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Chapter Eighteen

Run-up to the Election


In the remaining four or five days before the general election, with all debates and evident media opportunities out of the way, I concentrated on visiting as many businesses as I could in the district to generate some last-minute buzz. I mainly hit places in Robbinsdale and along Central Avenue up into Columbia Heights. Time was running out.

In the last week of the campaign, I also returned to e-democracy forum and postings on my website. The 1,000 or so members of the Minneapolis discussion list should know about the picketing event at the Star Tribune and how it had turned out. Even more important, I tried to develop an argument about the financial bailout.

A position on the bailout

Back in September, I had been hesitant to criticize Keith Ellison because none of us knew what was happening. If the credit market was frozen without an injection of federal cash, then, of course, the bailout was justified. But I was always confused where the money would go and how that payment related to unfreezing credit.

Since the makers of bad mortgages had passed them along to investors via Fannie Mae and Freddy Mac, then it seemed to me that the “toxic” assets were being held by wealthy investors or by investment funds, but not by banks whose business was to extend credit. The argument did not make sense. Even so, we had Henry Paulson, President Bush, and the Democratic leaders of Congress all telling the public that we needed to pass legislation immediately that would give $700 billion to Wall Street institutions to unfreeze credit.

After the bailout legislation passed and Paulson had control of $700 billion of taxpayer funds, the Treasury Secretary changed course. The credit market was not thawing. In fact, banks were hoarding their cash even more tightly. They were using bailout money to pay bonuses to executives and even buy other banks.

I was a stockholder in Wachovia Bank, the nation’s fourth largest, which had acquired toxic assets from a bank it bought in California. Two years ago, its stock had been trading in the $50 to $60 range. Then, suddenly, this bank was in trouble and would not be bailed out. The FDIC had engineered a takeover of it by Citigroup, removing almost all stockholder equity. Wachovia, then trading at $10.00 a share, plunged to below $1.00 in a day. (When Wells Fargo made a more attractive counter-offer, Wachovia climbed back to $5.00.) In contrast, the Treasury Department gave U.S. Bank $6 billion, which it did not need. The money was used to acquire two other banks.

In mid October, Sixty Minutes ran an interview with a man who used to be a derivatives broker. He spilled the beans on what was really happening. Derivatives were investments - “bets” would be a better term - based upon a future economic event. In this case, they were bets that mortgages would go into foreclosure. With rising housing prices, no one thought that would happen. But it did happen on a massive scale.

Many had invested in these derivatives. Many respected banks and other Wall Street institutions, who had been willing to sell derivatives at the time, now had to pay the holders. It was like an insurance policy. Banks were selling the insurance but had no reserves to pay the claims. They had to pay out maybe $50 or $60 for each dollar they had received when the bet was placed. No wonder there was a credit problem. These banks were having to make good on the heavily leveraged derivatives.

So it was not bad mortgages, after all, that had caused the financial crisis. It was the derivatives. As an atomic bomb is set off by conventional explosives, so foreclosed mortgages were setting off an even more explosive collapse of funds associated with derivatives. But we were not being told this. Hank Paulson and his friends in Congress and on Wall Street were telling us that the housing slump was responsible. Presumably the banks were holding bad mortgages and had run out of cash. That was not what had happened.

The Sixty Minutes program laid it on the line: This crisis was due to gambling, pure and simple. The derivatives were a gambling device. They were said to be a way to protect against risk, but even that description was inaccurate. You did not have to hold the underlying asset - the mortgage - to place a bet with Wall Street that the asset would become worthless. You could bet on this event even if you did not own the asset. In fact, you could bet on anything you wanted so long as someone like a Wall Street bank would accept the offer.

The New York banks had thus become like large gambling casinos. Through most of the 20th century that had been illegal. Then the banking “modernization” act passed in 2000 allowed commercial banks to take on these more risky investments. The sales representatives who sold the derivatives pocketed tens of millions of dollars in commissions, and the bank executives received an even greater reward. When the investments went sour, the banks turned to the government for a bailout courtesy of the taxpayer.

If I could see this clearly, then so could Keith Ellison and his colleagues on the House Financial Services committee, chaired by Barney Frank. Any fourth grader would know that you shouldn’t sell insurance without having reserves to pay the claims. Members of Congress, having access to privileged information, would know this and even more. However, the same members of Congress were receiving big campaign contributions from the same Wall Street interests that now received taxpayer money.

Back in September, the Star Tribune had beat the drums hard for this bailout - harder than for anything else I had seen in years. What was its interest in the bailout? More precisely, what was the interest of its owners, Avista Capital Partners? By chance, had this private equity firm in New York purchased derivatives?

So I got busy with my typewriter - my computer keyboard, that is. I wrote a lengthy statement for the Minneapolis e-democracy forum explaining the role of derivatives in the nation’s financial crisis. It was posted to the forum on November 1st. The same statement went onto the front page of my campaign website under the title of “The Case against Keith Ellison’s Reelection”. This was my last, best punch in the campaign.

Also, I wrote a letter to the editor of the Star Tribune, knowing that it would never be published. (It never was.) This letter asked two pointed questions. They were:

“ First, did Avista Capital Partners have a financial interest in the federal bailout legislation? Specifically, did this firm purchase credit default swaps? If so, what is the extent of its investment in those instruments?

Second, how can you assure your readers that the Star Tribune’s editorial and reporting policies are independent of its owner’s (Avista Capital Partners’) financial interests?”

Even if the Star Tribune would never publish such a letter, I included its text in a posting on the e-democracy forum so that its 1,000 subscribers would know that the question had been asked. They would know that the Star Tribune had ducked the question. I thought this might have an effect.

A political activist named Eskit (who had given me the musical CD on the street at the Republican National Convention) left a telephone message for me asking what my position was on the bailout. When I told him I was against it, he asked for some copies of my campaign literature to pass around the apartment building where he lived. Opposition to the bailout was resonating with voters even if Keith Ellison remained relatively unscathed.

If the financial crisis was caused mainly by derivatives, that changed the nature of the possible solution. A crisis caused by bad mortgages could not be solved by going after the holder of the mortgage because the underlying asset was worthless. It could not be solved by going after the poor homeowner who had defaulted, of course. But if derivatives had caused the problem, there was a deep-pocketed solution. For every loser in the bet against the housing market going sour, there was a winner. It was the party that had bought the derivative and received the payout. These people were presumably rich investors, private-equity funds, hedge funds, and the like, although one did not know for sure. The industry was deregulated. There were no public records.

Knowing that derivatives were responsible for the financial collapse, an obvious solution for government officials would have been to impose a windfall-profits tax on the people who had become rich from the payout on derivatives. Maybe, even, we could find a way to tax the salespeople who had earned such large commissions from peddling derivatives, and the Wall Street executives who had received such generous bonuses for condoning reckless bets.

But this type of solution was heresy. It was Socialism! The hysterical tone of the McCain campaign in its final days may have been related to the financial crisis. The public must not become aware of the real problem and then want to go after the rich. Never fear, the corporate media kept people in the dark. We were instead worked up that some guy named “Joe the Plumber”, who earned $250,000 a year from plumbing, might not be able to afford to expand his business if Obama’s tax plan went into effect!

Friday morning, October 31st, there was to be a meeting of black community leaders at the Sunny Side Restaurant on Glenwood Avenue, two blocks from my house, starting at 9:00 a.m. Don Allen had called the meeting. Representatives of Minnesota Public Radio would be on hand to discuss whether the station had lived up to its obligation to do “community engagement” on the North Side. It might have received dollars for such a program. Allen wanted a large turnout for this meeting. I was invited to attend.

Although this event did not have much to do with my campaign, it was interesting. Al McFarland, editor of Insight News, was among the participants, and so was the Minnesota Vikings Hall-of-Famer, Carl Eller. MPR said it wanted “community reporters” to contribute story ideas about north Minneapolis; I filled out one of the applications. There was also a discussion about the type of story that would be helpful to residents of north Minneapolis. I commented that the rock superstar Prince had grown up in this neighborhood; MPR might encourage future achievers of this and other sorts by giving publicity to extraordinary undertakings by young people. This suggestion was not quite what others had in mind. It was more about control of resources by black-community groups.

The “Independence Caucus” endorses my Republican opponent

On the following day, Saturday, November 1st, I had to deal with a sudden challenge. A man named Daniel Riojas posted a message on the Independence Party discussion list proposing that party members support Barb Davis White for Congress in the 5th district. He said she was endorsed by an “independent” political organization in the district . “Things may be breaking for Barb White in the last weeks.” She was “eating Ellison’s lunch.” His personal estimate was that her support was “within a 6 point range (of Ellison’s) which would have her either winning by up to 2% or losing by not more than 4%.” The “IPs may be the power-brokers in this race if they break for White.”

I, however, was the Independence Party candidate for Congress in the 5th district. I let Riojas know this in my prompt reply: “Thanks a lot, Dan Riojas, but I'm running as a candidate under the Independence Party label.  You are a Republican.  Barb and I get along well.  My assessment is that we're both big underdogs. We've made common cause against Ellison in many respects & I wish her success.  I'd appreciate it, however, if you did not try to steal votes away from me but would address such appeals to your own party.  - Bill”

This released a venomous attack against me: “I'm sure that you would agree that in a free country, free men are owners of their own minds. With all due respect - The votes of free men are not your property sir. I came to politics in the Wayne County Michigan (Detroit) Libertarian Party and have always been a Jeffersonian. Which is why I supported Barb White. So where honest men reason as a means of persuasion in order to gain the support of other free men there is no theft and any such accusation reveals something amiss in your perception of the life of a free people.” Another Riojas message said: “Barb White receives Endorsement of Independent Voter Group - McGaughey unhappy :( “

As I recalled, Riojas had once been a guest on the cable show sponsored by Metro Property Rights Action Committee, one of the right-wingers sometimes invited by Jim Swartwood. That was OK, but this was not. I wrote: “That's fine if an "Independent Voter Group" wants to endorse Barb Davis White.  Your insinuation that I want to control people's minds or votes is totally false. Anyone of whatever party can vote for whomever they choose.  What I object to is your confusion of this "independent" group - what is its name, by the way? - with the Independence Party of Minnesota.  You were also using bogus data to suggest that Barb Davis White was within striking distance of winning the election in the 5th district. No, Barb justifiably has received support among women in north Minneapolis because of the references to her hair extensions in the Star Tribune ....  But now you want to fight dirty.  The election is coming Tuesday.  Mr. Riojas, I hope your kind of politics goes down to a crashing defeat.”

From Riojas came this reply: “Bill, Don't be a drama queen, there was no "min-control" insinuation. I was simply reminding you that where there is reason and persuasion without the use of coercion then there is no (as YOU put it sir) "theft" of votes. Personally sir, I believe that if you hold the positions that you stated in your debate with the other candidates then this would be the appropriate time for you to step aside and endorse Ms. White. "mind-control" really Bill ! - you should do stand up - too funny !!  :) ”

I responded: “We were, I thought, trying to run legitimate and effective political campaigns.  But then came Riojas, a Republican operative, suggesting that the Independence Party should support the Republican candidate for Congress instead of me, the IP endorsed candidate; and when I objected to this, he accused me trying to control the minds of free men.  Look, I can handle jerks like Riojas.  But if you want to know why this discussion has gotten off track, you should that there was a deliberate attempt by a person associated with another party to make this happen.”

Riojas next posting suggested that the Independence Party should act like grown-ups by supporting someone who could win. At the end of his message was “Again IP voters have a choice. Play the Grown Up Card or Surrender Your Influence (Yet Again) and Watch the World Go By pecker in hand  -- sorry.” I think this last sentence contained a reference to masturbation, implying that Independence Party members would be like adolescents, if they supported me, instead of adults who preferred intercourse.

In the next posting, Riojas appealed to my nobler instincts: “The question in my mind is will Bill McGaughey fall on his sword (not for Ms. White) but for his professed beliefs - not that I think it will matter in the end. I believe that the average Libertarian, Reform Party, Independent and IP voter gets this and in that I believe you to be an honorable man, I would like to see from you sir, (as I believe is an act of leadership to urge and encourage from others) the greater and higher action.”

Then came a press release from Riojas: “For immediate release: Barb Davis White, the Republican challenger for the Congressional seat in Minnesota’s 5th district, has received the endorsement of the Independence Caucus, a bi-partisan group committed to taking back government from the ‘Big Money’ special interest groups. In stark contrast to the incumbent, Ms. White has consistently campaigned for an end to out of control federal spending, campaigned against earmarks and the Government Bailouts, and has shown he understands that the problems with our economy..”

At last, I had information on what was happening. A group that called itself the “Independence Caucus”, which was said to be “bipartisan” (although Republicans obviously had more influence in it than Democrats) had endorsed Barb Davis White for Congress.

I wrote:“I think IP members should recognize a deliberate attempt - by both parties - to peel away our votes.  With respect to Dean Barkley, read the first sentence of the lead article in today's (Sunday) paper.  David Dillon in his latest email cites a piece of literature produced by the Republicans urging people to vote Republican rather than for him, the Independence Party candidate.  And now we have Riojas attacking me through the IP discussion list, even referencing masturbation.  Our campaigns are issue-driven.  Theirs seem based on dirty tricks.”

Riojas responded: “Waah !   Geez Bill. So now should we say that Bill McGaughey has come out for restrictions on free and open debate - I know you don't believe in that kind of thing.  I'd step out for a Latte about now Bill (Step away from the computer ! Slowly) Anybody got a hankie for Bill?”

Also tiring of the discussion, I made my closing argument: “If the Independence Caucus is a ‘bipartisan’ group, then it isn't us.  We're a third party.  This idea of Democrats and Republicans "taking back government from the 'Big Money' special interest groups" is a joke. Those parties totally depend on special-interest money. But if there is a caucus within those two parties to reform the system, that's good.” And then this: “Again, this ‘Independence Caucus’ is a bipartisan group espousing some of the same goals as IP members.  It is not, however, to be confused with the Independence Party.  The fact that Mr. Riojas is posting on an Independence Party discussion list suggests to me that he does intend to confuse people.”

I quote this discussion at some length because, as one might guess, I enjoy the cruder sorts of political exchange. This is where “the rubber meets the road”, one might say. I do think that my defense was effective since other party members began speaking up and Riojas suspended his attacks.

I had mentioned Dean Barkley in a posting about attempts to peel away votes. The Star Tribune was the culprit in this case. The lead article on the front page of the Sunday paper, November 2nd, right before the election, began with this sentence: “The Minnesota U.S. Senate race remains a tossup on the final weekend of the campaign, with the outcome likely to be decided by who can snatch away the most voters from third-party contender Dean Barkley.”

This was the most influential positioning for news reports in the entire campaign. According to the Star Tribune, polls showed Al Franken getting 42 percent of the vote, Coleman getting 38 percent, and Barkley 15 percent. The actual result was 15 percent for Barkley and 42 percent for both Coleman and Franken. The Star Tribune, normally favoring DFL candidates, had this year endorsed Norm Coleman editorially, perhaps because Coleman favored the bailout and Franken did not.

We thus had the Star Tribune telling its half-million Sunday readers to look for slippage in Dean Barkley’s support; and that would decide the race between Coleman and Franken. It was consistent with the approach taken in the 2006 gubernatorial race when the Star Tribune ran an opinion article and a letter to the editor toward the close of the campaign speculating that the Independence Party candidate, Peter Hutchinson, would or should drop out of the race although there had been no such discussions within the Hutchinson campaign. It was DFL wishful thinking. Also, as we shall see, the Star Tribune after the election in 2008 harped on the theme that the Independence Party was only a spoiler.

At the last Senatorial debate

The last debate between the three candidates for U.S. Senate was Sunday evening, November 2nd, at the Fitzgerald theater in St. Paul. This had also been the scene of the debate between Norm Coleman and former Vice President Walter Mondale (Paul Wellstone’s last-minute replacement) during the 2002 election for Senate. It had been quite a scene. The Independence Party was miffed that its Senate candidate, Jim Moore, had been excluded from the debate. I joined its protest demonstration outside the theater. Wearing my large purple Mexican hat, I shouted and yelled until I was hoarse. (CNN’s Anderson Cooper was standing a short distance away.) Then came word that up at the state capitol Governor Jesse Ventura had appointed Dean Barkley to fill Wellstone’s seat for the remainder of his term. Now, in 2008, Barkley was one of the debaters.

I anticipated a repeat of the experience six years ago. The Franken people were out in force with their signs. Then, across the street, big Coleman signs started to appear. Where was our party? Denn Evans and another man showed up. Evans gave me a ticket to the debate. They thought Diane Goldman, Barkley’s campaign manager, would bring the campaign signs. When she arrived, however, there were no signs. So that part of the event was canceled.

I sat on the left-middle side of the Fitzgerald theater with other Independence Party people. Gary Eichten of MPR was moderating the debate. The three debaters - Barkley, Coleman, and Franken - each had his own style. There seemed to be no clear winner although I, of course, thought Barkley’s performance was “above average”. It was a privilege to have been able to attend this historic event in person.

I learned that Dean Barkley and his supporters would be gathering at McGovern’s Pub on West Seventh Street in St. Paul. In the meanwhile, I ran into two old acquaintances. Tom Kehoe, a friend from the days of promoting a shorter workweek, was one. Tom Leavey was the other. In the early ‘70s, I had rented a room from his grandmother near the University of Minnesota campus. I told them both about the gathering at McGovern’s Pub. They said they would join me there.

When I arrived, Dean Barkley was holding court at one of the tables. I sat at a nearby empty table with an Independence Party stalwart, Mark Jenkins, whose occupation was new-media consulting. We had an interesting conversation. Kehoe arrived, and then Leavey. Maybe the high point of the night was when Dean Barkley rose from his table and came over to greet Leavey. The two had known each other in the early days of the Reform Party. After another drink and some more popcorn, I left the bar and talked with Tom Leavey on the street for a few minutes before heading back to Minneapolis.

Last-minute campaigning

As Tuesday’s election approached, I thought I had one last shot to get media coverage. That would be on Monday, November 3rd. People were finally paying attention to politics. Perhaps the newspaper or one of the local television stations would run a story about political candidates doing last-minute campaigning. This strategy had worked in my 2004 presidential campaign in Louisiana; I had received television coverage both in Shreveport and in Monroe on the day before the primary.

First, however, the media needed to know where the candidate would be. I sent out a press release to a dozen media announcing that on Monday, the day before the election, I would be “will spend today (Monday) greeting prospective voters on the streets of downtown Minneapolis, and specifically: at the Nicollet Mall around 7th street between 11:30 a.m. to 1 p.m. and on 7th Street and Marquette Avenue between 4:30 p.m. to 6 p.m.” After giving out my cell phone number, I wrote that “the candidate is six feet tall, wears glasses, and has a reddish beard.”

My hour-and-a-half campaign stint on Nicollet Avenue (next to the statue of Mary Tyler Moore tossing her hat in the air) in downtown Minneapolis was an uncomfortable event. This corner spot may not have been the best location. After fastening my sign to a lamp post, I looked for individuals who might want to talk. Most were not interested in talking with me but walked by briskly to lunch or wherever else they were headed.

The only useful encounter was with two or three young men who had a video camera. They said they were from “FLY-TV”. In a wacky camera interview, they asked me if I knew such-and-such persons and whether I thought those persons should be in jail. Of course, I did, not knowing the person. It turned out that my proposed jailbird was FLY-TV’s host. So we had a good laugh. I would be on TV. Perhaps the tape would be aired often if I was a Congressional candidate saying that the show’s host belonged in jail. Outstanding coverage!

Otherwise my campaign appearance was uneventful. I was relieved when the time was up and I walked back to my car which was parked on LaSalle Street.

My next scheduled event was at 4:30 p.m. Before then, however, the phone rang. It was Don Allen, Barb Davis White’s campaign manager, with an unusual piece of news. While listening to Minnesota Public Radio that afternoon, he was surprised to hear Keith Ellison’s voice. There had been a panel discussion in which Ellison had participated.

Allen thought that this broadcast violated the fairness doctrine. To give one candidate air time on the day before the election and not others probably violated the law - he was checking with an attorney. In the meanwhile, Allen proposed that I call Minnesota Public Radio, as he already had done, to request that Barb Davis White and I be given an equal amount of time on its station before the end of the day.

I proposed that we ask for a more reasonable amount of time - perhaps 5 or 10 minutes. He agreed. So I placed the call. The woman on the line was a woman whom I had met at the Sunny Side restaurant on the previous Friday. She said she would have to check with MPR’s legal department before giving an answer.

The upshot was that I spent the next several hours hanging around the phone in my bedroom instead of making my scheduled campaign appearance in downtown Minneapolis. The consultations with the legal department took forever. When I called back several hours later, the woman said it was their view that the fairness doctrine did not apply when a candidate participated in a panel discussion or another event that was legitimate news.

I tried to seem upset. All we were asking for was 5 minutes between us to try to achieve balance in coverage given the three Congressional candidates in our district. The woman said she would pass this by the news director. He would call me if they decided to grant my request. No, I said, have him call me in either case. I would like to hear from him directly what his decision was.

In truth, I was not as angry as I wanted to