By J. Patrick Coolican (contact)

Fri, Oct 17, 2008 (2 a.m.)

Jill Derby is boxed in.

That’s the clear conclusion arising from her televised debate Thursday with Rep. Dean Heller, the Republican freshman running for reelection in northern Nevada’s 2nd Congressional District.

Derby attacked Heller toward the end of the debate, which aired on “Face to Face with Jon Ralston,” accusing him of being the real tax-and-spender in the race because he supported two-thirds of a $300 million tax increase while a state Assemblyman in the early ’90s.

“Who’s the big spender here?” Derby asked.

Heller said it supported necessary services.

The problem is that Heller, a former Nevada secretary of state, has become a leading voice of young turk conservatives, a consistent voice against government spending, taxes and new regulation during his first term.

So, after the debate, Derby said Heller had turned against Nevadans, voting against expansion of the State Children’s Health Insurance Program, pay equity for women and renewable energy tax credits.

Derby has the tricky task of running to Heller’s right, and to his left.

In a normal Congressional district, in a year when the country has turned sharply against Republican governance, Derby would pound Heller as a leader of a failed governing philosophy and call for more government intervention in the failing economy.

But this is CD-2, which covers western Clark County and the entire state outside the county lines. Republicans still outnumber Democrats by 25,000 voters despite recent Democratic gains. Many voters here, including registered Democrats, are hostile to government.

This is a re-match of Heller-Derby 2006, a race decided by 13,000 votes.

Heller, who wore his trademark grin, seemed to revel in this tough spot his opponent finds herself in.

He happily explained his vote against the recently passed Wall Street bailout, referencing rich bankers pulling home millions of dollars while Congress gave them $700 billion to clean bad debt out of the financial system.

Many voters in the district, distrustful of both Washington and Wall Street, likely agree with Heller on the bailout, which dominated much of the debate.

Heller also criticized his own party for allowing banks to take on too much debt and deregulating the financial services industry, while attacking favorite Republican targets, Fannie Mae and Freddie Mac, the big private mortgage lenders that had implicit backing from the government.

He criticized the treasury secretary, which allowed him to shove aside the unpopular Bush administration: “Hank Paulson was born without ears.”

This left Derby, who also opposed the bailout, with little opportunity to create any distance between herself and Heller. She said the bailout didn’t direct money to homeowners who need it, while adding that doing nothing wasn’t really an option.

Heller said he favors a plan advocated by William Isaac president of the government’s Federal Deposit Insurance Corp. from 1981 to 1985, in which the FDIC would buy “net worth certificates” from troubled banks if it were determined they could be more viable over time. The banks would submit to more rigorous regulation and then buy back the certificates once they were on more sound footing. The FDIC did something similar with failed savings and loan institutions in the 1980s to great effect, Isaac argued in a recent piece for The Washington Post.

The problem with this solution, unmentioned by either candidate, is that it ignores the financial markets’ real blood on the floor: the unregulated trading of esoteric financial instruments, in which investors bet on each other defaulting. This mysterious market amounts to about $60 trillion, though no one is really certain about this debacle.

Derby, a former higher education regent, did her best to draw contrasts with Heller. She attacked him for opposing a credit card holder “bill of rights,” which, as advertised, would protect consumers from unfair practices. Heller has received at least $150,000 from financial institutions since 2006 and sits on the House Financial Services Committee.

Heller said the credit card bill was “just another bailout for people who are irresponsible.”

Derby opted not to voice support for a bailout for the irresponsible.