So what is John McCain's strategy to miraculously turn the credit crunch to his advantage? Turn it into a racial allegory. How does he do this?

First, he wants you to ignore the reality of Collaterized Debt Obligations or CDO's in bringing our economy to the brink. The real reason, of course, the economy is in dire straits has a little to do with a relatively small percentage of high-risk mortgages on the brink of foreclosure but more with the fact that those riskier mortgages were repackaged and resold in various financial instruments that made it impossible for investors purchasing those CDO's to adequately discern the degree of risk in the repackaged debt. Then those financial instruments were resold and repackaged again as hedge funds and on the mutual fund market. At a certain point after all the slicing and dicing, all the major investment and commercial banks were unsure how much bad debt they held themselves and had no idea for the various other institutions they lend and borrow money from were carrying.Not knowing makes you not want to lend money to the other banks which locks up the amount of credit available for thousands of other non-financial corporations which potentially brings the economy to a screeching halt. A little known but very important part of the economy is the Commercial Papers market. Basically companies far removed from the financial/ banking sector deal with day-to-day variations in cash flow by trading in thousands of very short term loans on a daily basis - typically loans that last only a few days, loans that are bought and sold on a normally very mundane basis as "commercial papers".
When investment banks started to panic about extending credit to each other, that market froze up and Bernanke and Paulson started to have heart palpitations.

For an excellent simplified account on how the little discussed Commercial Papers market nearly froze our entire national economy a little over a week ago please check out this NPR story with contributions from two regular contributors on the show "This American Life".
http://www.npr.org/templates/story/story.php?storyId=95099470

Anyhow, the point is the drama in this story is about how lack of regulation of how mortgage debt got creatively repackaged and resold on financial markets snowballed and nearly caused several other seemingly unrelated markets to nearly collapse.

But not according John McCain. According to John McCain the whole financial mess stems solely from Fannie Mae and Freddie Mac because rather than Wall Street (read educated white people) tripping over itself with financial instruments that allowed the unscrupulous to resell mystery debt from a real estate market that could "only ever go up", for John McCain this story has to be about "irresponsible" (read black) people getting involved in the homeownership game who never should have been allowed to.

Blame Freddie Mac and Fannie Mae because, as partially government backed institutions (before the takeover), they helped poor people get mortgages. To boil down the story - its bad ("irresponsible") black folks getting financial responsibility they weren't ready for not possibly the all-knowing, innately self-correcting (read mostly white) Free Market that is responsible.

OK I know what you are saying - "Back this up examples, show me the McCain Team doing this because throwing the 'r-word' around is too often the fall-back method of lazy leftys. Give me proof".

Look a this McCain ad - the biggest financial crisis since the Great Depression and it all boils down to two scary black men threatening an older white lady with foreclosure.

The funny thing about this ad. Its completely factually untrue. It claims to quote the Washington Post but here's how the Post's "Fact Checker" analyzed the ad.

The McCain video attempts to link Obama to Franklin Raines, the former CEO of the bankrupt mortgage giant, Fannie Mae, who also happens to be African American. It then shows a photograph of an elderly white woman taxpayer who has supposedly been "stuck with the bill" as a result of the "extensive financial fraud" at Fannie Mae.

The Obama campaign last night issued a statement by Raines insisting, "I am not an advisor to Barack Obama, nor have I provided his campaign with advice on housing or economic matters." Obama spokesman Bill Burton went a little further, telling me in an e-mail that the campaign had "neither sought nor received" advice from Raines "on any matter."

So what evidence does the McCain campaign have for the supposed Obama-Raines connection? It is pretty flimsy, but it is not made up completely out of whole cloth. McCain spokesman Brian Rogers points to three items in the Washington Post in July and August. It turns out that the three items (including an editorial) all rely on the same single conversation, between Raines and a Washington Post business reporter, Anita Huslin, who wrote a profile of the discredited Fannie Mae boss that appeared on July 16. The profile reported that Raines, who retired from Fannie Mae four years ago, had "taken calls from Barack Obama's presidential campaign seeking his advice on mortgage and housing policy matters."

Since this has now become a campaign issue, I asked Huslin to provide the exact circumstances of the quote. She explained that she was chatting with Raines during the photo shoot, and asked "if he was engaged at all with the Democrats' quest for the White House. He said that he had gotten a couple of calls from the Obama campaign. I asked him about what, and he said 'oh, general housing, economy issues.' ('Not mortgage/foreclosure meltdown or Fannie-specific,' I asked, and he said 'no.')"

Now the McCain folks are circulating a new video where they recut old C-Span footage to contrast "Democrats" (read black and testy and/or Barney Frank) with calm collected (white) Republicans speaking sense to those riled up.

The solution keep Republican read (white, "controlled") people at the reigns of the economy. At least would seem to be the barely unstated subtext of teh McCain campaign here.

Of course there is some opinions that the strategy was cooked up by none other than Karl Rove himself.

I do think that McCain and Palin ought to identify that the source of this contagion, the thing that started these dominos going down was the misbehavior of Fannie and Freddie, who I would remind you are the biggest part of the bailouts," he said. Earlier in the program, he had specifically brought up Raines' name in this context

"Contagioion", "misbehaviour" - interesting choices of language for a discussion of one financial institution, no, Mr. Rove?

Thoughts?