Update on the Bailout

AP provided an interesting update:

John McCain and Barack Obama offered long-distance help from the campaign trail. They announced separately that they support a plan that some House Republicans had pushed earlier: raising the federal deposit insurance limit from $100,000 to $250,000.

I wonder what the cost is. I'll bet it's not too high. How many people keep more than $100k in a bank account anyway?

For his part, President Bush sought to avoid being marginalized. He spoke with both nominees, and made another statement in the White House. "Congress must act," he demanded in front of the cameras.

Avoid being marginalized? I think that boat already sailed. Has there ever been another sitting president kept out of his party's convention?

Another possible change to the bill would modify "mark to market" accounting rules. Such rules require banks and other financial institutions to adjust the value of their assets to reflect current market prices, even if they plan to hold the assets for years.

And, after all, we can certainly trust the banks to price their holdings properly.

Some lawmakers reported a shift in constituent calls pouring into their offices. Calls and e-mails were overwhelmingly opposed to the rescue plan before Monday's vote, many offices said. But Monday's stock market dive prompted calls Tuesday from Americans furious about Congress's inaction, some said.

Decisive, as ever.

--SCC

The Real Motives for the Bailout

CNBC was kind enough to report the real reason the bailout is needed:

“All our concern about bailing out Wall Street," Cashin said. "It’s really to try to free up Main Street. So the guy with the plumbing-supply business who gets a contract can go to the bank and get some of the money he needs overnight.”

You see, they're really in it for the little guy. It just gives you a warm feeling inside, doesn't it?

--SCC

Failure of the Bailout Vote

Republicans are claiming that the defeat of the Bush/Paulson bailout plan was due to the Democrats' failure to garner enough votes on their side of the aisle. Yet more blame-mongering by the Republicans.

Among the more ridiculous blame games being played by the Republicans is the assertion that they would have passed the bill if only Pelosi hadn't been so mean to them.

So there are a dozen Republicans, who had decided that the package was in the best interests of the country, who changed their minds because of something Pelosi said? I guess we'd better hope that Osama doesn't say the wrong thing.

Don't get me wrong. I previously characterized Pelosi's speech as "partisan bile." But this whole non-issue is a pretty transparent attempt by the Republican leadership to cover up how badly they had mis-counted their caucus.

This isn't a bill that Pelosi or Franks wanted. They had wanted a bill that had a real cap on executive compensation, strict oversight, and bankruptcy court authority to change mortgage T&C. They gave up those elements based on assurances from the Republican leadership. (The executive compensation clause in Monday's bill was toothless.)

Giving that speech was a bad idea, but the failure of the Republican House leadership to deliver on their deal is going to have serious repercussions on a number of areas.

The reason that Clinton negotiated with the Republicans so successfully is because he knew that they would deliver what they promised. If this leadership can't do that, perhaps the caucus should choose leadership that represents them better.

According to Reuters:

Without the bailout plan, which would allow the Treasury to buy toxic mortgage-related assets from banks, credit markets around the world could remain frozen, which could lead to a recession.

I think that Franks had a point last week, that this bailout story is becoming something of a self-fulfilling prophecy. Right now, we're seeing a market rally based on promises that something will pass on Thursday.

Given how low the prices of the mortgage-backed CDOs is, there is probably a killing to be made out there. If only there were more transparency to the underlying loans, there would be more buyers.

A real failure here is in the design of the instruments. If there were better visibility, it is likely that the CDOs based on liar loans would be rated and priced differently, which would have removed the financial incentives for companies to originate them. This sort of design issue is something that regulators should have enforced. This particular problem has been known since the mid-1980s, so there is plenty of blame to be spread over both parties on this one.

According to the AP:

Banks were in miser mode after the House's rejection of the rescue package. The key bank-to-bank lending rate, the London Interbank Offered Rate, or LIBOR, soared to 4.05 percent from 3.88 percent for 3-month dollar loans, and to 6.88 percent for overnight dollar loans — the highest level since tracking began in 2001.

That's especially worrisome because normally, LIBOR is just slightly above the Federal Reserve's target fed funds rates, an interbank lending rate. Now, it is more than 4 percentage points above the target rate of 2 percent. That has troubling implications for other lending rates tied to LIBOR, including homeowners' adjustable rate mortgages.

--SCC

Uncertainty Over the Bailout

Nobody is happy about the bailout, except for the investment bankers whose chestnuts will be rescued from the fire. But, for all the rhetoric about the importance of bi-partisan support for the bailout, some members of the GOP seem to be looking to score political points from opposition to the bailout.

I don't see the Democrats going along with even a modified version of the administration proposal unless the President and McCain can pull significant Republican congressional support behind the plan. Why should they go out on a limb while the Republican lawmakers play it safe?

It is time for McCain to play a leadership role in this battle. He needs to pick a side and support it publicly. Instead, we're getting a sort of mealy-mouthed attempt to placate the far right of his own party. From the AP story:

At one point in the White House meeting, according to two officials, McCain voiced support for Ryan's criticisms of the administration's proposal. Frank, a gruff Massachusetts liberal, angrily demanded to know what plan McCain favored.

These officials also said that as tempers flared, Bush struggled at times to maintain control.

At one point, several minutes into the session, Obama said it was time to hear from McCain. According to a Republican who was there, "all he said was, 'I support the principles that House Republicans are fighting for.'"

The modifications proposed by the Democrats all seem to me to be reasonable:

To be sure, Democrats demanded a number of changes in his $700 billion bailout plan, but administration insiders signaled they probably were acceptable. They included greater oversight, more protections for taxpayers, efforts to head off home foreclosures and piecemeal allocations of the federal money to buy toxic mortgage securities.

I also like the idea of limits on executive pay for participating companies, though I don't see that one passing in any substantive way. Everyone knows that investment bankers have taken home outlandish bonuses based on inflated valuations of these same CDOs that underlie the crisis in the first place. I don't see that it is unreasonable to ask them to take a pay cut to make up for their excesses.

--SCC

McCain's Temper

McClatchy has an interesting story describing McCain's temper. Even many of his fans agree that he tends to be too impulsive.

"Yeah, he has a temper," said Delaware Sen. Joseph Biden , the Democratic vice-presidential nominee and Senate Foreign Relations Committee chairman. "It's obvious. You've seen it.

"But is John whatever his opposition painted him to be, this unstable guy who came out of a prisoner or war camp not capable of (acting rationally)? I don't buy that at all."

I think that Biden's take is probably correct. I do think that McCain sometimes acts impulsively, and that it is very difficult to get him to recognize an error and reverse course.

On the other hand, when he recognizes an error, I can't think of another prominent politician who issues a more gracious apology. (His apology after the Keating 5 affair should be in a textbook, and he became as passionate an advocate of campaign finance reform as there is in the Senate.)

--SCC

Let Sarah Speak

Politico is reporting that Governor Palin has not made herself available to political reporters for in-depth interviews about her positions. This is not the sort of story that the Republicans want to have run about their candidate, since it will reinforce stereotypes about her.

Less than two months before voters hit the polls, Palin has yet to sit down for or even schedule an issues-oriented interview with any newspaper, magazine or television network.

She's tough, pretty, a good speaker, and she has a handle on the Republican "message." She would make a good showing. (I wouldn't characterize her as a "deep thinker," but she is very telegenic, and the Sunday morning shows aren't really good at evaluating how much depth a person has.)

In the meantime, the media will be thrilled to report on qvetching from issues-oriented reporters:

"We know now that Sarah Palin can give one hell of a speech," Carney said. "She's a natural. And that's no mean feat. We don't know yet and we won't know until you guys allow her to take questions, you know, can she answer tough questions about domestic policy, foreign policy?"

"But I mean, like from who?” Wallace asked. "From you?”

When Carney answered "Yes," Wallace followed up with, "Who cares?

"I think the American people want to see her," Wallace continued. "Who cares if she can talk to Time magazine?"

Later that day, Carney — who last week had a much-buzzed about interview with McCain in which the candidate became testy, and refused to answer some questions — told Politico that the McCain campaign is acting "condescending and smug" toward the press.

Palin is tough, pretty, a good speaker, and she has a handle on the Republican "message." The Republicans should let her speak to reporters. Maybe they don't want to start with Time, since their reporter seems to be particularly ticked off right now. Maybe they start with the Wall St Journal or the Washington Times.

Or maybe they put her back on TV, on the Sunday morning shows. She is a very telegenic candidate, and her depth of experience is much less important in a setting like television.

--SCC

Fact Check on the Republican Convention

AP provides an interesting fact check for claims made during Republican convention speeches.

I'm sure that everyone is shocked, simply shocked to discover that politicians sometimes stretch the truth to make a rhetorical point.

Smugness and the VP Candidates

I think we may be looking at a serious public health hazard during the vice presidential debate. Between Palin and Biden, the total level of smugness in the debating hall may well reach critical mass and ignite the world's atmosphere.

We have no choice but to condemn both Obama and McCain for their reckless disregard for public safety when they chose those two as their running mates.

--SCC

Palin Seeks to Ban Books

The New York Times reports that Palin sought to ban books from the Wasilla library shortly after her election on a conservative religious platform. When the librarian refused to go along, Palin fired her. (The librarian was re-instated due to community pressure.)

Shortly after becoming mayor, former city officials and Wasilla residents said, Ms. Palin approached the town librarian about the possibility of banning some books, though she never followed through and it was unclear which books or passages were in question.

Ann Kilkenny, a Democrat who said she attended every City Council meeting in Ms. Palin’s first year in office, said Ms. Palin brought up the idea of banning some books at one meeting. “They were somehow morally or socially objectionable to her,” Ms. Kilkenny said.

The librarian, Mary Ellen Emmons, pledged to “resist all efforts at censorship,” Ms. Kilkenny recalled. Ms. Palin fired Ms. Emmons shortly after taking office but changed course after residents made a strong show of support. Ms. Emmons, who left her job and Wasilla a couple of years later, declined to comment for this article.

In 1996, Ms. Palin suggested to the local paper, The Frontiersman, that the conversations about banning books were “rhetorical.”

Noonan disses Palin

Peggy Noonan let it all hang out over an open mike. After appearing on MSNBC to defend the Palin selection, Noonan was overheard telling GOP operative Mike Murphy:

"The most qualified? No. I think they went for this — excuse me — political bullshit about narratives," she said. "Every time the Republicans do that, because that's not where they live and it's not what they're good at, they blow it."

Murphy responded in kind:

"The greatness of McCain is no cynicism, and this is cynical."

Needless to say, this contrasted with Noonan's Wall St Journal column defending Palin. (She has since added comments to the top of that column explaining and apologizing for her open mike moment.)

--SCC

Thoughts on the Republican Convention

As an outside observer, I found it pretty funny how hard the McCain camp tried to keep Bush away from his own party's convention. I halfway thought that they were going to tell Bush and Cheney that there was an urgent crisis that required their personal attention somewhere in Antarctica.

They finally settled on a truncated speech by Bush over CCTV. It was pretty funny watching him try to judge how long to pause after the applause lines. The crowd (which may have contained every last citizen who still likes Bush) seemed to try really hard to fill up the places where he paused too long, and to cut short applause when he didn't allow enough time.

(I had a picture in my mind's eye of McCain, shears in hand, hunting around backstage for the cable with Bush's feed...)

Thompson's speech was very well received. He presented the McCain bio, which is a very compelling story. And he told some good-ole-boy homilies about the Obama tax plan. (The PBS commentators pointed out that his performance tonight was much better than anything he did while he was promoting his own candidacy.)

Lieberman's speech was very creditable. His reception appeared to be awkwardly warm, which was probably to be expected.

--SCC

Palin's Assault on Science

In August, Alaska filed suit against the federal government to overturn the listing of the polar bear as an endangered species. In support of this listing, Governor Palin wrote an editorial in the New York Times. This editorial claimed:

I strongly believe that adding them to the list is the wrong move at this time. My decision is based on a comprehensive review by state wildlife officials of scientific information from a broad range of climate, ice and polar bear experts.

Inside Higher Ed received a copy of this "comprehensive review," but only after substantial resistance from within the state government. The conclusion of this document was somewhat different than what Governor Palin suggested:

For the purpose of this review, we presumed that the projections of sea ice loss in the current scientific literature represent the best available information. Similarly, we have also presumed that the relatively substantial amount of information in the scientific literature on polar bear ecology, including habitat use and predator-prey dynamics, is applicable to polar bear subpopulations that have not been studied. Given these two critical assumptions and recognizing their significant associated uncertainties, the finding that the polar bear will decline significantly across much of its range is supported.

It seems likely that Palin would support a continuation of what has been termed Bush's "war on science."

--SCC

What Palin Really Thinks about Earmarks

The Washington Post has an interesting article about Palin's record regarding earmarks as a mayor of Wasilla. It turns out that she hired lobbyists to secure earmarks for Wasilla. Once she had hired the right people and paid them the right amount of money, the taps were opened.

Since both Palin and McCain have pointed to her opposition to earmarks as a key qualification, we have to ask exactly how committed that opposition is.

As mayor of Wasilla, however, Palin oversaw the hiring of Robertson, Monagle & Eastaugh, an Anchorage-based law firm with close ties to Alaska's most senior Republicans: Rep. Don Young and Sen. Ted Stevens, who was indicted in July on charges of accepting illegal gifts. The Wasilla account was handled by the former chief of staff to Stevens, Steven W. Silver, who is a partner in the firm.
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Palin was elected mayor of Wasilla in 1996 on a campaign theme of "a time for change." According to a review of congressional spending by Taxpayers for Common Sense, a nonpartisan watchdog group in Washington, Wasilla did not receive any federal earmarks in the first few years of Palin's tenure.

Senate records show that Silver's firm began working for Palin in early 2000, just as federal money began flowing.

In fiscal 2000, Wasilla received a $1 million earmark, tucked into a transportation appropriations bill, for a rail and bus project in the town. And in the winter of 2000, Palin appeared before congressional appropriations committees to seek earmarks, according to a report in the Anchorage Daily News.

Palin and the Wasilla City Council increased Silver's fee from $24,000 to $36,000 a year by 2001, Senate records show.

Soon after, the city benefited from additional earmarks: $500,000 for a mental health center, $500,000 for the purchase of federal land and $450,000 to rehabilitate an agricultural processing facility. Then there was the $15 million rail project, intended to connect Wasilla with the town of Girdwood, where Stevens has a house.
...
In fiscal year 2002, Wasilla took in $6.1 million in earmarks -- about $1,000 in federal money for every resident. By contrast, Boise, Idaho -- which has more than 190,000 residents -- received $6.9 million in earmarks in fiscal 2008.

All told, Wasilla benefited from $26.9 million in earmarks in Palin's final four years in office.
...
In hiring Silver, Wasilla found someone who was a member of each lawmaker's inner circle. Silver has donated at least $11,400 to Stevens's political committees and $10,000 to Young's reelection committee in the past decade, according to Federal Election Commission records.

More on the Palin Selection

I've been trying to give Palin a fair shake as a Vice Presidential nominee. After spending a couple of hours cruising around the Internet, I'm afraid that my fuse is burning short.

Palin's most attractive characteristic has been her reputation as a reform-minded governor. But even that is being called into serious doubt. As I posted earlier, Palin evidently supported the infamous bridge to nowhere before opposing it. Not only that, she kept the money that she claimed that she was saving the taxpayers.

From the Times Online piece:

in a first unsettling revelation – which the McCain camp will hope does not become a pattern – the Anchorage Daily News reported yesterday that when she ran for governor Mrs Palin campaigned on a “build the bridge” platform. The newspaper, in a reference to John Kerry’s alleged “flip-flopping” in the 2004 presidential campaign, said: “Palin was for the Bridge before she was against it.”

It also appears that Palin was nearly recalled as Mayor of Wasilla after she fired the police chief and library director for failing to support her campaign. This is certainly not an action one would expect of a "reform-minded" candidate.

There is also a collection of supporting documents related to the firing of the Public Safety Commissioner. From the Times Online piece:

The bipartisan investigation by the Alaskan state legislature, which is known locally as “Troopergate”, was launched last month when Mr Monegan, after he was fired, alleged publicly that he had been sacked for refusing to fire Mike Wooten, Mrs Palin’s brother-in-law, and after months of pressure by the Palin camp.

There is a fair amount of evidence that aides to Palin had placed pressure on Monegan. Palin denies that the pressure was applied at her direction.

From an AP report on troopergate:

Palin has denied the commissioner's dismissal had anything to do with her former brother-in-law. And she denied orchestrating the dozens of telephone calls made by her husband and members of her administration to Wooten's bosses.
...
In 2005, before Palin ran for office, the Palin family accused Wooten of drinking a beer while in his patrol car, illegal hunting and firing a Taser at his 11-year-old stepson. The Palins also claimed Wooten threatened to kill Sarah Palin's father.

Wooten was suspended over the allegations for five days in 2006 but is still on the job. Monegan refused to comment on Wooten's situation, saying he could not discuss personnel matters.

More recently, Todd Palin said, he took his concerns over the governor's safety directly to Monegan. But he said he never told anyone to fire Wooten.
...
Attorney General Talis Colberg's conducted an investigation and found that 14 members of the Palin administration — including Colberg himself — made calls to Department of Public Safety officials about Wooten.

Her Replacement Commissioner had to resign after just two weeks on the job, following revelations about a reprimand he had received for sexual harassment.

It also appears to be well-known that Palin favors inserting creationism into the science classroom.

The volatile issue of teaching creation science in public schools popped up in the Alaska governor's race this week when Republican Sarah Palin said she thinks creationism should be taught alongside evolution in the state's public classrooms.

Palin was answering a question from the moderator near the conclusion of Wednesday night's televised debate on KAKM Channel 7 when she said, "Teach both. You know, don't be afraid of information. Healthy debate is so important, and it's so valuable in our schools. I am a proponent of teaching both."

Later, Palin backpedaled, perhaps after consulting with somebody familiar with the concept of a separation between church and state:

The question has divided local school boards in several places around the country and has come up in Alaska before, including once before the state Board of Education in 1993.

The teaching of creationism, which relies on the biblical account of the creation of life, has been ruled by the U.S. Supreme Court as an unconstitutional injection of religion into public education.

Last December, in a widely publicized local case, a federal judge in Pennsylvania threw out a city school board's requirement that "intelligent design" be mentioned briefly in science classes. Intelligent design proposes that biological life is so complex that some kind of intelligence must have shaped it.

In an interview Thursday, Palin said she meant only to say that discussion of alternative views should be allowed to arise in Alaska classrooms:

"I don't think there should be a prohibition against debate if it comes up in class. It doesn't have to be part of the curriculum."

She added that, if elected, she would not push the state Board of Education to add such creation-based alternatives to the state's required curriculum.

I've been waiting for her Republican defenders to explain what Palin's national security qualifications for the presidency are. Maybe she had written articles or editorials, or maybe she had experience traveling to other lands. So far, the best they've come up with is:

• She has negotiated with the Canadian government over a natural gas pipeline from Alaska. (At least she has one good entry on her resume.)


• Alaska shares a border with Russia. (Presumably, she has obtained insight into the Russian soul via osmosis across the Bering Strait.)


• She first obtained a passport in 2007 to perform visits to the Alaska National Guard in Kuwait and Germany. (Her foreign travel experience is so limited that a stopover in Ireland is listed on her resume.)

In the August 31 "This Week" discussion of the Palin decision, George Will was so desperate that he had to fall back on the argument that he cared more about her positions than her experience. I can't think of another case where George Will has said such a thing.

There is more to the qualification to high executive branch office than experience. There is understanding the constitutional principle of limited government and the culture of corruption that inevitably develops in a capitol that abandones limited government; that regulates everything and subsidizes everybody. She understands that.

--SCC
Palin and Science
Palin and Earmarks
Palin Seeks to Ban Books
Palin & Funding for UnWed Mothers

Saving the Republican Party

Robert Borosage suggests that the Republicans can save their party by a return to the values that guided Eisenhower. His article makes a number of good points; here are a couple of quick quotes:

So what can be done? In the best tradition of circular firing squads, Republicans are sniping at one another for the debacle. The fundamentalists blame the neo cons; the country clubbers deride the evangelicals; the corporate core scorns the supply-siders. And each of them is justified, for every strand of the Republican party contributed to conservative misrule. The neo-cons led us into the debacle that is Iraq, while shredding the Constitution. The evangelicals shocked America with the Schaivo grandstanding, and the efforts to enforce morality through radical right judges. The supply-siders really did practice "voodoo economics." And the corporate cronies descended into corruption and plunder shocking even by Washington standards.
...
Eisenhower reflected the common sense, country club values of a Republican Party that represented Main Street. He insisted on fiscal discipline, and was willing to raise taxes if necessary, even as he championed smaller government. To balance the budget, he put a lid on military spending, letting the services fight among themselves on how to divide the kitty. "We -- you and I, and our government," he warned, "must avoid the impulse to live only for today, plundering, for our own ease and convenience, the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow."

Palin and the Bridge to Nowhere

Reuters is reporting that the "Bridge to Nowhere" applause line used by Palin may be more controversial than it appeared at first blush. Palin originally supported the bridge during her campaign for governor, then reversed herself once in office.

The bridge itself was obviously a prime example of porkbarrel spending in Washington. Perhaps it looked like a great idea in Ketchikan, but it is pretty easy to see why taxpayers elsewhere were less keen on the project.

Palin especially risks charges of hypocrisy over the fact that she kept the federal money even after holding the big press conference to announce what a waste it was. That is going to strike a lot of voters (and taxpayers) as being two-faced, and not at all in sync with her image as a fresh-faced reformer.

In the city Ketchikan, the planned site of the so-called "Bridge to Nowhere," political leaders of both parties said the claim was false and a betrayal of their community, because she had supported the bridge and the earmark for it secured by Alaska's Congressional delegation during her run for governor.

The bridge, a span from the city to Gravina Island, home to only a few dozen people, secured a $223 million earmark in 2005. The pricey designation raised a furor and critics, including McCain, used the bridge as an example of wasteful federal spending on politicians' pet projects.

When she was running for governor in 2006, Palin said she was insulted by the term "bridge to nowhere," according to Ketchikan Mayor Bob Weinstein, a Democrat, and Mike Elerding, a Republican who was Palin's campaign coordinator in the southeast Alaska city.

"People are learning that she pandered to us by saying, I'm for this' ... and then when she found it was politically advantageous for her nationally, abruptly she starts using the very term that she said was insulting," Weinstein said.
...
The state, however, never gave back any of the money that was originally earmarked for the Gravina Island bridge, said Weinstein and Elerding.

In fact, the Palin administration has spent "tens of millions of dollars" in federal funds to start building a road on Gravina Island that is supposed to link up to the yet-to-be-built bridge, Weinstein said.

"She said 'thanks but no thanks,' but they kept the money," said Elerding about her applause line.

--SCC

The Iraq Surge

The New York Times is reporting that there was significant debate within the Bush administration about whether to proceed with the Iraq "troop surge."

At the time, General Abizaid and others within the Pentagon objected that the surge would not be sustainable, and that it would not meet the goals laid out for it:

some officials and senior military officers are arguing against the idea, saying that it could undercut a sense of urgency for Iraqi units to take on a greater role in fighting the insurgency and preventing sectarian attacks. Gen. John P. Abizaid, the head of the United States Central Command, told Congress last week that the military was stretched so thin that such an increase could not be sustained over the long term.
...
Temporary spikes in troop levels have succeeded in tamping down insurgent violence in Iraq in the past. But several Pentagon officials say they are not sure that the Army can achieve the same results against attacks fueled increasingly by sectarian tension. An increase in American forces this year to more than 140,000 from 128,000 has failed to stem the spike in sectarian attacks, they noted.

Representative Duncan Hunter, a California Republican who is losing the chairmanship of the Armed Services Committee at the end of the year, said at a news conference that rather than sending more American troops, he favored redeploying Iraqi units from largely calm areas to Baghdad and other violence-ridden sections of the country.

“The idea of having the Iraqi battalions that we’ve stood up and trained 50 to 100 miles away, in areas that are peaceful, simply staying in their barracks while we put together new rotations of Americans to take their place, simply doesn’t make sense,” he said.

Different factions within the administration favored different options:

But Mr. Bush’s penchant to defer to commanders in the field and to a powerful defense secretary delayed the development of a new approach until conditions in Iraq, in the words of a November 2006 analysis by the Central Intelligence Agency, resembled anarchy and “civil war.”

When the White House began its formal review of Iraq strategy that month, the Pentagon favored a stepped-up effort to transfer responsibility to Iraqi forces that would have facilitated American troop cuts.

The State Department promoted an alternative that would have focused on fighting terrorists belonging to Al Qaeda in Mesopotamia, containing the violence in Baghdad and intervening to quell sectarian violence only when it reached the proportions of “mass killing.”

The American ambassador to Baghdad argued that he should be given broad authority to negotiate a political compact among the Iraqis.

“The proposals to send more U.S. forces to Iraq would not produce a long-term solution and would make our policy less, not more, sustainable,” the ambassador, Zalmay Khalilzad, wrote in a classified cable.
...
Because some aides to the Joint Chiefs of Staff were suggesting at the time that the military was stretched too thin to send many more troops, another security council staff member, William J. Luti, a retired Navy captain, was asked to quietly determine whether forces were available. Mr. Luti reported that five brigades’ worth of additional combat forces could be sent and recommended that they be deployed. The idea later won additional support among some officials as a result of a detailed study by Gen. Jack Keane, the former vice chief of staff at the Army, and Frederick W. Kagan, a military specialist, that was published by the American Enterprise Institute.

In the end, the troop reinforcement proposal split the military. Even after the president had made the basic decision to send additional troops, Gen. George W. Casey Jr., the top American commander in Iraq, never sought more than two brigades, about 8,000 troops in all, Defense Secretary Robert M. Gates reported to Mr. Bush in late December. But General Casey’s approach substantially differed from those of two officers who wanted a much bigger effort: the No. 2 commander in Iraq, Lt. Gen. Raymond T. Odierno, and Gen. David H. Petraeus, who helped oversee the military’s new counterinsurgency manual and whose views were known by the White House before he was publicly named to replace General Casey, administration officials said.
...
Three days after the 2006 midterm Congressional elections, the White House finally convened a formal governmentwide review. The Republicans had taken a beating at the polls and the Iraq Study Group, a nonpartisan panel led by Lee H. Hamilton, the former Democratic representative, and James A. Baker III, the secretary of state to the first President Bush, was preparing to publish its recommendations — to step up efforts to train Iraqi troops and withdraw virtually all American combat brigades by spring 2008.
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the debate continued to swirl. In an early December meeting of top officials, Mr. Cheney argued for sending forces to address the sectarian violence in Baghdad, while Ms. Rice reiterated her argument that there was little the military could do to stop sectarian violence there, according to notes taken by a participant.
...
By now, there was a split in the military community. General Odierno had taken over in early December as the second-ranking officer in Iraq. He conducted a review that called for a minimum of five additional brigades in and around Baghdad and two more battalions in Anbar Province to reinforce efforts to work with Sunni tribes there.

As a subordinate to General Casey, General Odierno had no role in the security council review. But his views were known to General Keane, the retired four-star general who had helped oversee the study for the American Enterprise Institute that advocated adding five Army brigades and two Marine regiments. In separate meetings with Mr. Bush and Mr. Cheney on Dec. 11, General Keane relayed General Odierno’ assessment, which was forwarded by General Pace as well.

Along with Mr. Kagan, General Keane also described in detail to Mr. Cheney and his staff his own plan calling for American forces to be deployed in mixed Sunni-Shiite neighborhoods in Baghdad to demonstrate that the United States would be even-handed in protecting civilians.
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Donald H. Rumsfeld’s resignation on Nov. 6, and Mr. Gates’s swearing-in to replace him as defense secretary in mid-December, removed some of the institutional resistance at the Pentagon to the “surge.” Ms. Rice also became more supportive after it was made clear that demands would be made of the Iraqis.

(Reuters has published a summary of this article.)

Much of the success of the surge has been due to the "Sunni Awakening," where Sunni tribes switched sides and began to fight against al Qaeda rather than being allied with them. Some critics of the surge point out that the Sunni tribesmen are on Washington's payroll, and suggest that they may decide to defect back once the payments stop. Washington has been encouraging the Iraqi government to integrate as many of these fighters as possible into the Iraqi defense forces, which would reduce this possibility.

But even as it sought ways to support Maliki, the United States was also hedging its bets by working with tribes in Iraq’s far-flung provinces. Before the surge, the American military had joined forces with Abdul Sattar Buzaigh al-Rishawi (known as Abu Risha) and other Sunni sheiks against Sunni insurgents. The additional American troops during the surge reinforced that effort and encouraged it to spread. The Iraqis called the tribal movement a Sahawa or Awakening. The Americans initially called the tribesmen “concerned local citizens,” but when translated into Arabic that came out something like “worried Iraqis.” So the name was changed to “Sons of Iraq.”
...

There has also been resistance from the Iraqi government to applying the same strategy to the Shiite militias.

Together they devised a plan to rid Diwaniya of the Shiite militias that roamed freely through the streets, and to strengthen the hand of Shiite tribal leaders: a variation on the tribal-empowerment plan that had already done so much to blunt the power of Sunni insurgents in Iraq’s once-violent Anbar Province. But their strategy wound up attracting far more attention than they liked from the Shiite-led government of Nuri Kamal al-Maliki, for the simple reason that sharing power within the Shiite fold was just as difficult for many Shiites as sharing power with Sunnis.

Over the previous few years, my own trips through Iraq had focused mostly on the U.S. and Iraqi governments’ struggle with Sunni insurgents in battlegrounds like Mosul, Baquba, Hit and Arab Jabour. But the nature of the war has fundamentally changed. The American “surge,” together with a strategy that emphasized protecting civilians and engaging with Sunni tribesmen, weakened Sunni insurgents and jihadists. The bitter fighting between Shiites and Sunnis that turned Baghdad into a killing ground of car bombs, suicide attacks and mutilated corpses has quieted down. And now this sectarian struggle has been eclipsed by a growing tussle for power among the Shiites themselves. The competition involves Prime Minister Maliki and the Shiite religious parties (the Islamic Supreme Council of Iraq and Maliki’s Dawa Party) that constitute the ruling hierarchy in Baghdad; Moktada al-Sadr’s weakened but still-popular political movement and its military wing, the Jaish al-Mahdi, or Mahdi Army; and, increasingly, Shiite tribes.
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Shiite tribal leaders had begun to network with the Sunni Anbar sheiks to discuss how they might bring more security to the south and enhance their own political clout. Maj. Gen. John Allen, who served as the second-highest-ranking American officer in Anbar in 2007 and early 2008, recalled how Shiite sheiks from neighboring Karbala Province visited Anbar for a tribal get-together. They chanted poetry and closed the session by posing before an Awakening flag: crossed scimitars, the scales of justice and a pot of coffee on a yellow field. There were other meetings. “Their plea was, ‘Help us to get organized and we can throw off this thing called the Mahdi Army, and we can get the tribal society dominant again in the south, and we can begin to bring social order to the south akin to the way Sunni tribes had brought social order back to Anbar Province,’ ” Allen recalled.
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After word of the program spread, dozens of sheiks began to approach Othman to get in on it. The next step was to import the program from the approach roads to the streets of the city. The sheiks were less of a force inside the city, so Team Phoenix put out the word that patrol volunteers would be paid slightly less than the pay scale for an Iraqi Army soldier. To protect the police’s prerogative, it was decided that the citizen-watch groups inside the city would not be armed. They would be equipped with radios to contact the police and would be outfitted with orange reflector belts for identification.
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On Dec. 2, 2007, there was a meeting of the Ministerial Committee for National Security, a top-level body in Baghdad that Maliki and senior American officials used to coordinate policy. One agenda item was the Sons of Iraq, of which there were now more than 100,000, largely as a result of the Sunni Awakening. As the Americans saw it, the program was integral to the turnaround in Anbar and helped improve security in Abu Ghraib, Yusufiya, Diyala and even Baghdad. They wanted the Maliki government to integrate at least 20,000 and ideally 30,000 of the recruits into the Iraqi Army and police and find ways to employ the rest.
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Maliki appeared to accept as many as 103,000 Sons of Iraq but insisted there could be no tribal Awakening in the Shiite south, his own power base. “The prime minister said, ‘Look, it is different in the south,’ ” recalled a senior American official who asked not to be named, because of the sensitivity of the subject. “ ‘There is not the same security imperative there. The Iraqi security forces can take on the security threat that comes from militias. It is not a question of the tribes being actively in bed with the militia. There is a different security dynamic. The Awakening would be a political movement. That is not what the coalition should be doing.’ I think he did not want us to be creating political movements to challenge him. I have got to say there is some merit to that.”

--SCC