagger report looks at Congress' filibuster "problem." Greewald, again.. on the Webb Amendment and those to strain so mightily to send other people's children to war.

And speaking of wars, Steve Clemons argues in Salon that President Bush will not attack Iran.

A request to visit ground zero by Iran's Mahmoud Ahmadinejad draws outrage.. from Hugh Hewitt.. And  Ed Morrissey at Captain's Quarters.

Sidney Blumenthal goes mega-meta on the Bush presidency, playing off the new Draper biography, and his analysis is a doozy. Here's a taste: "Bush grasps at the straws of his own disinformation as he casts himself deeper into the abyss. The more profound and compounded his blunders, and the more he redoubles his certainty in ultimate victory, the greater his indifference to failure. He has entered a phase of decadent perversity, where he accelerates his errors to vindicate his folly. As the sands of time run down, he has decided that no matter what he does, history will finally judge him as heroic". Oof. Go read the whole thing.

TalkingPointsMemo links to AP's coverage of Dem fundraiser Norman Hsu's indictment, speaking of doozies. 

The Huffington Post is among several blogs that fact-checked the President's sound bite from this morning's news conference that he got a B in Econ 101. More like a C-. ThinkProgress expands on that.

But not to worry, the economy is strong. Uhhh.. especially if you want to use dollars as toilet paper. Thanks for the rate cut Chairman Bernanke! The Saudis are now openly speculating about dropping the dollar peg and said dollar is dropping like a stone on world currency markets today-- all time low versus the Euro and at parity with the Canadian dollar for the first time in more than 30 years. The NYT website is leading with it at the moment.  And I've posted before about Ambrose Evans Pritchard's checkered past, but he seems to have hit the Saudi nail on the head last night. CalculatedRisk sums up Bernanke's acknowledgement on Capitol Hill this morning that he got some stuff wrong on the mortgage front. And Minyanville's Mike Mish Shedlock says Bernanke's bullet missed the mark.

And how bad was Bear Stearns' quarter? Remember how they kicked off the credit panic when their two subprime-heavy hedge funds imploded? Profits were down 62%. Ouch.

From the: IF AL GORE HAD SAID THIS BELTWAY JOURNALISTS WOULD BE TURNING INSIDE-OUT file: Rudy Giuliani brags he's one of the 5 most famous Americans on the planet. (Hat Tip: John Aravosis at Americablog)

John Stewart succinctly sums up the latest case of "free speech abomination" with the catchy combo of police overreaction and student douchebaggery.  And a hat tip to my co-worker Garrett Haake for finding the YouTube video where you can actually hear what the alleged DB was saying.

[Youtube:lpMSNjXhhhg]

RedState posts on how students at this country's most prestigious colleges performed really badly on a test of American History and civics. Maybe everyone's busy learning how to be a hedge fund manager. (Click on the link inside to take the quiz.)

by Chris Colvin, Nightly News writer

Hi. It's a short entry today, but with some interesting stuff about the Petraeus and Crocker Show, the Fox "exclusive" with the boyz last night, and an interesting take on what in the world Osama binb Laden was talking about when he mentioned mortgages and taxes in his latest tape.

DeYoung and Ricks in the WaPo sum up yesterday's P&C testimony as an exercise in "kicking the can down the road." Expected, yeah.. and also as expected, the General and the Ambassador came under much more vigorous questioning before the Senate Armed Services and Foreign Affairs Committees today than they did yesterday in the House. The New York Times' "Lede" Blog is liveblogging today and has some highlights. See the Hagel and Kerry section for the first real shots fired across Petreaus' bow. And Salon's Tim Grieve saw Senator Russ Fiengold asking the right questions on 9/11.

 If you saw Nightly News last night, you saw and heard New York Times reporter Damien Cave's pre-testimony look at what he actually sees on the ground in Iraq. Today, Cave wrote a news analysis after watching yesterday's testimony.. and finds some understatement of trouble and overstatement of gains.

Glenn Greenwald of Salon watched the P&C Show on Fox News last night and came away more than a little bit disturbed. And the Carpetbagger Report explains the reason for the Fox exclusive.. P&C don't need to talk to Democrats. But Macsmind thinks the Fox criticism is all a bunch of sour grapes.

Now to Osama bin Laden's latest message and Slate's Ann Applebaum with an interesting take on what it is he's really trying to say when he talks about high taxes and the subprime mortgage market. And The Times of India picks up on how America's top spy is baffled by the world's #1 terrorist's beard. (Hat tip: cursor.org)

And a couple of nuggets on the credit crunch front.. Greg Ip, writing in The Wall Street Journal's Economics Blog thinks Fed Chairman Bernanke's remarks on trade this morning contained something of a "go signal" for a rate cut. CalculatedRisk points to a Lehman Brothers report that itself points to a severe drop in home sales and possible consumer spending in the coming months. And Moody's warned yesterday that, if you're waiting for the housing slump to end, you might not want to hold your breath.

by Chris Colvin, Nightly News writer

Hi. So a Sydney newspaper reports President Bush used a good old Americanism about how the military is faring in Iraq, but new speculation about how the U.S. is now heartily embracing the Sunnis (in preparation for a conflict with Iran?) raises some alarms. And even bigger alarms raised by the question: was that "accidental" flight of 6 nuclear warheads really no accident at all? Plus, Fred Thompson, finally! More bad news on housing.. and as credit becomes harder to get, a primer on you and your FICO.

The Carpetbagger Report picks up on a report in an Australian newspaper that says the President told the Australians "We're kicking ass" in Iraq. Here's a link to the original story in Sydney's Morning Herald.

Salon's Sidney Blumenthal adds to a body of evidence that President Bush was told Iraq had no WMD before the war, and he discounted those CIA reports. Andrew Tilghman in Washington Monthly writes about the U.S. military overblowing the threat from al Qaida in Iraq.  Iraqi blogger Riverbend has resurfaced two months after disappearing.. in Syria. (Hat tip: Cursor.org)

MediaMatters Eric Boehlert reports on the curious lack of news coverage of the Iraq war over the summer, given the public's stated preference in polls that Iraq is the most important news story out there, and the one being followed most closely by the most Americans.

No, Iran. Former CIA guy Larry Johnson goes ahead and raises the question.. was that "accidental" flight of the 6 nuclear warheads last week no accident?  See previously: the Iran rollout scenario.

Oh and Syria fired on an Israeli military jet. Uh. Just a misunderstanding!

Speaking of roll-outs.. Fred Thompson is finally an actual candidate. Here's the announcement via WaPo's Balz and Shear. The LA Times' Joe Mathews has a fascinating look at Thompson's roots, and how his (former) in-laws made him the man he is today. And Fred got some needling (exactly what they wanted, no doubt) at the top of last night's GOP debate.. which was waged as Fred cracked jokes with Jay Leno yesterday. The WSJ's Mary Jacoby sums up.

Today's credit crunch news: yeah it's bad. The Mortgage Bankers Association reports foreclosures hit an all-time high in Q2. Marketwatch has it. Combine that with yesterday's horrifying numbers on pending home sales (down 12% for the MONTH of July.) Nice chart from interestrateroundup. (Hat tip: ac in Calculated Risk comments). But the head of the Atlanta Fed says problems in the housing market are contained. (Yikes, where have we heard that before?)  Speaking of (un)contained, Countrywide said it was laying off 900 workers yesterday, amid rumors of much MUCH bigger cuts to come.. as a Dallas-based mortgage blog says the company knew exactly what was coming a year ago.

This seems counterintuitive.. credit card companies have drastically increase marketing to subprime borrowers.

But Andrew Leonard at Salon picks up on this..and digs a little deeper for the answer to why this seemingly perverse practice might make sense for lender.

Jeremy Grantham an investor who's been sounding the siren about a global credit bubble for a long time, argues that even if the credit crunch doesn't morph into a full-blown catastrophe, stocks, bonds and real estate still have a long fall ahead. (hat tip: patrick.net)

And here's another set of initials we need to get familiar with: S.I.V. Specialized Investment Vehicle. The SEC is taking a look at them, now.. and here's a hint: they're the kind of "off-the-books" partnerships that sank Enron.

And finally, news you can use from those lovable Minyans. Your FICO and you.