Bailout package *passes* house

[HATEFACE]

[Fionn]

So whens the next world war?

it started in '96

My professional opinion?

Hold on to your butts.

+1

[Mulu]

Negotiators from the House and Senate have concluded marathon discussions with secretary of the treasury Henry Paulson and come up with a bill that will be voted on this week. The bill has grown from 3 pages to 110 pages in a week. At this rate of growth it would be 4000 pages by next week and 7 billion pages by the election.

Bailout Bill Fails in the House
In an unusual show of bipartisanship, the left and the right joined together to defeat the Wall St. bailout bill for the time being. The left sees it as a giveaway of $700 billion from ordinary taxpayers to Wall St. firms that made extremely bad business decisions. The right sees it as the camel's nose under the tent: if the government can socialize losses, it can also later socialize profits.

David Corn summarizes the left's case against the bailout in this article. His main points are:

The taxpayers will not only bail out U.S. companies, but also foreign ones
Million-dollar-a-month CEO salaries will continue
The five-member oversight board will include three Bush appointees
Few home owners will be saved from foreclosure
There are no guarantees that the treasury will get warrants commensurate with its investment
There is no regulatory reform in the bill
He argues that there is no need to panic. A good bill in a week's time is a lot better than a bad bill right now.

Conservative Republican Rep. Mike Pence (R-IN) also made a clear case against the bailout. [edit] link appears to be broken now [/edit] His main points:

Economic freedom means the freedom to succeed but also the freedom to fail
This bill gives the government the right to interrupt free markets
The bill forever changes the relationship between the government and the markets
The American people will have to foot the bill for Wall St.'s mismanagement

For a lot of ordinary Americans, this crisis reminds them of the story "The Boy Who Cried Wolf." As the Washington Post put it: "The leaders of the country said: Trust Us. The people said: Not this time." Too many people still remember about how the administration said we had to invade Iraq right now with no time for debate because, as Condi Rice put it, "We don't want the smoking gun to be a mushroom cloud". Maybe there is a wolf this time, but the administration has no credibility any more. The House is operating exactly the way the founding fathers wanted it to operate: to reflect the will and passions of the people.

John McCain blamed the failure of the House bill on the Democrats, even though 60% of the Democrats voted for the bill and only 33% of the Republican did so. The old Maverick McCain would have said: "Government interference in the markets is a bad thing, something Republicans understand and Democrats don't, so we defeated this evil bill." But Candidate McCain knew that would not sell so well, so he didn't say it. McCain clearly realizes that his suspending his campaign and zipping off to Washington to provide leadership doesn't look so great now that the bill went down to defeat not because the Democrats opposed it, but because 2/3 of the House Republicans opposed it. Who is the real leader now that Nancy Pelosi got of majority of her people behind the bill but McCain was unable to rally more than 1/3 of his troops and all eight members of the Arizona congressional delegation--four Republicans and four Democrats--voted against it?

Yesterday's electoral count: Obama 286 McCain 252
Today's electoral count: Obama 286 McCain 225 Ties 27 (he lost his edge in Florida)

Oh, and on the "who saw it coming first" score, McCain loses by a few years. Eliot Spitzer saw it coming first. (Hmm, bad word choice... )

Anyway, here is the article describing several years of regulatory attempts by state government, blocked by Bush. And actually I posted this article once before, back near when it was written.

Cipher, you should have known better than to believe the right wing media. Bush is most to blame for all this. He finally got a legacy other than Iraq.

[HATEFACE]

Well if you can't trust the word of Eliot Spitzer who can you trust?

Beat it windbag you're losing all your hot air. Bill history and congressional history speaks for itself. You can continue to play the political game but maybe you ought to put blame where it's properly due.
Mulu, you should know better then to believe left-wing media. Blame Bush? No sir, I'll blame everyone involved. Bush did indeed look the other way when he should of nailed people's asses to the wall.

[Mulu]

Bush did indeed look the other way when he should of nailed people's asses to the wall.

He actually prevented state attorney generals from nailing people's asses to the wall. Washington Post is center right btw.

Anyway, with little else to say, on to some cartoons.

[paazin]

Bush did indeed look the other way when he should of nailed people's asses to the wall.

He actually prevented state attorney generals from nailing people's asses to the wall. Washington Post is center right btw.

Anyway, with little else to say, on to some cartoons.

Oh god if I see that Wall Street not Main Street analogy again I think I'm going to go psycho and hunt down each of you alfans one by one

[Kest]

lol they gave the crow a label (in case you didnt realize)

obv these comics need more words. tell, not show!!

[NickD]

http://tinyurl.com/3jdn9e

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES
Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Bolding mine. No other comment.

[Mulu]

Old news nick. Both administrations pushed to lower the bar on loans, Clinton lowered it, Bush lowered it even more, but that's only part of the equation.

The new approach, announced Tuesday night by Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky., would tack large and contentious tax measures to the bailout bill. Senate leaders figure the House will have to approve it because the tax cuts are too appealing to Republicans and the financial rescue plan will still seem essential to most Democrats.

Yes because losing $700 billion isn't enough, let's give a break to the wealthy while we're at it by slashing capital gains even more. What a fiasco.

[fluffmonster]

capital gains is little more than a tax on savings...its not really a good idea anyway. if republicans are so foolish and petty that this is the candy they have to be given to get them with the program, its a concession we can make.

[Dorn]

If this is all because of bad policy and poor regulation, perhaps the US should find some trillions or so to go some meagre way to compensating the world outside for allowing such dodgy and money-grubbing approaches from the big investment banks. Perhaps the executives of these organisations should go before international courts as well.

The amount of people outside the US who are losing out, losing homes, losing lifetimes of savings etc becasue of this US sanctioned crisis would be astonishing.

Talk about the gulf war buring the US moral capital built up from the 2nd world war....crikey.

Makes me think more socialist and isolationist policy might not be such a bad idea.

Would something liek this effect the long term economy in the US? As in investor faith in US based firms would be damaged?

(not an economist by any stretch.....clearly )

[Mulu]

The latest version of the bailout I saw included bailouts for foreign investors. They could sell their toxic assets to US firms, who then dump them on the Fed.

[ç i p h é r]

I don't like the concept of a bailout, and I like it even less now than I did when it was first proposed for 3 principal reasons:

1. A bailout rewards (and possibly perpetuates) the bad behavior that got us here in the first place, on the part of consumers who made reckless personal financial commitments, on the part of executives who put bonus compensation ahead of corporate responsibility, on the part of mortgage brokers who flat out cheated the system and made off with phat lewt, and on the part of government that encouraged bad lending practices to begin with.

2. A bailout will prevent or delay a necessary market adjustment. There is an asset bubble in the housing sector that needs to correct itself.

3. A bailout prevents the free market from doing the one thing it's best at: Sorting out the winners and losers. Banks, like Chase, that largely stayed away from subprime lending *should* emerge as market leaders. These are the institutions we want to trust our savings with!! Reward them for their sound financial practices.

What I REALLY want to see government do is hold people accountable. Why isn't Mr. Raines behind bars? Whoever cheated the system ought to be prosecuted. There is a paper trail in this sordid mess. That needs to be followed wherever it leads.

What I REALLY want to see voters do is hold their representatives accountable. There should be an independent investigation into the activities of our public officials. It would be an insult to injury if folks like Barney Frank were to be re-elected to office. If we're not going to have term limits in Congress, we absolutely must hold their feet to the fire.

And maybe...just maybe...we bring out the guillotine? Just kidding.

p.s. A pity this crisis didn't unfold a year ago. I have a feeling the primaries would have turned out quite differently.

[fluffmonster]

1. Most of the "perpetrators" have already made their getaway, whether in riches or ruin. If nothing is done, the whole country will suffer...what you're saying here basically amounts to collective punishment. Its like saying you're not going to plug a hole in the life raft to make sure the captain goes down with his ship.

2. If the market is going to be an effective clean-up mechanism, it needs to have transparency and full information. If that was the case, we wouldn't have gotten into this position in the first place. Why should we believe that the market is all of the sudden a different animal now than it was last month? Also, credit crisis will create an impediment to housing market correction. Don't know how you expect the market to clear if there is no liquidity. So basically, your thinking here is precisely backwards.

3. You need to understand that the credit markets ARE NOT WORKING. That will prevent big chunks of the rest of the economy from working too. Your contention that sound institutions will be able to work fine is demonstrably wrong. In the current climate, there is such a profound lack of trust that even solvent banks with a good loan portfolio will not be extended credit.

Also, in markets the sorting of winners and losers is often arbitrary. You can make no mistakes and still lose, and you can make gross errors and still win. The markets handsomely rewarded the exact bad behavior you decry, and all it took was for nobody to do anything about it.

Its just really unfortunate to see this kind of blind market fundamentalism at work. It is a timid ignorance which inhibits not just good governance but also the maintainence of effective market mechanisms. What you're saying is the economic equivalent of creationism, replete with an image of Eden that just isn't there. What you espouse is nothing more than a repeat of the hands-off negligence that led the world to the Great Depression.

[ç i p h é r]

1. Most of the "perpetrators" have already made their getaway, whether in riches or ruin. If nothing is done, the whole country will suffer...what you're saying here basically amounts to collective punishment. Its like saying you're not going to plug a hole in the life raft to make sure the captain goes down with his ship.

If the government is going to be the guarantor of all loans, why on earth would institutions NOT continue to gamble on high risk, high reward investments? This defies common sense.

2. If the market is going to be an effective clean-up mechanism, it needs to have transparency and full information. If that was the case, we wouldn't have gotten into this position in the first place. Why should we believe that the market is all of the sudden a different animal now than it was last month? Also, credit crisis will create an impediment to housing market correction. Don't know how you expect the market to clear if there is no liquidity. So basically, your thinking here is precisely backwards.

The market isn't a different animal now. If it runs its course, the dust will settle, and there will be winners and there will be losers. That includes people as well as corporations (and hopefully public officials too).

As for liquidity, real estate has value. It's not worth zero so the question is not whether houses can ever be bought or sold again but at what price investors and banks will feel confident that property is sufficiently UNDER valued to be considered a safe investment. That's what a correction amounts to, and if you believe that a bubble exists in the housing sector, then you must realize that this bailout simply guarantees that we - the taxpayers - bear all the losses for the correction rather than the institutions holding the assets.

3. You need to understand that the credit markets ARE NOT WORKING. That will prevent big chunks of the rest of the economy from working too. Your contention that sound institutions will be able to work fine is demonstrably wrong. In the current climate, there is such a profound lack of trust that even solvent banks with a good loan portfolio will not be extended credit.

I think that's grossly overstating the situation, not to mention incredibly patronizing. Get out of your ivory tower professor and examine the facts on the ground. Real estate transactions are still occurring and those require mortgage financing. Things are just being done more rigorously than before and with a great deal more caution (documented income history, 20% down payments, high credit scores, etc are a must), which is in fact a very good thing, unless you still want to foolishly cling to the sort of utopianism that got us to this point, in which case you are right; The credit markets aren't working.

It's not as though every mortgage was a bad mortgage or that every borrower is suddenly defaulting on their loan. I'm having a hard time connecting the dots between what I'm seeing and the predictions of utter financial collapse. What I do see though is a great deal of overreaction - and fear mongering - due to uncertainty, and of course, political posturing. If I was a banker holding onto bad loans, I'd love to sell those to the government and wash my hands of it all too. And if I was your representative, I'd love to try to take credit for solving a problem I had a hand in creating.

Also, in markets the sorting of winners and losers is often arbitrary. You can make no mistakes and still lose, and you can make gross errors and still win. The markets handsomely rewarded the exact bad behavior you decry, and all it took was for nobody to do anything about it.

And what? Government bureaucrats will do a better job micro managing the economy? Even if that were possible, it's hopelessly idealistic. With the sort of rampant corruption we have in government, about the only thing you will be assured is that those with the most money WILL end up the winners. Good God man. What are you doing in America? Comrade Putin needs you.

Its just really unfortunate to see this kind of blind market fundamentalism at work. It is a timid ignorance which inhibits not just good governance but also the maintainence of effective market mechanisms. What you're saying is the economic equivalent of creationism, replete with an image of Eden that just isn't there. What you espouse is nothing more than a repeat of the hands-off negligence that led the world to the Great Depression.