The media's tax fraud

Jamison Foser

Media Matters 

Fri 3/6/2009 

When is a tax cut for 98 percent of taxpayers portrayed as a tax increase? When some of the small handful of people whose taxes will go up happen to control the nation's news media.

Last week, President Obama unveiled a budget outline that extends the Bush tax cuts for all but the top two percent of taxpayers and makes permanent a tax credit of up to $800 for low- and middle-income workers that was included in the recent stimulus package, among other tax cuts.

On the other hand, individual taxpayers with taxable income above $200,000 ($250,000 for families) per year would pay more in taxes under Obama's plan, under which the tax rates paid on income in the top brackets would revert to their levels under President Clinton in the 1990s -- from 33 and 35 percent to 36 and 39.6 percent. Slate.com's Daniel Gross estimates that for someone with $350,000 in income, this will amount to about $1,500 a year in increased taxes.

So: Obama's plan cuts taxes for the vast majority of Americans, while raising them for the small number of people who make more than $200,000.

But the media, eager to hype their bogus "war on the wealthy" storyline, have portrayed it as a tax increase.

Here's how The Washington Post led its front-page article last Friday, the day after the plan was announced:

President Obama delivered to Congress yesterday a $3.6 trillion spending plan that would finance vast new investments in health care, energy independence and education by raising taxes on the oil and gas industry, hedge fund managers, multinational corporations and nearly 3 million of the nation's top earners.

The article was chock-full of details about the tax hikes, referring to "nearly $1 trillion in new taxes over the next decade on the nation's highest earners ... $318 billion in new taxes on families in the highest income brackets, who would see new limits on the value of the tax breaks from itemized deductions. ... That proposal is a fraction of the new taxes Obama proposes to heap on the nation's highest earners. ... Hedge fund managers would take an even bigger hit. ... Oil and gas companies would be asked to pay an extra $31 billion over the next 10 years ... Corporations that operate overseas could expect to pay $210 billion more over the next 10 years."

By my count, at least 484 of the article's 1,284 words were about the tax increases in Obama's proposal. Among those 484 words was this quote from House GOP leader John Boehner: "The era of big government is back, and Democrats are asking you to pay for it." That simply isn't true, unless you make more than $200,000 a year -- though the Post simply presented Boehner's claim without rebuttal.

And how did the Post address the tax cuts in Obama's plan? The article devoted just 39 words to them. Among other omissions, the Post completely ignored the fact that the plan makes permanent the Bush tax cuts for the vast majority of Americans.

And by the following Monday, tax cuts had disappeared entirely from the Post's reporting. Under the headline "Aides Defend President's Budget; White House and Fiscal Conservatives Set for Showdown," the Post reported Obama's budget would be "raising taxes on top income earners and oil and gas companies" and again quoted a Republican criticizing the tax increases. But there wasn't so much as a hint that most Americans would see their tax bills go down.

The New York Times' coverage of Obama's proposal was little better -- and cable news was often even worse.

Here's one indication of how hysterical the media went over potential tax increases for very few Americans: both The New York Times and ABC News rushed to produce reports about wealthy taxpayers purportedly seeking to reduce their incomes to avoid paying the higher tax rates. The ABC article in particular was deeply flawed, prompting widespread condemnation that led to an editor's note and re-write that improved things -- if only a little.

What makes all of this even more absurd is that the increase in the top tax rates probably shouldn't be considered a tax hike in the first place. Obama's tax rate proposal merely allows the Bush tax cuts to expire as they were designed. See, when the Republican Congress passed, and President Bush signed, the tax cuts in 2001, they decided not to make them permanent, scheduling them to expire in 2010. Obama's proposal simply allows that to happen for the top rates -- it makes no change to what is already going to happen under current law.

If the expiration, on schedule, of tax cuts that were always scheduled to expire is described as a policy of raising taxes, that makes a mockery of the entire tax policy debate of the past decade. It rigs tax debates in favor of Republicans, who find it easier to argue for tax cuts for the wealthy if they can argue that the cuts won't cost very much -- by making them "temporary" -- but who then get to argue that the scheduled expiration that they included in order to make the cuts look affordable would constitute a tax increase. The GOP gets to have it both ways, describing tax cuts as temporary when it helps them, and pretending they were intended to be permanent when it helps them. It's no great surprise Republicans want to have it both ways -- but that doesn't mean the media should go along.

The actual change the Obama proposal makes to the Bush tax rates is making permanent the cuts for those who make less than $200,000. The proposal doesn't actually increase income tax rates for anyone compared to current law, and it reduces them for the vast majority of taxpayers. Yet the "increase" -- mandated by a law signed by President Bush, and scheduled to occur for nearly a decade -- has gotten all the attention, while the cuts have largely escaped notice from the major media.

That is certainly not a new phenomenon. The elite media have long behaved as though the only part of tax policy that matters is the part that affects the wealthy.

During last year's Democratic primary debates, ABC's Charlie Gibson asked the candidates about their plans to let some of the Bush tax cuts lapse as scheduled. When Hillary Clinton pointed out that the candidates were planning to let expire only the cuts for the wealthiest taxpayers, Gibson famously claimed that would include public schoolteachers. Gibson's lack of understanding of the typical family's income (and tax) situation was so clear, the debate audience actually laughed at him.

Just a few weeks later, it was Wolf Blitzer's turn to moderate a debate. When Clinton said she would pay for her health care proposal by using the additional tax revenue that would result from allowing the expiration of the Bush tax cuts for "people making more than $250,000 a year," Blitzer responded:

BLITZER: I just want to be precise. When you let -- if you become president, either one of you -- let the Bush tax cuts lapse, there will be effectively tax increases on millions of Americans.

Blitzer was actually being much less precise. Clinton (and Obama) had both stated very clearly that they would allow the expiration of only the cuts for the very wealthy. Under the guise of being "precise," Blitzer then re-stated their positions more vaguely, speaking of "tax increases on millions of Americans." Which millions? Clinton and Obama had been clear; Blitzer was not -- and so many viewers likely thought he was talking about them.

Blitzer, like Gibson, had portrayed a very narrow proposal that would affect only the very highest-income workers as something much broader; something that would affect the typical taxpayer. I noted at the time:

You have to wonder how media stars like Blitzer and Gibson have lost touch with their viewers so badly that they think $200,000 incomes are typical.

Charlie Gibson reportedly makes $8 million a year and is paid less than his counterparts at CBS and NBC.

Might that have something to do with his lack of perspective? How could it not?

Charlie Gibson would see his taxes go up under the Democrats' plan. So would Wolf Blitzer. And, coincidentally, they suggest that their viewers' taxes would go up, too -- even though for the vast majority of viewers, that isn't true.

The media's tendency to behave as though the top tax bracket is the only one that matters badly skews tax policy debates. And you have to imagine it alienates some of the vast majority of readers and viewers who are not in that bracket.

© 2008 Media Matters for America

DeLay: Limbaugh's a GOP "role model"

Joan Walsh

salon.com

March 4, 2009

I just watched the disgraced Tom DeLay hail Rush Limbaugh on "Hardball," and warn: "Republicans better understand and look at the role model he's presenting ... Stand up and fight!" At the same time, the former House GOP leader insisted Limbaugh is the leader of the conservative cause, but not the Republican Party, and blamed Democrats for hyping Limbaugh's role.

Where to start?

The GOP's reputation is circling the drain, and President Obama's approval ratings are at an all-time high, according to a new WSJ-NBC poll. Just under 70 percent of Americans approve of Obama's performance, while only 19 percent of Americans disapprove, despite GOP obstructionism and loons like Limbaugh fervently wishing he'll fail. Only 26 percent of those polled have a favorable view of the GOP -- an all-time low. Still, terrified Republicans are trying to have it both ways: Keep the divisive Limbaugh on his big white pedestal, while blaming Democrats for saying he's their party leader.

But come on: Did Nancy Pelosi make Rep. Phil Gingrey apologize to Limbaugh last month for criticizing him? Did Howard Dean make Republican National Committee Chairman Michael Steele crawl to Limbaugh  exactly 51 minutes (according to "Hardball") after Limbaugh attacked him on his radio show yesterday, and say he hadn't meant to call Limbaugh's behavior "incendiary" or "ugly"? Is Harry Reid the reason it's impossible to find one, even one, Republican to criticize Limbaugh on the record -- without then racing to kiss his ring and apologize?

It's Tom DeLay, not President Obama, who is now designating Limbaugh as his party's "role model." It's irresistible to respond: Really? Limbaugh's the "role model" for the party of family values? Athrice-divorced, drug-abusing, Parkinson's-mocking, cigar-suckingegomaniac, a poster boy for meanness, overindulgence and excess? Some folks in my letters lately have objected to my discussing some of Limbaugh's personal traits, particularly his physical appearance at CPAC, where he I said he looked "sweaty and hopped-up." Facts are facts: He was sweaty and hopped-up. And with Tom DeLay saying he's a Republican role model, I think we have to take in Limbaugh -- all of him --to fully appreciate his outsize impact on the shrinking Republican Party.

Imagine if the Democrats had an unelected leader of Limbaugh's stature, who in the wake of 9/11 wished for President Bush to fail -- and who got other Democrats to join him. (I say "him" because it's simply impossible to imagine a female Limbaugh, of similar unlovely temperament and appearance -- a big, pasty, sweaty, nasty Ruth Limbaugh, let's call her, railing against Bush -- getting any kind of national podium, let alone the kind Limbaugh has. Just try that thought experiment for a minute, and then try telling me sexism is history.) Imagine him ranting and raving and sweating and hopping up and down at, say, a MoveOn conference. Imagine that when a few Democrats had the temerity to suggest that this unelected leader might be wrong, might be hurting the party, might even be hurting the country, they had to rush to apologize to said leader within minutes or hours.

Then imagine those same Democrats trying to insist that said leader is a "role model" but not, actually, in fact, technically, their party leader. If Democrats had done anything like any of this in 2001 and 2002, the mainstream media wouldn't be debating whether Republicans were actually to blame for exaggerating said leader's importance -- as MSNBC has done all day Tuesday  -- they'd be denouncing Democrats as the party of treason. To be honest, imagining a Democratic Limbaugh getting away with his brand of demagoguery and treachery is about as impossible as imagining a female Limbaugh.

And what about poor Michael Steele? He told Politico's Mike Allen that he'd been "inarticulate" and that he hadn't said what he really thought about Limbaugh. Do you need help remembering what Limbaugh said that was "ugly," Michael? How about the Chelsea Clinton "jokes," back when she was 13? What about visibly mocking Michael J. Fox for his Parkinson's tremors and insisting Fox was exaggerating his disease for political gain? Remember when Limbaugh complained, "We are being told that we have to hope [Obama] succeeds, that we have to bend over, grab the ankles, bend over forward, backward, whichever, because his father was black, because this is the first black president." Is that "ugly" enough for you, Michael? Maybe you want to rethink your apology? Sadly, I doubt it.

Still, there's one reason to believe Democrats, not Republicans, are to blame for all this mess about Rush Limbaugh, even though it's not true: the reliable old question, qui bono? Democrats certainly benefit from the circular firing squad. The GOP is in free fall, and it just keeps eating its young. Sarah Palin was the first sacrificial lamb, nominated for vice-president before she was ready (if she'll ever be) and then slaughtered (for the time being, at least) by McCain campaign leaders. Bobby Jindal was trotted out to almost certain failure after Obama's speech last weekend. Now Limbaugh has emasculated the brand-new RNC chair, Michael Steele. I'm sure it's an accident all three represented a possible future of the party that wasn't white and male.

So for now the future of the party is an admitted Oxycontin addict who plea-bargained his way out of a drug conviction, who mocks children and Parkinson's sufferers, who exhibits strange sexual fears about our first black president (why is he worried about "grabbing his ankles?"), who was famously detained on a Dominican Republic vacation for carrying Viagra without a prescription? I wouldn't mention that last little issue, except it helps me agree with Tom DeLay that he's a role model for Republicans: Clearly a party that is afraid to stand up to a bully like Limbaugh needs some kind of political Viagra, immediately. It would be nice to see a Republican whose bouts of integrity and courage lasted more than four hours.

Copyright 2009 Salon Media Group, Inc.

Unpatriotic: The Ever-Growing Root-for-Failure Caucus

Steve Benen

Washington Monthly

March 2, 2009

The list just keeps getting bigger.

Over the last few days, Tom DeLay, Rick Santorum, and Michelle Malkin have joined the Limbaugh-inspired group of conservatives who are publicly hoping that President Obama fails. Yesterday afternoon, RedState's Erick Erickson kept the ball rolling with an item headlined, "I Too Want Barack Obama to Fail," encouraging other conservatives to rally behind the campaign to undermine the president.

Join the RedState Army of Activists and lets [sic] work to make sure Barack Obama fails at destroying liberty and freedom:

I want Barack Obama to fail and I want to help ensure he does.

If Barack Obama is successful in implementing his stated agenda, America will fail and the American dream will die for millions.

We already know Barack Obama's economic policy will fail, but it will hurt millions of hard working Americans.

I will join the RedState Army of Activists and fight for freedom by working to undermine Barack Obama's agenda and helping him fail.Thank [sic] you for your interest in the I WANT BARACK OBAMA TO FAIL.

Let's put aside how ironic it is to hear those who believe they're patriotic actively rooting against the nation's elected leadership. And by all means, let's certainly overlook the kind of response this would have elicited if, in the midst of multiple international crises, the left put together an organized campaign encouraging Americans to "help" George W. Bush "fail."

Instead, let's note the politics. Ben Smith, highlighting Erickson's post, said, "[S]omewhere, Brad Woodhouse and Rahm Emanuel are smiling."

Yep. If Democratic leaders were drawing up a plan to make the right appear ridiculous, their best case scenario would be one in which leading conservatives, consumed by anger just one month after Inauguration Day, started saying things like, "I want Barack Obama to fail and I want to help ensure he does," in the midst of a global economic crisis and two wars.

In the drive to paint the right as unhinged, blind partisans, committed more to a right-wing ideology than American success, these guys are doing the Democrats' work for them.

Better yet, by pushing this line so aggressively, the right is also putting elected Republican officials in an awkward position. When asked if they agree with the cries of the activist base, GOP policymakers have to decide whether to appear anti-American or denounce some of their loyal supporters.

Reiterating a point from Saturday, actor John Wayne, who was very conservative, was asked for his thoughts after JFK defeated Richard Nixon in 1960. "I didn't vote for him," Wayne said, "but he's my president, and I hope he does a good job."

It's such a simple and obvious sentiment. That it eludes so many conservatives is a genuine shame.

Copyright 2009 Washington Monthly

The Ecstasy and the Agony

Frank Rich

Op-Ed Columnist

The New York Times

March 1, 2009

BARACK OBAMA must savor the moment while he can. It may never get better than this.

As he stood before Congress on Tuesday night, the new president was armed with new job approval percentages in the 60s. After his speech, the numbers hit the stratosphere: CBS News found that support for his economic plans spiked from 63 percent to 80. Had more viewers hung on for the Republican response from Bobby Jindal, the unintentionally farcical governor of Louisiana, Obama might have aced a near-perfect score.

His address was riveting because it delivered on the vision he had promised a battered populace during the campaign: Government must step in boldly when free markets run amok and when national crises fester unaddressed for decades. For all the echoes of F.D.R.’s first fireside chat, he also evoked his own memorably adult speech on race. Once again he walked us through a lucid step-by-step mini-lecture on “how we arrived” at an impasse that’s threatening America’s ability to move forward.

Obama’s race speech may have saved his campaign. His first Congressional address won’t rescue the economy. But it brings him to a significant early crossroads in his presidency — one full of perils as well as great opportunities. To get the full political picture, look beyond Obama’s popularity in last week’s polls to the two groups of Americans whose approval numbers are in the toilet. There is good news for Obama in these findings, but there’s also a stark indication of the unchecked populist rage that could still overrun his ambitious plans.

The first group in national disfavor is the G.O.P. In the latest New York Times/CBS News survey, 63 percent said that Congressional Republicans opposed the stimulus package mostly for political reasons; only 17 percent felt that the Republicans should stick with their own policies rather than cooperate with Obama and the Democrats. The second group of national villains is corporate recipients of taxpayer money: only 39 percent approve of a further bailout for banks, and only 22 percent want more money going to Detroit’s Big Three.

The good news for Obama is that he needn’t worry about the Republicans. They’re committing suicide. The morning-after conservative rationalization of Jindal’s flop was that his adenoidal delivery, not his words, did him in, and that media coaching could banish his resemblance to Kenneth the Page of “30 Rock.” That’s denial. For Jindal no less than Obama, form followed content.

The Louisiana governor, alternately smug and jejune, articulated precisely the ideology — those G.O.P. “policies” in the Times/CBS poll — that Americans reject: the conviction that government is useless and has no role in an emergency. Given that the most mismanaged federal operation in modern memory was inflicted by a Republican White House on Jindal’s own state, you’d think he’d change the subject altogether.

But like all zealots, Jindal is oblivious to how nonzealots see him. Pleading “principle,” he has actually turned down some $100 million in stimulus money for Louisiana. And, as he proudly explained on “Meet the Press” last weekend, he can’t wait to be judged on “the results” of his heroic frugality.

Good luck with that. He’s rejecting aid for a state that ranks fourth in children living below the poverty line and 46th in high school graduation rates, while struggling with a projected budget shortfall of more than $1.7 billion.

If you’re baffled why the G.O.P. would thrust Jindal into prime time, the answer is desperation. Eager to update its image without changing its antediluvian (or antebellum) substance, the party is trying to lock down its white country-club blowhards. The only other nonwhite face on tap, alas, is the unguided missile Michael Steele, its new national chairman. Steele has of late been busy promising to revive his party with an “off-the-hook” hip-hop P.R. campaign, presumably with the perennially tan House leader John Boehner leading the posse.

At least the G.O.P.’s newfound racial sensitivity saved it from choosing the white Southern governor often bracketed with Jindal as a rising “star,” Mark Sanford of South Carolina. That would have been an even bigger fiasco, for Sanford is from the same state as Ty’Sheoma Bethea, the junior high school student who sat in Michelle Obama’s box on Tuesday night and whose impassioned letter to Congress was quoted by the president.

In her plea, the teenager begged for aid to her substandard rural school. Without basic tools, she poignantly wrote, she and her peers cannot “prove to the world” that they too might succeed at becoming “lawyers, doctors, congressmen like yourself and one day president.”

Her school is in Dillon, where the Federal Reserve chairman, Ben Bernanke, grew up. The school’s auditorium, now condemned, was the site of Bernanke’s high school graduation. Dillon is now so destitute that Bernanke’s middle-class childhood home was just auctioned off in a foreclosure sale. Unemployment is at 14.2 percent.

Governor Sanford’s response to such hardship — his state over all has the nation’s third-highest unemployment rate — was not merely a threat to turn down federal funds but a trip to Washington to actively lobby against the stimulus bill. He accused the three Republican senators who voted for it of sabotaging “the future of our civilization.” In his mind the future of civilization has little to do with the future of students like Ty’Sheoma Bethea.

What such G.O.P. “stars” as Sanford and Jindal have in common, besides their callous neo-Hoover ideology, are their phony efforts to portray themselves as populist heroes. Their role model is W., that brush-clearing “rancher” by way of Andover, Yale and Harvard. Listening to Jindal talk Tuesday night about his immigrant father’s inability to pay for an obstetrician, you’d never guess that at the time his father was an engineer and his mother an L.S.U. doctoral candidate in nuclear physics. Sanford’s first political ad in 2002 told of how growing up on his “family’s farm” taught him “about hard work and responsibility.” That “farm,” the Charlotte Observer reported, was a historic plantation appraised at $1.5 million in the early 1980s. From that hardscrabble background, he struggled on to an internship at Goldman Sachs.

G.O.P. pseudopopulism ran riot last week as right-wing troops rallied around their latest Joe the Plumber: Rick Santelli, the ranting CNBC foe of Obama’s mortgage rescue program. Ann Coulter proposed a Santelli run for president, and Twitterers organized national “tea parties” to fuel his taxpayers’ revolt. Even with a boost from NBC, whose networks seized a promotional opening by incessantly recycling the Santelli “controversy,” the bonfire fizzled. It did so because — as last week’s polls also revealed — the mortgage bailout, with a 60-plus percent approval rating, is nearly as popular as Obama.

The Santelli revolution’s flameout was just another confirmation that hard-core Republican radicals are now the G.O.P.’s problem, not the president’s. Rahm Emanuel has it right when he says the administration must try bipartisanship, but it doesn’t have to succeed. Voters give Obama credit for trying, and he can even claim success with many Republican governors, from Schwarzenegger to Crist. Now he can move on and let his childish adversaries fight among themselves, with Rush Limbaugh as the arbitrating babysitter. (Last week he gave Jindal a thumb’s up.)

But that good news for Obama is countered by the bad. The genuine populist rage in the country — aimed at greedy C.E.O.’s, not at the busted homeowners mocked as “losers” by Santelli — cannot be ignored or finessed. Though Obama was crystal clear on Tuesday that there can be “no real recovery unless we clean up the credit crisis,” it was telling that he got fuzzy when he came to what he might do about it. He waited two days to drop that shoe in his budget: a potential $750 billion in banking “asset purchases” on top of the previous $700 billion bailout.

Therein lies the Catch-22 that could bring the recovery down. As Obama said, we can’t move forward without a functioning financial system. But voters of both parties will demand that their congressmen reject another costly rescue of it. Americans still don’t understand why many Wall Street malefactors remain in place or why the administration’s dithering banking policy lacks the boldness and clarity of Obama’s rhetoric.

Nor can a further bailout be easily sold by a Treasury secretary, Timothy Geithner, whose lax oversight of the guilty banks while at the New York Fed remains a subject of journalistic inquiry. In a damning 5,600-word article from Bloomberg last week, he is portrayed as a second banana, a timid protégé of the old boys who got us into this disaster. Everyone testifies to Geithner’s brilliance, but Jindal, a Rhodes scholar, was similarly hyped. Like the Louisiana governor, the Treasury secretary is a weak public speaker not because he lacks brains or vocal training but because his message doesn’t fly.

Among the highlights of Obama’s triumphant speech was his own populist jeremiad about the “fancy drapes” and private jets of Wall Street. But talk is not action. Two days later, as ABC News reported, the president of taxpayer- supported Bank of America took a private jet to New York to stonewall Andrew Cuomo’s inquest into $3.6 billion of suspect bonuses.

Handing more public money to the reckless banks that invented this culture and stuck us with the wreckage is the new third rail of American politics. If Obama doesn’t forge a better plan, neither his immense popularity nor even political foes as laughable as Jindal can insulate him from getting burned.

Copyright 2009 The New York Times Company 

The Great Solvent North

THERESA TEDESCO

Op-Ed Contributor

The New York Times

February 28, 2009

Toronto

HAS the world turned upside down? America, the capital of capitalism, is pondering nationalizing a handful of banks. Meanwhile, Canada, whose banking system had long been notorious for its stodgy practices and government coddling, is now being celebrated for those very qualities.

The Canadian banking system, which proved resilient in the global economic crisis, is finally getting its day in the sun. A recent World Economic Forum report ranked it the soundest in the world, mostly as the result of its conservative practices. (The United States ranked 40th).

President Obama has joined the adoring throng. He recently said that Canada has “shown itself to be a pretty good manager of the financial system in the economy in ways that we haven’t always been here in the United States.” Paul Volcker, former chief of the United States Federal Reserve, commented that what he’s arguing for “looks more like the Canadian system than the American system.”

Most people don’t know that the vision behind Canada’s banking system, made up of a few large, national banks with branches from coast to coast, actually had its beginnings in the United States. Canada’s system is the product of a banking framework inspired by Alexander Hamilton, the first American secretary of the Treasury. Hamilton envisioned the First Bank of the United States, chartered in 1791, as a central bank modeled on the Bank of England.

Canadians found inspiration in Hamilton’s model, but not all Americans did. In the 1830s, President Andrew Jackson opposed extending the charter of the Second Bank of the United States, perceiving it as monopolistic. Money-lending functions were then assumed by local and state-chartered banks, eventually giving rise to the free-market, decentralized system that America has today.

Today, Canada’s system remains truer to Hamilton’s ideal. The five major chartered banks, the few regional banks and handful of large insurance companies are all regulated by the federal government. Canadian banks are relatively constrained in the amounts they can lend. Canadian banks are required to have a bigger cushion to absorb losses than American banks. In addition, Canadian government regulations protect the domestic banks by limiting foreign competition. They also keep banks broadly owned by public shareholders.

Since Canada’s financial services sector was deregulated in 1987, permitting the banks to buy brokerage houses, they have enjoyed vast earnings power because of their diverse businesses and operations. And in contrast to the recent shotgun marriages at bargain prices between ailing Wall Street brokerages and American banks, Canadian banks paid top dollar decades ago for profitable, blue-chip investment firms.

Canadian banks are known to be risk-averse, and this has served them well. While their American counterparts were loading up their books with risky mortgages, Canadian banks maintained their lending requirements, largely avoiding subprime mortgages. The buttoned-down banks in Canada also tended to keep these types of securities on their books, rather than packaging them and selling them to investors. This meant that the exposures they did have to weak mortgages were more visible to the marketplace.

The big five Canadian banks — Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Bank of Montreal — survived the recent turmoil relatively unscathed. Their balance sheets remain intact and their capital ratios are comfortably above requirements. Yes, Prime Minister Stephen Harper’s government may buy as much as 125 billion Canadian dollars (about $100 billion) worth of mortgages, increasing banks’ capacity to lend. But this is small change compared with the scale of Washington’s bailout.

Few would have predicted that Canadian banks, long derided as among the least autonomous because of stringent government oversight, would emerge from the global mayhem as some of the more independent international players.

Since Mr. Obama seems to admire the Canadian banking system, his administration might want to take a page out of its playbook.

This would entail building a national banking system based on a small number of large, broadly held, centrally and rigorously regulated firms. Imitating the Canadian model would require sweeping consolidation of American banks. This would be a very good thing. Washington had difficulty figuring out the magnitude of the financial crisis because there are so many thousands of banks that it was impossible for regulators to get into all of them.

Washington is already on the path to achieving consolidation. Eventually, some of the larger banks into which the government is injecting taxpayer money will probably be deemed beyond help, and will either be allowed to die or be partnered with other banks. The market will take its cues from this stress-testing, and make its own bets on which banks will survive. It’s hard to predict how many will have survived when the dust settles, but the new landscape might consist of only 50 or 60 banking institutions. More radically, Washington could take over the licensing of banks from the states, or, at the very least, consider more stringent regulation of global and super-regional banks. After all, the Canadian system is considered successful not only because it has fewer banks to regulate, but because regulation is based on the tenets of safety and soundness.

There is no time to waste. Reconfiguring the American banking structure to look more like the Canadian model would help restore much-needed confidence in a beleaguered financial system. Why not emulate the best in the world, which happens to be right next door? At the very least, Hamilton would have approved.

Copyright 2009 The New York Times Company