The Fighting 29th

All about New York's 29th Congressional District

Thanks to Exile from The Albany Project for live blogging, and to all the readers who commented. It was fun, and I hope we can do it again.

Tonight's 13-WHAM debate was far better than last night's WXXI debate in NY-26. Moderators allowed the candidates to answer at length, there was some direct exchange between the two candidates, and the questions were pretty good. Sean Carroll and Don Alhart did a standout job.

Readers who missed the debate can watch a stream at 13-WHAM. I'll publish a link when it's posted.

Reader Elmer sends a Star-Gazette item which announces that Eric Massa will be on 820-AM in Elmira at 1 p.m. on Saturday. Randy Kuhl will also appear sometime before the election.

Elmer also reports that he heard a Chamber of Commerce radio ad in support of Randy Kuhl and his positions on health care.. The Chamber supports a minimalist approach to health care reform, as explained here.

The Messenger-Post has a story about polling in the 29th.

In that story, Justin Stokes, Kuhl's campaign manager, argues that IVR (touch-tone) polls, such as the SurveyUSA poll, may have issues with their methodology. That may be true, though SurveyUSA had a good track record in the Presidential primaries. Today's Research 2000 poll was a live interview poll, and it was pretty close to the SurveyUSA poll.

That all said, polling House races is harder than Presidential race polling. In 2006, Mark Blumenthal posted an excellent analysis at pollster.com, explaining the difficulties involved.

Yesterday's ad on health care issues from a 527 prompted a sharp response from the Kuhl campaign. WXXI has a story on the ad and Kuhl's outrage.

As I've mentioned before, half of the game with ads from outside groups is to generate free media coverage, since they rarely make a big media buy. Targets of these ads are in a tough position. If they put out a press release contesting the ad, local media coverage will probably attract more attention than the ad itself. If they don't push back, the ad airs uncontested.

The Massa campaign has issued a press release about Randy Kuhl's latest ad. The release points out that the "Pelosi tax plan" that Kuhl accuses Massa of supporting is actually a non-binding resolution, that Massa isn't in Congress, and, besides, Massa has his own tax plan [pdf].

All true, but here's my question: When did Nancy Pelosi become universally despised? Or, put another way: If Massa had produced a similar ad in 2006, would he have put a picture of Denny Hastert and Randy Kuhl in it?

Perhaps it's a failure of my imagination, or a reflection of my biases, but I don't think that the undecided, low-information voters who are the target of last-minute campaign ads are going to see Nancy with Eric and reach for the smelling salts.

In addition to power of the she-devil Pelosi, Kuhl's counting on that old warhorse -- "He'll raise your taxes" -- to carry him through one more battle. I'm skeptical. We're funding an endless war, rescuing banks, and we've just nationalized an insurance company. Isn't it obvious that taxes will go up?

Democrats are saying that the top 5% will bear the burden of the increase. I think that's salable in this environment. Kuhl's implied claim that he won't raise taxes just flies in the face of economic reality.

Overpaying for $700 billion of possibly bad assets in order to re-capitalize banks is a desperation move. There are other desperation moves that probably make more sense. But, given the choice between a bailout and frozen credit markets, I'll take the bailout, reluctantly.

That said, there are good reasons to be against this bill. It could use better oversight, the final bill was larded with pork, and the equity provisions were pretty vague. So I understand Eric Massa's opposition to the bill, even if I don't agree with him.

What I don't understand is how Randy Kuhl thinks that this bill is "drastic improvement" over Monday's plan. In terms of the bailout provisions themselves, as far as I can tell, they're more-or-less identical to Monday's plan. The FDIC increase and AMT reduction are nice to have, but there's nothing new that prevents taxpayers from "picking up the tab" of $700 billion, as Kuhl claims.

Because this shit sandwich of a bill just had a little pork and taxcut mayo added, Kuhl's explanation doesn't cut it. It looks, instead, like he wanted to have it both ways. His phone lines were jammed with angry constituents last week, so he voted against Monday's bill. By Friday, it was pretty clear that small and mid-size businessmen in the 29th supported the bill, and that the credit markets were actually in crisis. So Kuhl changed his vote, apparently to appease the latter group and to avoid responsibility for a financial meltdown.

Kuhl's vote will probably end up being seen as a necessary evil. He didn't need to insult our intelligence with this "drastic improvement" spin.

WENY has a story about the non-debate in Bath. This is the event that was supposed to be sponsored by the League of Women Voters, but after Randy Kuhl and State Senator George Winner declined to attend, it became a candidate forum.

WENY also quotes Kuhl as follows on the new bailout bill:

What I’m going to be looking for is to see whether or not the taxpayer has been really hung out to dry. Is it going to pick up the cost of the bailout at the expense of those unscrupulous lenders on Wall Street or whether or not there's significant protection for that person.

As far as I can tell, the taxpayer protections in the new bill, which amount to getting equity in the company that we're bailing out, are the same as the old bill.

The latest news from the House is that it looks like the opposition to the bill is dying down. Democrats are going to ask for a formal whip count and list from Republicans before the vote, to avoid a repeat of Monday's embarrassment.

Randy Kuhl's spokeswoman Meghan Tisinger tells Gannett that Kuhl's staff is "still studying reviewing" the bailout bill that passed the Senate last night.

This bill's bailout provisions are essentially the same as Monday's bill. But it's full of sweeteners, including a tax credits for alternative energy, and raising the limit for the Alternative Minimum Tax exemption. It also includes some strange special interest provisions, like these two:

• Extend cost recovery period for motor racing tracks.
• Exempt from excise tax certain wooden arrow shafts for use by children.

There's at least one change actually related to the current economic crisis: raising the limit of FDIC-insured deposits from $100K to $250K.

McClatchy has a great rundown on the bill.

Randy Kuhl has posted an alternative bailout plan. It's hardly a serious alternative. Here are some quotes and a few thoughts:

Require the Treasury Department to guarantee losses up to 100%, resulting from the failure of timely payment and interest from mortgage-backed securities (MBS) originated prior to the date of enactment. [...] Direct the Treasury Department to assess a premium on outstanding MBS to finance this insurance.

In 2006, the Mortgage-Backed Security market was $6.1 trillion. Let's assume that we're looking at $8 trillion today. Earlier this year, Merrill-Lynch sold some lower-grade MBS at 22 cents to the dollar. Let's assume, charitably, that 25% of entire MBS pool is bad debt. We need an insurance pool capable of taking a loss of $2 trillion. How are banks that are already broke going to pay those kind of premiums?

Immediately suspend the capital gains rate from 15% for individuals and 35% for corporations. By encouraging corporations to sell unwanted assets, this provision would unleash funds and materials with which to create jobs and grow the economy.

The "unwanted assets" that the banks would be selling aren't worth what the banks paid for them. So, there won't be any capital gains on those assets. Even if the banks sell both MBS and "good" assets, the losses from the MBS will offset the gains from the "good" assets.

Suspend “Mark to Market” Accounting: Direct the SEC to suspend the mark-to-market regulatory rules until the agency can issue new guidelines that will allow firms to mark these assets to their true economic value. The current rules contribute to a downward spiral as firms have to evaluate their assets not on the basis of their long-term investment but rather on a short-term mania.

"Mark to Market" is simply reality-based accounting. If banks are allowed to value securities at any price they think is reasonable, they'll have a major incentive to keep those assets on their books at inflated values, guaranteeing that there will be no market in them for the indefinite future. And there's no evidence that "Mark to Market" is causing a downward spiral, as Forbes notes in its story about the Merrill-Lynch sale earlier this year:

"I have previously argued that mark-to-market losses exaggerate the severity of the credit crisis," wrote investment strategist Ed Yardeni in his e-mail newsletter Tuesday. "Then again, Merrill Lynch converted its mark-to-market losses into permanent ones.... This is bad news for other investment banks and commercial banks trying to get rid of loans and securities in a market flooded with distressed assets."

The plan that failed today had many faults, but at least it was an attempt to inject some liquidity into the market. Kuhl's plan expects banks to conjure up capital from thin air, sell worthless assets at a profit, and pretend that the rest of those assets are worth far more than their real value. It's a fairy tale solution to a real world problem.

Reader Elmer sends today's Corning Leader opinion page [pdf] (and jump [pdf]), where Joe Dunning analyzes Kuhl's reluctance to debate in a public forum. He concludes that Kuhl's "accessibility has diminished" over the past two years. The whole column is worth a read.

The Messenger-Post has a long piece on the bailout. It sees local concern about Wall Street, especially among those with 401(k)s, but sees no concern in the real-estate market. It quotes Kuhl's opposition to the Paulson plan.

The Democrat and Chronicle's editorial on the bailout castigates the local Republican delegation as follows:

Moreover, most of the House Republican minority, which includes area Reps. Randy Kuhl, Tom Reynolds and Jim Walsh, say they are being led by a desire to stop a $700 billion bailout. But what they are really doing is representing the views of the same Wall Street fast-money types who created this crisis. They want government support without any strings — no restrictions on CEO pay, no taxpayer stake, no congressional oversight.

In Kuhl's case, that's just factually wrong. Kuhl has said the opposite, " I will OPPOSE the Bush Administration’s proposal if it does not include provisions to protect the taxpayer." A simple fact-check on Kuhl's latest press release takes a couple of seconds. There's no excuse for that kind of sloppiness.

Since the details of the bailout bill are not yet finalized, we don't know Randy Kuhl's position on the bailout plan. After reading his statement yesterday, which emphasized taxpayer protection and no golden parachutes, I concluded that Kuhl might well support the final bailout bill.

Today's Buffalo News story on the bailout reaches this conclusion:

In saying private companies will have to carry the financial burden of any bailout, Kuhl sided with the renegade Republicans who refused to agree with the tentative compromise leaders of both parties agreed to Thursday.

I don't think that's true. From what I've read, there are three groups of thought on this.

First, Paulson, whose plan didn't include taxpayer equity or pay caps. His plan is DOA.

The second group is a small number of Democrats and a large number of Republicans who just think the whole thing stinks. The Republicans have put out some talking points, which, as this article explains really don't make a lot of sense.

The third, and largest, group is the compromisers in both parties, who see the importance of the bailout but want to couple it with taxpayer equity in return, some form of pay caps, and tight oversight. These people are laboring to get something that's strict enough to include the nay-sayers, while still giving Paulson what he says he needs.

My guess is that Kuhl will end up in this group. I don't think he's a dead-ender. He's not a member of the Republican Study Committee, which is the 100 or so most conservative House members who have been most steadfast in their opposition to the bailout.