See also: In CBS Interview, Palin Calls For Surge In Afghanistan.

Taegan Goddard just posted a piece at CQ suggesting that McCain may be preparing to join Republicans in voting against the bailout. If so, he’s basically saying “No way am I going down for this, Bush, it’s your problem, you take the fall.”

An interesting discussion followed my post yesterday outlining four possible scenarios for the bailout negotiations in DC. The whole thing is playing out now in DC.

We’re moving toward options 3 or 4.

I don’t think it’s #1. It could be #4. I kind of hope it’s #3.

There are four distinct possibilities.

1. The need for a bailout is a bluff, so nothing happens and Bush finally looks wholly like the idiot asshole that he is. McCain suspended his campaign for nothing. The Republican Party loses in a landslide in November.

2. McCain votes for the bailout, providing cover for other Republicans to follow him, and enough Democrats will sign on so the bailout passes. The Republicans who vote for it blame McCain for the mess, and he loses to Obama, in a landslide, and the Republicans lose more seats, but most of them get re-elected anyway. (Democratic voters think the bailout sucks but it’s not a matter of religion for them as it is with the Republicans.)

3. McCain convinces Bush & Cheney to resign, Pelosi becomes President until January 20, and a Democratic Congress and Executive passes the bailout, all Republicans who have conservative constituencies vote against it and win re-election in November. A few Democratic incumbents get thrown out because the public will hate the bailout, even if it works. Pretty good chance the next Senate has a Republican majority, maybe the House too.

4. The need for a bailout is not a bluff, Bush refuses to leave, McCain refuses to sacrifice his candidacy, the Republicans in Congress won’t vote for the bailout so neither will the Democrats, and the world economy melts down.

Okay it’s your choice. Which of the four scenarios do you think will prevail?

I think the hot potato lands in Bush’s lap. His father comes down and tells him playtime is over, he has to leave to save the world economy, and what little remains of the Bush name, and we limp along until Obama takes office on Jan 20.

Maybe this was the whole point of all the gimickry of McCain’s announcements today, to provide a lot of smoke to hide the fact that they can’t put Palin up in front of the country live.

CNN: “McCain supporter Sen. Lindsey Graham tells CNN the McCain campaign is proposing to the Presidential Debate Commission and the Obama camp that if there’s no bailout deal by Friday, the first presidential debate should take the place of the VP debate, currently scheduled for next Thursday, October 2 in St. Louis.”

Aside from the financial crisis, the candidacy of John McCain is melting down today. Never seen anything like this.

11:55AM: Just heard an announcement on MSNBC that McCain has requested that Friday’s debate be postponed so he can focus on the economic plan in front of Congress. He also said he plans to suspend his campaign until the crisis is resolved? Not clear on exactly what was said, but this is obviously a big deal.

AP: McCain calls for debate delay.

First reaction — this is the right thing to do. Whether you like it or not, McCain’s vote on this matter is pivotal, and being in debate prep is probably not the best place for him to be.

Rahm Emanuel (D-IL) says he’s not so sure McCain’s presence is needed in DC. He says the American people could hear from the candidates in the debate. So it’s not clear that Obama is going to react positively to the McCain move.

Picture of McCain announcing the suspension of his campaign.

My first reaction was probably wrong — this was an intensely political decision by McCain and a bit of a double-cross as Obama was trying to work out an agreement between the campaigns privately when McCain decided to go public.

Chris Cillizza at the Washington Post has background.

Lots of new stories on today’s NewsJunk.

Wonkette calls McC’s move a bluff-in-vain. “You could tell after seeing that new Washington Post/ABC News poll this morning that McCain would need one helluva muppet stunt to get himself a farthingworth’s of non-horrendous attention.”

“The debate is on,” a senior Obama campaign official told ABC News.

MP3 of Obama response to McCain.

If you want to spend 40 minutes getting a high-speed update on the financial crisis, I highly recommend yesterday’s Fresh Air interview with NY Times financial reporter Gretchen Morgenson.

There’s a chin-dropping number in the interview. $60 trillion. It’s the dollar value of insurance purchased to back up the money market. It’s as if all the neighborhoods in the world were on fire and the insurance industry is going to have to deal with claims on all of it. Obviously, they never planned for that. But there’s a lot more shocking stuff in the interview, and it raises far more questions than it answers. If you’re like me, and put off understanding how our financial system really works, I’d suggest clearing out 40 minutes and have a listen.

Update: Aaron Pressman, in a comment on this post, suggests (gently, much appreciated) a rewording. “The $62 trillion (not $60) is the total amount of credit default swaps, or insurance policies, that financial firms have written on all types of debt, not just money markets. So: It’s the dollar value of insurance purchased to back up bond market investments. It’s the amount that banks and insurers are on the hook for if absolutely everything goes down the tubes.”

If you love movies as I do the Great Depression was a time of tremendous growth in the art of moving pictures. Some great technology had just come online at the end of the Roaring Twenties, talking pictures, and that art matured in the 30s, when some of the greatest movies of all time were produced. So if there’s going to be a Great Depression, get ready to go to the movies, a lot!

The first question raised by this amazing NY Times piece:

Did McCain know his campaign manager was also on the Freddie Mac payroll?

If he knew, McCain is corrupt to the core, if he didn’t — he’s a figurehead who his own people don’t respect or protect.

Either way it’s not a good thing for a potential future President.

My guess, and it’s just my guess is that McCain didn’t know, that he sold his campaign to Davis and Schmidt when it was clear he had no way to win against Obama, and in doing so guaranteed himself a ceremonial role in his own administration if they could win the election. These are the people who write the speeches for Pailin, who designed her candidacy and it’s looking more and more like Frank Rich hit the bulls eye in his Sept 13 piece about Palin and Whathisname (that would be McCain). McCain is the old brand that gets this crowd of Bush/Cheney/Rove Republicans back in the White House. After the election they’ll just resume doing what they were doing during the previous two Republican administrations. And it still might work. It’s hard to imagine that this revelation will mean much to people already planning to vote for McCain.

McCain’s blogger calls the NY Times “an Obama advocacy organization.”

I wonder if a lot of people understand how the financial crisis came to be. I’m not sure I would understand it if I hadn’t gone to visit a friend who in the Sierra foothills last year.

She had inherited a house at a resort 10 years ago and had been living there ever since. It’s a big house, but the construction wasn’t finished. There were fixtures to be installed upstairs, and the driveway wasn’t paved, but for the most part it was done.

She didn’t have a job, but she had been taking out loans on the property every couple of years, and at first I didn’t understand how she could do that, until I realized that the property value had kept increasing so even though she was spending most of the money she borrowed on living expenses and improvements to the property, she always had equity she could borrow against. Every two years she’d take out another loan, max out her equity, but in a couple of years the value would go up and she’d be able to take out another loan.

Until the value stopped going up, then the party was over. She still had to make payments, but now she didn’t have the means to. She defaulted, left the house, and the bank took over. If they could sell it, it would be at a considerable loss.

I think a lot of people were doing that.

And I think that’s where the trouble started. Making those loans was a profitable business, and a lot of people wanted some of the action. At one point I even wondered how I could, but I never (thankfully) figured it out. As long as real estate kept going up, everyone kept making money. There was even a way to rationalize it. The United States is where everyone in the world wanted to live. So property would keep increasing in value as long as there was growth somewhere in the world. But it turns out that China and India, Russia and Brazil are pouring their new money into their own countries, reproducing the infrastructure we already have, building their own highways, hospitals and universities.

When real estate started going down, the value of all those mortgages went down, in some cases way way down. Then the house of cards built on the ever-increasing value of real estated collapsed. That’s the part you’ve been reading about. Banks need to have a certain dollar value of assets to back loans they get from other banks. When the value of the assets go down, their loans get called, they have to sell these assets to pay back their creditors, but no one wants to buy them. That’s when you hold up the big Fail sign and hope someone thinks you’re too big to Fail.

But really, this is probably the shit hitting the fan, it’s probably not a liquidity crisis as Paulson says. It’s our laziness, our thinking that our superior military and nukes would guarantee us a permanent position at the top of the pyramid. We don’t make enough of the things people want these days, and instead of investing in building better education, health and infrastructure, and solving the energy problem, we’ve been lying to ourselves.

We also fucked up by electing idiots to lead us, and letting the press get away with providing entertainment instead of keeping us informed on what the rest of the world was doing. This led us to elect ever more dishonest idiots to lead us, and they didn’t like what little oversight the press provided leading to the ridiculous situation where the candidates won’t even sit down for an interview, and you can hardly blame them, the reporters are such incompetent jerks.

I heard someone say that the real estate bubble isn’t the problem it’s the canary in the coalmine, the first financial crisis of a series of crises. I believe this is probably true. I thought we had time to solve these problems, what Obama was saying and certainly still is saying are the right things: education, health care, infrastructure, energy. And pull back from the short cuts. We can’t afford boondoggles like the war in Iraq, but it may already be too late.

No matter what, as a country we have to stop looking for the quick fixes, and start thinking about our future and doing the things we need to do to have one.

Of course all this comes at an opportune moment. We can change direction on November 4. That’s not actually very far away and another opportunity like that won’t come for a long time. Something to think about.

I’m absolutely sure the economic bailout story is going to end with Bush and Cheney resigning. Or more accurately, not end, but move on to the next phase. Pretty sure they will be gone by the end of the week.

It’s the only thing that will give Republicans cover, and will let the Democrats feel they are not being set up. It will get everyone’s attention and remove the theory that it’s more Bush-Cheney deception.

Bush and Cheney have no credibility, the only thing they can do right now to help the country, if that’s really what they’re doing, is to step aside.

I wrote up the idea in more detail yesterday.

It’s going to shake a lot of people up, but they have to go, now.

A sure sign this idea will come up on a broader level is this story on Politico about an open rebellion among House Republicans in a meeting with Cheney earlier today.

Meanwhile OpenLeft says the Paulson plan is a sham, and former Speaker Gingrich urges Congress to reject it, saying any Rep that votes for it will lose in the November election.

Update: An alternate theory — if McCain puts his head on the chopping block that could provide enough cover for Republicans and Democrats to vote for the proposal.