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How the government under Secretary Paulson's plan will restructure and financially support Fannie and Freddie while gradually winding them down. Secretary Paulson says that it would be a grave error if we did not use this time to permanently address the structural issues presented by the G.S.E.'s a reference to them as government sponsored enterprises. Government support said Paulson has to be explicit or nonexistent.To wind them down the plan calls for reducing their portfolios by 10% a year. In return for $1 billion in senior preferred stock from each company to the government which pay an interest rate of 10% at least the government is committing $100 billion to each company to cover future losses. The government also receives warrants that allows it to to buy upto 80% of the stock of each company at a nominal price of less than $1 a share. Beginning in 2010 both companies will pay a quarterly fee to the government in return for financial help. Senator McCain had some words for the people running the companies: "its an example of cronyism, special interests and lobbyists. A quasi governmental organization where the executives were making hundreds of some billion dollars a year, while things were going downhill, going to hell in a handbasket." ...

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US ambassador to the UN agencies for food and agriculture describes the precarious situation in Africa and Asia with the lack of food supplies and fertilizer supplies from Ukraine. She says we are nowhere near the 20 million tons that come out of Ukraine normally and there's over 100 ships waiting to get into Black Sea ports. The war is affecting planting season in Ukraine. Cindy McCain is the wife of the former Senator from Arizona, and she says that there is no water in Arizona for agriculture and yet golf courses everywhere, that climate change is a huge part of the food crisis.

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Under the Energy Independence and Security Act of 2007 the government is authorized to give upto $25 billion in low interest loans to auto companiesto retool plants to make smaller fuel efficient cars. Lobbyists for the auto industry are trying to increase that to $50 billion. The package of loans is presented not as a bailout but as a way to offset some of the $100 billion it is estimated it would cost the industry to meet the new fuel economy standards enacted in that bill. GM's 7.2% bonds due 2011 were trading at 64.25 cents on August 27, 2008, translating nto a yield of 29% for that debt. In the credit default market it costs $4.5 million upfront and 0.5 million anually to insure $10 million of GM bonds for 5 years. The govenment loans at 4-5% would cost significantly less as borrowing costs are very high for automakers at present. Both Senators McCain and Obama see Michigan and Ohio as crucial to a win and support the loan package. It would cost $3.75 billion in insurance costs for the $25 billion loan package. Because of the automakers precarious financial condition and no improvement in consumer demand or in financial markets in sight in the next 2-3 years as a plausible scenario, and more losses looming for automakers, this package may turn out to be a crucial element in the recovery of the American auto industry and in turning over almost America's entire fleet of cars on the road into more fuel efficient cars....

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There is a difference between the two candidiates. Most of Obama's tax policies are vague or not clear. This risks having higher taxes costing more than $648 billion over 10 years according to the Tax Policy Center. Taxpayers would shrink from 62% to 50% of households and there would be a hodge podge of tax credits. On energy McCain is pushing for nuclear energy and Obama is not giving this option enough importance. Obama would probably give more importance to higher taxes and redistribution of income and building infrastructure but sweeping changes in taxes increasing taxes for the middle class and having many tax credits is something that needs careful thought not to reverse the positive benefits of lower taxes and simpler tax code improvements of recent years. With Obama fuzzy on how much the tax system would be changed and its impact on the middle class and working class it will be a question on voter's minds. Because some way has to be found to pay for increased spending on infrastructure and healthcare. And though its largely accepted that something effective has to be done for health care for middle and working classes in the country its important that it be well thought out and free of special interests on one hand and free of political bias so that creative and useful solutions can be be made to take advantage of the unique situation the United States is in. Its not clear that the junior Senator has the experience and the understanding of this vast subject that would be needed to come up with the right system of health care for this country as any hastily put together solutions would not be likely to be the best ones....

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Just as the drug industry is more getting more dependent on the government with the medicare drug benefit raising the retail drug purchases paid by government to 34% in 2006 from 28% in 2005, the industry is facing more governmental scrutiny, from the FDA, from Congress from the public, and during this election campaign. Rep .Rosa DeLauro, who heads the House appropriations subcommittee that has oversight over FDA funding compares the drug industry to the tobacco industry saying that it requires the same amount of scrutiny. At the same time the drug industry is aware of the changes in the public mood and the recent controversies over drug studies, such as the one on Vytorin and other controversy. It is initiating some voluntary changes, registering clinical trial results, submitting commercials to the FDA before they air, and under pressure from medical journals registering trials before they are performed. A new law will requires and its not clear whether the drug industry is dragging its feet and then making changes when there is increasing public pressure. This is the feeling of the medical journals like the Journal of the Medical Association and the New England Journal of Medicine. JAMA's editors will be keeping up this pressure as they have more articles showing how the drug industry manipulates data and the need for public skepticism of information that comes out of the drug industry. The New England Journal editors expressed the need to publish information that helps doctors get all the available information, and not just the information from the drug industry that makes the drug look better than it really is, such as the information and analysis it provided on antidepressant medications. The chairman of the energy and commerce investigations subcommittee Rep. Stupak, finds the advertising for drugs contains information that cannot be backed up and not true ethically, medically, or legally. As this reflects the public mood look for more investigations in Congress and investigative research by the journals. On the issue of importation of drugs from Canada there is bipartisan support as both Senator McCain and Senator Clinton support importation. Clinton supports legislation that allows the FDA to approve new generic versions of biotech drugs which would lower prices of biotech drugs. And with the US consumer budget facing strains in a recession there will be increasing pressure and demands for relief in the area of drug prices, especially for the elderly and uninsured and from corporate payors. ...

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A professor at Georgetown University on why it takes time to build democratic institutions, with one important omission- the military in Muslim countries such as Egypt have no intention of building these institutions and have undermined the development of these institutions for decades. A bigger omission lies in inability of the military in the most populous Muslim countries with horrendous gaps in development in basic welfare indices such as education, infrastructure and services, that have put these countries decades behind developing Asia and even Latin America which also had a past of military rule. In countries such as Pakistan and Egypt the military simply lacked the skillset and abilities to deliver in economic terms. Therein lies the biggest failure. In China and Russia the governments have popular support because of their capability to deliver economic growth that has transformed both countries and improved the lives of the people in the region. These crucial omissions explain why Republicans such as Senator John McCain and Lindsey see the need for the U.S. to be on the right side for change. Latin America shook off its history of military rule or one party rule and Brazil, Chile, Mexico are part of two free trade regions in Latin America, supporting the free trade system and economic growth in this hemisphere. The issue ultimately rests with the people of Pakistan, Egypt, and other Muslim countries, and a process of learning, compromise, healing and reconciliation that ocurred in Latin America is likely to follow in the Muslim world. It has already begun in Pakistan which like India has a independent judiciary and lively press, and some of the institutions for a functioning demcoracy. The worst omission is unmentionable because it is so obvious - that of firing live ammunition into protesters for democracy. Years after this happened in S. Korea, Mexico and other countries the day is remembered in a certain way. The important point is that when it comes to this there is no exception to the pattern. ...

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Paul Volcker was Fed Chairman from 1979-1987 and is now 81 years old. He is best known for taming the runaway inflation of that period. He is now the senior economic advisor closest to Obama and they have a developed a sense of rapport and trust through frequent discussions and meetings in which Obama has sought Volcker's advice, especially at critical junctures of the present crisis. So close is the association that Volcker now keeps a cellphone with him at all times and he has gotten used to Obama's messages at all times. And this week he is due to appear on the campaign trail with Obama for the first time. At a round table discussion with voters in Lake Worth, Florida, he will give his view on the state of the economy and the credit markets. This puts the 81 year old Volcker on the campaign stump for the first time. In his debate with McCain at Hofstra University Obama said "let me tell you who I associate with. On economic policy I associate with Warren Buffett and former Fed chairman Paul Volcker, who have shaped my ideas and who will be surrounding me in the White House." Obama is increasingly relying on Volcker. His staff now routinely reviews policy proposals and speeches wit Mr. Volcker. And conference calls and face to face meetings of economic adviers are increasingly organized to accomodate Mr Volcker's schedule. When there is a discussion of the financial crisis Jason Furman the campaign's economic policy director says the most important question for Obama is "what does Paul Volcker think?" It all started when Obama sought advice from Volcker through his economic adviser Austan Goolsbee, a 39 year old University of Chicago Professor. The bond between the two started with a dinner invitation in June 2007, when Obama was still a long shot candidate, setup by Mark Gallogly, cofounder of Centerbridge partners, a New York private investment firm. He invited a number of financial executives like Gary Cohn of Goldman and Fleming of Merrill and Mr. Volcker. At a private dining room in a Capitol Hill restaurant Volcker was seated directly opposite Obama. That night on a return flight to New York Volcker told the group that he "was genuinely impressed" by the Senator from Illinois. When this was passed on to Goolsbee his reaction was- "Volcker is a legend.. we want to pick his brain." Since late summer 2007 Goolsbee had regular discussions with Mr. Volcker. Some of them were about including Volcker's ideas that the housing downturn would snowball into a larger financial crisis into Senator Obama's policy positions. A September 2007 speech by Obama to Nasdaq stated that the oversight lapses and abusive practices would cause the markets to "be ravaged by a crisis in confidence." Since then at almost every turn of the crisis after Bear Stearns collapse, Obama and Volcker have consulted together....

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Leon Panetta gives his account of the response of the Obama administration to the attack on the U.S. mission in Benghazi, Libya.

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The WSJ's Monica Langley provides insights into Donald Trump's campaign strategies, some of them right out of his book "The Art of the Deal." His target voter is from a think big strategy to get voters across a broad spectrum using the slogan "Make America Great Again," with a knack of tapping into a deep well of voter frustration with the political establishment. How to get attention in the media is the next step Trump tackled by using social media to the fullest - using Twitter often, making statements that attract attention such as the ones on China, Mexico, Senator McCain and Muslims that tap into failure of political correctness to address voter frustration on trade and jobs, immigration and terrorism. The Trump campaign has 14 million followers on Twitter, and 50 million "engagement" accounts on Facebook- that cost very little. Social media is to Trump in 2016 what community networking on the PC dashboard was to Obama in 2008. As the WSJ pointed out in an editorial, the splitting of the Republican vote among many candidates, and the failure of candidates to grasp the nature of the unconventional campaign waged by Trump- descending into attacks based on target groups of voters on every candidate except Trump- created the opportunity Trump has grasped with his knack for improvising along the way. Commonsense campaigning without sophisticated strategies, improvising often along the way, using the available medium of social media at little cost to get the message and slogan across, helped Trump make the deal with voters to upset the political establishment. The Sanders campaign is also based on careful repetition of the same slogan and facts about inequality and lobbyists, over and over again, offering strong action on health care and college tution just as Trump offers strong action on China trade, immigration with the idea of the wall, and barring entry of Muslims for terrorism till "we figure out what's happening." The difference being that Trump thinks big and targets the entire electorate of his party's voters in the primaries from the beginning, and a broad based campaign on many issues. Underestimating your opponent carries many risks in politics, never more so than when you are out of touch or not listening to voter frustration, and fail to speak up to it....

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The Journal editorial outlines steps the Obama administration must take for Libya. It calls for decisive military action before Ghadafi suppresses the democratic protests in Libya and points to the dangers of not acting now.

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How a "stand-off" no-fly zone can be implemented for Libya by ships and aircraft operating off the coast of Libya with precision guided missiles. This would deny the regime in Tripoli the use of the airspace. This is possible because most of Libya's cities are on the coast. No aircraft need to fly over Libya and an attack on the air defenses of the Tripoli regime would not be needed. Combined with shoulder fired surface to air missiles in the hands of rebel forces this would be an effective deterrent.