The bailout bill vote in the House of Representatives was 205-228; motion failed.
Hallelujah. Whatever the solution to the housing crisis is, this bill wasn’t it. I never thought it would fail, but I’m happy it did.
The bailout bill vote in the House of Representatives was 205-228; motion failed.
Hallelujah. Whatever the solution to the housing crisis is, this bill wasn’t it. I never thought it would fail, but I’m happy it did.
I, for one, am pleasantly suprised. Could it be that not everyone is listening to the Bush admintistration’s chorus of chicken littles any more? I’m sure the next idea won’t be a panacea, but hopefully it won’t cost every taxpayer approximately $2500!
You state that this bill wasn’t the solution. With which of its provisions do you disagree?
Um, maybe robbing future taxpayers to the tune of $700 BILLION dollars the government doesn’t have to buy assets that are worth less than that and then giving the treasury department the ability to resell at a loss?
Or the increased regulation, causing more government control over what would be better left to the free market? Remember Fannie and Freddie were already government sponsored enterprises (meaning private profits, taxpayer funded losses).
nontimendum– Just for starters:
Sec. 101(a)(1)
Sec. 106(a)
Sec. 106(b)
Sec. 106(c)
Sec. 107(a)
Sec. 112
Sec. 115
Sec. 118
Sec. 122
Generally speaking, I don’t agree with the premise that the government has to act on this. I also think this bill concentrates too much power in the Treasury Secretary. And perhaps most importantly, it’s too much money. It’s $700 BILLION DOLLARS. Do you realize how much money that is?
Yes. It’s $70,000,000,000. Pretty much unfathomable. To conclude that it’s too much money, however, you must have an idea as to how much is needed to unseize credit markets. Please share.
The Secretary was to be subject to multi-level oversight, including a congressional panel.
James, the problem is that the assets are “worthless” only as determined by mark to market valuation, which is what makes them “toxic” to a balance sheet. There needs to be an allowance to perform valuation via some form of financial analysis, such as discounted cash flow. The intent of the intervention was to jump start asset price discovery in the credit markets.
I hope the opponents to this are proven right because, in my opinion, unless congress takes another run at this things are going to get really ugly really fast. Specifically, I expect a significant spike in failed businesses and unemployment.
Have you looked at the regional banks today? I know a couple of people who work at Nat City, and they are very, very scared.
Oops. $700,000,000,000. So big it’s hard to type.
“…you must have an idea as to how much is needed to unseize credit markets…”
I guess my point is, I don’t see it as the government’s responsibility to “unseize credit markets.” Now, I’m the first to admit that I’m no economist. I’m just a dumb taxpayer. But I’ve been trying to educate myself, even listening to debates by lawmakers in the House regarding this bill. I have yet to have anyone give me a good explanation of why we should do this. The best they can do is say, “well, Bernanke said we need to do this,” or, “Congress has to act or else we don’t know what will happen, but it could be terrible!” I’m sorry, but that’s not very compelling. Certainly not compelling enough to outlay $700 BILLION DOLLARS in taxpayer funds.
My father-in-law said something I thought was instructive. He said the people in charge weren’t smart enough to prevent this crisis; why do we think they’re smart enough to fix it?
The difference is the recession we are in or the depression we will be in if we don’t do something and do it quickly. We are already in hock to foreign nations that we have borrowed from. If we go into a full blown depression they will own us lock, stock and barrel. Do you want that?
I’m as much a free market capitalist as anyone, so I also hate the idea of government intervention. That said, I believe the current situation is so dire that I was willing to hold my nose while congress did the deed.
C.J., the 101 version is that banks were overleveraged as badly as 30: to 40:1 debt to capital. One of the reasons for those ratios is that the assets they hold are not being properly valued (see previous post). In an attempt to deleverage, even in the absence of a run on deposits, banks are forced to cling tightly to capital, i.e. not offer credit as they otherwise would. Because of that, proponents are concerned that businesses will not have access to the capital they need to continue operating, let alone attempt to grow.
Part of the problem is that bailout is a true misnomer. The intervention was to be an investment in assets that would likely perform very well. It’s ironic that opponents have done a wonderful job of painting this as a bailout for Wall Steet fatcats when in fact its taxpayers themselves who need this the most.
My two cents, for what it’s worth… Banks are in a liquidity crisis which prevents them from giving out loans and in many cases means calling in loans and lines of credit even from businesses that are in fine financial shape, because the banks need cash the cash to stay afloat.
A business which loses their line of credit is a business that will now struggle to pay their payroll or build up seasonal inventory.
Business fails. Workers are without jobs.
That, in a nutshell, is why something needs to be done to allow banks to dump their bad debt and free up cash. What that something is is not my area of expertise, but watching this economy implode is not my idea of a good time.
Something else to think about – cash in a bank is only insured by the FDIC up to $100,000. That needs to be increased.
Too much regulation???? The lack of regulation under this administration is the reason we are in this predicament. If anything, we need more regulation. It’s obvious that you can’t let the market police itself because it can’t be trusted…
Hopefully, President Obama and his administration will start throwing come of these corporate thieves in jail and it may help with the problem.
Wasn’t it Obama who said something about “…not a good idea to ask the person who drove the bus into the ditch being the wrong person to get it out…”
Any plan supported by Barney, Dodd, Paulsen and Bernake……apply the same standard Barack.
nontimendum, PeoriaIllinoisan, good posts. Last week, McDonald’s was denied lines of credit to update equipment. MCD, a company that most banks would love to have as a client to lend to!! This will happen to mom and pop shops to that try to get a loan.
Most people think that Main St. and Wall St. are each separate entities but in reality they are joined at the hip. And when one dies the other will follow.
What is the answear? Let it all crash and burn? Guess it would start a new system like the depression did, if the credit system fails.
The temporary answer is the proposed capital infusion to defibrillate the credit markets.
Even with passage of the intervention bill, we are still in the early innings of the deleveraging process. The intervention should work to minimize the length and depth of the downturn.
This bill is just an extremely tough vote for politicians whose constituents are overwhelmingly against it. I still believe some version of the bill will pass this week.
The cost is not/will not be $700 billion. That is the estimated cost before the government recoups costs when homes are later sold.
By the way, Barney Frank and Bill Clinton started the “a house for everyone” thing and forbid banks from denying loans in bad neighborhoods, etc. They also required banks to lower their guidelines in “poor market areas”. It has simply taken a number of years for this to build up to this level.
However, not everyone who’s home is being foreclosed upon is in that position because they bought a home they couldn’t afford. I know of a number of professional-type friends from around the country who got low interest ARM’s one to two years ago thinking they would refinance when the rates increased later, then got laid off from those high paying jobs and were unable to refinance because they no longer make enough money. The rates increased even higher over the last year or so and … there they are. Stuck.
A shortage of credit also means significantly higher interest rates for those who can get it.
I forgot to add that it was under the Clinton years that the bank’s debt/asset ratios was lowered making it even easier for a large bank to become insolvent if they allowed themselves to drop near those levels. JP Morgan’s Jamie Dimon has refused to do so and actually strengthened what is known as the Tier1 capital levels over the last 5 years or so.
This situation makes the “call” on the load to WTVP look like a precursor to the current situation. Makes calling in loans to boost cash flow even on performing loans.
While everyone wants to look at this through political lenses, the vast majority of us will have a hard time fully understanding the true impact a failure of the financial markets will have on the United States or what it will take to prevent it. While the elected officials in washington play politics with the situation for short term gains (electability, etc.); they are completely forgetting about our long term needs.
To paraphrase Senator Everett Dirksen: “700 Billion here,700 Billion there, pretty soon we’re talking real money”
Amazing! People do not want their own government to help out their own capitalist financial banking system stay afloat but want their government to be socially responsible concerning everything else. Hilarious, confusing and sad.
I knew it wouldn’t take long for someone to paraphrase FOX News and blame the Clinton years. Wow, no one blamed Bush for 9/11, even though it happened on his watch, yet they blame Clinton for not getting bin Laden, yet we still don’t have Bin Laden on the Bush watch. Nope, this whole Wall Street mess is the direct cause of the Bush Administration no matter how you candy coat it. Greed greed greed. These people need to be in jail awaiting trial. The Dems did have enough votes to pass this bailout without the Reps but then if it failed to work, guess who would have been blamed? So, they relied on the Reps to gather the votes needed to pass it and that didn’t happen because they didn’t like what the Speaker of the House said before the vote. (so much for “country first” propaganda) The party of less government (Republicans) now wants more government by bailing out these greedy CEO’s with our money. Nope, let it crash. In fact, maybe Bush could stand out in front of the Whitehouse and have people pay $5 grand for a picture with him. Maybe by Christmas, we’ll have enough picture money to help.
I think that hiding within your partisan, vitriolic rant, your one proposed solution was “Nope, let it crash.” Smart.
You’re running for City Council, right?
Let it collapse. What’s wrong with another depression? Afraid you won’t be able to watch your big screen TVs?
My parents survived the last one and they became the “Greatest Generation”. Maybe we could use a little more of that.
Instead of paying 700 billion to band-aid a failing system, how about 400 billion to pay off our debt and free ourselves of the tyranny of the federal reserve System.
Oh, I get it. This way, The Federal Reserve gets nearly twice as much money and keeps it stranglehold on the government!
“Amazing! People do not want their own government to help out their own capitalist financial banking system stay afloat but want their government to be socially responsible concerning everything else. Hilarious, confusing and sad.”
I really pray I am sensing a tongue planted firmly in cheek.
The New World Order is not about governments, it is about a One World Baking System. Maybe Jesse James, The Daltons and Bonnie and Clyde really were American Heroes. Once the Federal Reserve and The IMF and the Bank of The Settlements become one… it will be back to feudalism.
you have a point kcdad, although I think one-world govt. is a part of the new world order, but let’s put some thought into this people. Can you borrow your way out of a debt crisis? Of course not. It’s like an alcoholic drinking his way to sobriety. It’s ludicrous.
At some point this country has to face the fact we cannot borrow our way to prosperity forever. We cannot continue to import more than we export, particularly imports from places like China, Venezuela, Saudi Arabia, and the like. It’s fine to vote and call your Congressman, DO IT!, but every day you have a chance to vote with your dollars. There are hardly any CITGO stations left in central Illinois, why? If enough individual Americans make the decision to save more money, and buy fewer foreign made products, it will eventually make a difference. There are no easy fixes. Those days are over, folks. Congress can’t waive a magic wand and correct the abuses of the past 20 years. We are going to have to work our way out of this. No other way.
I figured I would offer my insights into this, but this video on YouTube: http://www.youtube.com/watch?v=_MGT_cSi7Rs does it so much better.
Let it all collaspe? Well then all those senior citizens on social security and pensions will no longer have any income. The homes they have paid on for 25 or 30 years will be lost and they have no place to go. More soup kitchens than in any previous history. Homeless every where you look. No money, no jobs, no homes, nothing, zip, blank, zero. Everything goes down the toilet. You think we have a problem with the bailout? Wait until we go into a full blown depression and see how many foreign countries catch on and overwhelm us and storm the bastile and we become their subjects. They are just waiting for us to trip like that.
I spent my morning calling the banks in the yellow pages.I asked them if they are still writing loans,did they ever stop writing loans,and if in the future they are going to continue to write loans.I stopped calling at the letter P because all the answers were the same.Yes.They also said this bailout made no sense to them.Their policies haven’t changed on how they issue loans.If you qualify for a loan you get it. CW
I’m actually glad the vote failed myself. From what I gather, something needs to be done, but a few failures might actually have politicans working with economists (not Paulsen though) to craft a bill that will help long and short term, and not simply seeking “political cover.”
And as I said at Billy’s blog today, I firmly believe it is all Phil Gramm’s fault – as he pushed through Gramm Leach Bliley and the Commodity Future Modernization Act. Sure, he did it during Clinton’s tenure, but he strongarmed congress into both, deregulation bills that McCain supported.
http://www.chron.com/disp/story.mpl/business/steffy/6012610.html
or
http://www.motherjones.com/news/feature/2008/07/where-credit-is-due-timeline.html
Yeah like the bail out money won’t be abused. That is too funny. Trust the same people? Geez, the people in charge didn’t have a clue this was coming. Bring on some indictments on some of these greedy people and then maybe we should use “our” money.
Yes I am thinking of running for city council. With what we have now we could use a change here too.
CW – Of course no bank is going to admit that credit has significantly tightened. Have you not been watching interviews with business owners who are being told no to new credit, having existing credit lines recalled and reduced, etc.? AutoNation’s CEO was just on the news complaining that banks (plural) were using every excuse they could to deny car loans, even to people with good credit.
This is a very serious situation and will mushroom very quickly.
THOUGHTS TO PONDER
I’m against the $85,000,000,000.00 bailout of AIG.
Instead, I’m in favor of giving $85,000,000,000 to America in
a We Deserve It Dividend.
To make the math simple, let’s assume there are 200,000,000
bonafide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman
and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billon that equals
$425,000.00.
My plan is to give $425,000 to every person 18+ as a
We Deserve It Dividend.
Of course, it would NOT be tax free.
So let’s assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wife has $595,000.00.
What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage – housing crisis solved.
Repay college loans – what a great boost to new grads
Put away money for college – it’ll be there
Save in a bank – create money to loan to entrepreneurs.
Buy a new car – create jobs
Invest in the market – capital drives growth
Pay for your parent’s medical insurance – health care improves
Enable Deadbeat Dads to come clean – or else
Remember this is for every adult
U S Citizen 18+ including the folks
who lost their jobs at Lehman Brothers and every other company
that is cutting back. And of course, for those serving in our Armed
Forces.
If we’re going to re-distribute wealth let’s really do it…instead of
trickling out
a puny $1000.00 ( “vote buy” ) economic incentive that is being
proposed by one of our candidates for President.
If we’re going to do an $85 billion bailout, let’s bail out every
adult U S Citizen 18+!
As for AIG – liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.
Here’s my rationale. We deserve it and AIG doesn’t.
Sure it’s a crazy idea that can “never work.”
But can you imagine the Coast-To-Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion
more than I do the geniuses at AIG or in
Washington DC .
And remember, The Family plan only really costs $59.5 Billion because
$25.5 Billion is returned
instantly in taxes to Uncle Sam.
Excellent New Voice but I would go a little further. Give every citizen in the US a million dollars (not tax free of course). Not only would it be cheaper than the bailout, like you listed it would solve the financial problem and as a bonus, we could ID every illegal immigrant in this country. They would be the ones without a new BMW.
Cancel the party. Playing along with your brilliant idea, I get $425 per person.
As to AIG, it received an $85b loan, for which “we” will receive 11.5% interest on money that costs “us” 3.5%. Also, we are now the first-in-line creditor and the loan is backed by all company assets.
Seems like a good investment to me.
nontimendum…..obviously you are better at math 🙂
I hate math. My calculator exploded and is now floating somewhere in another dimension.
So there.
mdd.The banks I called knew I was just a citizen calling for my own info.The people you mentioned that were on tv interviews,you believe every word they say because it’s on tv.I for one do not know what to believe,but I know I will not trust Anything from Washington.The news media is almost as bad,they are not reporting the news their making news by spreading panic.Thats why I tried to get some info for myself.
NV, you aren’t the same person who sent an email to Dan and Greg about this yesterday were you?? I heard them read an email outlining the exact same plan on air and my jaw dropped when I heard the math because it seemed just a little off…
I totally agree with you though on the bailouts, I too completely oppose them. Companies that make bad decisions need to fail so that other companies that make better decisions can take their place thus creating more wealth, that’s capitalism ladies and gentlemen.
New Voice your idea is excellent. That is similar to what I have been saying since this fiasco started.
Let Wall Street fail, but the people that will lose money in the 401k, or with mortgage problems will be ok with the infusion of cash. They can then pay off their mortgages, etc and that would put money back into the financials, so they would lose their excuse.
11bravo.
No, I sent no email, but I know there a million ‘plans’ out there like this. My friend and I were talking about getting REAL tax incentives, etc. We thought we were being brilliant…..turns out several other people I have talked came up with a similar idea. He did the math. I edited and provided comic relief.
CW – Banks are even canceling home equity lines of credit and/or reducing the amounts available to be borrowed. I know for a fact that 2 of the largest banks with offices in this area are doing this.
If you have a line of credit – write yourself a check and use it, even if you simply deposit the amount back into the bank, just so that you have the cash still available to you.
http://www.foxnews.com/story/0,2933,432501,00.html
Like I mentioned, earlier.