Posted on 09/30/2008 5:58:22 AM PDT by reaganaut1
The $700 billion bailout bill is palatable to no one. It’s a huge price tag. It was originally presented to Congress as all but a fait accompli. Secretary of the Treasury Henry Paulson and Federal Reserve Chairman Ben Bernanke have been underwhelming in selling the plan on Capitol Hill. And it’s hated by a public suspicious of the country’s elites, whether in Washington or on Wall Street.
Put that all together with a reflex against such a massive governmental intervention among House Republicans, and it’s understandable that so many of them voted against it and the bill went down yesterday. They were immediately the targets in the Beltway blame game, although there’s plenty of it to go around. House Speaker Nancy Pelosi, who has been acrimoniously partisan over the last few days (calling Republicans “unpatriotic” over the weekend), delivered an obstreperous anti-Republican speech on the House floor prior to the vote, apparently unaware of the delicacy of the moment. She didn’t deliver five of her own committee chairmen and lost more than a dozen of her fellow California Democrats. Ninety-five Democrats voted against the plan; if 13 more had voted “aye,” the bailout would have passed.
But as a practical matter, Democrats wanted as much political cover as possible to pass the unpopular Bush administration proposal. The Republican leadership delivered only a third of its caucus. The Republican opponents marshaled arguments that ordinarily would win us over, for instance, about the plan representing “the slippery slope to socialism.” But we believe these arguments fall down in the current crisis. If the crunch that Paulson and Bernanke are warning about comes, it will squeeze off credit — the very lifeblood of capitalism — to businesses, entrepreneurs, and consumers all around the country.
(Excerpt) Read more at article.nationalreview.com ...
The U.S. stock market, as represented by the Wilshire 5000, was recently worth about $13 trillion http://personal.fidelity.com/research/etf/content/market_indexes.shtml . A 5% drop amounts to $650 billion. Even if the $700 billion of investments lost 25%, that would amount to $175 billion, far less than the drop in the stock market. Many financial experts think the government would make money on the plan, although there is no consensus. Many Freepers are saying "to hell with Wall Street and the stock market", but many people, including lots of Republican voters, have their savings primarily invested in the stock market. How much support do you think there is now for partial privatization of Social Security (personal accounts), a long-term Republican goal.
Disregarding the stock market, a deep recession costs many people their jobs and blows a big hole in the Federal budget deficit.
The Republicans are not giving voters a reason to trust them over the Democrats on the economy.
Sad that it takes a massive, near-trillion dollar corporate bailout to get Repubs to show their conservative side.
I go for Gingrich’s proposals:
Gingrich’s four-point plan includes: (1) suspending immediately mark to market provisions (the accounting practice of valuing a financial position in an investment at its current market price) in the hopes of stopping the downward spiral in asset values and eventually replacing it with a three year rolling average; (2) repealing immediately Sarbanes-Oxley, the 2002 accounting law Gingrich described as “an enormous drag on small business”; (3) setting the capital gains tax rate at zero “matching the Chinese and Singapore” (to encourage private capital to flood into the market picking up properties without the taxpayers being at risk); and (4) passing an “extraordinarily powerful” energy bill (”to return $500 billion a year to the American economy that are currently going overseas”).
Normally I ignore Gingrich, but that sounds decent except for #1. The banks must be made solvent ASAP.
The House REpublicans have two days to get a ‘REAL BILL’ penned and presented to the Democrats for a say in this process..since the Paulson Plan failed. Paulson’s plan is not the best plan, and although the House Repubs had a clause in there to protect american taxpayer by making banks pay back in 5 yrs the difference of sales price of MBS’s and actual sale price later. That was agreed to on Fri and removed over weekend, so it may not have been just Pelosi’s statements...
"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
Based on the comments of the CEO of BB&T, 92% of the banks in the country are solvent.
I firmly disagree. That there must be a safety net is clear. Making sure that some liquidity is provided is sensible. That would be a number south of 250BN, doled out in tranches over the next few weeks. However, I am sure that there is no percentage in utterly safeguarding the players in the mortgage market. A good number should go under and take their worthless subprime loans with them. That will mean people thrown into the street, but if that is your worry, then attach a provision providing short-term welfare so they can get into the rental property they should never have left until they learned how to understand a simple mortgage loan.
And somebody please put a commercial up in Barney Frank's district putting his rejection of oversight in 2004 right next to his blame game this past week. Even Tasachusans couldn't ignore that.
I'm not sure I quite understand what you are proposing. The banks that are insolvent cannot become solvent with less than trillions in govt debt purchases. The alternative (see http://www.hussmanfunds.com/wmc/wmc080929.htm) is to let the 8% of insolvent banks be liquidated and deal with those consequences directly (plus up any depositors and hand the accounts to a solvent bank). Nobody gets thrown onto the street in that scenario.
This is a trillion dollar deficit
In a few months paulson will be on wall st with his buddies
This is the biggest looting since they looted social security.
IN ADDITION: If they don’t revoke the ‘EXEMPTION OF 40-1’ given by SEC in 2004 to Morgan Stanley and Goldman Sachs nothing will save them, for the other three were Bear Stearns, Merrill Lynch and Lehman and they have already gone down.
Also, uptick rule has to be reimplemented, and the FDIC limit has to be raised in order to install confidence in those with large sums of money in banks.
The FEDS have a few other options that should be used to protect taxpayer.
PRES BUSH SENT PAULSON’S PLAN TO CONGRESS TO GET SOMETHING DONE, AND THE HOUSE REPUBS MUST STEP UP TO PLATE AND GET A ‘REAL PLAN’ PRESENTED BEFORE THURSDAY. I DON’T THINK BUSH WAS AS MUCH FOR PAULSONS PLAN AS HE WAS TRUSTING HIS REPUBLICANS TO GET ON STICK AND GET A GREAT PLAN IMPLEMENTED.
A deep recession is inevitable, if we hadn’t been trying to “prevent” recessions for the last 15 years by pumping more and more and more Monopoly money into the system it would not have been.
LoL! Do you think Pelosi will allow a "REAL PLAN"? You need to read up what a "REAL PLAN" would entail, starting here http://www.hussmanfunds.com/wmc/wmc080929.htm and some other good proposals put forth in this forum (e.g. zero capital gains tax, etc). Anything else (e.g. pissing 700B into a hole) is not going to accomplish anything (except lower the federal credit rating).
Gingrich: "I think as long as Paulson is the treasury, his arrogance, his background as the chairman of Goldman Sachs makes it impossible to get to a good bill and I can't imagine a circumstance where Bush is going to fire him. So we as a country are trapped by a secretary of the treasury who is adamant about aggrandizing his personal talent. On the other hand you have liberal Democrats who frankly wanted a much worse bill. They wanted to give billions of dollars to left wing activists."
I am no economist and I have little in the way of practical advice on this very tangled matter but I think I can at least give some voice to why conservatives have a hard time swallowing this bailout at this time:
1. The timing is bad as far as trust is concerned. First, the proximity to a major election which may well determine who controls government for a long time makes people suspect either the problem or the nature of the fix is mostly dictated by November 4. (Visions of currency manipulators like Soros or other billionaires who are personally involved in this campaign like Buffet and Winfrey as well as memories of Riady and others who manipulated the Clinton administration make anyone suspicious.) Second, conservatives are having a hard time with the idea that this has to be fixed now, my way, or we are all going to die. Most of us have taken economic hits before and we have survived. Conservatives in particular tend to take a long view. Yes, my equity in my house has gone down in the past few years and the value of the 401k is dropping but I am not flipping houses or draining the equity for more toys, or taking early withdrawals from my savings so I can afford to wait out some downturns.
2. Bush and the members of his administration have not earned our trust on all matters. I do trust his conduct of the war but many conservatives felt betrayed by the immigration legalization dustup and many times members of his administration have turned out to betray him. So his trust of Paulsen is not a selling point for us.
3. We also don’t trust Paulsen. What we know of Paulsen is that his friends are in the very firms which are to be bailed out and Paulsen himself will be out of a job come January, at the latest. He therefore has a conflict of interest. The impression—rightly or not—is that Paulsen and his buddies put together a program to benefit themselves and are now trying to shove it down the throats of taxpayers as the only solution. (As a commentator on the radio last night stated, the impression is that Paulsen and company are the wealthy passengers on the Titanic who get first chance at the lifeboats while the steerage passenger go down with the boat. At the very least, a captain ought to go with us.)
4. Conservatives also distrust the government to get itself out of a problem in which it got itself in the first place. We don’t see provisions to reform the business practices and legislation which created this perfect storm in the first place. There doesn’t seem to be any effort to investigate the causes and tie names and solutions to those causes. We are accustomed to hearing the Democrats blame greedy capitalists or big business so we are suspicious when the same song is playing now. We want to see audits, investigations, legislative reform, and not promises to do such but real efforts to determine where the fault lies and to reform. We are too jaded to trust promises to reform because too often those promises are conveniently forgotten when the crisis is over. We want names, numbers, perp walks, resignations, mea culpas, whatever.
5. We don’t trust the legislative process. U.S. laws long ago stopped being clear-cut and easy to understand. Too many laws are phrased like “Notwithstanding paragraph 317(b)2(1)(xliv) of U.S.C. 49223, no entity which meets the criteria of paragraph 29A(d)(146) of U.S.C. 1311(1)(w)(i)shall have to . . . “ . . . you get the drift. It is impossible for anyone to fully understand the effect of these laws.
6. In addition to the incomprehensibility of such laws, we conservatives have all too often been burned when hidden passage, loopholes and goodies have been discovered only after legislation has been passed. The taxpayers rightly suspect that this bailout will be loaded with special interest giveaways, making it more expensive for taxpayers and more politically advantageous for the party in power.
Conservatives are also realists. They understand that notwithstanding these reservations, it may be necessary to bite the bullet right now but conservatives and indeed all taxpayers need to be reassured that whatever caused this problem in the first place won’t happen again, and that whatever is being done is the absolutely minimal needed to prevent catastrophy. I don’t think the case has been made for this yet and I don’t think I am alone in my misgivings. Someone has a lot of selling to do, although I suspect this will be shoved down our throats eventually I do respect those who are fighting for some of these issues.
I was with him while he worked out what has spooked investors in investment banks. He makes the very astute point that if they were permitted to collapse the way ordinary regulated banks do, the problem would simply evaporate. The ‘good bank’ would be stripped from the ‘bad bank’ and the debts would disappear with the released distressed assets, leaving the core deposit/loan bank still in place and now able to continue business without even government intervention. This does utterly impoverish the bondholders, but it contains the problem and protects the investores and depositors.
Then he goes and suggests the government actually buy into the companies, injecting subordinate super-bonds so as to buoy the balance sheets. Now, this does permit the distressed assets to be written off and protect the underlying ordinary capital, but what it also does is put the government on the boards of directors, essentially imitating what Japan evolved from the ‘70’s into the ‘90’s. We all remember what happened then (and continues to happen), yes? Not a good solution, though probably a nod in the correct direction.
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