I’ve been surprised at how little conservative blowback there’s been given John McCain’s recent populist tilting on Wall Street. But Ramesh Ponnuru’s not thrilled:

Senator McCain’s embrace of “regulation” as the answer to Wall Street’s ills is vacuous: He isn’t telling us what rules he would put in place, let alone how those rules would have helped in the past or would help in the future.

On another level, I suppose it’s the vacuousness that’s keeping conservative objections tamped down. McCain isn’t saying anything in particular, and presumably if he becomes president this portfolio will be turned over to Phil Gramm and the anti-greed moment forgotten.

I’ve been waiting for someone to outline an idea to me about good forward-looking proposals to help clean up this mess and now here comes Andrew Jakabovics for CAP:

While securitization adds complexity to the question of where the authority to modify loans lies, we believe that recent actions by the Federal Deposit Insurance Corporation to engage in wholesale loan modifications for bankrupt California lender IndyMac Bank’s loans—which it now holds directly or in a servicing portfolio—serve as guidance for where U.S. mortgage giants Fannie Mae and Freddie Mac and the private mortgage servicing companies must go.

The housing bill that recently passed into law mandates a Treasury study of auctions of mortgage pools based on the Center for American Progress’s Saving America’s Family Equity, or SAFE loan program, to get large numbers of loans into the hands of new investors who could restructure the existing loans so that they would perform. Under the SAFE loan program, the discount below face paid at the auction would allow the new note holders to do the necessary writedowns without incurring losses.

The SAFE loan program, like the FDIC actions, recognize that both borrowers and investors, and ultimately taxpayers, are better off when loans are restructured rather than allowed to proceed to foreclosure. Liquidity will return to Wall Street when the confidence in Main Street’s ability to pay its mortgages is restored. The Bush administration should accelerate that study so that U.S. financial regulators can get down to the real business at hand—finally fixing the problem in the mortgage marketplace at its source.

This sounds reasonable to me. I also don’t really understand why the Fed decided to eschew a rate cut earlier this week. Recent inflationary pressure had all come from rising commodity prices, and those prices seem to be headed down in anticipation of a worldwide downturn. Nothing remotely resembling a dangerous wage-price spiral was ever in sight and certainly isn’t in sight now. The big risk would be that the scary news from the financial market leads to job and income losses in the “real world” that lead more people to miss their mortgage payments and send us into a downward spiral.

David Leonhardt has a worthwhile column suggesting that, perhaps, we should all focus a little less attention on how to bail out the latest disaster company and a bit more attention on how to address what, for lack of a better term, one might call the fundamentals of the economy. From back before AIG joined the scrap heap, Scott Lilly had a commentary wisely linking the financial crisis to the income crisis in America: “As a report I authored a little more than a month ago details, the wage and salary increases that have occurred since 2000 have not been sufficient to even maintain the level of income that most families enjoyed at the beginning of this decade.”

Instead of growing real incomes, we saw a growth in both the quantity of indebtedness and in the sophistication — or, at least, we were told it was sophistication — of the credit instruments that people were able to avail themselves of to maintain the levels of consumption they wanted. As long as it lasted that seemed to be not ideal, but still fairly beneficial. Being able to go into debt at appropriate moments is, after all, a pretty useful thing. And part of what it means to have a viable modern economy is to have sophisticated instruments for managing credit and risk. But it now turns out that a lot of that risk was mis-assessed and there are a lot of debts that can’t be paid.

That specific set of issues needs to be unwound with minimal collateral damage, of course, but what’s really needed is a return to more robust form prosperity — to a world in which growth in output is shared by a wider set of people and household consumption isn’t so dependent on debt-innovation that political authorities feel compelled to let everyone push the envelop lest the party end.

Obama once again leading in the Gallup tracking poll, a result I believe is mirrored in other trackers.

Gilbert Arenas’ new fat contract didn’t look like a very wise move to me when the Wizards signed it and it doesn’t look any wiser now that we learn he needs a third knee surgery and will miss at least the first month or so of the season.

New EPI “economic snapshot” on the deteriorating labor market situation:

Not good. Heidi Shierholz has an issue brief here.