In the House, the Bill Vote Fails to Pass (So Far)

Posted by Kendall Harmon

The stock market is falling like a rock. Credit markets remain frozen.

Right now it is 206 yes,-227 no.

218 needed to pass. they are keeping the vote open and trying to persuade people who voted no on the floor to change their vote.

Filed under: * Economics, PoliticsEconomyThe September 2008 Proposed Henry Paulson 700 Billion Bailout Package

Posted September 29, 2008 at 2:47 pm [Printer Friendly] [Print w/ comments]

1. Ad Orientem wrote:

The news services are reporting that the bill failed.  Fasten your seat belts folks.  This could get ugly fast.


September 29, 3:19 pm | [comment link]
2. Byzantine wrote:

A victory for the people, for a change.

September 29, 3:23 pm | [comment link]
3. Ad Orientem wrote:

I am not sure how putting the country on the edge of what could be the most serious economic collapse since the World War can be described as a victory for the people.

September 29, 3:46 pm | [comment link]
4. BlueOntario wrote:

It may prove a Pyrrhic victory.

September 29, 3:50 pm | [comment link]
5. Clueless wrote:

The collapse is inevitable.

This bailout bails out only investment bankers.  Stopping the bailout means that they too will lose, severely.

So, Yes.  It is a victory for the people, although one in the middle of a tragedy, as the stock market will continue to slide, taking the dreams of literally billions of people globally with them, and the livelihoods of millions more.

September 29, 3:51 pm | [comment link]
6. Byzantine wrote:

Because the people know that this bailout will be paid 100% by downstream dollar holders to the benefit of the criminal class—upstream recipients of new dollars—that bet so recklessly with other people’s money to begin with.

September 29, 3:53 pm | [comment link]
7. Byzantine wrote:

Either we take our medicine now or we take a harsher mix later.  The housing bubble went on for far too long, diverting billions of dollars of capital into unsustainable activities.  The bailout was yet more hair of the dog.  Economic recovery cannot begin until the malinvestments are liquidated and capital diverted toward productive ends.

September 29, 3:57 pm | [comment link]
8. Br. Michael wrote:

7, by that logic the Great Depression was truly a victory for for the people.

September 29, 4:17 pm | [comment link]
9. Byzantine wrote:

Absent government intervention in the economy, the Great Depression would have been known as the Short, Sharp Recession.

September 29, 4:32 pm | [comment link]
10. Chris wrote:

yes, we still had double digit unemployment five years into FDR’s New Deal.  What rescued us from the Great Depression was not government programs - unless you count the Armed Forces, which won WWII and unleashed an era of prosperity that rivaled the 1920s.

September 29, 4:40 pm | [comment link]
11. Cennydd wrote:

I’d rather the overnment go after those who CAUSED this mess in the first place:  the greedy CEOs and investment bankers with the astronomically-high salaries and perks, the million-dollar homes, executive aircraft, and everything else that the Mainstreet folks can’t afford, such as overseas shopping sprees for their wives, private colleges for their children, excellent healthcare, etc.  In other words, I’d like to see the government seize ALL of their assets and redistribute the proceeds back to the people that they STOLE them from; but at the same time protecting their employees and their employees’ families.  Lonf Federal jail terms might be appropriate.

September 29, 4:42 pm | [comment link]
12. Chris wrote:

it was Bush’s fault - my pal Pelosi said so RIGHT BEFORE THEY VOTED!!!!  That’s just the time to be throwing partisan barbs….

September 29, 4:56 pm | [comment link]
13. Chris wrote:

#11, when Gorelick, Raines and Jim Johnson are all behind bars, I’m all for investigating other corporate malfeasance.  Here’s another link for the Democrat Hall of Shame, every one of them in this 2004 video (where they steadfastly defend FM/FM) should resign:

September 29, 5:00 pm | [comment link]
14. CanaAnglican wrote:

12. Chris,  You are so, so right.  That Nancy is one scary gal in the choice of her timing.

September 29, 5:55 pm | [comment link]
15. Kendall Harmon wrote:

#9, the government intervention in the economy in the late 20’s and early 30’s is seen now as a textbook example of what NOT to do.  They made a bad situation even worse. It is not simply intervention but the when and then how of intervening that matter.

Ben Bernanke did his doctoral studies on that period.

September 29, 6:24 pm | [comment link]
16. Clueless wrote:

There are some useful comments on the bottom of this article, including the following:

How A Clinton-Era Rule Rewrite Made Subprime Crisis Inevitable

Terry Jones
Wed Sep 24, 7:19 PM ET

One of the most frequently asked questions about the subprime market meltdown and housing crisis is: How did the government get so deeply involved in the housing market?

The answer is: President Clinton wanted it that way.

Fannie Mae and Freddie Mac, even into the early 1990s, weren’t the juggernauts they’d later be.

While President Carter in 1977 signed the Community Reinvestment Act, which pushed Fannie and Freddie to aggressively lend to minority communities, it was Clinton who supercharged the process. After entering office in 1993, he extensively rewrote Fannie’s and Freddie’s rules.

In so doing, he turned the two quasi-private, mortgage-funding firms into a semi-nationalized monopoly that dispensed cash to markets, made loans to large Democratic voting blocs and handed favors, jobs and money to political allies. This potent mix led inevitably to corruption and the Fannie-Freddie collapse.

Despite warnings of trouble at Fannie and Freddie, in 1994 Clinton unveiled his National Homeownership Strategy, which broadened the CRA in ways Congress never intended.

Addressing the National Association of Realtors that year, Clinton bluntly told the group that “more Americans should own their own homes.” He meant it.

Clinton saw homeownership as a way to open the door for blacks and other minorities to enter the middle class.

Though well-intended, the problem was that Congress was about to change hands, from the Democrats to the Republicans. Rather than submit legislation that the GOP-led Congress was almost sure to reject, Clinton ordered Robert Rubin’s Treasury Department to rewrite the rules in 1995.

The rewrite, as City Journal noted back in 2000, “made getting a satisfactory CRA rating harder.” Banks were given strict new numerical quotas and measures for the level of “diversity” in their loan portfolios. Getting a good CRA rating was key for a bank that wanted to expand or merge with another.

Loans started being made on the basis of race, and often little else.

“Bank examiners would use federal home-loan data, broken down by neighborhood, income group and race, to rate banks on performance,” wrote Howard Husock, a scholar at the Manhattan Institute.

But those rules weren’t enough.

Clinton got the Department of Housing and Urban Development to double-team the issue. That would later prove disastrous.

Clinton’s HUD secretary, Andrew Cuomo, “made a series of decisions between 1997 and 2001 that gave birth to the country’s current crisis,” the liberal Village Voice noted. Among those decisions were changes that let Fannie and Freddie get into subprime loan markets in a big way.

Other rule changes gave Fannie and Freddie extraordinary leverage, allowing them to hold just 2.5% of capital to back their investments, vs. 10% for banks.

Since they could borrow at lower rates than banks due to implicit government guarantees for their debt, the government-sponsored enterprises boomed.

With incentives in place, banks poured billions of dollars of loans into poor communities, often “no doc” and “no income” loans that required no money down and no verification of income.

By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market—a staggering exposure.

Worse still was the cronyism.

Fannie and Freddie became home to out-of-work politicians, mostly Clinton Democrats. An informal survey of their top officials shows a roughly 2-to-1 dominance of Democrats over Republicans.

Then there were the campaign donations. From 1989 to 2008, some 384 politicians got their tip jars filled by Fannie and Freddie.

Over that time, the two GSEs spent $200 million on lobbying and political activities. Their charitable foundations dropped millions more on think tanks and radical community groups.

Did it work? Well, if measured by the goal of putting more poor people into homes, the answer would have to be yes.

From 1995 to 2005, a Harvard study shows, minorities made up 49% of the 12.5 million new homeowners.

The problem is that many of those loans have now gone bad, and minority homeownership rates are shrinking fast.

Fannie and Freddie, with their massive loan portfolios stuffed with securitized mortgage-backed paper created from subprime loans, are a failed legacy of the Clinton era.

September 29, 6:35 pm | [comment link]
17. Jeffersonian wrote:

#9, the government intervention in the economy in the late 20’s and early 30’s is seen now as a textbook example of what NOT to do.

Kendall, I think you and Byzantine are on the same page…re-read his post.

September 29, 6:36 pm | [comment link]
18. athan-asi-us wrote:

Thanks to the Clinton dictates, they (mortgage brokers) were actually out here giving illegal aliens mortgages. Don’t blame the Clinton cabal totally however, the Republicans were playing the same game by not cracking down on the obviously illogical three card Monte being played by the lenders, FF and FM.

September 29, 7:23 pm | [comment link]
19. Irenaeus wrote:

“Thanks to the Clinton dictates, they (mortgage brokers) were actually out here giving illegal aliens mortgages”—-#18

More uninformed, toxic nonsense.

September 29, 7:26 pm | [comment link]
20. Kendall Harmon wrote:

#17, I was agreeing with the post that Byzantine wrote, and noting its significance for Bernanke.

September 29, 7:37 pm | [comment link]
21. Ad Orientem wrote:

Re # 9

Absent government intervention in the economy, the Great Depression would have been known as the Short, Sharp Recession.

I can only conclude from the above statement that you are woefully ignorant of the history of the Great Depression.

The Hovver administration was fanatically opposed to intervention in the economy.  When urged to take the country off the Gold Standard in order to loosen the supply of money they refused setting about one of the worst periods of deflation in history at a time when the few people who had money were hording it along with specie.  This massively aggravated the crisis.  In addition Hoover refused any federal effort to intervene as the banking crisis worsened arguing it was not the Federal Government’s job.  The result was the near total collapse of the nation’s banking system by time FDR became president in March of 1933. 

I can not think of a single act by the Hoover administration which could in any way be interpreted as an intervention in the economy other than the disastrous tariff law they passed in an effort to go protectionist..  The result was an unemployment rate of near 30% by time Mr. Hoover left office.

September 29, 9:07 pm | [comment link]
22. Byzantine wrote:

Ad Orientem,

On the contrary, the Revenue Act of 1932, the Reconstruction Finance Corp., the Glass-Steagall Act, the Federal Home Loan Bank and other measures were all efforts by the Hoover administration to put the toothpaste back in the tube.  They failed, as such efforts will always fail, and back then people were still under the quaint notion that their money was backed by something other than a promise not to inflate too rapidly.

The Keynesians and neo-classicists have been proved wrong over and over, and yet the alchemy of money-printing persists.

September 30, 11:07 am | [comment link]
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