John McCain blamed Barack Obama and Democrats for the failure to pass a financial rescue plan Monday. Huh? Two-thirds of House Republicans voted against the plan, the group that McCain was trying to get on board. This is the same group that scuttled the bipartisan plan that was nearing finalization last week. And the claim that House Speaker Nancy Pelosi is to blame because of her partisan speech — as boneheaded and irresponsible as it was — makes the GOP look even worse. As Peter Wehner, a former Bush administration official, wrote on the National Review blog: “On one of the most important votes they will ever cast, insisting ‘the speech made me do it’ is lame and adolescent.”
But there is plenty of blame to go around, including for President Bush, who doesn’t even have clout within his own party, to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, who didn’t do a good job explaining the bailout, and to Democratic and Republican leaders who were unable to deliver as many votes as expected.
The only good news is that, so far, the market is up today based in part on the hope that Congress will get its act together.
54 Comments
CHARGE 1 – “The March on Selma got me born.”
EVIDENCE – Senator Obama was born August 4th, 1961. The march on Selma began March 7th, 1965.
SOURCE 1 = http://www.newsbusters.org/blogs/john-stephenson/2008/03/30/more-obama-lies-media-will-ignore
SOURCE 2 = http://blogs.suntimes.com/sweet/2007/03/obamas_selma_speech_text_as_de.html
COUNTER CLAIM – Senator Obama was talking about the general movement, not specifically about Selma.
REBUTTTAL – Senator Obama was in Selma, Alabama, before a mostly AA crowd at the Brown Chapel AME Church on March 4th, 2007. He clearly stated “because some folks were willing to march across a bridge . . . they (his parents) got together, and Barack Obama, Jr. was born. So don’t tell me I don’t have a claim on Selma, Alabama!” Barack Hussein Obama was born on August 4, 1961. The first march on Selma, Alabama occurred on March 7, 1965.
VERDICT – SENATOR OBAMA, YOU ARE A LIAR
I’m sure our paid shill for the McCain campaign will explain to us how the 40% of the Democrats who voted NO constitute a majority of House Democrats and somehow FORCED the Republicans to vote against their own president’s plan.
McCain has already blamed Obama for causing the entire Wall Street crisis. McCain rants and raves about the lobbyists, greed and those overpaid CEO’s of corporations that get golden parachute packages that caused the crisis but yet McCain keeps Rick Davis and the former CEO of Hewlett Packard (one of those fired overpaid CEO’s that got a golden parachute package) on his campaign staff.
McCain uses the words maverick and reformer only when it is convenient to lie to the voters but in real life, all he needs to do is look inside his own campaign staff and root out all those responsible.
Maybe when he does that, I might be willing to vote for him.
This is a little long, but a pretty good piece, I thought. Wanted to share it in it’s entirety
The Bailout Defeat: A Political Credibility Crisis By MICHAEL SCHERER / WASHINGTON
53 minutes ago
There was a lack of trust, a loss of confidence, a popular revolt.
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Nearly every major political leader in the U.S. supported the $700 billion financial-bailout bill. The President. The Vice President. The Treasury Secretary. The Chairman of the Federal Reserve. The Chairman of the Securities and Exchange Commission. The Democratic and Republican nominees for President. The Democratic and Republican leadership of the House and Senate. All of them said the same thing: vote yes.
But a majority of those politicians anointed by the Constitution to reflect the will of the people voted no. This is a remarkable event, the culmination of a historic sense of betrayal that Americans have long felt for their representatives in Washington. The nation’s credit crisis on Monday exposed a much deeper and more fundamental problem: a crisis of political credibility that now threatens to harm our nation further, should the markets freeze up and more companies begin to fail, as many experts predict.
The problem has been growing for years. Roughly 28% of Americans approve of President Bush. Roughly 18% of Americans approve of Congress. Now those low numbers and majority of bad feelings have manifested themselves in the starkest of terms.
Asked to take a leap of faith regarding a dizzyingly complex problem, a critical mass of voters refused to trust their leaders, turning down the medicine that was offered. And so the politicians who are most exposed to popular whims have run for cover. With an election on the horizon, 95 House Democrats and 133 House Republicans opposed the bill. Some portion voted no for clearly ideological reasons. But many more were simply doing what politicians do – responding to the will of the people.
An analysis by statistician Nate Silver, who runs FiveThirtyEight.com, made this clear. Of the 38 incumbent members of Congress from both parties who are considered vulnerable in the coming election, 30 voted against the bill (eight supported it). By contrast, members of Congress from relatively safe districts were evenly divided – 197 for it to 198 against it.
“What this showed more than anything else was that not even members of Congress can ignore a switchboard system of Capitol Hill that is so totally jammed,” said Peter Sepp, a conservative opponent of the bill with the National Taxpayers Alliance.
If the experts are right, the nation now risks great financial hardship, because there was no one to stand up and explain the situation. The Dow Jones industrial average dropped 778 points on the news. Treasury Secretary Hank Paulson warned Monday afternoon that car loans and student loans were likely to tighten. Other economists have warned of the possibility of widespread corporate failures and unemployment, if the short-term credit markets freeze up. Bank failures, or mergers, are likely to continue. The taxpayer costs of federal insurance on deposits could increase.
In a worst-case scenario, economic historians may find that all of Paulson’s predictions come true, leaving the cost to the Federal Government far greater than the risky $700 billion investment in the private sector. If this comes to pass, the historians will find many people to blame: Paulson and President Bush for failing to explain the plan better. The House leadership for failing to whip enough votes. Even the presidential candidates for failing to use their bully pulpit to force the issue.
But those historians should not forget that roots of the failure predate the vote on Monday, and even the mistakes of Wall Street. Years ago, the trust between the people and their politicians was broken. Credibility was lost. The reserve of goodwill went bankrupt. And when they needed it most, our nation’s leaders found that they had squandered their ability to exert influence over the people who chose them to lead.
View this article on Time.com
dadman – and when did the Civil Rights movement start? Maybe Obama was referring to those in Selma because he was talking to an audience of Selma people?
If you want to hold Obama’s feet to the fire for one lie then are you willing to hold McCain’s feet to the fire for his lies?
Both candidates have said stupid things and both should be held accountable for them.
It is interesting the watch the political dance as the sides alternate supporting and then disowning the deal. Politics suck.
Maybe the “bailout debacle” is the best thing that could have happened.
I suspect that the market is up today because the traders feel that there will be a bailout/rescue plan passed that is in large part similar to that defeated in the House yesterday (along with some bargain hunting, to be sure).
I wonder how the market would react if the “rescue” took the form of: 1) the feds buy the mortgages (not the CDOs and other derivatives held by the institutions); 2) infuse capital into the regulated banks only (not the hedge funds, not the shadow banks) in return for equity in these institutions; 3) regulation of all entities making loans secured by mortgages on the same terms and conditions as are placed on banks and thrifts? Likely, not well, as this would have the effect of keeping the risk from the derivatives on the books of the institutions; the government, as holders of the mortgages themselves, could renegotiate the terms thereof, akin to what was authorized for FHA (I believe) in the housing act passed this summer; and would diminish the potential salaries and bonuses of the executives and others in these institutions.
Would this solve the credit freeze that is so widely talked about? I don’t know, but it would allow for more capital to be infused in the system while keeping the risk associated with the CDOs, etc., where it should be; within the institutions involved in creating and holding the same.
Seems like they are spending more time blaming each other than getting anything done. In other words, business as usual in DC. We need to throw each and every one of them out!
And, I would add, the feds would be acting akin to a private investor. It is my understanding that Warren Buffet’s investment in Goldman, Sachs was in return for preferred stock (what the government should get for its new capital on behalf of the citizenry).
I would advise all to hear Hal Linsey in this weeks program 09-26 – for commentary about the current financial crisis – scroll to the latter half of the program – peace http://www.hallindsey.org/
It’s the Federal Reserve System which is not even getting mentioned.
I do enjoy a good round of blame game though.
Carry on.
Vaughn, do you think the economy would tank further (to some point of no return) if Congress took the time to actually consider alternatives to the bush / Paulson plan (albeit improved with some safeguards and methods of accountability)? Is the hurry actually imperative?
I think what was not passed yesterday was an improvement, but probably not enough. I suspect Congress began with a flawed plan, or at least not the best plan.
I don’t know who or what to trust. It seems we’ve been here before. Told we must hurry, there is no time, scared into action. And only after the wrong action was taken did we learn how badly misled we were.
There are credit card call centers and mailers that have gone silent around the country.
‘Countrywide on your side’ no longer has the same appeal.
The AIG logo has been changed to a deflated balloon.
There has been a run on new Swiss bank accounts under assumed names.
The republican concept of bipartisanship is to split everything 50-50; the republicans get all the credit and the democrats get all the blame, no matter who did what.
I don’t know, Linda. I read where Mr. Buffet says that something needs to be done, and I have a high regard for his opinion. Thus, my suggestion that any bailout/rescue follow his lead insofar as receiving equity for new capital.
I continue to hold the position that the major problem globally is the existence of the exotic derivatives which were created and sold in an unregulated market. If the estimate I’ve read of $1.4 quadrillion in these securities is close to accurate, that in and of itself could drag the global economy down for a long time until they are “unwound”. The risk from these things include the investments made in them by institutions of various kinds, which given their nature, would affect pensions, 401k plans, as the value of the stock in institutions holding these craters.
If, indeed, there is a credit contraction threat extant, then this will hit “Main Street” hard. For a bit of an extreme example, your neighbors place their house on the market. If no one is able to obtain a mortgage loan to buy it, the value to be received by the neighbors declines until someone not needing such financing comes along and buys it. This, then, depresses the values of the remaining homes in the neighborhood. Another example would be Widget, Inc. traditionally borrows funds to acquire raw materials inventory to manufacture widgets on a short term basis, such debt to be repaid from the proceeds of sales of the same. If Widget Inc cannot borrow due to a lack of credit, then it must scramble to stay in business, which might result in layoffs, etc., the result of which could be the former employees cannot make their mortgage payments, their homes go into foreclosure, etc. Meanwhile, Widget Inc.’s suppliers cannot make sales of their raw materials, as no one can buy them, forcing layoffs, etc. one level above.
Extreme and overly simplistic; but that is what is being discussed in many articles I’ve read (lately, I’ve had too much time to read for reasons you know) about a credit contraction.
TO ALL MY FRIENDS AT WE BLOG…. George Bush has been in office
for 7 1/2 years. The first six the economy was fine.
A little over one year ago:
1) Consumer confidence stood
at a 2 1/2 year high;
2) Regular gasoline sold for
$2.19 a gallon;
3) the unemployment rate was
4.5%.
4) the DOW JONES hit
a record high–14,000 +
5) American’s were buying new cars, taking cruises, vacations overseas, living
large!…
But American’s wanted ‘CHANGE’! So, in 2006 they voted in a Democratic Congress and
yes–we got ‘CHANGE’ all right. In the PAST YEAR:
1) Consumer confidence has plummeted ;
2) Gasoline is now over $4 a gallon & climbing!;
3) Unemployment is up to 5.5% (a 10% increase);
4) Americans have seen their home equity drop by $12 TRILLION
DOLLARS and prices stil dropping;
5) 1% of American homes are in foreclosure.
6) as this was written, THE DOW was probing another low. $2.5 TRILLION DOLLARS HAD EVAPORATED FROM INVESTORS’ STOCKS, BONDS & MUTUAL FUND PORTFOLIOS!
YES, IN 2006 AMERICA
VOTED FOR CHANGE…AND WE SURE GOT IT! ..
REMEMBER THE PRESIDENT HAS NO
CONTROL OVER ANY OF THESE ISSUES, ONLY CONGRESS.
AND WHAT HAS CONGRESS DONE IN THE
LAST TWO YEARS, ABSOLUTELY NOTHING.
NOW THE DEMOCRATIC CANDIDATE FOR
PRESIDENT CLAIMS HE IS GOING TO REALLY GIVE US
CHANGE ALONG WITH A DEMOCRATIC CONGRESS!!!!
JUST HOW MUCH MORE ‘CHANGE’ DO
YOU THINK YOU CAN STAND?
I think your assessment is correct vt., these unregulated derivatives cause the mortgage crisis to raise exponentially.
I believe even regulated banks have off book activities (legally) which I think would severly impact their regulated side.
I bet the calls house repubs got before the vote, are dwarfed by those they got after the crash!
Phantom
Posted September 30, 2008 at 2:38 pm | Permalink
I think your assessment is correct vt., these unregulated derivatives cause the mortgage crisis to raise exponentially.
I believe even regulated banks have off book activities (legally) which I think would severly impact their regulated side.
I bet the calls house repubs got before the vote, are dwarfed by those they got after the crash!
________________________________________________
What crash? The market is back up today. Everything is fine. Just let the correction happen. There is no need to panic.
“If, indeed, there is a credit contraction threat extant, then this will hit “Main Street” hard.”
Hmmm, main street has been living high on the hog for years. If you are talking about main street in Florida, Las Vegas, California….
Housing prices have to correct.
Here is Kansas, there was not much of a spike to begin with so there is little pain on the way down since there is a log less room to drop. The job market is good here, so home values will remain. If you don’t have the credit to qualify for a morgtage in the new age of strict credit, RENT.
The less congress does the better in my opinion.
Already, lending has been restricted to the point where you pretty much have to have 20% down payment to purchase a home. That in and of itself has eliminated a host of buyers that were in the market 2 to 5 years ago. That reality is going to affect the value of your house, especially if you live in a area that was ballooned up by unsustainable buying.
Continuing to give mortgages to people who dont understand the magnitude of the debt they are taking on just to keep the prices up in your neighborhood is more of the same old policies that caused foreclosure neighborhoods to pop up in the first place.
It was too much credit (courtesy of the Fed and loose lending policies of Fannie and Freddie) which caused the economy and asset values to balloon beyond sustainable values. This was done by the Federal Reserve System and Lawmakers actively seeking to increase available credit so that the economy appears to be growing robustly and everybody is happy.
unsustainable means unsustainable. Housing values are returning the levels they should have been all along and away from values that were grossly overpriced.
dadman
Posted September 30, 2008 at 2:36 pm | Permalink
TO ALL MY FRIENDS AT WE BLOG…. George Bush has been in office
for 7 1/2 years. The first six the economy was fine
___
And this mess did not happen overnight. Just because Bush said the economy was fine does not make it so. He also said the Iraq War was ‘mission accomplished’ and we all know what a lie that was! Perhaps if Bush had not spent $600 billion for his Iraq War, our country would be in beter shape to handle this financial crisis?
Bush and Republicans were in total control for 6 of those years and if there was a problem on Wall Street, then why wasn’t there something done by them? They certainly passed all their spending bills that they wanted pushed through.
Why did they let Phil Gramm, McCain’s economic adviser, push for deregulation? I’ve seen the Republicans blame everybody else but themselves in this mess.
Rather than blaming everyone – why not just say both parties are to fault for this mess and see how we can get out of it with the least amount of damage to our country? Or is that too much to ask from partisanship politics?
I agree with my liberal friends in that you must have regulations if you are going to have a centrally planned economy.
Those of you who are pushing for deregulation, need to also be pushing for Abolishment of the Federal Reserve System.
You cannot have a private bank that is unaccountable to the people doing what they want without regulation.
I say you just get rid of the problem and get rid of the Fed.
Only in my wildest dreams though it would appear.
Austrian..
>What crash? The market is back up today. Everything is fine. Just let the correction happen. There is no need to panic.
That’s myopic thinking! You don’t have to panic, but allow others to!
Thousands of jobs are being lost with these instant corrections and forced sale Corporate mergers. Mortgage contracts are flawed, families are stuck with. Small business credit is tougher to maintain or get!
Investors have lost money they risked. Some have savings in crashed banks they will never recover.
Congress is in a election year panic is why they voted down the bailout. Sucks to be them but doing so, they are dropping responsibility that comes with being a Senator.
Panic has been building for a long time with CEO and executive overpaying and it’s not going away with the bailout. Stock fraud has been happening more often on Wall Street in the last 8 years.
Announcing steps that helps the consumer will go a long way for the bailout to happen. Helping corporations return to fraudulent business practices is wrong.
This is a key time for Federal regulators to make a difference how some corporations act.
“Rather than blaming everyone – why not just say both parties are to fault for this mess and see how we can get out of it with the least amount of damage to our country? Or is that too much to ask from partisanship politics?”
Didn’t you get the memo? EVERYTHING IS 100% THE DEMOCRATS’ FAULT!
Mrage.
Thomas Jefferson always said that you shouldn’t spend money before you have earned it.
I do agree with the regulations. If you are going to have a centrally planned economy and not a free market, you are going to have to regulate.
How about we get an audit of the Federal Reserve? We have never done one and I think that since they control our money, we should know what they are doing with this countries life blood.
Do you agree?
Didn’t you get the memo? EVERYTHING IS 100% THE REPUBLICANS’ FAULT!
Guess it depends who is talking.
If everyone has an hour to spare, I’d like to suggest watching a video called, “Money as Debt”. It is 45 minutes long and can be found on youtube or google.
If you have questions, just ask. I have seen it twice and have a good understanding of what it is conveying.
The History of a Financial Disaster
1997
Fannie Mae is a GSE (Govt. Sponsored Entity) regulated by Congress.
Fannie Mae buys mortgages from other companies.
It is backed by the taxpayers for all losses, but keeps all profits.
President Clinton loosens Home Loan Requirements.
1998
Banks begin making thousands of bad loans,0 down, no documentation, for 120%! (1998 – 2008).
Executives at Fannie receive huge bonuses if loan targets are met.
Franklin Raines and Jamie Garelick from the Clinton Administration are appointed to run Fannie Mae.
2003
President Bush proposes a new oversight committee to clean up Fannie Mae, but Democrats derail the effort.
Rep. Melvyn Watt, (D-NC) Committee on Financial Institutions & Consumer Credit. stated, “I don’t see much other than weakening the bargaining power poorer families to get affordable housing.”
1999 – 2004
Raines earns $100 million in bonuses.
Garelick earns $75 million in bonuses.
In 2004, Enron collapses, congress investigates, Executives Skilling & Lay go to jail, for fraudulent bookkeeping.
Congress responds with the Sorbanes-Oxley Act, more heavy regulation of corporations.
2004
An OMB investigation finds massive fraudulent bookkeeping at Fannie Mae.
False numbers triggered executive bonuses every year.
Congress holds no hearings, no one goes to jail, or is punished.
WHY NOT?
1999 -2005
Fannie Mae gives millions to Democratic causes, examples: Jesse Jackson & ACORN.
Fannie Mae pays millions to 354 congressmen and senators, from both parties.
Who got the most money?
Top 4 Recipients
#1 Sen. Christopher Dodd, (D-CT) Chairman of the Banking, Housing, & Urban Affairs Committee
#2 Sen. Barack Obama, (D-IL)
Federal Financial Management Committee
Top 4 Recipients
#3 Sen. Chuck Schumer, (D-NY)
Chairman of the Finance Committee
#4 Rep. Barney Frank, (D-MA)
Chairman of the House Financial Services Committe
2005
Franklin Raines & top execs are forced to resign from Fannie Mae.
They do not go to jail.
There is no media “perp. walk.”
They keeps all of their bonuses
They finally pay $31.4 million in civil fines.
2005
The Federal Housing Enterprise Regulatory Reform Act is sponsored by:
#325 Sen. John McCain, (R-AZ)
Armed Services, & Commerce, Science, & Transportation
“If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”
2005
None of the top 4 recipients support the legislation.
The reform act is blocked by Democrats, never even making it out of committee.
None of the politicians return any of the money, tainted by fraud.
2008
Fannie Mae & Freddie Mac go bankrupt and the govt. takes them over completely.
Lehman Brothers, goes bankrupt from investing in bad mortgages.
AIG get $85 million in loan guarantees, after insuring bad loans & projects.
Taxpayers will ultimately pay BILLIONS.
2008
Franklin Raines is now an advisor to the Obama Campaign which wants the govt. to take over more of the economy.
Did government involvement in the mortgage market work out?
How will even MORE government involvement make it better? Do you want to be Sweden?
McCain favors revising regulations & loan standards, selling off Fannie & Freddie.
SOURCES
Congressional Record, 5/25/06
“Hannity & Colmes,” Fox News, 9/16-9/17/08
Herald Tribune, 4/18/08
New York Times, 9/13/03
http://www. govtrack.com, 9/17/08
Austrian
Moderate use of credit is allowed and greatly appreciated. We can spend more than cash on hand and that’s wonderful.
I want regulations to stop stock fraud. If short sellers are gaming Wall Street put an end to their manipulation.
People investing shouldn’t demand corporates create fraud to make a profit for a mutual fund.
How to regulate the Federal Reserve, I have no idea what good it will do. The Fed has to sustain themselves first. The Fed has to support corporates on Wall Street in some way. They have to do a better job regulating and investigating.
A better SEC leadership and more investigators would help!
I put blame on corporates they were allowed too much free market manipulation.
Mrage,
That may be your problem. You think this is a free market. Just because someone told you it was, that doesn’t make it so.
They love to use the words freedom and free markets, but only when it suits their needs. They piggy back on the founding fathers principles, but hardly apply them in real life.
We live in a centrally planned economy. Fredrick Hayek proved and won a nobel prize by showing that the Federal Reserve was soley responsible for the boom and bust cycles of our economy.
I want an audit, not regulations on the Federal Reserve. They have proven now more than ever that they are a hinderance to our economic freedom. Just look at the mess that we are in now. Why would we listen to them? They caused the problem.
“2004
An OMB investigation finds massive fraudulent bookkeeping at Fannie Mae.
False numbers triggered executive bonuses every year.
Congress holds no hearings, no one goes to jail, or is punished.
WHY NOT?”
Ask the Party that was in charge: REPUBLICANS!!!!!
The major Wall Street ratings firms played a big, and largely overlooked, role in creating the current economic crisis. Ratings companies are supposed accurately and impartially analyze the books of financial institutions. But they failed to do that.
Instead these reckless firms signed off on the health of companies like Fannie Mae, Freddie Mac, and Lehman Brothers again and again, much the same way that Enron’s accountants said everything was fine right up to its complete collapse.
Austrian,
Your advocating historian values to fix the current Wall street meltdown. I didn’t know who Fredrick Hayek was. I’ll have to read more opinions of his.
You want an audit where?
Lender of last resort
The Federal Reserve has the authority and financial resources to act as “lender of last resort” by extending credit to depository institutions or to other entities in unusual circumstances involving a national or regional emergency, where failure to obtain credit would have a severe adverse impact on the economy.
Through its discount and credit operations, Reserve Banks provide liquidity to banks to meet short-term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals.
Longer term liquidity may also be provided in exceptional circumstances. The rate the Fed charges banks for these loans is the discount rate (officially the primary credit rate).
In making these loans, the Fed serves as a buffer against unexpected day-to-day fluctuations in reserve demand and supply. This contributes to the effective functioning of the banking system, alleviates pressure in the reserves market and reduces the extent of unexpected movements in the interest rates.
For example, on September 16, 2008, the Federal Reserve Board authorized an 85 Billion dollar loan to stave off the bankruptcy of international insurance giant American International Group (AIG).
Central bank
In its role as the central bank of the United States, the Fed serves as a ‘banker’s bank’ and as the government’s bank. As the banker’s bank, it helps to assure the safety and efficiency of the payments system. As the government’s bank, or fiscal agent, the Fed processes a variety of financial transactions involving trillions of dollars.
Just as an individual might keep an account at a bank, the U.S. Treasury keeps a checking account with the Federal Reserve through which incoming federal tax deposits and outgoing government payments are handled.
As part of this service relationship, the Fed sells and redeems U.S. government securities such as savings bonds and Treasury bills, notes and bonds. It also issues the nation’s coin and paper currency. The U.S. Treasury, through its Bureau of the Mint and Bureau of Engraving and Printing, actually produces the nation’s cash supply; the Fed Banks then distribute it to financial institutions.[19]
Federal funds
Federal funds are the reserve balances that private banks keep at their local Federal Reserve Bank. These reserve balances are the “reserves” in “federal reserve”, hence the name of the system.
The purpose of keeping funds at a Federal Reserve Bank is to have a mechanism through which private banks can lend funds to one another. This market for funds plays an important role in the Federal Reserve System as it is what inspired the name of the system and it is what is used as the basis for monetary policy.
Monetary policy works by influencing how much money the private banks charge each other for the lending of these funds.
“…ND WHAT HAS CONGRESS DONE IN THE
LAST TWO YEARS, ABSOLUTELY NOTHING.”
Let me quote Regular for your enlightenment:
Regular
Posted September 29, 2008 at 6:16 pm | Permalink
“Try and learn how the government works. The minority can resist attempts where a committee majority is not reached and prevent the bill from getting to a vote in the Senate/House.”
Good point David. Especially with the extremely slim margin in the Senate where the Republics routinely filibuster.
The view of Joseph Stiglitz, the Nobel-prize winning economist, writing in the unapologetically lefty Nation:
“The champagne bottle corks were popping as Treasury Secretary Henry Paulson announced his trillion-dollar bailout for the banks, buying up their toxic mortgages. To a skeptic, Paulson’s proposal looks like another of those shell games that Wall Street has honed to a fine art. Wall Street has always made money by slicing, dicing and recombining risk. This “cure” is another one of these rearrangements: somehow, by stripping out the bad assets from the banks and paying fair market value for them, the value of the banks will soar.
There is, however, an alternative explanation for Wall Street’s celebration: the banks realized that they were about to get a free ride at taxpayers’ expense. No private firm was willing to buy these toxic mortgages at what the seller thought was a reasonable price; they finally had found a sucker who would take them off their hands–called the American taxpayer.
The administration attempts to assure us that they will protect the American people by insisting on buying the mortgages at the lowest price at auction. Evidently, Paulson didn’t learn the lessons of the information asymmetry that played such a large role in getting us into this mess. The banks will pass on their lousiest mortgages. Paulson may try to assure us that we will hire the best and brightest of Wall Street to make sure that this doesn’t happen. (Wall Street firms are already licking their lips at the prospect of a new source of revenues: fees from the US Treasury.) But even Wall Street’s best and brightest do not exactly have a credible record in asset valuation; if they had done better, we wouldn’t be where we are. And that assumes that they are really working for the American people, not their long-term employers in financial markets. Even if they do use some fancy mathematical model to value different mortgages, those in Wall Street have long made money by gaming against these models. We will then wind up not with the absolutely lousiest mortgages, but with those in which Treasury’s models most underpriced risk. Either way, we the taxpayers lose, and Wall Street gains.
And for what? In the S&L bailout, taxpayers were already on the hook, with their deposit guarantee. Part of the question then was how to minimize taxpayers’ exposure. But not so this time. The objective of the bailout should not be to protect the banks’ shareholders, or even their creditors, who facilitated this bad lending. The objective should be to maintain the flow of credit, especially to mortgages. But wasn’t that what the Fannie Mae/Freddie Mac bailout was supposed to assure us?
There are four fundamental problems with our financial system, and the Paulson proposal addresses only one. The first is that the financial institutions have all these toxic products–which they created–and since no one trusts anyone about their value, no one is willing to lend to anyone else. The Paulson approach solves this by passing the risk to us, the taxpayer–and for no return. The second problem is that there is a big and increasing hole in bank balance sheets–banks lent money to people beyond their ability to repay–and no financial alchemy will fix that. If, as Paulson claims, banks get paid fairly for their lousy mortgages and the complex products in which they are embedded, the hole in their balance sheet will remain. What is needed is a transparent equity injection, not the non-transparent ruse that the administration is proposing.
The third problem is that our economy has been supercharged by a housing bubble which has now burst. The best experts believe that prices still have a way to fall before the return to normal, and that means there will be more foreclosures. No amount of talking up the market is going to change that. The hidden agenda here may be taking large amounts of real estate off the market–and letting it deteriorate at taxpayers’ expense.
The fourth problem is a lack of trust, a credibility gap. Regrettably, the way the entire financial crisis has been handled has only made that gap larger.
Paulson and others in Wall Street are claiming that the bailout is necessary and that we are in deep trouble. Not long ago, they were telling us that we had turned a corner. The administration even turned down an effective stimulus package last February–one that would have included increased unemployment benefits and aid to states and localities–and they still say we don’t need another stimulus. To be frank, the administration has a credibility and trust gap as big as that of Wall Street. If the crisis was as severe as they claim, why didn’t they propose a more credible plan? With lack of oversight and transparency the cause of the current problem, how could they make a proposal so short in both? If a quick consensus is required, why not include provisions to stop the source of bleeding, to aid the millions of Americans that are losing their homes? Why not spend as much on them as on Wall Street? Do they still believe in trickle-down economics, when for the past eight years money has been trickling up to the wizards of Wall Street? Why not enact bankruptcy reform, to help Americans write down the value of the mortgage on their overvalued home? No one benefits from these costly foreclosures.
The administration is once again holding a gun at our head, saying, “My way or the highway.” We have been bamboozled before by this tactic. We should not let it happen to us again. There are alternatives. Warren Buffet showed the way, in providing equity to Goldman Sachs. The Scandinavian countries showed the way, almost two decades ago. By issuing preferred shares with warrants (options), one reduces the public’s downside risk and insures that they participate in some of the upside potential. This approach is not only proven, it provides both incentives and wherewithal to resume lending. It furthermore avoids the hopeless task of trying to value millions of complex mortgages and even more complex products in which they are embedded, and it deals with the “lemons” problem–the government getting stuck with the worst or most overpriced assets.
Finally, we need to impose a special financial sector tax to pay for the bailouts conducted so far. We also need to create a reserve fund so that poor taxpayers won’t have to be called upon again to finance Wall Street’s foolishness.
If we design the right bailout, it won’t lead to an increase in our long-term debt–we might even make a profit. But if we implement the wrong strategy, there is a serious risk that our national debt–already overburdened from a failed war and eight years of fiscal profligacy–will soar, and future living standards will be compromised. The president seemed to think that his new shell game will arrest the decline in house prices, and we won’t be faced holding a lot of bad mortgages. I hope he’s right, but I wouldn’t count on it: it’s not what most housing experts say. The president’s economic credentials are hardly stellar. Our national debt has already climbed from $5.7 trillion to over $9 trillion in eight years, and the deficits for 2008 and 2009–not including the bailouts–are expected to reach new heights. There is no such thing as a free war–and no such thing as a free bailout. The bill will be paid, in one way or another.
Perhaps by the time this article is published, the administration and Congress will have reached an agreement. No politician wants to be accused of being responsible for the next Great Depression by blocking key legislation. By all accounts, the compromise will be far better than the bill originally proposed by Paulson but still far short of what I have outlined should be done. No one expects them to address the underlying causes of the problem: the spirit of excessive deregulation that the Bush Administration so promoted. Almost surely, there will be plenty of work to be done by the next president and the next Congress. It would be better if we got it right the first time, but that is expecting too much of this president and his administration.”
http://www.thenation.com/doc/20081013/stiglitz
I guess this is unsurprising:
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http://www.house.gov/house/messaging.shtml
Sure there’s a rebound, some people betting the house won’t screw up a second time after getting their hides warmed last night.
If they have another failed vote, look for the bottom to fall out again.
The underlying cause of the problem is greed. Try legislating that out of the human race.
THE TRUTH!
This morning Fox News aired something associated with this…….interviewing a guy who admitted that Barack Hussein Obama when he was a community organizer, was training ACORN members on how to harass lending institutions, banks, and bank execs to give home loans to people without qualification.
Watch this video till the end.
http://www.youtube.com/watch?v=NU6fuFrdCJY
Let’s say 5 million houses are in danger of foreclosure. Average mortgage: maybe $200,000. So there’s your trillion bucks worth of bad loans. Let’s say the value of each unit is $150,000, considering the falling value of real estate. Boom; the lenders stand to lose 250 billion.
If the government ends up owning five million houses what the hell does it do with them? Couldn’t we wipe out most of our military housing shortages somehow?
So you end up paying a trillion dollars for houses worth say $750 billion. And all that is needed to make the loans good is a rebound in real estate prices. And in the mean time, the government can work all sorts of interest bearing deals to save homes from foreclosure. A thirty-year loan on three-quarters of the original principal would eventually return a profit to the treasury.
I don’t mind the bailout as long as the government ends up owning the property. In fact, it’s a golden opportunity, I’d wager. The government would in effect be buying much of the recent housing boom. The government would have the housing market cornered, and could do what ever the hell it wanted, given any kind of economic recovery otherwise. But can Uncle Sam take care of the property? Probably not. At least that way, it’s an investment, not a give-away.
What’s really cool about my plan is under it the govenment would nationalize housing. Haw, haw, haw.
http://www.youtube.com/watch?v=qqOlNz1vcQk
I suggest everyone e-mail this video to their favorite government official with your very own personalized cute comments
I think this Power Point shows what caused the mortgage and credit crisis pretty well. And it does so without pointing fingers at one political party or the other. Which I think is a bit of a mistake as it is primarily the Dims that are at fault for setting in place the unrepayable loans they wanted given to people that couldn’t afford them.
http://www.scribd.com/doc/2074315/Subprime-Primer?query2=subprime%20primer%20.ppt
The reason and it didn’t pass is it’s an election year,you know the only time the reps listen to their constituents
It falls to the dems. in the senate to take the leadership role, as the house is inept and in a state of chaos. We should write Roberts about our disappointment in his vote, or should we wait to see how he and brownback vote?
http://news.yahoo.com/s/nm/20081001/pl_nm/us_financial_bailout_vote_2
“…with your very own personalized cute comments.” — annie_moose
——-
What I thought of was borrowing Bill Cosby’s words and changing them slightly to fit the circumstances.
“You know, I brought you in this world, and I can take you out. And it don’t make no difference to me, I’ll make another one look just like you.”
Anyone thrilled about the idea of the federal government OWNING your house (and controlling your mortgage) until you get your home loan paid off? That means it will be controlled by the same people who decided to push mortgage companies/banks into giving loans to people who could stand up, breathe, and had a dollar in their pocket when they applied for a house they couldn’t afford or had no interest in paying for.
Excuse me, but it was the Mortgage companies who came up with the “creative loan solution” because there was a huge amount of money being made from sub-prime loans. It’s very profitable to finanace a home with a variable or interest only mortgage, they weren’t doing it out of the goodness of their hearts so poor people could buy houses…although that’s what they want you to believe..and that big bad liberals were forcing them do it. Just look at their CEO’s salaries and tell me it’s not about greed and making money. Their lobbyists made sure de-regulation happened just so corporations could line their pockets.
Now I am really convince that McCain is too old to be a president.
I have yet to hear from our country’s “leaders” how an open-ended bailout of this country’s largest banks will do anything but continue to satisfy Wall Street’s greed. If the current administration is behind a bailout bill, you can rest assured it is NOT in the citizens’ best interests. It looks and smells like a desperate last-ditch attempt by a bunch of fat-cat Republicans to steal the last scraps left at the table before Barack Obama takes office and the freewheeling, unregulated greedheads are run out of Washington on a rail. I don’t own a home for any bank to take from me, I lost my job three months ago, I have no health insurance and with the market in a shambles, my 401(k) is all but lost. Someone please tell me how this bailout will guarantee me some relief on even ONE of those issues.
I hope the people saying we have to do this bailout know what the hell they are talking about:
How much is 700 billion dollars
http://news.yahoo.com/s/livescience/howmuchis700billion
NASA in fiscal year 2009. budget: $17.6 billion,
The National Science Foundation (NSF) has an annual budget of $6.06 billion
$606 billion for military operations and other activities associated with the war in Iraq, according to the Congressional Budget Office (CBO).
The entire military budget for fiscal 2008 is $481.4 billion.
Social Security is a $608 billion annual program.
Based on the U.S. Census Bureau’s estimate of the current population of about 305 million people, each person would have to pay $2,300 to fund the $700,000,000,000. If each American (including children) paid a dollar a day, it would take more than six years to pay the money in full
While the devil is in details (of course), I think cartoonist Ted Rall sums up why most people hate the idea.
http://www.rall.com/uploaded_images/9-25-08-718557.jpg
Sometimes on Wall Street stockholders lose. This mess was running along like a boom town economy. Following boom town action comes very slow times which is not new. In fact there is tons of history to substantiate this fact. Now it may be time for the winners to absorb some of the loss or they can cash in and hit road looking for other winners.
It’s what’s best for the nation. Which in my eye is bailing out homeowners thus taxpayers. Bailing out homeowners will get things moving along once again which is all the economy is waiting for. New USA industry and lots of new good paying jobs is what the nation needs otherwise we are pissing in the wind. Bailing out Wall Street won’t bring new industry and jobs as the last 30 years has proven. Out sourcing USA means of constantly creating new wealth in the name of cheap crappy products at Wal-Mart is coming back to bite us in the butt.
I say to House members don’t rush through this because haste makes waste. Throwing homeowners out on the street does not generate new wealth for the nation. Reorganizing their loans would be smart thinking. Then bring on new industry and jobs.