Wall Street Rejoices Over Your $700 Billion

UPDATE: Let’s be clear, as the New York Times updates:

“My hope is that we can get a deal,” said Senator Christopher J. Dodd, chairman of the Senate Banking Committee, hours after House and Senate negotiators had announced that an accord was at hand. President Bush had hoped that an agreement could be announced after the late-afternoon meeting.

Mr. Dodd, looking tired and annoyed, complained that the late complications were making the episode sound more like “a rescue plan for John McCain,” the Republican presidential candidate, than one for the financial system… [Pols emphasis]

The impression that much remains to be done was reinforced by Mr. Dodd’s comments. After saying he still hoped for a deal, the senator said it was important to take “whatever time it takes” to arrive at a good arrangement, since the effects will be felt for “years and years to come.”

It has become abundantly clear, that members of Congress are hearing from their constituents, many of whom are furious about the proposed rescue. [Pols emphasis]

UPDATE: What the hell is going on? Talks now in “disarray,” according to CNN:

Dana Perino, the White House press secretary, released a statement saying, “The president appreciates the bipartisan members of the congressional leadership and the two presidential candidates coming to the White House today to discuss how to finalize the financial rescue package. There is a clear sense of urgency and agreement on the need to stabilize the financial markets, and prevent a massive financial crisis from affecting everybody in America.”

The statement went on to say that the group will continue to work on a deal.

But according to Sen. Richard Shelby, R-Alabama, who attended the meeting, “we will not have a deal.”

Sen. Chris Dodd, D-Connecticut, who also attended the meeting, said Thursday that the meeting was contentious and blasted what he calls McCain’s inaction.

“I’m not quite sure what John McCain said at the meeting. He said something. … He had no indication he was for any particular plans. I don’t know where he is on all of this,” Dodd said…

Qui bono?

UPDATE: A done deal, as the New York Times reports:

House and Senate negotiators from both parties said Thursday that they had reached general agreement to move forward with the Bush administration’s proposed $700 billion rescue effort of the nation’s financial system.

Emerging from a nearly three-hour meeting in the Capitol, Republicans and Democrats said they would continue working through the day to complete the legislative language and would begin final negotiations with the Treasury.

It was unclear if a final draft would be ready by 3:55 p.m. when Congressional leaders are scheduled to meet at the White House with President Bush and the two presidential candidates, Senator John McCain, Republican of Arizona, and Senator Barack Obama, Democrat of Illinois.

But lawmakers in both parties said that few substantive differences and no major obstacles remained. They said the bill would authorize the full $700 billion requested by President Bush, but that Congress was intent on disbursing the money in installments…

As Money reports:

Stocks surged Thursday, with the Dow up more than 230 points, as investors breathed a sigh of relief that a $700 billion bank bailout deal is nearing completion, after days of heated debate.

Optimism about bailout plan tempered the latest signs of economic distress – including GE’s profit warning and weak reports on new home sales, weekly jobless claims and demand for manufactured goods…

Hinnenkamp said that passage of a bailout would likely spark a euphoric reaction in the short run, as investors breathe a sigh of relief that one of the weights on the economy has been lifted. Additionally, investors would take reassurance from seeing Congress put this through, despite party differences.

“In the longer term, Wall Street might acknowledge that it doesn’t like all the provisions,” he said. “But in the shorter run, it should restore confidence to the markets, something that has been sorely lacking of late.”

Optimism about the deal enabled investors to look past the session’s negatives, including GE (GE, Fortune 500)’s profit warning, a seven-year high for jobless claims, a big drop in durable goods orders and a report that showed new home sales fell to a 17-year low…

106 Community Comments, Facebook Comments

  1. sxp151 says:

    The stock market seems to be doing fine. I think if we just string Wall Street along with bailout news, the stock market will end up higher than it was last Monday. Eventually they’ll forget entirely about it, and we’ll have saved ourselves a crapload of money.

    Weird how Wall Street always reacts to speculation about events, rather than the events themselves.

    • bob ewegen says:

      Rise on the rumor, fall on the event.

    • Another skeptic says:

      The Dems staged a victory party designed to discredit McCain and wound up with mud on their very partisan faces.

      Their “plan” is so full of holes that it’s unworkable. It’s earmarked and loaded with social programs tied to modifying home mortgages. None  of this should be in the final bill.

      Similarly, the House GOP’s insurance proposal makes no sense. It proposes to sell insurance against a decline in values of mortgage back securities that have already lost their value. That’s like selling insurance to somebody who’s just wrecked a car and wants the insurer to cover the damage. And it’s like selling to someone who’s gone without health insurance after they get cancer.

      So both parties are making fools of themselves, as is the Administration, imo.

  2. indipol says:

    When every Senator and Rep in America ignores the overwhelming flood of calls and emails telling them to not bailout Wall Street, then they do it anyway, that’s called leadership.

    • Half Glass Full says:

      The easy way would be to say “hell no” and just blame everyone else. Politicians from ALL sides have acted responsibly in making the best now of a terribly bad situation.

      It’s a mess. It’s disgraceful. But it’s necessary.

      • indipol says:

        i have yet to see any objective facts to convince me that this is “necessary.”  (and I am a dedicated investor with stake in the game.)  furthermore, the moral hazard this creates, and the near-certainty that this ensures it will happen again, makes me ill.

        at any rate, placing the term “necessary” on this bailout is subjective, not objective.

        I totally agree that a real leader makes unpopular choices even when his/her constituents are clamoring for something more popular.  This isn’t one of those cases.

        • Danny the Red (hair) says:

          The was no liquidity in the credit markets. None.

          Unless you had treasuries you could not sell a bond.

          Institutions started hammering their credit lines get liquidity further straining banks leverage and shriveling their balance sheets for loans and market making.

          Equities get the glory, but credit drives the market.  Money is a flow: it MUST change hands in order for the system to work. When the market goes “no bid” you are in deep trouble.

          In the old days there were actor who could come in and provide low bids, but modern risk management practices have limited those kinds of players.

          A financial stabilization plan is necessary to promote liquidity in the market.  The Paulson plan was the wrong plan, I want to see what the new plan looks like, but I know a plan is necessary and I have my opinion on what it should look like.

          • PERA hopeful says:

            Esp. since I’ve selected you to be my financial advisor … the very minute I get some money, that is.

          • indipol says:

            that a no bid condition is the same as being trapped inside the event horizon of a black hole.  it’s not.

            i’m not opposed to the gov making intelligent moves right now.  But Congress buying that completely bogus pulled-out-of-Bernanke’s-ass $700B number without even asking where the F it came from is ludicrous.  It’s also ludicrous that the Dems continue to try to extract executive pay regs as the biggggg concession they’re going to wring out the Admin for this.  The D’s are acting totally spineless at exactly the wrong time, asking milquetoast questions of Paulson and Bernanke.  The last time this kind of BS went on in the Hill it produced the Patriot Act.

            i am not ignorant of the risk here (which is why I pulled out of most of my stock positions and went into inflation-protected securities and gold), but to my eyes throwing $700B cash into the air is very high long-term risk with very uncertain short-term gain.

            • Danny the Red (hair) says:

              History has shown “no bid” or “Panics” as they used to call them cause depressions.

              We had depressions every 15 years or so before the regulation of Great Depression.

              When we were an agrarian society with limited industrial production, depressions were not as terrible because people didn’t become homeless setting off migration waves.  People could live off their farms and not worry about employment and credit conditions.

              That’s not our world.

              The $700B number is pulled out of the air by Treasury.  5% of GDP is higher than most bailouts.  I disagree with you about the conduct of Democrats.  I think they and the senate republican have acted responsibly.

              I think oversight and warrants are good additions.  I want a HOLC workout fund, but I understand GOP resistance to this, but it would help speed the recovery.

              Hell buy the foreclosed homes and give them to the folks hammered by the hurricanes.

              But the risk is real and pressing

    • Haners says:

      Barrack Obama’s contribution to the whole thing is calling President Bush and telling him that “something needs to be done”.

      We obviously have leadership pouring out of our ears.

      • Sir Robin says:

        You know Obama had a detailed set of principles he’s put forward that must be met in the final version of this socializing of debt.

      • Fidel's dirt nap says:

        now THAT is LEADERSHIP.

      • BlueCat says:

        Think about that.  He couldn’t spare  the time to read two and a half pages before he started shooting his mouth off?  His advisers didn’t think their was any point in briefing him on it?  Why not? Have they just given up explaining  this stuff to him?   He was going to rush to DC to save the day  by discussing the ins and outs of a plan he never looked at?  This is showing leadership? Sorry Haners,  your candidate is a disaster and his running mate is a very bad joke.

        And,  in case you didn’t notice, everyone was reporting progress until McCain showed up to pull off his phony political stunt complete with the un-suspended suspended campaign and  the Letterman show embarrassment.  It was AFTER McCain arrived that everything went to shit so fast.  No wonder he scares the pants off George Will.  

        • dwyer says:

          McCain is captive now to the far right, the very people whose ugly tactics cost him South Carolina in 2000 and may have cost him the nomination. He is identifying totally with them.

          A sad day for a old man who was once very brave.

  3. Disinterested17 says:

    It’s only the most expensive bill in the history of the world . . .

    Gotta buy all those votes!

  4. CrazyOkie says:

    I imagine next year we will see a documentary outlining all of the conflicts of interest for those involved with cutting this deal.  

    I look forward to seeing who voted for this scam.

  5. Half Glass Full says:

    Or you can assume that they’ve been given the facts and are trying to make the best of a really lousy situation.

  6. parsingreality says:

    I’ve made some bad decisions in life, and some of them were even due to greed (quite a long time ago).

    Where’s my bail out?

  7. Ralphie says:

    This won’t reach the House floor unless there are at least 100 R votes for it, and there aren’t.

    Dems aren’t going to pass this piece of shit all alone.

    • sxp151 says:

      They were out in front demanding that we must pass exactly the President’s bill right now. Where were Jim Bunning, Mike Pence, John Boehner, and Richard Shelby last week?

      Now they’re against any deal.

      They’re making it up as they’re going along. The essential bankruptcy of their “give the rich whatever they want, and everything else will work itself out” economic philosophy is out on display.  

    • Gilpin Guy says:

      to keep McCain from looking like a fool.  This isn’t what’s best for the country.  It is a stall tactic to give legitimacy to McCain’s goofy campaigning.  Sickening politics really.

      “We have a deal”.  “No you don’t you terrible Democrats”.  Something like that.

  8. ajb says:

    I just spent a little time on Thomas, the congressional website. Over the past few years, there have been several bills introduced to regulate the mortgage market (I searched on Fannie Mae). They all died in committee:

    H.R.1409 Secondary Mortgage Market Enterprises Regulatory Improvement Act (2001)

    H.R.4071 Uniform Securities Disclosure Act

    (2002)

    S.1508 Federal Enterprise Regulatory Reform Act of 2003

    S.1656 Federal Housing Enterprise Oversight Modernization Act of 2003 (2003)

    H.R.2575 Secondary Mortgage Market Enterprises Regulatory Improvement Act (2003)

    H.R.2022 Leave No Securities Behind Act (2003)

    H.R.2803 Housing Finance Regulatory Restructuring Act of 2003

    H.R.1461 Federal Housing Finance Reform Act of 2005

    S.190 Federal Housing Enterprise Regulatory Reform Act of 2005

    All of these bills were introduced and killed when republicans controlled the House, Senate, and White House.

    Now republicans want to blame Democrats? You have to admire the chutzpah!

  9. Danny the Red (hair) says:

    This morning–done deal.

    McCain shows up

    No deal.

    Now the house minority is holding up a new “proposal” that nobody knows anything about.  Not minority leadership not Senate republicans, not Paulson, not the president.  WTF?

    McCain loves to say he would rather lose an election than lose a war, now he’s got to add that he’s willing to cause a depression if it will help him win an election.

    McCain=a bag of shit.

    • Go Blue says:

      Fuck him. Now this is personal.  

    • bob ewegen says:

      you’re going to suffer from a stress disorder. Tell us what you really think.  

    • Dabee47 says:

      According to who?  Chris Dodd…woohoo!

      House Repubs weren’t on board with this and only some Senate Repubs were.  Sure, Judd Gregg was, Bob Bennett I guess…but sure as hell not Shelby…and obviously not McCain.

      Dodd and Barney Frank (along w/ Gregg and Bennett flanking them) weren’t in a position to say they had a deal in place this morning.  They had what they hoped some folks would go along with…but didn’t get Boehner and the gang on board. That was the major fuck up.

      Now, politically speaking, if we get a deal tomorrow morning, McCain’s going to come out of this looking pretty good.  Not to people that actually think, but to the idiots that will decide this election.

      One day Dems will learn how to play politics…apparently it hasn’t happened yet.  And yes, playing politics with this was a great idea…if it works.  Getting a deal tomorrow isn’t going to make anything worse than if we had a deal today.  If this is over by tomorrow night and McCain and Obama are sitting in Mississippi tomorrow night, bravo repubs…

      • Danny the Red (hair) says:

        In the Senate they had the majority of the Rs in the Banking committee (not Shelby obviously- who is waving around that stupid Chicago School deregulation plan)

        They even had a majority of the Rs on the House finance committee.  They just need half the House GOP rank and file to make it look like everybody was on board.  They were drifting that way and McCain comes in and shits the bed giving everyone an excuse to run.

        • Dabee47 says:

          As far as I’ve seen, Dodd only named Bennett and Bob Corker in terms of who was on board.  He named Gregg, which is nice, but he’s not on the committee.

          Spencer Bachus was on board in the House…at least he’s the RM on the committee, but who else was in this “majority?”

          I’m more than happy to admit when I’m “flat wrong,” but all Dodd said this morning, then when he was making the rounds after the meeting at the White House, was that he thought that they had a deal but no one outside of the two respective committees had cleared anything with the rest of Congress, the White House, or the Treasury.  That’s not a deal, that’s the BHUA and Financial Services.

          BTW, I completely agree that McCain is a giant shit, but while he may have “come in and shit the bed,” the bed was already covered in shit…

  10. redstateblues says:

    I hope that the people who are blocking this understand what they’re doing. I understand how much pressure they’re feeling from their constituents, but if we fail to act… I don’t know.

    • Ralphie says:

      I hope that the people who approve it know what they are getting into.

      We were stampeded into war recently based on bullshit.

      I can certainly understand people who are skeptical about the urgency.  And I can’t understand the people who aren’t.

      This deal will get done when the people are ready for it.

      And not a moment before.

  11. colorado76 says:

    so McCain can save the day tomorrow, they better cover their tracks well.  If people believe it, it will help, but if people find out about it, that’s the ball game.

    • bob ewegen says:

      preventing us from hanging every third member of Congress, chosen by lot, from a lamppost as a means of getting the attention of the rest?  If there is, I vote we horsewhip the lot of them, Barney Frank excepted.

    • Danny the Red (hair) says:

      Taxpayers are skittish.  They don’t trust the government. They are worried they’re getting ripped off.

      Taxpayers are right.  But the House weasels are forgetting to mention the best when you are being mugged, sometimes you have to give the robber the money to stay alive.

      Credit markets completely broke down last week.  That is what is known as a “Panic.”  We had lots of them in the 19th century and they caused depressions.

      We’re being mugged-pay the money ans stay alive.  Take precautions to keep our streets safe in the future (Wall and Main).  And make sure the muggers get punished.

      But this stunt is encouraging people to oppose doing anything.  Dumb.

      If you got a problem with the “principles” publish your own plan–house dipshits are waving around a fake plan that nobody has seen just to take advantage of the public’s justifiable outrage at being hit with a $10K bill per family. Unconscionable politics.

      And I blame John- big bag of shit-McCain

  12. sxp151 says:

    http://marcambinder.theatlanti

    During the White House meeting, it appears that Sen. John McCain had an agenda.  He brought up alternative proposals, surprising and angering Democrats. He did not, according to someone briefed on the meeting, provide specifics.

    One the proposals — favored by House Republicans — would relax regulation and temporarily get rid of certain taxes in order to lure private industry into the market for these distressed assets.

    That approach has been rejected by Senate Democrats, Senate Republicans and, to this point, the White House. During the meeting, according to someone briefed on it, Sec. Henry Paulson told those assembled that the approach was not workable.

    • bob ewegen says:

      the mcCain plan is hair of the dog that bit you, i.e., more Kool-Aid but this time with a cynanide chaser?  

    • redstateblues says:

      Mean turning the American economy into an Ayn Rand novel?

    • Progressive Promoter says:

      And McCain goes on TV, flashing that creepy leer of his, proclaiming that he’s willing to take the political hit for “doing the right thing.”  How is blowing up a finely negotiated bipartisan agreement a positive thing?  It looks like this whole thing is a political game for him.

      Wonder how House Banking Committee ranking member Rep. Spencer Bachus (R-Alabama)–and one of the spokespeople for the “deal”– felt after Rep. John Boehner stuck a knife in his back later in the day?  

      Ugh.  They make me sick.

  13. Go Blue says:

    Mr. McCain went to DC today to kill the bipartisan work being done for a political photo-op and sell-out. After killing a weeks work of bi-partisan negotiations, he floated his own “bailout” plan which included more corporate tax cuts and deregulation.

    Main street just took the back-seat because of John McCain’s  and his DC banking lobbyist campaign.  

  14. Canines says:

    Speaking about Fannie Mae and Freddie Mac, the president said: “Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.”

    Doesn’t that prove the foolishness of chartering Fannie and Freddie in the first place? Doesn’t that suggest that maybe, just maybe, government may have contributed to this mess? And of course, by bailing out Fannie and Freddie, hasn’t the federal government shown that the “many” who “believed they were guaranteed by the federal government” were in fact correct?

    Then come the scare tactics. If we don’t give dictatorial powers to the Treasury Secretary “the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet.” Left unsaid, naturally, is that with the bailout and all the money and credit that must be produced out of thin air to fund it, the value of your retirement account will drop anyway, because the value of the dollar will suffer a precipitous decline. As for home prices, they are obviously much too high, and supply and demand cannot equilibrate if government insists on propping them up.

    http://ronpaulblog.com/

  15. ClubTwitty says:

    would actually live by his words, just once.

    What a cynical, despicable old man.

  16. Sir Robin says:

    a request for authority (a blank check) without transparency or adequate explanation. Bernanke and Paulson have wasted a week sticking to what amounts to a kick in the head to taxpayers everywhere.

    It’s been said, but deserves repeating. Why would anyone trust the Bush administration to fix the problem they created. I havenb’t heard any accountability for the mess they’ve gotten us into. Have you?  

  17. Sir Robin says:

    ABC News’ George Stephanopoulos reports that when Treasury Secretary Hank Paulson told a room full of Democrats, “Please don’t blow this up,” House Speaker Nancy Pelosi said, “We’re not the ones trying to blow this up; it’s the House Republicans.”

    “I know, I know,” Paulson replied.

  18. Go Blue says:

    More great economic news rolls out while John McCain plays politics with our economic future.

    Government Seizes WaMu and Sells Some Assets

    Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history.

    Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual – the nation’s largest savings and loan, with $307 billion in assets – to JPMorgan Chase.

    The move came as lawmakers reached a stalemate over the passage of a $700 billion bailout fund meant to help ailing banks, and removes one of America’s most troubled banks from the financial landscape while mitigating another potentially huge taxpayer bill for the rescue of another failing institution.

    Thanks John! But don’t worry, I’m sure you’ll be fine with your 9 homes.

  19. ClubTwitty says:

    At the bipartisan White House meeting that Mr. McCain had called for a day earlier, he sat silently for more than 40 minutes, more observer than leader, and then offered only a vague sense of where he stood, according to people in the meeting.

    … there was no evidence that he was playing a major role in the frantic efforts on Thursday night on Capitol Hill to put a deal back together again.

    http://www.nytimes.com/2008/09

  20. Ray Springfield says:

    Besides Mr.McCain’s grandstanding, if a deal isn’t cut by Monday morning, the US market will burn thousands of points.

    Washington Mutual has been another fatality.

    Honestly, the Democrats have delayed all week as well. The coming Thanksgiving will give us a full blown depression if something isn’t done.

  21. Go Blue says:

    From Paul Krugman

    Where Are the Grown-Ups?

    Many people on both the right and the left are outraged at the idea of using taxpayer money to bail out America’s financial system. They’re right to be outraged, but doing nothing isn’t a serious option. Right now, players throughout the system are refusing to lend and hoarding cash – and this collapse of credit reminds many economists of the run on the banks that brought on the Great Depression.

    It’s true that we don’t know for sure that the parallel is a fair one. Maybe we can let Wall Street implode and Main Street would escape largely unscathed. But that’s not a chance we want to take. [snip]

    Furthermore, one non-rank-and-file Republican, Senator John McCain, is apparently playing spoiler. Earlier this week, while refusing to say whether he supported the Paulson plan, he claimed not to have had a chance to read it; the plan is all of three pages long. Then he inserted himself into the delicate negotiations over the Congressional plan, insisting on a White House meeting at which he reportedly said little – but during which consensus collapsed.

    The bottom line, then, is that there do seem to be some adults in Congress, ready to do something to help us get through this crisis. But the adults are not yet in charge.

    Krugman nailed it. A 72-year-old man is acting like a spoiled rotten child and he’s putting the entire country at risk.

  22. Danny the Red (hair) says:

    MONEY: Under the agreement, Paulson would be allowed to get an overall amount of $700-billion, BUT only $250-billion would be available immediately.  Then an additional $100-billion would be given to Paulson upon his certification that he needed it.  And the final $350-billion would be subject to a “Congressional joint resolution of disapproval.”

    The other principles include:

    TAXPAYER PROTECTIONS:

    – standards to prevent excessive executive compensation

    – some form of equity sharing

    – most profits used to reduce national debt

    OVERSIGHT:

    – oversight board, IG, GAO audits, reports to Congress

    FORECLOSURES:

    – find ways to modify mortgages for those at risk of foreclosure

    – require modification on loans owned or controlled by the government

    Sounds like a good start. House GOP prefers more deregulation and more tax cuts for wallstreet

    • Laughing Boy says:

      Why can’t the Dems pass the bill without House GOP support?

      What it looks like is they don’t want to appear to have pulled the trigger on something they are clearly interested in pulling the trigger on.

      Here are the specifics of the GOP plan:


      * Rather than providing taxpayer funded purchases of frozen mortgage assets, we should adopt a mortgage insurance approach to solve the problem.

      * Currently the federal government insures approximately half of all mortgage backed securities. (MBS) We can insure the rest of current outstanding MBS; however, rather than taxpayers funding insurance, the holders of these assets should pay for it. Treasury Department can design a system to charge premiums to the holders of MBS to fully finance this insurance.

      * Have Private Capital Injection to the Financial Markets, Not Tax Dollars. Instead of injecting taxpayer capital into the market to produce liquidity, private capital can be drawn into the market by removing regulatory and tax barriers that are currently blocking private capital formation. Too much private capital is sitting on the sidelines during this crisis.

      * Temporary tax relief provisions can help companies free up capital to maintain operations, create jobs, and lend to one another. In addition, we should allow for a temporary suspension of dividend payments by financial institutions and other regulatory measures to address the problems surrounding private capital liquidity.

      *Immediate Transparency, Oversight, and Market Reform. Require participating firms to disclose to Treasury the value of their mortgage assets on their books, the value of any private bids within the last year for such assets, and their last audit report.

      * Wall Street Executives should not benefit from taxpayer funding. Call on the SEC to review the performance of the Credit Rating Agencies and their ability to accurately reflect the risks of these failed investment securities.

      *Create a blue ribbon panel with representatives of Treasury, SEC, and the Fed to make recommendations to Congress for reforms of the financial sector by January 1, 2009.

      Which parts of this seem unreasonable to you folks?

      I’m also really curious how you are all blaming John McCain for this.  By all accounts, he said very little in the meeting, and had not much to say afterward except that the House GOP had some legitimate concerns.  McCain is one vote in the Senate, and doesn’t have much control over the conservative House R’s.

      Is Congressional leadership willing to let the economy crash to try to stick it to McCain?

      • Laughing Boy says:

        Here’s this, too:

        Hundreds of Economists Urge Congress Not to Rush on Rescue Plan  

        Sept. 26 (Bloomberg) — More than 150 prominent U.S. economists, including three Nobel Prize winners, urged Congress to hold off on passing a $700 billion financial market rescue plan until it can be studied more closely.

        In a Sept. 24 letter to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson’s plan because it’s a “subsidy” for business, it’s ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.

        “It doesn’t seem to me that a lot decisions that we’re going to have to live with for a long time have to be made by Friday,” said Robert Lucas, a University of Chicago economist and 1995 Nobel Prize winner who signed the letter. “The situation may get urgent, but it’s not urgent right now. Right now it’s a financial sector problem.”

        The economists who signed the letter represent various disciplines, including macroeconomics, microeconomics, behavioral and information economics, and game theory. They also span the political spectrum, from liberal to conservative to libertarian.

        Advocates for a rescue plan this week point to a seizing up of credit markets, reflected in elevated inter-bank lending rates, as reason for action. Some economists are unconvinced.

        “I suspect that part of what we’re seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,” said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.

      • cologeek says:

        The Dems in the House could easily pass the bailout without a single Republican vote.  But Pelosi cannot put it forward without those Republicans because the Democrats don’t want to take sole responsibility for it passing.  The bailout plan isn’t popular with Mainstreet Americans.

        Congressman Paul Kanjorski (D-PA) was on CNBC and said that his mail and calls on the bailout plan are running 50-50: 50% no and 50% hell no.

        Pelosi needs at least 100 House Republicans to give the Democrats cover to have the American tax payer punished  for Wall Street’s folly.  She doesn’t want to lead if there is a possibility that the Democrats have to take responsibility for using their power.

        • Sir Robin says:

          The Republicans not only have to step up to the plate and deal honestly with the taxpayers, they have to acknowledge their role in causing this mess. They should admit that trickle down tax policy didn’t work. They should admit that deregulation doesn’t work. They should, in short, take responsibility for this mess and then go to their base and ask for the money back.

          Can someone verify this? The top 400 richest individuals saw their assets rise $604B in the last eight years! Wow, that number is close to the $700B being asked for from the rest of us.

            • Sir Robin says:

              The authors of this video stole the soundtrack from Dire Straights. You’re attempt to fix blame on Carter…a president from 30 years ago is laughable, or Clinton, who had one of the more remarkable economic successes as President is equally laughable.

              The speculation, sub-prime lending practices, greed and transfers of wealth to the Republican base over the last eight years is the direct cause of where we find ourselves today. The last eight years.

              • Laughing Boy says:

                …greed and transfers of wealth to the Republican base over the last eight years is the direct cause of where we find ourselves today. The last eight years.

                It sounds nice, but I don’t think the evidence supports what you’re saying.

                The root cause of what’s happening right now is that billions of dollars in loans were made to people that could not pay them back.  Do you agree?

                • Sir Robin says:

                  Go do some research and find out how much money has been transferred to the Republican base over the last eight years through every trick in the books.

                  • Laughing Boy says:

                    I’m looking at specific reasons for the housing/now financial market mess and you’re blaming it all on the rich getting richer (I think). This problem isn’t about class warfare IMO, just bad government strategies and policies.

                    Have a good day.  I mean it.

                    • Sir Robin says:

                      any attempts at strengthening oversignt and regulation have ANYTHING to do with it?

                      You’re not going to get of that easy.

                    • Laughing Boy says:

                      The initial deal that McCain was accused of blowing up (a falsehood, it was gone before he even arrived) had no oversight and the House R plan had provisions for oversight and less regulation and a loosening of capital gains.

                      I want to make sure we’re talking about the same plans – it’s a little confusing with all the info being released at the moment.

                    • sxp151 says:

                      Paulson’s original: no oversight

                      Democratic plan that was almost final: oversight

                      House Republican plan: somewhere in the middle (no blank check, but more deregulation)

                    • Laughing Boy says:

                      The R’s are going apeshit over this one…

                         TRANSFER OF A PERCENTAGE OF PROFITS.

                         DEPOSITS.Not less than 20 percent of any profit realized on the sale of each troubled asset purchased under this Act shall be deposited as provided in paragraph (2).

                         USE OF DEPOSITS.Of the amount referred to in paragraph (1)

                         65 percent shall be deposited into the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Regulatory Reform Act of 1992 (12 U.S.C. 4568); and 35 percent shall be deposited into the Capital Magnet Fund established under section 1339 of that Act (12 U.S.C. 4569).

                         REMAINDER DEPOSITED IN THE TREASURY.All amounts remaining after payments under paragraph (1) shall be paid into the General Fund of the Treasury for reduction of the public debt.

                      Not sure why the Dems thought it would be appropriate o try to weasel money for groups like ACORN in a time like this.

                      Talk about ‘blowing something up’.

                • The root cause of this mess is panic caused by the collapsing housing market.  Assets devalue, the credit market comes to a screaming halt, and the investors are looking around for their now non-existent profits, backed by assets worth less than their investment paper.

                  The funny thing is, if they looked at their stock holdings in the same way as they looked at their mortgage backed securities, we’d have so many investors jumping out of windows on Wall Street that people in New York would think it was raining investors.

                  Were bad loans made?  Sure.  But those risks were known, at least at some level.  I have to wonder how much of this was feedback between easy credit and the housing bubble, offsetting the risk of offering easy credit…  The rest was made by greedy lenders/brokers who knew they’d be reselling the mortgage and its risks.

      • sxp151 says:

        * Have Private Capital Injection to the Financial Markets, Not Tax Dollars. Instead of injecting taxpayer capital into the market to produce liquidity, private capital can be drawn into the market by removing regulatory and tax barriers that are currently blocking private capital formation. Too much private capital is sitting on the sidelines during this crisis.

        * Temporary tax relief provisions can help companies free up capital to maintain operations, create jobs, and lend to one another. In addition, we should allow for a temporary suspension of dividend payments by financial institutions and other regulatory measures to address the problems surrounding private capital liquidity.

        Yeah, that sounds about like the standard Republican solution to all problems. If all you have is a hammer, everything starts to look like a nail…

        As for why it’s John McCain’s fault, the only thing that changed between Thursday morning (when there was a deal) and Thursday afternoon (when there was no deal) is that John McCain swept in and said, “Here I come to save the day!” Nobody can know quite what crazy shit he said to the Republicans in their closed-door meeting that morning, but after that they were all spooked.  

        • Laughing Boy says:

          The deal was foisted on the public very quickly, and was sold as an all or nothing deal.  McCain really hasn’t done much other than to listen, as far as I can tell.

          Again, if it’s such a smart, great proposal, then Pelosi and Reid can ram it up the ass of the lowly House Republicans.  They don’t need McCain, they don’t need the R’s.  At all.

          • sxp151 says:

            Paulson sprung a stupid deal on the Congress, but Congress is now offering a substantively different proposal. As for what McCain’s done, who the hell even knows? We have rumors of what he did at the White House meeting (just listened and touted the House Republican proposal a little at the end), but nobody has a clue what he did at the prior meeting with Republicans alone.

            Is it a “smart, great proposal”? No, and I’m not for a second claiming it is. I still think a bailout of any kind is unnecessary. But it’s stupid to pass this without Republican support. This isn’t raising the minimum wage, it’s a huge and rather unpopular program, and it only makes sense if politics can be kept out of it.  

            • Laughing Boy says:

              But it’s stupid to pass this without Republican support.

              Why?

              • sxp151 says:

                If you have a national emergency, both parties get behind the solution. If you don’t get both parties behind it, it probably wasn’t much of an emergency. If it’s not an emergency, why pass the bill?

                The idea that politicking should stop in times of crisis is not one invented this year. Good politicians have always tried to get all sides behind anything sufficiently big. The Great Depression and New Deal is the one counterexample I can think of in this century, but that’s probably an exception Democrats don’t want to repeat. (Even today, many Republicans complain about Social Security and such.)

                • Laughing Boy says:

                  Iraq was done without Democrat support?  77-23 in the Senate, and 296-133 in the House.

                  I also don’t see why if it’s such a great idea that the Dems don’t just pass it and demonstrate the leadership qualities that swept them into a majority in 2006…

                  • sxp151 says:

                    I meant that it “would have been stupid.” (Damn verb conjugation.) Of course some Democrats did support it, and that’s what Republicans wanted very much. Republicans could have rammed it through pretty easily on a party line vote, but they didn’t want that.

                    As for your, “if it’s such a great idea…,” we’ve been through this twice already. I’ve already explained what I think about it.

      • * A mortgage insurance program will never return its money to the United States Treasury.  Once we spend that money, it’s gone.

        * For MBS insurance, the securities are already sold; pushing an insurance premium on shareholders will cause already stressed institutions to go further into credit crunch and possibly into bankruptcy before the effects of insurance can take hold.

        * Private capital doesn’t exist right now – that’s the problem.  No-one wants to spend money.  And we got into this mess through deregulation; more deregulation is insanity by definition.  

        * We’re already in a tax crunch because of collapsing housing markets; lowering taxes is just a ploy to further bankrupt government.

        * The reform proposals aren’t even marginally sufficient.  Transparency is something that should be covered under current SEC guidelines already; mis-stating assets and risks is supposed to be covered.

        * A review of the Credit Rating Agencies is already underway by the FBI and possibly other agencies.  Perhaps a formal rule from the SEC is required, or perhaps some penalties for intentional mis-rating, but the conservative GOP proposal doesn’t do anything that’s not already being done.

        * And finally, if the President isn’t already convening a blue ribbon panel, and we don’t know what the Hell McCain is thinking in this respect, then we at least know Obama’s already gone ahead and asked for just this kind of advice.

        IMNSHO, the McCain/House GOP conservative plan is just more of the same corporatist thinking that got us into this mess, plus a bit of window dressing that shouldn’t be so much of a plan as it is already taking place.

        • Laughing Boy says:

          * A mortgage insurance program will never return its money to the United States Treasury.  Once we spend that money, it’s gone.

          It’s much less than $700 Billion, though, even if the taxpayers have to pay for some of it.

          And we got into this mess through deregulation; more deregulation is insanity by definition.

           

          I totally disagree.  Forcing banks to loan money to people that can’t pay it back is the root of this problem.  The Bush admin wanted more oversight of Fannie and Freddie, as far back as 2002.  If the loans are no good, it doesn’t matter who buys them, bundles them, or sells them.  IMO deregulation is not the problem.

          * We’re already in a tax crunch because of collapsing housing markets; lowering taxes is just a ploy to further bankrupt government.

          If you want to see a tax crunch, write a blank check for $700 billion.

          * The reform proposals aren’t even marginally sufficient.  Transparency is something that should be covered under current SEC guidelines already; mis-stating assets and risks is supposed to be covered.

          The House proposals are much more in that direction than the Paulsen/Dodd turd.

          Could you define “corporatist thinking” for me and how it relates to this issue?

          Again, I want to be clear – the Dems can pass anything they want.  THey don’t need a single R vote.

          • The current Dem proposal doesn’t support writing a blank check for $700b.  It supports an initial authorization to spend $250b if the Administration determines it’s necessary, with another $100b available on certification by the Administration, and another $350b available only with Congressional approval.  It also provides strong oversight of the expenditures to ensure that the Administration isn’t just doling it out for no good reason.

            Adding an explicit transparency proposal to the current Congressional compromise proposal would be acceptable to me (and in all likelihood to the Congressional negotiators).  True reform of the market would be getting rid of MBSs or at least making sure they’re marked for the risk that they are.  The latter option is already being overseen by the SEC from what I understand, so that part of the GOP proposal would be proposing a solution that’s already under way.

          • But they want buy-in, per responses above.  This is an unpleasant solution to an unpleasant problem, and it shouldn’t be used as a political football.  Getting buy-in from a bi-partisan majority is important.

            You and I have different opinions on the source of the problem, and neither of us are economists.  I’ve said my bit above, and will just leave it at agreeing to disagree.

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