Financial bailout bill does not pass

[hsmamainva]

So, McCain and Bush put together a bill, stick it in Congress, it fails because the Republicans vote against it 2 to 1 and it's the Democrats fault.

 

 

:glare:

 

I'm STILL trying to figure THAT one out!!!!

 

It makes NO sense to me either!!!!

 

:confused:

[5kidsforME]

I just received this email from my congressman - the one who had the virtual town hall meeting on Saturday to ask his constituents what they wanted him to do:

 

The past several days have been historic ones for Congress and for the families and people of this great nation. We face significant challenges in our financial markets and I do not underestimate the serious nature of the decisions we face in dealing with the credit crisis. I realize that the current credit crisis could create problems for every American should the financial markets freeze and remain frozen. Throughout this debate it has been clear that action is necessary but the recovery bill considered in the House of Representatives today should not have been the only option.

 

In reviewing the plan and doing some deep soul searching I believe that it had significant problems. First is the government purchase and ownership of troubled private assets on a massive scale. The impact of this action would be a fundamental change in the role of government in the American free enterprise system. The obligations to offset Wall Street losses would have been placed on future generations. To authorize the Paulson plan would be to lessen the consequences of risky behavior and could lead to riskier behavior in the future. Furthermore it did not go far enough in holding accountable those at fault for the current crisis by failing to establish penalties for their past bad business practices.

 

There are free market mechanisms that should have been and still can be implemented to help ease the current crisis. While the recovery bill would have allowed community banks to write off losses on their holdings of Fannie Mae and Freddie Mac stock, it did not provide backing to assist banks in raising private capital. By providing incentives for private capital, the government could help troubled banks offset losses that keep them from lending while limiting government intervention and taxpayer risk.

 

I also have serious concerns with government overseeing the purchase and sale of these troubled private assets. I feared that the purchase and sale of the assets would not have been executed in the most efficient way possible under this proposal and taxpayers could lose. The potential existed for the government to pay too much and sell for too little.

 

In addition I had considerable reservations about increasing the national debt by 6.6% to $11.3 trillion dollars to finance the bailout. This equates to an additional $3,000 of debt for every man, woman and child in the U.S. on top of the $34,000 already owed by each American toward the national debt. We cannot continue to borrow and spend at this rate and expect a healthy future for our country.

 

In my deliberations, I sought to make a decision in the best interest of the taxpayers. Over the past week I've had calls, emails, letters and visits from over 2000 constituents of the First District with an overwhelming majority voicing opposition to this recovery plan. Many of you expressed a need for Congress to act, but felt that this plan was not the right course of action. With that in mind I have offered that Congress should not adjourn and should stay in Washington to get the right plan for economic recovery.

 

My two main priorities for any plan are to most wisely protect you as a taxpayer and to protect the value of your retirement, your home and your savings. There is no doubt that this crisis and resulting legislation would have had significant impact on our future. However, I believe that the proposed plan for recovery had substantial and avoidable flaws. The plan that was before us put $700 billion in taxpayer funding on the line to bail out Wall Street financial firms, would fundamentally alter free market decision making, let bad actors off the hook and create a massive new bureaucracy with no guarantee of success. For these reasons I could not vote in favor of this plan. The House of Representatives failed to pass H.R. 3997, the Emergency Economic Stabilization Act of 2008, today by a vote of 205-228.

 

Sounds like he wants to just keep working towards a plan that has fewer flaws, although I'm not sure what that means exactly.

 

Thanks for sharing this! This really gives a lot of information and explanations.

[hsmamainva]

Kathleen in VA -- we have the same Representative!

 

Wittman, right?

 

(I voted for Forgit, but he lost -- maybe if he changed his last name...)

[chiguirre]

Can they suspend trading on Wall Street for a couple of days?

 

 

Normally, Rosh Hashana would mean light trading days for Wall St., but I don't think that's going to hold this year. OTOH, there is nothing that makes traders more nervous than not being able to trade and that nervousness can move markets even more than the fundamentals justify. Even if Wall St. closes, it's not feasible to shut European and Asian markets, too.

[Aggie]

This particular bailout doesn't bail out people in foreclosure. It bails out the banks who were stupid enough to make the bad loans in the first place. They really should have known better. You expect the general public to be stupid if you let them, but the people lending out the money should know better. Under this bailout, people still can get foreclosed on.

 

Banks were pressured by the government into lending money. Some banks were sued because they didn't make enough loans to low-income families who couldn't afford the mortgages.

[Robin in Tx]

The money is coming from the Treasury by increasing the national debt, which was already at nearly catastrophic levels before all of these bailouts started. That means that the money is going to come from future taxes (unlikely) or hyperinflation (likely).

 

The funds were supposed to go to buy subprime loans off banks' balance sheets. Those assets will prevent banks from being able to lend more money in the future. Y'all might think that's a good thing but it's not. Companies who rely on lines of credit for operating expenses will have to lay off workers. This has the potential of a great depression. And remember, last time it went on for an entire decade and it took a World War to get us out of it.

 

If the govt purchased the assets, then they would have the assets on their books. They would make all the interest off the loans that perform, and they would have marketable assets to liquidate on the loans that didn't perform. One Journal report calculated that the govt could end up profiting as much as 3 Trillion off this deal over the next 20-30 years. Worse case scenario is that they would maybe break even, or lose a little bit (certainly not the whole amount).

 

Y'all do realize that they weren't just handing money over and charging the tax payers, right? That they were buying assets and that it would be paid back by returns on the assets. The govt. can weather the decades it will take for these assets to perform.

 

The executives have all pretty much been fired. It's the shareholders and legitimate borrowers who are in trouble. We wouldn't be bailing out anyone but ourselves.

 

Like someone said, there was fear in the eyes of Bernake and Paulson. They know a LOT more than we do and they are scared. The effects are world wide and this is likely the end of our being the world's financial center. Oil dropped $10 today which normally I would consider a good thing, but the reason why it dropped like that is not good - that was nearly a one day 10% drop, spurred by fears of a substantial world wide recession.

 

Interesting times. My economist professor friend just told me that the best investments rigiht now are farmland and handguns. Kinda funny... kinda not...

[Melissa in FL]

My congressman voted for it.

 

Guess what? That clears up that race for me, come November.

 

Mine voted no. She's a Democrat, and I called her office and told her she just won my vote in November by her vote (I'm a Republican). I really think her no vote was because she is up for reelection, but I'm sure she was under pressure from her party to vote yes and she stood up to that.

 

I do think we need some sort of a bailout to prevent a depression, and I don't want a total crash. But, I don't think this was it. I think now they will come up with something better.

Melissa

[K&Rs Mom]

So, McCain and Bush put together a bill, stick it in Congress, it fails because the Republicans vote against it 2 to 1 and it's the Democrats fault.

 

I don't care whose fault it was - I'm just glad this thing is dead! Both sides are going to blame each other and say mean things, nothing new there.

[Kathleen in VA]

Kathleen in VA -- we have the same Representative!

 

Wittman, right?

 

(I voted for Forgit, but he lost -- maybe if he changed his last name...)

 

Yes, mine is Rob Wittman. I'm really encouraged by his response to this whole thing - asking for our views and acting on what folks said.

 

Poor Forgit :) - that's an unfornunate name! I don't remember him being on the ballot:lol::lol::lol:.

 

I once had an ob/gyn named Dr. Kil. I told him he might want to think about adding "dare" to the end of his name. He thought I was kidding.

[hsmamainva]

Yes, mine is Rob Wittman. I'm really encouraged by his response to this whole thing - asking for our views and acting on what folks said.

 

Poor Forgit :) - that's an unfornunate name! I don't remember him being on the ballot:lol::lol::lol:.

 

I once had an ob/gyn named Dr. Kil. I told him he might want to think about adding "dare" to the end of his name. He thought I was kidding.

 

LOL!!!! *snort*

 

Poor Forgit is right!!! I haven't seen his signs up anywhere, so maybe he's lost interest in seeking political office!

 

I've seen Wittman's though.

 

That's cool that we're "neighbors" :)

[Jane Elliot]

The funds were supposed to go to buy subprime loans off banks' balance sheets. Those assets will prevent banks from being able to lend more money in the future. Y'all might think that's a good thing but it's not. Companies who rely on lines of credit for operating expenses will have to lay off workers. This has the potential of a great depression. And remember, last time it went on for an entire decade and it took a World War to get us out of it.

 

If the govt purchased the assets, then they would have the assets on their books. They would make all the interest off the loans that perform, and they would have marketable assets to liquidate on the loans that didn't perform. One Journal report calculated that the govt could end up profiting as much as 3 Trillion off this deal over the next 20-30 years. Worse case scenario is that they would maybe break even, or lose a little bit (certainly not the whole amount).

 

Y'all do realize that they weren't just handing money over and charging the tax payers, right? That they were buying assets and that it would be paid back by returns on the assets. The govt. can weather the decades it will take for these assets to perform.

 

The executives have all pretty much been fired. It's the shareholders and legitimate borrowers who are in trouble. We wouldn't be bailing out anyone but ourselves.

 

Like someone said, there was fear in the eyes of Bernake and Paulson. They know a LOT more than we do and they are scared. The effects are world wide and this is likely the end of our being the world's financial center. Oil dropped $10 today which normally I would consider a good thing, but the reason why it dropped like that is not good - that was nearly a one day 10% drop, spurred by fears of a substantial world wide recession.

 

Interesting times. My economist professor friend just told me that the best investments rigiht now are farmland and handguns. Kinda funny... kinda not...

 

That's a very clear explanation. Thanks, Robin.

 

Got my farmland. Now I'm off to buy my handgun. jk :glare:

[Robin in Tx]

That's a very clear explanation. Thanks, Robin.

 

Got my farmland. Now I'm off to buy my handgun. jk :glare:

 

I'm gonna come live with you. Even if it means I have to eat bear! LOL

[Jane Elliot]

I'm gonna come live with you. Even if it means I have to eat bear! LOL

 

LOL. Well, you'd be welcome, Robin, but I don't know that we'd have any bear. Two weeks ago 3 of the dc chased one up into a tree. It wasn't bear season, so we just shot him with a camera. Now, it's bear season, and he's mighty elusive. Those bears are smarter than they look.

[Amy loves Bud]

This has the potential of a great depression. And remember, last time it went on for an entire decade and it took a World War to get us out of it.

 

Yes, a war, not all of FDR's interventions.

 

If the govt purchased the assets, then they would have the assets on their books. They would make all the interest off the loans that perform, and they would have marketable assets to liquidate on the loans that didn't perform. One Journal report calculated that the govt could end up profiting as much as 3 Trillion off this deal over the next 20-30 years. Worse case scenario is that they would maybe break even, or lose a little bit (certainly not the whole amount).

 

Constitutionality of the federal government engaging in such a business? I'm not sure. I'm certainly not a lawyer, and I'm thinking about how it compares to issuing government bonds. I dunno but I'm leaning toward less constitutional than more.

 

And my economist friend is buying stock right now.:D

[Spy Car]

Yes, a war, not all of FDR's interventions.

 

 

It was the war that finally got the economy fully rolling again. FDRs measures helped, but let's not forget the stockmarket crashed in October of 1929, FDR did not become President until March of 1933 (nearly 3 years after the beginning of the Depression).

 

It is "common wisdom" (which doesn't guarantee it is correct) among economists that had the Federal government had mechanisms in place and acted in 1929 the Great Depression could have been avoided (or at least greatly mitigated in scope).

 

Almost nothing was done in 1929 to preserve liquidity, do we really want to repeat history?

 

Bill

[Aggie]

 

And my economist friend is buying stock right now.:D

 

This is my thought, too! Apple dropped to about $100 today.;)

[Murphy101]

The funds were supposed to go to buy subprime loans off banks' balance sheets. Those assets will prevent banks from being able to lend more money in the future. Y'all might think that's a good thing but it's not. Companies who rely on lines of credit for operating expenses will have to lay off workers.

 

ANY company that "relies" on credit is not a company that's going to stay in business for long. Recession or not. Credit for operating expenses is a clear sign of a company that isn't even making enough profit to cover their basic overhead costs.

 

A business using credit for operating expenses is no different than the average joe using credit to pay his mortgage or buy groceries. If he has the income to pay for it - he should use that income. NOT credit.

 

If he doesn't have the income, then how the heck is he going to pay the creidt when it comes due? AND IT WILL COME DUE.

 

This has the potential of a great depression. And remember, last time it went on for an entire decade and it took a World War to get us out of it.

 

yep. I know. Hope we can avoid it. Or at least avoid one as bad and long. But I didn't see anything in that bailout that would do that. Best case is it would have put it off for a few months and then not only would the companies still be bust, so would the gov't. My greatest concerns are:

 

1 - fools rushing in

2 - finding this is s stop gap at best and then the gov't not having that 700b to help the majority of citzens with things far more important than credit. Things like food lines.

 

Y'all do realize that they weren't just handing money over and charging the tax payers, right? That they were buying assets and that it would be paid back by returns on the assets. The govt. can weather the decades it will take for these assets to perform.

 

Yes, I get that.

1 - there may not be a return on those assets.

2 - the "gov't" is US

3 - if the gov't takes on all these "assets" (they aren't even assets - they are bad debts that they are praying will miraculously be paid on, knowing that many if not most of them won't be) - then the gov't is in the same sinking boat they just bought off the companies?

 

The executives have all pretty much been fired.

"pretty much" isn't good enough

 

We wouldn't be bailing out anyone but ourselves.

 

Really? Didn't see a thing in that bailout that would have made my mortgage payment easier to pay or produce any cheaper to buy.:001_huh:

 

Like someone said, there was fear in the eyes of Bernake and Paulson. They know a LOT more than we do and they are scared.

 

Not denying that.

Question is: Does that mean they are doing the best thing for the majority of citizens or the best thing to save their own backside? Just because they are scared, just because they know more, does NOT mean they give one red cent about you and me losing our jobs or homes. It does NOT mean this bailout plan was a good idea.

 

Interesting times. My economist professor friend just told me that the best investments rigiht now are farmland and handguns. Kinda funny... kinda not...

 

:iagree: Don't have farmland, but the kids probably won't have a backyard to play in come spring - we hope we'll be planting a garden of some size. (This year stunk for planting, nothign but flooding rain and hail!) Off to get the guns. Oh and bow and arrow. Handguns have a great use as protection, but I also have a feeling we'll be hunting meat this time next year. Frankly, we'd be doing it now if we could afford gun/amo and hunting fees.

[sdWTMer]

Good time to buy Apple stock, eh?

[ma23peas]

Many of you posting here are politically savvy and economically curious..here is a great video (LOOOOONG) but explains the current crisis and how it came about...

 

 

 

I need to sell a home (been on this market 16 months, may lose our teeth in this one!!

 

Tara

[Robin in Tx]

It was the war that finally got the economy fully rolling again. FDRs measures helped, but let's not forget the stockmarket crashed in October of 1929, FDR did not become President until March of 1933 (nearly 3 years after the beginning of the Depression).

 

It is "common wisdom" (which doesn't guarantee it is correct) among economists that had the Federal government had mechanisms in place and acted in 1929 the Great Depression could have been avoided (or at least greatly mitigated in scope).

 

Almost nothing was done in 1929 to preserve liquidity, do we really want to repeat history?

 

Bill

 

It is also commonly held by some economists that FDR's interventions did more to prolong the depression than get us out of it.

 

Herbert Hoover was pres when the market crashed. Look close at his protectionist policies and remember that those policies, especially as they relate to trade, are DEVASTATING both to our country and to the world. Keep that in mind when choosing a candidate to vote for.

 

People who have money to invest now will get rich because they are buying at depressed bargain prices. Just another example of the rich getting richer, while the working man is left to worry about where his family's next meal is coming from.

[hsmamainva]

I thought Hoover wanted the market to correct itself, so he sat by and did nothing to stop it??

 

(Feel free to correct me if I'm misinformed!)

[5kidsforME]

This is my thought, too! Apple dropped to about $100 today.;)

 

Do you know what they were when they were doing fine/good?

[Spy Car]

I thought Hoover wanted the market to correct itself, so he sat by and did nothing to stop it??

 

(Feel free to correct me if I'm misinformed!)

 

That is exactly correct. Hoover (who was an intelligent and descent person) let "free-market" ideology (which in the main I favor myself) blind him and his administration that intervention was necessary.

 

I'm afraid ideologues (on both the right and the left) are again ready to stand by and watch a collapse happen. It is sheer madness!

 

Bill

[Robin in Tx]

Martha, most businesses operate on credit of some kind. For example, one of my husband's customers (who buys industrial parts from my husband) gets an order from someone like Frito Lay to manufacture a packaging machine. The company dips into their line of credit to purchase the materials they need to build the machine. Once they have built it, they sell it to Frito Lay, and use the funds to pay off the line of credit and pay all their other expenses. And hopefully enough left over for profit to perhaps expand their manufacturing plant.

 

That is how it works. All the time. It is the small business owner who relies on this type of interim financing who will be hurt the most.

 

There may not have been anything explicit in the bill that said that Marth's mortgage is going to be easier to pay, but I guarantee you it will be a lot HARDER to pay if your husband can't find work. So yeah... it has the potential to effect your and my ability to pay our mortgages in the near future and for a long time.

 

The loans may be bad, but they will be spun off at 25% of the collateral's value or so. The govt. has the potential to make a LOT of money off this deal, but if we slump into a depresseion the banks won't be able to sell off the foreclosed homes and realize the same potential.

[Spy Car]

Martha, most businesses operate on credit of some kind. For example, one of my husband's customers (who buys industrial parts from my husband) gets an order from someone like Frito Lay to manufacture a packaging machine. The company dips into their line of credit to purchase the materials they need to build the machine. Once they have built it, they sell it to Frito Lay, and use the funds to pay off the line of credit and pay all their other expenses. And hopefully enough left over for profit to perhaps expand their manufacturing plant.

 

That is how it works. All the time. It is the small business owner who relies on this type of interim financing who will be hurt the most.

 

There may not have been anything explicit in the bill that said that Marth's mortgage is going to be easier to pay, but I guarantee you it will be a lot HARDER to pay if your husband can't find work. So yeah... it has the potential to effect your and my ability to pay our mortgages in the near future and for a long time.

 

The loans may be bad, but they will be spun off at 25% of the collateral's value or so. The govt. has the potential to make a LOT of money off this deal, but if we slump into a depresseion the banks won't be able to sell off the foreclosed homes and realize the same potential.

 

:iagree: All sorts of businesses need to raise capital through borrowing to finance investment. Dry up the "money supply" and be prepared for massive job losses and business failures.

[Caroline]

:iagree: All sorts of businesses need to raise capital through borrowing to finance investment. Dry up the "money supply" and be prepared for massive job losses and business failures.

 

This question has been on my mind, will major and minor corporations be able to make payroll this month? Will we start seeing job losses next week or month?

[Soph the vet]

So, McCain and Bush put together a bill, stick it in Congress, it fails because the Republicans vote against it 2 to 1 and it's the Democrats fault.

 

 

:glare:

 

I was under the impression that the original Bush/Paulson plan had been quickly revamped by Chris Dodd and Leahy (D) - Vt. I wasn't aware that McCain had actually authored any part of the bill? Did that happen after he met with the House Republicans?

[Murphy101]

Martha, most businesses operate on credit of some kind. For example, one of my husband's customers (who buys industrial parts from my husband) gets an order from someone like Frito Lay to manufacture a packaging machine. The company dips into their line of credit to purchase the materials they need to build the machine. Once they have built it, they sell it to Frito Lay, and use the funds to pay off the line of credit and pay all their other expenses. And hopefully enough left over for profit to perhaps expand their manufacturing plant.

 

I'm aware that most companies use credit to some extent.

That's a far different thing from not being able to run the daily operating needs of the business without credit.

They might dip some into a credit to build the machine, but if they are smart they insist on 25-50% of the cost up front. They are not running their entire business on credit. And they should be expecting enough in their fees to not only cover the debt and growth, but to set aside some for those occassions when a contract doesn't come through, a buyer fails to pay, or when they want to have a product premade ready to ship or advertise. Because THAT is also how it works.

 

Again a company running their entire overhead on credit is not a company that is solvent.

 

Also, a company that is in good standing isn't really going to be hurt that much. They are a sure bet. It's the new ones that are risky or don't have an excellent record that are up creek. They are still going to be up creek with a bailout. The bailout is NOT going to convince a bank to become risker with lending during these times.

 

There may not have been anything explicit in the bill that said that Marth's mortgage is going to be easier to pay, but I guarantee you it will be a lot HARDER to pay if your husband can't find work.

 

Yep. Thing is, I'm not seeing anything in it that would make it easier for my dh to find work either?

 

Because the SMART thing that every company should be doing is taking a hard look at their expenses and cutting back to use less credit and keep their business afloat. Bailout or not, they aren't going to keep spending and doing business as usual. No one is. Heck, already no one CAN. They are going to cut back and lay off. They are not going to take risks in lending.

 

:D Now if we really want to spur economics, I say divide the 700b amoung the american citizens. They will be buying homes (ha! paying off those cruddy mortgages!) buying cars (probably more fuel efficent!) and you know what? If those companies really need/want that money - let them convince us to invest some of that in their busienss.

[Saille]

I have a young niece who bought her first new car just a few months ago. She told me that the bank told her how much they would lend her, and that was how she picked out the car, based on what they told her she could afford, not the other way around. I know her income, there is no way she should have bought that car.

 

I know that every time we have looked at cars and asked about prices, the first question asked is not how much do you want to spend, but how much of a payment do you want. Look at the car ads. Many don't tell the price- just what the payment amount is, but if you look at the fine print, they are basing the payment on something like a 6 year loan on a 5-6 year old car or something crazy like that. The __________ consumer bites (you fill in your own word here - gullible? irresponsible?) , the salesman gets his sale, everybody is happy until the buyer can't make the payment.

 

The same thing happened to us when we bought our house. What the bank said we could afford was much more that we had decided we could afford. Fortunately for us, we stuck with our numbers and our mortgage is manageable.

 

Then we have the whole credit card thing. How many offers for credit cards do we throw away every month? The blame lies all around. The companies, banks, mortgage companies have marketed easy credit, get it now scenarios. Many of us don't bite, others do. Yes, they shouldn't make it so easy, but on the other hand, we don't have to bite.

 

We've had this exact same experience, both with our house, and the car we recently bought. It was surreal to look people in the eye and refuse to take the credit they were offering, while they insisted we could manage it.

[hsmamainva]

I was under the impression that the original Bush/Paulson plan had been quickly revamped by Chris Dodd and Leahy (D) - Vt. I wasn't aware that McCain had actually authored any part of the bill? Did that happen after he met with the House Republicans?

 

From what I understand, the Democrats and Republicans were working together very nicely until McCain flew into town, marched into the meeting, and said "We're not signing anything. If I have to go it alone, I'll do it." And most of the Republicans walked out.

 

(That was according to an article in our local paper...the Washington Post)

 

http://voices.washingtonpost.com/the-trail/2008/09/26/questions_linger_over_mccains.html

[Robin in Tx]

Business credit is not the cause of this problem, but businesses will pay the price for it. And if you think your husband has trouble finding work now, just wait.

[Mrs Mungo]

I was under the impression that the original Bush/Paulson plan had been quickly revamped by Chris Dodd and Leahy (D) - Vt. I wasn't aware that McCain had actually authored any part of the bill? Did that happen after he met with the House Republicans?

 

I should have said he took credit for it. Mitt Romney said this morning that it wouldn't have happened without John McCain...but of course, that was before it failed.

[Saille]

I was under the impression that the original Bush/Paulson plan had been quickly revamped by Chris Dodd and Leahy (D) - Vt. I wasn't aware that McCain had actually authored any part of the bill? Did that happen after he met with the House Republicans?

 

I doubt it. They were pretty much begging him to get the heck off Capitol Hill and take the Straight Talk Express with him.

[Robin in Tx]

I was talking about the tarriffs he imposed, and how it made the depression worse (protectionist policies as they related to trade).

[hsmamainva]

Here's the article I was looking for.

 

I'll cut and paste the first few paragraphs and then link to the full article:

 

How McCain Stirred A Simmering Pot

 

When Sen. John McCain made his way to the Capitol office of House Minority Leader John A. Boehner (R-Ohio) just past noon on Thursday, he intended to "just touch gloves" with House Republican leaders, according to one congressional aide, and get ready for the afternoon bailout summit at the White House.

 

Instead, Rep. Paul D. Ryan (Wis.), the ranking Republican on the House Budget Committee, was waiting to give him an earful. The $700 billion Wall Street rescue, as laid out by Treasury Secretary Henry M. Paulson Jr., was never going to fly with House Republicans, Ryan said. The plan had to be fundamentally reworked, relying instead on a new program of mortgage insurance paid not by the taxpayers but by the banking industry.

 

McCain listened, then, with Sen. Lindsey O. Graham (S.C.), he burst into the Senate Republican policy luncheon. Over a Tex-Mex buffet, Sens. Robert F. Bennett (Utah) and Judd Gregg (N.H.) had been explaining the contours of a deal just reached. House Republicans were not buying it. Then McCain spoke.

 

"I appreciate what you've done here, but I'm not going to sign on to a deal just to sign the deal," McCain told the gathering, according to Graham and confirmed by multiple Senate GOP aides. "Just like Iraq, I'm not afraid to go it alone if I need to."

 

For a moment, as Graham described it, "you could hear a pin drop. It was just unbelievable." Then pandemonium. By the time the meeting broke up, the agreement touted just hours before -- one that Sen. Lamar Alexander (Tenn.), the No. 3 GOP leader, estimated would be supported by more than 40 Senate Republicans -- was in shambles.

 

An incendiary mix of presidential politics, delicate dealmaking and market instability played out Thursday in a tableau of high drama, with $700 billion and the U.S. economy possibly in the balance. McCain's presence was only one of the complicating factors. Sen. Barack Obama played his part, with a hectoring performance behind closed doors at the White House. And a brewing House Republican leadership fight helped scramble allegiances in the GOP.

 

 

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/26/AR2008092603957.html

[ticklbee]

I read this a little while ago on Dave Ramsey's site...throwing it out here for your consideration (it's long):

 

Remember Enron, WorldCom, Adelphia, and other companies had artificially put assets on the books? They'd say something was worth $10M when they bought it, but eventually it decreased in value, and they never updated the value in the books. That was part of the fraud. Under current laws at that time, they were all convicted and put in jail for fraud.

 

Then we got all mad and made all these new laws that are coming out the wazoo called Sarbanes-Oxley. It's a huge, massive law but the idea is that we were going to mandate ethics to corporate America because apparently they didn't have any, according to the Enron failure. It's now a total pain in the butt to execute it in a publicly traded company.

It didn't work because you can't cause ethics to happen. However, it does make each company each day restate what their assets are worth if sold on the market. This accounting procedure is mark to market accounting--you need to remember that. It's a good concept and keeps companies from having loaded balance sheets.

How This Affects Us Today

 

However, it's part of what's caused this in the news now. Merrill Lynch was sitting with $30 billion tied up in sub-prime loans with houses. Stupid! They get what they deserve for doing that, and I'm with you on that. Those houses didn't become worthless all of a sudden because those people couldn't sell their bonds. Since they couldn't sell them, they basically gave them away for 22 cents on the dollar. Now do you think all those houses lost 80% of their value underneath that deal? No, they didn't, so they gave them away for 22 cents on the dollar (about $6 billion total) because there was no market for them. Nobody wants to buy sub-prime bonds because they suck. They're junk bonds. But at 22 cents on the dollar, it's a bargain because even if you foreclosed on every one of the houses in there, you'd probably get $20 billion back out of $30 billion, and so the company that bought those for $6 billion got a deal! But there's no market for them. That's where these companies are stuck. They can't sell this stuff, but accounting-wise, they've had to mark it down to market and it's frozen the marketplace.

Economist Wesbury is saying that if we change that one rule and don't force them to mark down to market value and just let them hold on to all the stuff, and say just on sub-primes for this period of time you can change that rule -- a temporary change -- that'll free the market up. It's seized right now; it's frozen. This will thaw it out and get it going again. He says that'll solve 60% of the problem ... and I think he's right.

That one accounting rule is what made Merrill Lynch sell out. That one accounting rule is what's driving other ones into the dirt. Would you rather let them change their accounting rule or loan them $700 billion for us to buyout their bad paper?

I'd rather them work their own crap out than have us bail them out with $700 billion of our tax dollars.

I don't like giving them any money or any help with my tax dollars. But I'd rather see that than see the whole thing turn completely upside down in a fruit basket turnover than have a whole meltdown or something and freak out here in the middle of the election season. Why don't we just take the FHA insurance program and extend it across these sub-primes? What that means is that you and I are guaranteeing the lender that they're not going to lose as much or any money on those mortgages. Now I don't like guaranteeing them, but I like it better than buying them. In other words, instead of $700 billion in tax-payer debt going out there to bail out these companies, just extend the insurance out. You could probably do that for less than $40 billion. It's like a 95% savings!

If the government insured those mortgages, they would then be marketable. And could sell them. And the companies would stay afloat. And we, the people, don't have to get into the mortgage business. Now we're going to get in there a little bit because of the insurance on those getting foreclosed on. But foreclosures aren't causing this. This is being caused because these companies are frozen and seized up. We've got to let some of the steam come off and put some oil in there to get this thing moving again. We can do that without going into debt $700 billion.

Here's Your Plan

 

Call your Congressman. Call your Senator. Tell them to change the mark-to-market accounting law and to extend insurance but extend no loans. If they extend loans - if they borrow the money on the national debt in order for us to all go into the mortgage business a trillion dollars - you're going to fire their butts and send them home.

I've talked with several people today, and it's on the tables in Washington, but it's not something you're going to see on TV. If you'll let your Congressmen know you know about this and that you'll vote against them if they don't vote to change the mark-to-market law and you'll contribute your money to make sure they never serve in office again. That's what you need to tell them early and often.

If you're pissed, this is the time to step up and do something about it, America! You can stop this! It's being railroaded down your throat, but you can stop them if you call them in mass starting now. READY ... SET ... GO!

 

Contact:

 

 

• Your representative
  
• Your senators
  
• Senate committee
  

 

 

[Saille]

From what I understand, the Democrats and Republicans were working together very nicely until McCain flew into town, marched into the meeting, and said "We're not signing anything. If I have to go it alone, I'll do it." And most of the Republicans walked out.

 

(That was according to an article in our local paper...the Washington Post)

 

http://voices.washingtonpost.com/the-trail/2008/09/26/questions_linger_over_mccains.html

 

Weird. The way I read it, he had no clue the Republicans were going to break away from the plan until they did it, in the meeting.

[Sara R]

It is "common wisdom" (which doesn't guarantee it is correct) among economists that had the Federal government had mechanisms in place and acted in 1929 the Great Depression could have been avoided (or at least greatly mitigated in scope).

 

 

A hyperinflationary depression would be worse than the Great Depression. At least in the Great Depression, if your bank didn't fail (I know, big if) you still had savings. In a hyperinflationary scenario, the purchasing power of everyone's savings is eroded.

 

I've read that you should translate "liquidity" as "inflation" when listening to these guys talk. The problem with the financials isn't liquidity, it's solvency. The government really doesn't have the money to bail these guys out. We already didn't have money before this crisis began. The baby boomers are starting to retire this year and Medicare gets more expensive every year. No one is talking about raising taxes enough to pay for these bailouts. So that means that we'll print money, which means inflation. Every holder and earner of dollars (both in our country and abroad)--not just taxpayers--is going to pay for this through inflation. Savers are going to suffer the most.

 

The problem was going into too much debt for consumption. There's no easy answer from here on out. We can either stop and dig ourselves out now, or we can postpone the day of reckoning and keep digging.

[Sara R]

I absolutely do not expect the general public to be stupid. I am responsible for myself, and my children, and I fully expect others to be the same. Why would we expect grown adults, who grew up in a country with more opportunity than anywhere else in the world, to be stupid?

 

I don't want to bail out the corporations, they decided to play dirty and they lost. Let them be a lesson to the other corps. who are still standing. But why does that give the general population a pass? I don't get it.

 

I'm not saying that we should bail out the general population. I'm just saying that they have more of an excuse to be stupid than the banks do. The banks historically (pre-1995 or so) haven't given money to anyone with a pulse. I think it's reasonable for someone young and naive to trust the opinion of a banker of how much house they could afford. This would have been a safe assumption before about 1995.

 

What excuse do the banks have? They just wanted to get more money. They knew the risks, or should have known, anyway. They make it their business to study that kind of thing.

 

The individual shouldn't get bailed out, because bailouts only encourage more stupidity. That's the "moral hazard" everyone keeps going on about. That goes for the banks and financials too, times about 100, because it was their business to know better.

[Robin in Tx]

Thank you for quoting that, because that is what I have been led to understand - the mark to market law is the problem here and all they really need to do is get rid of it.

 

I didn't mention this because I didn't think I could explain it very well and I doubted very many here knew what it was. Yes, this is the crux of the issue. But as long as we have mark to market, we've got frozen balance sheets and crippled businesses.

 

Thanks again.

[hsmamainva]

A hyperinflationary depression would be worse than the Great Depression. At least in the Great Depression, if your bank didn't fail (I know, big if) you still had savings. In a hyperinflationary scenario, the purchasing power of everyone's savings is eroded.

 

I've read that you should translate "liquidity" as "inflation" when listening to these guys talk. The problem with the financials isn't liquidity, it's solvency. The government really doesn't have the money to bail these guys out. We already didn't have money before this crisis began. The baby boomers are starting to retire this year and Medicare gets more expensive every year. No one is talking about raising taxes enough to pay for these bailouts. So that means that we'll print money, which means inflation. Every holder and earner of dollars (both in our country and abroad)--not just taxpayers--is going to pay for this through inflation. Savers are going to suffer the most.

 

The problem was going into too much debt for consumption. There's no easy answer from here on out. We can either stop and dig ourselves out now, or we can postpone the day of reckoning and keep digging.

 

Impressive post!!! :iagree:

[Robin in Tx]

What makes you think we are going to have to print money? Are you assuming the assets will not perform?

[Sara R]

What makes you think we are going to have to print money? Are you assuming the assets will not perform?

 

If the assets were performing, then why would the government have to step in? If these are such great assets, the private sector would have bought them.

[5kidsforME]

I read this a little while ago on Dave Ramsey's site...throwing it out here for your consideration (it's long):

 

Remember Enron, WorldCom, Adelphia, and other companies had artificially put assets on the books? They'd say something was worth $10M when they bought it, but eventually it decreased in value, and they never updated the value in the books. That was part of the fraud. Under current laws at that time, they were all convicted and put in jail for fraud.

 

Then we got all mad and made all these new laws that are coming out the wazoo called Sarbanes-Oxley. It's a huge, massive law but the idea is that we were going to mandate ethics to corporate America because apparently they didn't have any, according to the Enron failure. It's now a total pain in the butt to execute it in a publicly traded company.

It didn't work because you can't cause ethics to happen. However, it does make each company each day restate what their assets are worth if sold on the market. This accounting procedure is mark to market accounting--you need to remember that. It's a good concept and keeps companies from having loaded balance sheets.

How This Affects Us Today

 

However, it's part of what's caused this in the news now. Merrill Lynch was sitting with $30 billion tied up in sub-prime loans with houses. Stupid! They get what they deserve for doing that, and I'm with you on that. Those houses didn't become worthless all of a sudden because those people couldn't sell their bonds. Since they couldn't sell them, they basically gave them away for 22 cents on the dollar. Now do you think all those houses lost 80% of their value underneath that deal? No, they didn't, so they gave them away for 22 cents on the dollar (about $6 billion total) because there was no market for them. Nobody wants to buy sub-prime bonds because they suck. They're junk bonds. But at 22 cents on the dollar, it's a bargain because even if you foreclosed on every one of the houses in there, you'd probably get $20 billion back out of $30 billion, and so the company that bought those for $6 billion got a deal! But there's no market for them. That's where these companies are stuck. They can't sell this stuff, but accounting-wise, they've had to mark it down to market and it's frozen the marketplace.

Economist Wesbury is saying that if we change that one rule and don't force them to mark down to market value and just let them hold on to all the stuff, and say just on sub-primes for this period of time you can change that rule -- a temporary change -- that'll free the market up. It's seized right now; it's frozen. This will thaw it out and get it going again. He says that'll solve 60% of the problem ... and I think he's right.

That one accounting rule is what made Merrill Lynch sell out. That one accounting rule is what's driving other ones into the dirt. Would you rather let them change their accounting rule or loan them $700 billion for us to buyout their bad paper?

I'd rather them work their own crap out than have us bail them out with $700 billion of our tax dollars.

I don't like giving them any money or any help with my tax dollars. But I'd rather see that than see the whole thing turn completely upside down in a fruit basket turnover than have a whole meltdown or something and freak out here in the middle of the election season. Why don't we just take the FHA insurance program and extend it across these sub-primes? What that means is that you and I are guaranteeing the lender that they're not going to lose as much or any money on those mortgages. Now I don't like guaranteeing them, but I like it better than buying them. In other words, instead of $700 billion in tax-payer debt going out there to bail out these companies, just extend the insurance out. You could probably do that for less than $40 billion. It's like a 95% savings!

If the government insured those mortgages, they would then be marketable. And could sell them. And the companies would stay afloat. And we, the people, don't have to get into the mortgage business. Now we're going to get in there a little bit because of the insurance on those getting foreclosed on. But foreclosures aren't causing this. This is being caused because these companies are frozen and seized up. We've got to let some of the steam come off and put some oil in there to get this thing moving again. We can do that without going into debt $700 billion.

Here's Your Plan

 

Call your Congressman. Call your Senator. Tell them to change the mark-to-market accounting law and to extend insurance but extend no loans. If they extend loans - if they borrow the money on the national debt in order for us to all go into the mortgage business a trillion dollars - you're going to fire their butts and send them home.

I've talked with several people today, and it's on the tables in Washington, but it's not something you're going to see on TV. If you'll let your Congressmen know you know about this and that you'll vote against them if they don't vote to change the mark-to-market law and you'll contribute your money to make sure they never serve in office again. That's what you need to tell them early and often.

If you're pissed, this is the time to step up and do something about it, America! You can stop this! It's being railroaded down your throat, but you can stop them if you call them in mass starting now. READY ... SET ... GO!

 

Contact:

 

 

• Your representative

• Your senators

• Senate committee

 

 

 

 

 

Could you link this please? Thanks!

[Robin in Tx]

I tell you what, the prices on those assets are such great bargains I *wish* I had the money to buy some of them myself.

 

The assets will either perform or get foreclosed on. It takes time to do that and mark to market forces the banks to write down these assets which reduces their lending power. It really is about liquidity. The govt stands to make a lot of money off those assets.

[Confuzzled]

Could you link this please? Thanks!

 

I'm not the original poster of the article but I just read it myself it still have it in my browser.

 

http://www.daveramsey.com/etc/fed_bailout/economic_cleanup_10887.htmlc

[Sara R]

That was the first part of the problem, that started in the late 1990s. The problem got worse with the artificially low interest rates Greenspan put in after 9/11, to prevent that recession from being as bad as it should have been. That led to blowing up of the housing bubble. We are paying the price now for avoiding that recession then.

 

Low interest rates from Greenspan led to banks making assumptions that housing prices wouldn't go down. Little by little banks reduced lending standards, and--surprise--they still made money because if someone couldn't make a mortgage payment, they could just sell the house for the higher, appreciated value. This led to banks assuming that subprime wasn't all that bad because they were getting higher interest rates and default rates weren't very high (because prices were going up--but they didn't realize that was why). When one bank started "creative financing" the other banks felt like they had to start offering the same thing, or else the other banks would take their market share.

[Haiku]

What is the number of this bill? I have been looking online for 20 minutes and I can't find the number.

 

Tara

[Guest Virginia Dawn]

Our representative (D) voted no. He is up for re-election but that is misleading. He has not had anyone run against him in at least 10 years and has no one running against him now.

 

He sent out a letter stating his position and the fact that his constituents were overwhelmingly against the plan.

 

Dh and I just got through watching a video interview with Ron Paul after the vote on campaignforliberty.com

 

What got me is that he says the Federal Reserve has already been pumping billions of dollars into Wall Street in the last few days. Not only that but that there were already ways to do what congress is being asked to approve without all the hoopla. That is confusing to me.

 

What is also confusing is that plenty of very smart people, a great many of them well respected economists, are saying this whole package isn't even necessary. There are cheaper and easier ways to handle this crisis. I'm with those that smell a skunk even if we can't see it. Sooner or later it should come to light.

 

Personally, I think the handwriting is on the wall. We're going down, and there is not much we can do to stop it.

It's happened plenty of times to other nations as well, collapse and then rebuilding on the ashes.

 

I wonder what our country will be like 10 years from now. Things are not really that bad now, comparatively speaking. Maybe it won't get as bad as the depression. Our standard of living is so high now that even if it fell dramatically, we may still be better off than people were in the 30's. Goodness, our family now has much more than either dh or I had when we were growing up in the 60's and 70's.

[Spy Car]

Over a trillion dollars in (paper) value were lost on Wall St today.

 

In one day :001_huh: