Lay this one at the feet of Il Coglione himself. Five minutes after he spoke of the supposed plan, he was forced to admit: “Someone advanced the hypothesis of rewriting the rules. We were only talking about it, but there’s nothing yet.”

An hour later, Pierluigi Bersani, Italy’s shadow minister of the economy, said, “We already have enough problems without Berlusconi adding others. To speak of suspending the markets, and then, after just three minutes, to confusedly take back what you just said only adds uncertainty to uncertainty.”

And sure enough, it turns out that by “someone” Berlusconi meant “someone on the radio”:

“I heard it on the radio,” Berlusconi said about an hour after his initial comments, his spokesman confirmed. “The hypothesis wasn’t put forward by any leader, including myself.”

This morning, White House spokesman Tony Fratto denied that any such plan had ever been discussed.

[I]n fact I think that the Ayers connection is too tenuous to be interesting. But there is a nugget of a real critique at its heart, which is that the academic culture Obama belongs to thinks its just fine to be a former active terrorist who has refused to renounce support for the violence committed by his group; that culture has rewarded Bill Ayers with prestigious employment and other positions in a way that it wouldn’t dream of rewarding a similarly “idealistic” abortion clinic bomber. I know it’s hard to imagine, but if you’re conservative, that seems like a real problem.

So McArdle thinks the academy is to blame for not only accepting but even cosseting Ayers, and Obama is implicated because he’s a member of that same morally bankrupt institution, the university.

But if you look at what actually happened when it came to Ayers’s social (which is not, obviously, to say moral) rehabilitation, the key factor is pretty clearly his father, who was the former chairman of Commonweath Edison, one of the Midwest’s major energy companies. Here’s a bit from a Nov. 11, 1985 LA Times article about Bernardine Dohrn’s (Ayers’s wife) attempt to join the New York bar:

Dohrn was graduated from the University of Chicago Law School in 1967. Lawyers familiar with large firms say it is very unusual for someone with an 18-year gap in her legal career to be hired by a firm like Sidley & Austin. One possible explanation, they say, is that Dohrn is married to William Ayers, a former Weather Underground activist, and Ayers’ father is Thomas Ayers, former chairman of Commonwealth Edison and a leading member of Chicago’s Establishment.

The elder Ayers recently headed Chicago’s effort to obtain the 1992 World’s Fair. Sidley & Austin served as lawyers for the World’s Fair Authority. He also serves on the board of the Chicago Tribune Co.

And here’s how Michael Kinsley put it back in May:

When it became clear even to them that there would not be violent revolution in America, Ayers and Dohrn shrugged and rejoined society in Chicago, where he had grown up. It wasn’t difficult. While he was in hiding, his father was CEO of Commonwealth Edison, the big utility. Ayers the elder sat on every Establishment board in town–Northwestern, the Tribune Co., the Chicago Symphony. Ayers the younger and his wife were welcomed back into the fold.

This is the second insult that emerges from the story of Bill and Bernardine. They set off bombs and talked about killing their parents, and the Chicago establishment didn’t even care. The important thing is that he was Tom Ayers’ boy.

If one were only interested in scoring points against one’s favorite bêtes noires, he might ask where we’re to find the conservative critique of firms like ComEd and Sidley for their complicity in rehabilitating Ayers and Dorhn. Or better yet, to ask why the corporate-legal culture as a whole is so willing to ignore the past misdeeds of unrepentant former terrorists.

But that’s a pretty boring game. Lots of bad people–and like Kinsley, I count Ayers as a bad person–make it into lots of kinds of professions, and lots of people get rehabilitated for all kinds of reasons, most of them having nothing to do with justice. (Cf. Henry Blodget, who has written on financial matters for McArdle’s employer despite his involvement in securities fraud.) If McArdle wants to hate the university and the culture that surrounds it, that’s up to her. But one would hope she would do it without resorting to this kind of witless neo-McCarthyism. Does she really think that someone like Cass Sunstein is a Weather Underground fellow traveler? I expect not; but if that’s the case, then what’s the point in suggesting it?

At best, this is to say that Obama doesn’t believe in American exceptionalism. At worst, and this is where the new ad goes, it means Obama doesn’t sufficiently love America and is actually apart from it.

And Smith concurs:

It’s not about an obscure ’60s radical; it’s about challenging Obama’s Americanness, which is why the language of the ads, deliberately or inadvertently, echoes the language of viral emails that do that more directly.

But in another sense, I think Martin and Smith stop a step too short in their analysis. The Ayers stuff is, as Martin says, “a mere means to an end,” but so is the charge against Obama’s Americanness. Exoticism isn’t enough, and the real goal of the hard right–and it’s a goal that until recently the McCain campaign has not accepted for itself–is to paint Obama as a very familiar (and very American) figure: the black radical. The right loves the image of Obama as a black radical as much as they profess to fear it, because it’s a figure they know how to use to devastating electoral effect.

Here’s how I peel back the layers of the onion:

According to National Review types (who protest perhaps a little too much that their speculations about Obama not about race) what lies behind their concerns over Obama’s Americanness is the belief that at his core Obama is nothing more than a Manchurian candidate for the radical left. In the face of all available evidence, many of them (most obviously Stanley Kurtz, but the others as well) think that if and when Obama’s elected he’s going to swing further left than Malcolm X. This is why the question “Who’s the Real Barack Obama?” has been so effective as a tagline in email smears and now McCain campaign ads.

The second layer, obviously (as the AP picked out over the weekend) is race. Saying that Obama is “unamerican” or invoking ad nauseam his ties to an “unrepentant former terrorist” are another way to remind people that Obama is black. (As the AP’s Douglass K. Daniel put it, “In a post-Sept. 11 America, terrorists are envisioned as dark-skinned radical Muslims, not the homegrown anarchists of Ayers’ day 40 years ago.”)

The combination of these two factors is what makes Jeremiah Wright such a terrifying specter–but also such a potent electoral tool–in the eyes of the right. He’s black and radical, exactly the person whom the right is convinced they’re running against. Or more cynically, he’s exactly the person whom they want to be running against. For it is a fact of political history that in America there are few better ways to win an election than to run against the image of an angry black man–and so much the better if he’s yelling “God damn America” at the top of his lungs.

I’m convinced that Obama’s electoral success so far has everything to do with the fact that he hasn’t let even a whiff of black radicalism attach to his person.* And this success explains why the right has been so desperate to enlist any surrogate they can find as a stand in for him, be it Ayers, Wright, or even Michelle. (Remember the National Review’s “Mrs. Grievance” cover with its scary picture of a scolding Michelle?) Now that Sarah Palin has declared it open season on Wright, I expect we’re in for one last ugly push to make something stick.

The sad thing about all of this, of course, is that while it has everything to do with this election, it has nothing to do with how the president, whoever he is, is going to handle the next four years leading this country. The happy part is that (fingers crossed, breath held) so far the majority of Americans seem to agree.

++++++++

* Note: That this is a practical requirement of American presidential politics is not something I’m happy about, but I think it would be hard to dispute as a fact.

Having once somewhat cheekily included a sentence diagram in a book review, I was charmed this morning to see grammarian Kitty Burns Florey take on the sentences of Sarah Palin over at Slate. Check it out here.

Couric: Why, in your view, is Roe v. Wade a bad decision?

Sarah Palin: I think it should be a states’ issue not a federal government-mandated, mandating yes or no on such an important issue. I’m, in that sense, a federalist, where I believe that states should have more say in the laws of their lands and individual areas. Now, foundationally, also, though, it’s no secret that I’m pro-life that I believe in a culture of life is very important for this country. Personally that’s what I would like to see, um, further embraced by America.

Couric: Do you think there’s an inherent right to privacy in the Constitution?

Palin: I do. Yeah, I do.

Couric: The cornerstone of Roe v. Wade.

Palin: I do.

my position of just wanting that culture of life to be respected, and not wanting government to sanction the idea of ending life.

Are we allowed to ask, then (or would it constitute more “gotcha journalism”?) if this means that Palin opposes the death penalty as well? From what I’ve seen around the internet, she would seem not to, but if you don’t want “government to sanction the idea of ending life” doesn’t that mean you don’t want government to sanction the idea of ending life?

And yes, I know that the Republican Party has tried to hijack the phrase “culture of life” from the original sense in which Pope John Paul II deployed it. The pope did use it to oppose abortion but also to oppose the death penalty (and euthanasia, and stem cell research). When the Republicans imported it into their 2004 platform, however, they explicitly endorsed the government’s right to impose the death penalty.

None of that really matters, though, since in the second part of that sentence Palin is uncharacteristically clear about the role government should (not) have in ending life. Do I believe that Palin really opposes the death penalty? Of course not, though it would be one of the few good things I could say about her if she did.

So what do you do if you’re a Republican congressman? Do you accept some responsibility for the fiasco? Of course not. You, the party of macho moose hunters and multi-day snowmachine racers, blame the tone of Nancy Pelosi’s pre-vote speech:

Some members of the House GOP are blaming Speaker Pelosi’s hard-edged partisan speech for the loss.

“Progress had been marked by magnaminity with Frank, and Hoyer … Hers (speech) had a partisan tone,” said Rep. Adam Putnam.

Suddenly the enduring popularity of the Republican party makes complete sense to me: being a conservative means never having to take responsibility for anything.

P.S. I’d sure love to be there for the Boehner-McCain phone call that is probably happening, oh, right about now.

++++++++

Second Quick Update (#1 below): McCain’s campaign is giving it a whirl as well, blaming Pelosi’s tone and (surprise!) Obama for the House Republicans’ vote:

Just before the vote, when the outcome was still in doubt, Speaker Pelosi gave a strongly worded partisan speech and poisoned the outcome.

This bill failed because Barack Obama and the Democrats put politics ahead of country.

Good luck with that one, guys.

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Third Quick Update: Seems there is at least one honest Republican left. Courtesy of The Corner:

Rich – I’m afraid Rep. Frank has a point on this one. Some feelings on the GOP side were hurt, so they voted against the economic well-being of the country?

Sincerely,

A very concerned GOP staffer.

++++++++

Quick Update: What do you do if you’re a Democrat in Congress? Noah Millman has the answer:

The Democrats met the Administration more than halfway, and the GOP leadership could not deliver the promised 80 votes. Tomorrow, the Democrats introduce their own bill, pass it on a party-line vote, and dare the Administration to veto.

There are lots and lots of reasons not to like this bill. But most of those reasons are Democratic talking points. The GOP alternative proposal was borderline illiterate.

While they’re at it, you’d hope that they’d go ahead and do it right, nationalizing and recapitalizing failing banks as Yves Smith and Nouriel Roubini and Paul Krugman have been advocating. Odds of that happening? I’m going with zero to none.

+ Reports off the Hill say that a deal is done. $700B total, greater Congressional oversight, restrictions on executive pay, no bankruptcy law changes, no money for affordable housing, the (useless) House GOP insurance proposal stays in but only as an option, and, most importantly, the government gets equity warrants in case the toxic assets really are as bad as everyone fears. Obama and McCain are both on board.

+ Paul Krugman and Brad DeLong are now openly favoring Swedish-style nationalization instead of the Paulson plan–which, for the record, Yves Smith has been pushing since the beginning–even though Krugman, at least, recognizes that a nationalization plan is political poison until at least after the election.

+ House GOP aides and their sycophantic know-nothing cheerleaders are pleased with themselves for having put a wrench in the works mid-week to make the bill more “free-market friendly” (they are thinking of their insurance proposal), but meanwhile a more realistic appraisal (also from a GOP aide) tells it like it is:

1) This is, essentially, the same bill. Total deal is $700b, which Paulson or next Treasury Secretary can spend the first $250b even if he believes unnecessary. He/She can spend second $450b if thought necessary. A new bill isn’t passed with veto proof majorities to repeal it. This is substantively identical to the original Paulson plan. Congress always had the power to repeal some or all of the authority if it has veto proof majorities.

2) As for Acorn and bankruptcy, they were never in the bill. Dodd/Frank tried to push those in mid/week, they weren’t in the plan already rejected by conservatives on Monday. Even Obama conceded that those provisions would come out. They were simply a red herring, used for extra bargaining power by the left.

3) Lipstick has been put on the pig, and perhaps some Members will be fooled by it, but their constituents will not. I think some political careers will be ended over this.

+ Oh, and remember that AIG bailout? It was probably necessary to keep the credit default swap market from cratering, but it doesn’t make things look any better that it saved Goldman Sachs (Henry Paulson’s old firm) from a $20B loss.

How did we get to this point? It’s the culmination of many past betrayals.

First of all, we have the Republican Study Committee blowing things up with a complete nonsense proposal — solving the crisis with a holiday on capital gains taxes. How is that possible? Well, if a party runs on economic nonsense for 25 years, eventually many of its foot soldiers will be people who actually believe the nonsense.

More specifically, though, the failure to get a deal reflects the betrayals of the Bush years. Democrats weren’t going to trust Henry Paulson, because behind him they see the ghost of Colin Powell (and Paulson’s “all your bailout are belong to me” proposal, aside from being bad economics, showed an incredible tone-deafness.)

And after the way the Bushies and their allies double-crossed the Democrats again and again in the aftermath of 9/11 — demand national unity, then accuse you of being soft on terrorists anyway — there’s no way Pelosi and Reid will do the responsible but unpopular thing unless the Republicans agree to share ownership.

So what we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch.

As a friend said last night, we’ve become a banana republic with nukes.

But if you’re like me you may be wondering what the scale of that toxicity is. How bad are things really?

Now we have a number. Here’s commenter Dan from Yves Smith’s Naked Capitalism blog. (For my fellow humanists: the OIS spread is, among other things, an indicator of how much credit is available out in the world, the bigger the number, the less credit is available, hence an “explosion” is not good; LEH is, or was, Lehman Bros.):

I understand that the explosion in the OIS spread is a reflection of the fear banks have for each others solvency. And it makes sense that it exploded right after the bankruptcy of LEH–it was not the bankruptcy per se, IMO, but the that $110b of senior LEH debt went from trading .95 to .12 in a matter of days that concentrated the market’s attention. If you include the less senior debt that is trading at essentially zero, LEH had $110b hole in its balance sheet….

Now is there a precedent in this history of bankruptcy–excluding cases of accounting fraud–where bonds collapsed like this once a bankruptcy court opened up the books? I’m thinking the answer is ‘no.’ Which then makes you re-evaluate the premise that there wasn’t fraud at LEH in marking the value of their assets.

Now extrapolate this reasoning across the entire banking system and, voila, you have the seizure of the interbank lending market.

And the really bad news is that the bailout, even if it were to pass, wouldn’t fix this problem:

Now this leads me to the question: if the OIS spread represents eminently legitimate fears of inaccurate marks on banks books, how is a commitment from the treasury to buy hundreds of billions of distressed assets from the banks any assurance to a counterparty that that bank will not still become insolvent. Obviously it helps on the margin, but the staggering hole in LEH’s balance sheet that was revealed after bankruptcy creates profound fears about the true solvency of C or UBS. Until the market is convinced they are solvent–and TARP does not do this–the OIS spread will remain elevated and lending will remain frozen.

Scary stuff.

And on that note, I really can’t recommend Naked Capitalism highly enough as the place to go if you want to try to keep a handle on what’s happening these days in the economy. If you haven’t been tuning in there lately, the short version is that Smith believes we are in for a pretty massive shrinkage of the economy (on the order of 4-5% of GDP) no matter what anyone does or does not do in terms of bailouts. He’s a critic of the Paulson-Dodd plan, not because of the preposterous reasons adduced yesterday by House Republicans, but because he’s convinced that the Paulson plan will lead us down the (unsuccessful, and very painful) path of the Japanese crisis of the 1990s rather than the (successful, though still painful) path that Sweden took to handle its crisis in the 1990s. What’s more, Smith argues that the scale of the financial mess is simply too big for the U.S. government to try to prop up. The other day he posted an estimate by Ken Ohmae that it would take $5 trillion to really set things straight–money, needless to say, that the US doesn’t have and can’t get.