House Passes Bailout Bill, Bush Signs It The House passed the Senate version of the bill to bail out Wall St. yesterday and President Bush signed it into law. The secretary of the treasury can now begin buying up troubled assets from whomever he wants and at whatever price he deems appropriate. The Dow Jones index reacted to the news by dropping 157 points. Apparently investors aren't entirely convinced the financial crisis is over. The initial proposal was 3 pages; the final one was 451 pages. The difference is 448 pages of pork and tax cuts, something the leadership threw in knowing that recalcitrant Republicans would be hesitant to vote against tax cuts a month before an election. In theory, the taxpayers get something in return for their money--warrants to buy stock in participating companies, but how many warrants the treasury gets per gigabuck invested is not specified. The bill also contains some minor measures to curb the worst excesses of executive pay. For example, companies lose tax deductions on CEO salaries more than $500,000 a year and CEOs who mismange their companies and then get golden parachutes more than three times their annual salary have to pay a 20% excise tax on them. All in all, these measures do not stop extravagant salaries, bonuses, and severance packages; they just make them more expensive to the company and CEO. It is very likely that executives faced with the 20% excise tax will simply demand (and get) a 25% larger package. One interesting aspect of this whole project is how endangered members of the House voted on the two bills. Below is a list of incumbents running for reelection taken from our Hot House races page and how they voted on the first bill (which was rejected) and the second one (which passed). CD Party Incumbent 1st 2nd AZ-05 Dem Harry Mitchell No Yes AZ-08 Dem Gabrielle Giffords No Yes CA-11 Dem Jerry McNerney Yes Yes CT-02 Dem Joe Courtney No No FL-16 Dem Tim Mahoney Yes Yes GA-08 Dem Jim Marshall Yes Yes GA-12 Dem John Barrow No No IL-08 Dem Melissa Bean Yes Yes IN-02 Dem Joe Donnelly Yes Yes IN-08 Dem Brad Ellsworth Yes Yes IN-09 Dem Baron Hill No No KS-02 Dem Nancy Boyda No No LA-06 Dem Don Cazayoux No No MN-01 Dem Tim Walz No No MS-01 Dem Travis Childers No No NH-01 Dem Carol Shea-Porter No No NY-19 Dem John Hall Yes Yes NY-20 Dem Kirsten Gillibrand No No NY-24 Dem Mike Arcuri Yes Yes OH-18 Dem Zack Space Yes Yes PA-04 Dem Jason Altmire No No PA-10 Dem Chris Carney No No TX-22 Dem Nick Lampson No No TX-23 Dem Ciro Rodriguez No No WI-08 Dem Steve Kagen No No CD Party Incumbent 1st 2nd AK-AL GOP Don Young No No CO-04 GOP Marilyn Musgrave No No CT-04 GOP Chris Shays Yes Yes FL-13 GOP Vern Buchanan No Yes FL-21 GOP Lincoln Diaz-Balart No No FL-24 GOP Tom Feeney No No IL-10 GOP Mark Kirk Yes Yes MI-07 GOP Tim Walberg No No MI-09 GOP Joe Knollenberg No Yes MO-06 GOP Sam Graves No No NV-03 GOP Jon Porter Yes Yes NY-29 GOP Randy Kuhl No Yes NC-08 GOP Robin Hayes No No OH-01 GOP Steve Chabot No No OH-02 GOP Jean Schmidt No Yes PA-06 GOP Jim Gerlach No Yes WA-08 GOP Dave Reichert No No

On the first bill, 9 endangered Democrats voted for it and 16 voted against it. On the second bill it was 11 for and 14 against. Among the endangered Republicans, only three were for it the first time and 14 were against it. The second time, with the tax cuts and the pork thrown in, the split was 8 for and 9 against. The pork and tax cuts clearly had a bigger effect on Republicans than on Democrats. CQ Politics has a similar analysis based on its list of endangered incumbents. CQ Politics also notes that opponents of the these incumbents immediately began exploring how to use these vote to hammer the incumbents. Anyone who voted No/No can be accused of wanting a depression. Anyone voting No/Yes can be called a flip-flopper. Anyone voting Yes/Yes can be called a lackey of Wall St. You're damned if you do and damned if you don't. The NY Times has a story about how several representatives dealt with the pressure being applied to them. McCain Will Take the Gloves Off The McCain campaign (read: Steve Schmidt) has decided that being a war hero is not good enough, being a POW is not good enough, being a maverick is not good enough, and being a reformer is not good enough, so the mud is about to start flying. The campaign has pulled all its positive ads touting McCain's experience and long service to the country. From now on, the entire focus will be on Barack Obama's associations with convicted Chicago developer Tony Rezko, 1960s radical William Ayers, and Obama's former pastor, Rev. Jeremiah Wright. It is a high-risk gamble, but McCain loves to roll the dice. But this fierce new strategy has two potential downsides. First, while partisan Republicans will love it (as they loved Sarah Palin's convention speech), negative ads don't always work so well with independents, whose votes are now crucial to both sides. Second, there is a very real danger that either Obama, or more likely, Democratic 527s will start throwing mud right back at McCain. A few choice subjects for negative ads are (1) his taking bribes from convicted felon Charles Keating in the 1980s, (2) the fact that he is an old man who has had a very dangerous form of cancer four times, and (3) the way he divorced his crippled first wife to marry a beer heiress worth $100 million. Clearly Schmidt knows all this but apparently he feels he has to shake things up before it is too late. It is going to get real messy. The 527s on both sides are already in the act, of course. Here is an example of an anti-Obama ad and an example of an anti-McCain ad. Alaska Supreme Court to Hear Troopergate Appeal If the Democrats want to get nasty, another line of attack is Troopergate, the story around Sarah Palin's firing Alaska's commissioner of public safety for refusing to dismiss her estranged brother-in-law. This story is back in the news again because the Alaska supreme court has agreed to hear an emergency appeal from laywers trying to shut down the investigation, even though it was ordered by the Republican-controlled state legislature. The two sides will present oral arguments next Wednesday and the court will rule on Thursday. A report from the retired prosecutor hired by the legislature to investigate the matter, Steve Branchflower, is due Friday. If Branchflower determines that Palin abused her authority as governor to settle a family score, she will be in for withering criticism and McCain will have to answer questions about how good he is at vetting personnel. It would be much better for him if the whole investigation would just go away. Palin Releases Tax Returns Sarah Palin has released her tax returns. Like Joe Biden but unlike John McCain and Barack Obama, she is not a millionaire. The adjused gross incomes for the four candidates are given below. However, it should be noted that John and Cindy McCain file separate tax returns and the vast majority of the McCain's income and wealth is in Cindy's name. She released a summary of her 2006 income earlier this year that showed her income to be over $6 million then. Most of Obama's income comes from the royalties on two books he has written. Candidate 2006 Income 2007 Income Barack Obama $984,000 $4,140,000 John McCain $339,000 $387,000 Joe Biden $249,000 $320,000 Sarah Palin $166,000 $128,000

Today's Polls We have five presidential polls today, all of them favoring Barack Obama. After pulling out of Michigan yesterday, the only Kerry state McCain is fighting for is New Hampshire. But two new polls don't look encouraging for him. Saint Anselm college puts him 12 points behind and Rasmussen puts him 10 points behind. Rasmussen also put Obama ahead in Nevada, 51% to 47%. State Obama McCain Start End Pollster New Hampshire 49% 37% Sep 25 Sep 30 Saint Anselm Coll. New Hampshire 53% 43% Oct 01 Oct 01 Rasmussen Nevada 51% 47% Oct 02 Oct 02 Rasmussen Rhode Island 48% 26% Sep 30 Oct 01 Opinion Factor Washington 53% 43% Oct 02 Oct 02 Rasmussen

We also have four Senate polls. In North Carolina, state senator Kay Hagan (D) continues to have a small lead over Sen. Elizabeth Dole (R-NC), 37% to 35%. This race was not expected to be close, but the DSCC has poured a lot of money into North Carolina and it seems to be helping. In Minnesota, a Princeton Survey poll puts former comedian Al Franken (D) ahead of Sen. Norm Coleman (R-MN), 43% to 34%, with independent Dean Barkley at 18%. State Democrat D-pct Republican R-pct Start End Pollster Minnesota Al Franken 43% Norm Coleman* 34% Sep 30 Oct 02 Princeton Survey North Carolina Kay Hagan 37% Elizabeth Dole* 35% Sep 29 Oct 02 Elon U. New Hampshire Jeanne Shaheen 50% John Sununu* 45% Oct 01 Oct 01 Rasmussen Virginia Mark Warner 57% Jim Gilmore 31% Sep 29 Oct 01 Mason-Dixon

We also have 1 House poll and it could be the handwriting on the wall. NM-02 is a solid (R+6) Republican district. This is the seat Steve Pearce vacated to run for the Senate. Despite the district's leaning, Democrat Harry Teague is ahead of Republican Edward Tinsley 47% to 43%. If Republicans are having trouble holding open seats in solid Republican districts, they could be in real trouble in many other House districts that haven't been polled. Cong. Distr. Democrat D-pct Republican R-pct Start End Pollster NM-02 Harry Teague 47% Edward Tinsley* 43% Sep 30 Oct 01 Research 2000

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