Not So Fast on the Deal, House GOP Says Make Wall Street Pay

U. S News and World Report ^ | September 25, 2008 | Paul Bedard

[dickmc]

House Republicans, who've been swamped with your phone calls demanding that they reject President George Bush's historically huge $700 billion bailout of Wall Street and bad mortgage bankers, have come up with another idea:

[dickmc]

House Republicans, who've been swamped with your phone calls demanding that they reject President George Bush's historically huge $700 billion bailout of Wall Street and bad mortgage bankers, have come up with another idea: Instead of just buying the worthless mortgages, make the banks buy insurance from Washington, which would pay on those that default. It's a plan offered by House Minority Whip Eric Cantor, who's trying to come up with an alternative under orders from House Minority Leader John Boehner. Sources say his idea is a simple one, and one Treasury initially liked but rejected because just buying the bad paper was easier. The emerging plan would act just like the mortgage giant Ginnie Mae, which guarantees loans to poor buyers. It's different from the Bush-Paulson plan in that it doesn't require an upfront, tax-payer-funded kitty of $700 billion. Instead, companies with bad loans would buy insurance from the feds and the feds would turn around and sell the bad loans they end up getting stuck with. The expected result: The Treasury isn't out a ton of money upfront and is only on the hook for bad loans. And if past patterns prove true in the future, Uncle Sam could turn the bad loans into a profit.

"Our objective," said a key House GOP leader working the deal, "is we shouldn't burden the taxpayers, the people who have been living by the rules." The document, provided to Whispers, shows their major principles.

The reason for the alternative plan is simple: House members are receiving calls at a rate of 100 to 4 against the Bush-Paulson bailout. "People are angry."

House leaders said that Treasury looked at the insurance idea and initially liked it but then went for the easier fix: Just buy bad loans. House Republicans, however, have balked at that plan, hence Boehner's call to Cantor to drum up a new idea. Insiders say that the insurance plan isn't exactly an alternative to the Bush-Paulson plan because Paulson's blueprint is written so broadly that the insurance proposals could be folded into the larger plan, leaving it up to Treasury to figure out which program to apply to each bad loan.

Will the GOP get its say? Nobody knows, and they don't think a final deal will come before Sunday. But a GOP source said that House Speaker Nancy Pelosi doesn't want her side holding the bag, so she's demanding that any final bill be supported by a majority of House Republicans.

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This is I believe the alternate Republican House plan actually developed by Cantor. Has anyone seen any analysis on the workability of such a concept????

[goldstategop]

Its better than flushing down good money after bad. Its prudent, fiscally responsible and offers the surest path to getting the financial markets back on their feet without putting the taxpayers on the hook. Congress must exhaust all avenues before committing to a taxpayer bailout.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus

[Deagle]

Heh, sounds good...

Actually, I hope that the Republicans DO stand up to this bailout and prevent it. Much to the worlds dismay, the world and the US will go on as scheduled...a bit less financed but okay... think Y2K...

[Dawn531]

Instead, companies with bad loans would buy insurance from the feds and the feds would turn around and sell the bad loans they end up getting stuck with

Somebody explain how this works. If the bank is broke, how do they buy the "insurance?" And who would they sell the bad loans to?

[Crimson Elephant]

Whatever they do, just do it and get it done by Monday.

[skinkinthegrass]

This is great. :D
.....McCain / Palin have outflanked the 'Rats agian.
....GW, didn't have much of a choice.

[RC2]

Most of the debt is owned by China and European companies. Buy them back. Get out of debt to these countries. One problem that people are talking about, money people, is that if we don’t have the bail out, China and Europe will call in our debt. How much is that debt? We don’t know. I guess the little people don’t need to know. Cut all mortgage rates to 4% and people will spend the rest of the money and put it back into the economy. These mortgage companies don’t deserve the 6% interest rates.

[Soul Seeker]

House leaders said that Treasury looked at the insurance idea and initially liked it but then went for the easier fix: Just buy bad loans.

Swell. Love Washington's mindset. Do people here still want to claim we're fools for opposing the current plan when here we discover they already knew of a slightly better way and rejected it because it wasn't "easy"?

[padre35]

Depends, would that inject enough liquidity to keep the Banksters in business?

Insurance is not meant to pay, it is meant to collect, so what exactly would this plan accomplish?

[bedowin]

I have to say... this sounds like a less worse idea than giving free reign to the Fed to buy up billions of dollars in bad debt, as they see fit.

Now, I can see why the Dems may blow this deal up because if they come forward with this dramatically different proposal, then it makes it look like McCain and the Republicans are the real authority on solving this major economic issue.

You can bet Dems are vetting the idea with economic advisers looking for an angle that will make it look like a terrible idea to the American people.

[nhwingut]

This is beautiful. Talk about backfiring.

The libmedia has been hammering “Wall Street Bailout” “Taxpayers Footing The Bill” (as if they cared), using meme to slam Bush and McCain. While secretly loving it because it gave government more power and would allow libs to take credit.

And now, that it’s falling apart, poor Frank and Dodd “worked too hard” for it to fall apart. And the GOP might get credit. LOL!!

[johncocktoasten]

Just like we called and raised hell about the $700 bil. We need to call and support this plan. Insuring the debts will keep the b.s. artists out of this program and force them out of business. Meanwhile, the bank with something real, like a real person, in a real house, with a real job, with a real mortgage, can get that debt shored up on their balance sheets.

If they can suspend capital gains and the mark to market accounting rules on these assets, that would help even more. This plan could actually work and not bankrupt the US.

Also, tell Dingy HELL NO on any property flipper bailouts!!

[BGHater]

The ‘Banks’ could look for investments from private entities that have money. Warren Buffet just put up $5bil. China has tons of cash as well as the ME.

Credit Unions tend to do better in circumstances right now. They have options for investment as well.

The banks could keep the loans, either to write them off or hold onto long term to sell them later.

[Ol' Dan Tucker]

Instead, companies with bad loans would buy insurance from the feds and the feds would turn around and sell the bad loans they end up getting stuck with.

Any plan offered should exempt loans made using an ITIN and Matricula Consular card. Loans made using these two items were most likely made to a Mexican illegal alien and may be fraudulent. If the bank is suffering because of fraudulent loans then they weren't dilligent enough and should pay the price.

[Ol' Dan Tucker]

Insuring the debts will keep the b.s. artists out of this program and force them out of business. Meanwhile, the bank with something real, like a real person, in a real house, with a real job, with a real mortgage, can get that debt shored up on their balance sheets.

Not so fast there, pardner.

Does this plan insure loans made using an ITIN and Matricula Consular card? If so, then these are most likely loans made to Mexican illegal aliens and we should not be paying for their loans.

[johncocktoasten]

This concept is already in action with FHA and VA and functions well. This plan would remove the specter of marking to market rules tanking all the banks in the commencement of the reverse auction.

That and they ought to waive the capital gains tax for two years

[spectre]

I don't know who it would affect Wall Street, but if my Credit Union offered me 7 or 8% locked in interest, paid per month...I'd gladly hand them all my savings.

Everyone I know would do the same, and the banks would have "liquidity" again.

But what do I know?

sw

[Rapunzel]

Here's an idea...since the banks are repossessing so many homes and this is definitely harming the value of everyone's home..

.why not take the value of the appraised value of homes as of let's say, yesterdays date. Now make the banks write down the loan(mortgage) to the current value.

However this deal is available only to Primary residence. 2nd homes, vacation homes, investment homes are not available to this formula.

The banks must take the hit for this since they are ultimately the cause.

No mortgages are granted until the commitee gives final approval usuually just a quick 24 hours before a closing on a home takes place.

THEN if you can not pay, you lose the home and the bank gets it back. Fair is fair and I think that is what Americans that played the game right want.

Those of you with Home equity lines that used your home value as an ATM are shit out of luck. Living beyond your means can not go rewarded.

OK, flame away.

[BGHater]

Just look at Charles Schwab, they are offering 3% for a Checking Acct.

Not bad. They aren’t screaming, they are offering a product.

[shadowgovernment]

“oans made to Mexican illegal aliens and we should not be paying for their loans.”
>>>>>>>>>>>>..................
Sen Shelby said today that he asked the Fed chair,’ why should American taxpayers bail out foreign Banks?’ This has never been done in history: Fed chairman could not answer.
So much under the radar with this plan, who gets paid??
the Dems loaded it with so much crap is could no longer float.