"The timing is as interesting as the visit itself," said Chris Weafer, chief strategist at UralSib Financial in Moscow. "Gazprom's entire senior management goes into Sarah Palin's backyard during a contentious election. There's a message there."

In less than one month, Americans will vote into office either Barack Obama or John McCain. Each has very different ideas about how to tackle the financial crisis.

Martin Hutchinson says Obama is most likely to win on a populist anti-Wall Street platform. But if he follows up this rhetoric with more regulation and protectionism, this could hurt US investors even more in the long run.

This from Money Morning:

The market’s verdict on the billion bailout was pretty clear: Stock prices started dropping the moment the bill was passed on Friday afternoon and continued to do so Monday, with the Dow Jones Industrial Average closing down 370 points for the day – after being down 800 points earlier that same day.

The economic effect is also pretty clear: Given that the bailout plan is being launched at a point when money is already tight – and that it pours $700 billion of our money into the most useless, toxic waste left over from the housing bubble – you can be certain that it will end up starving more-worthwhile potential investments of badly needed capital.

But the political impact is less clear, in both the short- and long-term periods.

For a start, it’s not clear to the electorate who is to blame for the financial debacle. The Democrat presidential nominee, U.S. Sen. Barack Obama, D-Ill., naturally blames the Bush administration and mysterious “deregulation” for the problem. Indeed, he has a particular deregulatory act in mind, the 1999 Gramm-Leach-Bliley Act, which ended the separation of commercial and investment banking – conveniently ex-Sen. Phil Gramm was an advisor to Republican presidential nominee, Sen. John McCain, R-Ariz.

Add in conventional Democratic rhetoric about the “evils” of Wall Street (albeit toned down somewhat since so many Wall Street titans are Democratic supporters and have provided funding for Obama’s campaign) and you would think he had a pretty clear path to sail to achieve electoral victory. After all, if economic or political disaster occurs on the “other guy’s watch, it generally doesn’t take a rocket scientist to figure out a way to blame that “other guy” for what happened.

However, it’s not quite as simple as that, though you would think it was from the initial reactions of the McCain campaign. Blaming Wall Street greed gets Republicans nowhere, since Wall Streeters are popularly thought to be mostly Republican. And if there was regulating to be done, why didn’t the Republican administration do it? Thus, the populist comments by the Republican vice-presidential candidate, Alaska Gov. Sarah Palin, at the end of the vice-presidential debate last Thursday night amounted to a series of “own goals”— a soccer term for when a team forgets which end is which and boots the ball past its own goalkeeper.

There are two perfectly respectable things a Republican candidate can say in defense of the last eight years of economic management:

• First, much of the housing disaster was caused by the activities of Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), the two government-backed behemoths who should never have existed in a rational free-market economic system – and who were pushed into conservatorship by foreign governments
• Second, much of the misbehavior on Wall Street – as well as the subsequent collapse – resulted from an excessively loose monetary policy by the U.S. Federal Reserve over a period of more than a decade – and the Fed, in case nobody noticed, is not a private-sector operation.

There were signs Monday that McCain was moving onto the attack on the subject of Fannie Mae and Freddie Mac. Obama, after all, was the Senate’s second-largest recipient of campaign funds provided by the executives of those organizations – topped only by Sen. Christopher J. Dodd, D-Conn., who chairs the Senate Banking, Housing, and Urban Affairs Committee, which oversees Fannie and Freddie. Further, McCain was a leader of the (rather feeble) Republican attempts in 2005 to rein them in, which Obama and other Democrats opposed. Indeed, back in 2004-2005, there are lots of good sound-bite quotes from the Democrats about what splendid organizations Fannie and Freddie were.

Regrettably, for the Republicans, the responsibility of Fannie and Freddie for the disasters on Wall Street, while substantial (the securitization market would probably not have got off the ground without them) is somewhat indirect. Even more directly linked is the responsibility of the Fed in inflating money supply and inflating bubble after bubble. No politician, except the eccentric Rep. Ron Paul, R-Tex., has gone after the Fed, and since neither McCain nor Palin can be classed as economic experts, it seems very unlikely that either of them will use the Fed’s misdeeds as a key election-talking point in the last month of the campaign.

Thus, Obama’s mantra of Wall Street greed and excessive deregulation will probably continue to register with voters in the next few weeks, and should maintain – or even increase – the lead Obama is showing in opinion polls. The $700 billion bailout, which appears (rightly) to be massively unpopular, will remain in the news as supervising staffers are appointed and the first purchases of loans are made, and will be blamed primarily on the administration that thought of it. Both candidates supported it, so any advantage between them will be minor. At this point, therefore, it is difficult to see how McCain can win on Nov. 4, unless some foreign policy crisis refocuses the electorate’s attention away from the economy.

Obama elected on a platform similar to President Bill Clinton’s 1992 platform of free trade and middle class tax cuts would be relatively investor-friendly, as was Clinton himself. Moreover, Obama’s undoubted ability might help him take the right steps to clear up the current mess and move the economy back into growth mode. But Obama elected on a platform of bashing Wall Street, opposing global trade, raising taxes on the rich and re-regulating everything is a very different matter; if he really believed his own propaganda he would be a menace both to investors and the U.S. economy.

Fortunately, as with most politicians, it seems likely that what Obama says to get elected and what he will do in office bear little relation to each other. We will just have to wait and hope.

Source: Election 2008: Who Will Get to Spend the $700 Billion?

McCain's scorn for Barack Obama was on unrestrained display in Friday night's debate. How dare this impudent whippersnapper imagine he can be president, you could almost see McCain thinking. I'm the one who's racked up the frequent-flier miles to Waziristan! Henry Kissinger and I were BFFs when Obama was glued to "The Brady Bunch"! Listening to McCain debate was like a stroll down foreign policy memory lane: Brezhnev, Andropov, Chernenko. George Shultz, "our great secretary of state." Perestroika. SDI. Those were the days, my friend. We thought the Cold War would never end.

SAAKASHVILI: Well, first of all, I met both of them. I mean, Joe Biden is a longtime friend, amazingly smart guy, who gets very good perspective on Georgia's situation. I met Sarah Palin. She was wonderful. She was absolutely delightful. CAVUTO: Did you have or get a sense of any of those doubts that some of your colleagues at the U.N. have? SAAKASHVILI: Look, I don't know who was — I mean, I — first of all, I have huge, you know, trust in America's people judgment. That's why America is so attractive for us, that this is elections. You know, people have wise judgment. And, in the end, they will decide. And, so, I can hardly comment on individual candidates, at least beside the things what I have said. But it's very important to remember that, when Ronald Reagan was coming in, everybody was saying: "Who the hell is that guy? He doesn't know anything about politics."

On a clear day, it is, in fact, possible to see the unpopulated Russian island of Big Diomede from the Alaskan island of Little Diomede, which is inhabited by a small native population. Still, Palin's hometown of Wasilla isn't much closer to the Russian capital of Moscow (4,318 miles) than New York City is (4,663 miles). But rather than downplaying Palin's suggestion that she possesses special knowledge of Russia, the McCain/Palin campaign has continued to tout Alaska's proximity to the world's largest nation as a feather in her cap, without offering any evidence of actual experience Palin has in Russian affairs.

Saturday in Colorado Springs, Colo., Alaska Gov. Sarah Palin said, "The fact is that Fannie Mae and Freddie Mac have gotten too big and too expensive to the taxpayers. The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help."

I can't even start to dissect what's wrong with this statement, so I will let the reader assess Palin's understanding of the role of the GSEs in the financial system. From my perspective, I would have hoped to have more comprehension from a candidate at a time when the estimate of a resulting $300 billion taxpayer liability is viewed as plausible.

For some informed discussion, see Calculated Risk, as well as Nouriel Roubini.

(I was going to write about competitive depreciation in a Taylor rule framework, but this item called for immediate discussion.)