Based on Pelosi’s representations, I support the bailout bill.
About The Author
BooMan
Martin Longman a contributing editor at the Washington Monthly. He is also the founder of Booman Tribune and Progress Pond. He has a degree in philosophy from Western Michigan University.
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All except the part which allows breaks for people who signed for mortgages they should have known they couldn’t repay. They are as guilty as “Wall Street”.
How about the banks who came up with the schemes to allow people who, after all, just wanted a home, and were told by every goddamned radio and TV station that they should?
I’m sorry, but put the blame on the flim-flam men, not the people they bilked.
at the “no credit, no problem” car dealers at outrageous interest rates. Should we also bail them out with our tax dollars?
I disagree. Yes, banks could’ve done better due diligence on a great many of these mortgages, but there were clearly people out there who overstated their ability to repay their loans. There has to be some element of personal responsibility.
We used excessive leverage, failed to maintain adequate capital, engaged in reckless speculation, created new complex derivatives. We focused on short-term profits at the expense of sustainability. We not only undermined our own firms, we destabilized the financial sector and roiled the global economy, to boot. And we got huge bonuses.
If the Republicans do not lock step vote in line with us we are fucked. They’ll turn us against us in a second.
John McCain said the surge was a success many times. Must make it so then, eh?
I could give a flying fuck what the details are in Pelosi’s snotrag, nothing ever gets passed of this magnitude without at least a month of workup.
No month? No money. It’s a Democracy, not a Wall Street club.
Well, we lose the country a little more every week, evidently.
In a whole lot of cases, they weren’t even asked to state their ability to pay off the loan. Nobody cared — they were going to sell the paper at a profit.
When you take out a loan, do you depend on the lender to ask if you’re able to repay it?
Or do you, as a responsible adult, make that judgement yourself?
What’s with the Ron Paul crap? If there are to be no handouts to anybody, fine. Personal responsibility requires that everybody who put their pensions in a stock fund or corporate bonds or mortgage securities just take their losses and shut up.
But that’s not what is happening here. The swindlers at Goldman and Merril and all the rest are walking away unscathed while you dump on their victims. If we’re all into taking your lumps for your decisions, let the corporate bonds in these companies go into default. They can more than cover the bad paper. That what you want?
I’m not in favor of anyone going away “unscathed”.
People who borrow money they cannot repay cannot be called “victims”.
You still don’t explain why your standard is different for the company who are now protected from the consequences of buying securities in bad companies (and thus obviously didn’t do due diligence) than for the mortgagees who believed that company’s salesmen/swindlers.
“company bondholders who are now protected from the consequences…”
there’ll be time for sending people to jail.
BUT you overlook this that has impaired the system. Suggest you read and digest before blaming the little guys and gals who were duped.
Don’t forget it was the financing arm of big three autos that offered us, through their dealerships, 0% interest and $0 down then sold those loan documents multiple times on Wall Street. And let’s not forget these loans were insured against default.
So they had their cake and ate it too. In the event a borrower defaults, they repossess the auto and collected the insurance on a defaulted loan while repossessing the item. That’s thuggery, not capitalism.
Same goes for credit card debt, HELOCs, anything not yet made. As for credit card debt – there’s no money before you sign to pay for the item. The money is created by your signature because it is sold on Wall Street That’s the system; by your signature you’ve created money out of thin air.
Ah derivatives; loaded with fraud and manipulation. That’s for another day. It’ll be told.
into taking a three hundred thousand dollar loan if you had no job and no savings?
Put the loan sharks in prison? Fine. I’ve no problem with that.
But let’s not excuse the “little guys and gals” who were either stupid or greedy. Many of them thought they could buy these homes, see the price rise astronomically, and resell them before the balloon came due.
In quite a few cases the lenders were prepared with lines of bull that made it difficult for borrowers to understand what they were getting into. So, unless the borrower was sophisticated enough to know 1) better than to trust what the lender’s representative was telling them, 2) that they needed to do some due diligence, and 3) how to find and evaluate the information they needed, their dreams of home ownership would be fulfilled – temporarily, as it turned out.
And, as I found out myself, they were even very aggressively trying to steer people who qualified for low fixed rate loans into sub prime loans. In my case THEY came after ME and wanted me to refinance with them from a pretty decent fixed rate to an outrageous variable rate. Even after I told them to get lost they kept calling me for weeks and weeks and leaving voice mails, even though I was not returning their calls.
Doesn’t it speak to how fucked up the whole system was that the premise of your question is valid in the first place? What kind of lender would give out a loan if they weren’t somewhat assured that it would be repaid? Isn’t repayment the entire POINT of a loan? And if lenders were hiding or purposely obfuscating the terms of loans, what does that tell you about the lender?
I don’t have a lot of sympathy for people who try to live above their means and end up getting screwed. And that goes for both lenders and borrowers in this particular case. But there are certainly people out there who were either deceived or were just plain incapable of understanding the contracts they were getting into. Now ask yourself why a lender would deceive the former or give loans to the latter, and tell me where the ‘greed’ finger points.
You forget the reality that most of these loans, especially the preditory ones were channeled through mortgage brokers, who certainly would say anything, because the never hold the mortgage at all – they just a got a cut right off!
Those guys are the source of much of the street level contribution to the mess. Not to say there weren’t people with no assets and 5 mortgages.
I think that you can keep that latter class of people from benefiting too much from a recovery plan by limited any renegotiation to a mortgage holders primary residence only. I still don’t get how the Dems can talk about individually renegotiating mortgages. But hey, if it happens, I’ll make sure to be late on a few payments to qualify…. (see! Most market meddling creates a possibility for exploitation)
The biggest part of this mess isn’t poor folk who just wanted a home. Look at where this mess is concentrated–Florida, Las Vegas, Arizona, SoCal. That’s where the biggest problems are. And the majority of the folks who were “bilked” were just trading up the way they were told to. Get somethin’ fer nothin’. Yes there were and are problems with predatory lenders in poor neighborhoods but if that’s all it were, there wouldn’t be panic on Wall Street.
I’m down with much of this, but it seems that a lot of it is window dressing (most of that the 350 Billion, I’d say) and the core, effective parts are overly complex.
Why buy mortgages in order to go case-by-case to reduce them? Why not just pay off people’s mortgages directly on their primary residence only? Seems like there will be excessive waste in an overly administered response.
There is no better way to ‘protect’ taxpayers from losses than to give THE BAILOUT TO THE TAXPAYER THEMSELVES.
These jokers also seem to be setting up a serious market distortion in the area regarding discretion regarding the guaranteeing the value of reimbursements – sounds like if the right hand makes 5 cents, then the left hand can loose $1 billion. Perhaps it was just bad wording for the sake of brevity.
They aren’t buying “mortgages”. They’re buying CDOs which include a revenue stream from pieces of mortgages. They’re spread out, chopped up, minced, diced to microscopic pieces in some cases. Good luck trying to put a mortgage back together.
indeed.. sounds like we’re buying a buncha crap.
They are however talking about having the right to renegotiate on a case by case basis. Perhaps they are confused too?
it’s all spin.
if she had impeached those two war criminals and she and reid not been total ineffectuals and called for congressional oversight of the banking and financial sectors two years ago, perhaps a lot of this wouldn’t be happening. or at least there would be some real congressional hearings before rushing through this awful bill.
not to say there aren’t positive features of the bill.
but it’s just a big rush like the wars into iraq and afghnistan. and where was all the big rush to rebuild new orleans and the Gulf Coast; where’s the big rush as the whole planet is melting down: and where are the funds going to come from now for any i mean any new social programs under obama. oh, let’s just print more money.
I’m not the least bit convinced or impressed by anything the 20% congress can come up with after the shams they’ve put through and put up with so far.
For the Iraq war of choice we have volunteer armed forces and contractors. For the Vietnam war of choice we had the draft. It was the draft that made the war personal causing violent protests. The violent protest caused a backlash with the voters that the republicans were more than willing to exploit to start the conservative ‘revolution’. While I think it was the duty of congress to impeach not only Chaney and Bush but the entire cabal that participated in war crimes, the simple truth is that we did not have the votes to impeach. Remember the country is still close to evenly divided. Impeachment would have caused a backlash that the republicans could and would have exploited to remain in power. Now that the conservative revolution has come to its meltdown conclusion the republicans are left holding the bag of blame for all the voters to see with no cover of impeachment resentment. Meaningful congressional hearings can only happen when you have the votes to implement changes. I hope now we can get those votes in landslide victory.
I think the problem is real because the stock markets might go into a spiral that could not be stopped. Last time this happened it took more than a decade, FDR and a world war to end it. I just hope this works. If we can get control of congress, we can get the money back from those who made and benefited from this mess and well as fix the laws to prevent this in the future as well as inject some real (progressive) fairness.
I really wanted to see explicit regulation language. There’s nothing really preventing this from happening again other than “greater congressional oversight”, a term that has become toothless and meaningless recently. I’m also disappointed that they didn’t revert to the original bankruptcy laws: that would have really helped one of the root problems.
The offshore oil-drilling capitulation pissed me off. Not only is it not going to move forward (if Ted kennedy won’t allow wind turbines off nantucket, there is no way he’s gonna permit a drilling platform), it’s a waste of money as lawsuits are inevitably going to challenge this.
That said, it’s not 100% awful: if only for the cosmetics, it looks good to limit ceo pay and to do away with golden parachutes.
I don’t think it’s going to ass anyway: there’s a big hurry to get something done, but bailing out wall street during an election year when so many regular families are suffering is a pretty big risk, and both parties know it:
I guess I’m just dense, but she never spells out just what the gov is going to do, or what it’s going to buy if anything. Boo, what is it exactly that you support? As far as I can tell we still have no idea how they’re going to price these alleged assets or what kind of paper they are — stock in the banks/corps? The mortgages themselves — in which case, which ones, and who decides? The garnishes Pelosi describes sound great, but we still have no idea whether the main course is poisoned.
Thing is, I strongly suspect that the legislators don’t have any more answers to questions like that than the rest of us do. Yet they’ll be voting on this pig in a poke tomorrow. If all this is as crucial as the Bushies keep screaming, it surely deserves a lot more calm deliberation. There are at least 300 academic economists who seem to think so too:
And some 300 signatures follow.
A draft of the bill is available here as a PDF file. It’s 106 pages.
I don’t like any of it. Anyone who votes for this bill deserves to be voted out of office and rightfully so, and yet the only way this will pass is if majorities of both the GOP and the Democrats in the House get behind it.
I don’t see it happening. I just don’t see enough people committing political suicide over this, particularly House GOP.
OK Zandar.
Developing from Reuters: Republican Rep. Blunt says expects “substantial support” from House Republicans for new rescue plan 8:32pm EDT
Now for the rescue, what’s known so far is that what went in got clipped because of MainStreet’s protestations. We knew $700 billion is at a minimum, a down payment on an $11 trillion mortgage. Let’s recall the Feds lent $1 trillion to the banks and Wall Street handsomes last week alone. So
$250 billion down and $50 billion slices that may not happen in the next 3.5 months, makes a big yawn. But this section on FASB grabs me and won’t let go: via Chicago SunTimes
Section by Section Analysis of the Legislation:
In other words, banks and other financial entities will return to false and misleading accounting. Won’t be market positive once it’s re-read and digested.
As I write: Wachovia, B&B and Fortis gone.
As I write munis are next
There’s no practical solution. Eventually, U.S. Treasuries will be shunned. This is scary. Very.
Here’s Canada’s PM Harper: No, help from us
The CONSEQUENCES can’t be spun away. This is IT!
That’s the strongest signal yet that this bailout won’t work.
No matter what happens, when China and Saudi Arabia stop funding our debt, the game ends.
Other countries are not moving to help us. Other countries are instead moving to save themselves and limit the fallout.
At this point if a bailout or not happens, it’s academic. The crash is coming regardless.
We’re goners.
One of David Letterman’s writers said on the show after the 2000 selection, “George Bush is going to run this country into the ground!” I don’t think that anyone could have imagined how right he would turn out to be.
I guess Pelosi and Reid missed that show.
At this point if a bailout or not happens, it’s academic.
I think that’s a bit too defeatist. It’s true that the economy is structurally fucked because most people can get by only by taking on additional debt, and because we’ve outsourced too much to be able to meet our own demand for manufactured goods. But the bailout signals to the rest of the world that we are not serious about getting our house in order. In the short run it will make speculators pick up dollar-denominated assets, but soon enough foreign investors will decide that the dollar has nowhere to go but down, and will get out of it.
The fundamental problem is political, not economic. If a benevolent foreign power took over this country, it could implement programs that would make investors confident that the American economy can bounce back. The problem is that the people who own and hence run this country are too greedy and stupid to themselves make the “sacrifices” necessary to make the US economy a going concern again.
Every time I think that perhaps a leader might level with the people and explain to them what the problems really are, I”m reminded that Mondale once said that taxes would have to go up. “He [Reagan] won’t tell you. I just did.” Mondale got massacred and Reagan raised taxes. Good luck fixing the political problem before we find ourselves drowning in our own toxic waste.
If someone can look through the bill and explain to me how it “Guarantees taxpayers are repaid in full — if other protections have not actually produced a profit” (from “Pelosi’s representations”), I’d be much obliged.
There’s a diary up about this at dKos: This deal sucks!.
The diarist lists five “failures”, the first of which is that the government will get an ownership stake in companies it is rescuing only at the discretion of the Secretary of the Treasury. Here is the relevant text:
In an earlier post, I wrote, “Given the track record of the Dems, I see no grounds for believing that a final bill that is passed will contain provisions for the government holding equity, any more than the FISA bill did not contain telecom immunity.” Booman replied, “I doubt it. The Senate is on board with equity and the House will have an easier time passing this with equity than without it.”
Well, this is how they give us equity.
Sec. 113(d)requires that the Secretary get warrants from public companies unless the aggregate purchase by the govt of troubled assets is less than $100 million. (And the secretary has authority to set that de minimis lower but not higher.)
Here’s the whole section. The warrant exercise price is the price that the government (or other holder if the government has sold the warrant) can exercise the warrant to convert it into actual stock. So if for example the value of the stock is $45 a share on the date the govt buys troubled securities from the bank and Paulson sets the exercise price at $45. the govt can later buy the stock at that $45 price even if the value of the stock rises to $150.
So if the purchase of troubled securities helps the bank and the value of the bank rises, the warrant becomes very marketable and the govt could sell it to an investor. Or if the bank was being sold for $150 in a cash merger the govt would get $150 less the $45. There is no reason to believe that the Secretary would set the exercise price of the warrant artificially high at the time the price was set. It would more likely be tied to the value of the stock at the time.
*laughs*
We’re going to make a ton of money out of this! Watch, baby, the Fed’s gonna be our playah!
We should be have doing this capitalism forevah!
No. We’re probably going to have a financial loss, this is a way to try to make that loss less than it would be. And to inject a little more fairness into the situation since the shareholders of troubled institutions shouldn’t reap all the benefits while the US taxpayer takes all the losses.
It isn’t a perfect solution. No one thinks it is a perfect solution.
I was simply responding to the comment that mistook setting the exercise price with the provision that requires the govt to take warrants in public companies that are bailed out unless the amount they pay for troubled assets is below some deminimis amount.
Never rely on somebody else though. You should read the bill yourself to see what it says.
Then you get no upside on the equity.
But the reason you take equity is to offset your probable losses from buying the bad assets in the event that the financial institution turns itself around after those bad assets come off its books.
If the US taxpayer for instance paid $500 million dollars for troubled assets from a Bank. We holdthose assets for a while and eventually realize $300 million for them – we would have a $200 million loss. In the meantime, once the bad assets are off its books the Bank turns itself around and it’s stock starts to climb in value. The US taxpayer took the loss and the Bank shareholders reaped the benefit. By taking an equity position the taxpayer can hope to offset some of the losses IF there is a gain on the equity side.
If there is no gain then we lose but the Bank shareholders lose too.
I think it’s hopeless Mary. The whole blogosphere has revealed themselves to be infantile. No one is listening to reason. No one has any trust left. And our leaders are feeding a fake populist revolt that will do nothing but hurt the Democrats that have the courage to vote for this bill. And the bill is not bad considering the emergency we’re in and the fact that we needed to administration and republican votes to craft it.
I’m not trying to convince anyone. I think trying to convince anyone on the internet is pointless.
I simply had just read the bill and responding with truth gave me a chance to work through that section more carefully and think through the issues for myself.
My participation in blogs is for my own amusement or to work through my own intellectual issues by talking to other people. Nothing else. It’s all about me.
I have no blog leader. I don’t believe there are blog leaders. You should know that by now.
maryb, you are my blog leader 🙂
Good to see you! I made it out to Busch Stadium this year (For a Braves game, of course ;). I thought about trying to get in touch with you, but it was kind of a last minute thing on my way home from Kansas City.
It would have been great to see you. I wish you would have gotten in touch.
I hope you enjoyed our new stadium. I’m still trying to get used to it, I kinda miss the old one.
Next time you’re in the vicinity, drop me an e-mail.
You are suffering from some kind of Stockholm Syndrome. That the bill could have been worse isn’t the point. The problem is that this fits into a pattern. Congressional Republicans came up with their own alternative bill, but Democrats didn’t bother to come up with what is obviously possible, a better and less expensive bill. So what if they wouldn’t have been able to get the Republicans to sign off on the better bill? At least they would shown that they can do something other than play follow the leader. That Reid would repeatedly say “Paulson says xyz about the economy”, treating him as i he’s the only authority on the matter in the whole country, was disgusting.
Nancy Pelosi just said what she likes to say, “It’s a Republican bill”. Don’t blame us. Well, why wasn’t there a Democratic bill???
So who does the fact that there is an agreed bail-out plan help? Obama or McCain?
neither.
The sooner the bailout bill is passed, the better for McCain. It’ll take two or three days, but at some point the media will start to talk about something other than this crisis…not a shining moment for McCain as we see by the devastating (for McCain) polling trends.
On the other hand, what the media wants to talk about may not be helpful for McCain either. Lobbyist problems, VP headaches, wow. I can’t remember a candidate in such distress.
Anyone else?
i think obama should get there late, be the last one to vote, and say “this is nothing more than a transfer of wealth from the struggling middle class to the ruling class and i will not vote for this bill in this form.”
Slam that arm out, Booman! The Speaker has spoken!
Not one economist was called to testify at any hearing. How could something so fast be any good?
The blogosphere as rebels my ass.
It certainly sounds much better and “fairer” than the original plan. The problem with the improved version lies precisely with the improvements, but I understand that politically the original was an impossible sell on the right and on the left.
Where does the problem lie? In the probable rate of participation among banks. The aim of the original bill was not a bail-out of banks but an enticement to banks to resume lending at full throttle via an exchange of liquid assets (cash) for illiquid assets whose value is hard to establish at this point (CDOs). The improved bill with its punitive clauses will see much lower bank participation than the original one. Stronger banks have a strong incentive now not to participate at all. That will lead to much less lending in the coming year than would otherwise have been the case. As things stand now, it seems reasonable to expect further deleveraging among lenders and hence a rather brutal recession. Yes this bill is much more virtuous, but this virtue will hurt bad.
I believe there will have to be a second act to this bill next year once the next administration and congress have settled in. Hopefully the next treasury secretary will be able to demonstrate the treasury department’s ability to disentangle and properly price CDOs by then.
What you say may be true, but the United States is currently spending 5 to 6 percent more than it makes. The economy has to shrink, to bring demand into consonance with supply. This could be done with a significant and highly unlikely tax increase, which is what ought to be done, or can be done via recession, which is what will be done. The recession was going to come one way or another, as foreigners are not going to buy any additional US debt after the bail-out issues have been marketed.
Knut,
are you applying for a job at the IMF? The logic you unspool here is indistinguishable from standard IMF shock therapy.
Come on Boo. Pelosi is as corrupt as they get. She’s married to an investment banker, is an extremely wealthy multimillionaire and stands to personally make millions off of this bill. Just like virtually all of those who are supporting it. Bunch of crooks.
I still don’t know what anyone expects this bill to accomplish–even if everyone’s playing it straight. I won’t “fix” anything. They’re just kicking the can down the road.
House GOP rank and file is still holding things up at this hour, still meeting behind closed doors to determine if the plan is go. It’s been over two hours now.
For the first time ever I’m hoping the GOP shows the backbone the Dems won’t.
They will. It’s the only chance they’ve got.
The real question is, will the Dems stick to their demand that the GOP vote for the bill? Now that Pelosi and the rest have told us how great is all is, how do they justify killing it as promised if they only get 20 GOP votes in the House?
Upthread I noted a Reuters developing story from a GOP press Conference at 8.30 PM – there’ll be substantial GOP support.
This bill was written by a Committee. $700 billion was not enough for the problem at hand.
Main Street protests fails to understand what is ahead.
Here’s an article by an economist who, unlike the Dem establishment’s main economic authority, Henry Paulson, had been predicting for years that this crisis would occur:
Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders nd Unsecured Creditors of Banks
What you’re quoting seems to be about the original Bush/Paulson proposition. What came out now is quite different and includes most of the demands made by lefty critics. Unless there’s a sneak attack to change what’s been announced, I don’t see the point of continuing to talk about Paulson’s original 3-page paper.
Claims that the current form of the bill differs significantly from the original have been much exaggerated. Nancy Pelosi is still going out of her way to call this a “Republican bill”, to try to avoid responsibility for it.
I think the NYU economics professor whom I was quoting had seen the latest publicly available version of the bill, as of today. The post I quoted was dated 28 Sept.
I don’t really see what is to be accomplished by playing the devil’s advocate, when the devil is Bush/Cheney.
I’m not surprised. A loyal foot soldier following the harried retreat of an intellectually and morally bankrupt leadership. I had no doubt you would follow the Democratic party into oblivion.
Once again you guys let the worst president in history punk your sorry asses. You guys are bunch of coward punks that lined up to get bitch slapped by your master, Bush, one last time. It’s like ritual humiliation–which is entirely appropriate considering the political malfeasance the “opposition” party has engaged in the last 8 years.
Bush and the GOP have forced the Dems to publicly disown every last basic, fundamental principle of democratic values to prove they own your asses. You guys don’t even try to say you disagree with Bush anymore. You just claim you are more competent conservative rulers.
You guys live in fear. Fear rules your world. You have ran from every professed liberal value there is and are complete cowards or really conservatives that aren’t honest enough to come out and call yourselves conservatives. Which is it? Are you liberal and scared or are you really conservative?
It’s a clarion call to all who doubted it: the Democratic party is dead. It sold it’s soul in for a pig in a poke; for the chance the Republicans won’t say mean things about them they once again sold out to Republican ideas.
You guys are going to have to learn the hard way that being Republican-lite doesn’t work anyway. No one respects you for your capitulation. We tried this with Clinton, Gore, Kerry, and now the empty suit Obama. Only one “won” at the ballot box and he set about dismantling that “win” when in office. Obama has now morphed into what a Republican was 20 years ago. He’s a complete sellout.
Bush has totally owned you guys. Might as well have one more beautiful example of your cowardice, political incompetence, and contempt for liberal values; you’ve sold out the Untied States treasury to Bush’s criminal corporatist pals. You handed the keys of the treasury to the very criminals that are holding guns to our heads. But I guess these criminals are also your pals (Obama has certainly porked out at the corporate trough).
But there is no mistaking it now.
Bush OWNS your ass.
Bush holds a gun to your head and you cowards do Bush’s bidding. Every. Single. Time.
Pathetic. Truly pathetic. How could you guys get suckered each and every time by such and idiot?
CORRUPTION AND SLEAZE ARE SWIRLING AROUND THESE BAILOUTS – AND AMERICA KNOWS IT
that Republicans seem to be more outraged by this than many so-called liberal bloggers. That reminds me of this:
nice rant.
I’d trust you with the financial markets to the exact same degree I trusted the neo-cons’ belief in creative destruction in foreign policy.
You didn’t even mention one aspect of this bill that you disagree with, so I’ll leave it at that.
..will not be televised..